California Supreme Court
KIM v. REINS
Plaintiff Justin Kim worked for Defendant Reins as a restaurant training manager. Kim filed a class action for various Labor Code violations, claiming Reins had misclassified him and others as exempt and failed to pay them overtime. Reins moved to compel arbitration of Kim’s individual claims, dismiss the class claims, and stay the PAGA action pending the arbitration. The trial court granted the motion. Several months later, Kim and Reins settled the individual claims, leaving only the PAGA action. Reins then moved for summary adjudication of the PAGA claim on the ground that Kim no longer had standing because he was no longer an aggrieved employee now that his rights had been redressed by settlement of his claims. The trial court agreed and entered judgment for Reins, and the Court of Appeal affirmed. Kim sought review.
PAGA’S DEFINITION OF “AGGRIEVED EMPLOYEE” DOES NOT REQUIRE A CURRENT ECONOMIC INJURY
The Private Attorneys General Act of 2004 (PAGA) provides for additional civil penalties for certain Labor Code violations, which plaintiffs may seek on behalf of the state. Only an “aggrieved employee” may seek PAGA penalties. An aggrieved employee is a person who was employed by the alleged violator and against whom one or more of the alleged violations was committed. Because PAGA was intended to protect employees its provisions are construed broadly and in favor of protection. Section 2699(c) has only two standing requirements, that the person be employed by the alleged violator, and that one or more of the alleged violations was committed against him. Kim satisfied both and was therefore an aggrieved employee. Reins conceded that Kim had standing when he sued but argued Kim lost standing when he settled and dismissed his individual claims. Settlement is a remedy for violations but does not nullify those violations. Since the PAGA statute does not require an employee to assert an economic injury, Reins’ definition of aggrieved employee was at odds with the statute. PAGA standing is not inextricably linked to the plaintiff’s individual injury.
CELA INVOLVEMENT
Congratulations to CELA member Eric Kingsley of Kingsley & Kingsley, APC! Thank you to CELA members Aaron Kaufmann for his Amicus Brief for CELA and Cynthia Rice for her Amicus Brief for CRLA!
CA Supreme Court. 3/12/20. 9 Cal.5th 73. Opinion by Justice Corrigan.
California Courts of Appeal
ALEXANDER v. COMMUNITY HOSPITAL OF LONG BEACH
THE THREE PLAINTIFFS WERE FIRED FOR AN ALLEGED PATIENT RESTRAINT VIOLATION, DESPITE MULTIPLE DISCRIMINATION AND HARASSMENT COMPLAINTS AGAIN THE HEAD OF THEIR UNIT
Plaintiffs Judy Alexander, Johann Hellmannsberger, and Lisa Harris worked as nurses I the Behavioral Health Unit of Defendant Community Hospital of Long Beach. Two corporations took over the psychiatric unit in 1989: (1) Memorial Psychiatric Health Services (MPHS), which ran the Hospital’s locked mental health ward; and (2) Memorial Counseling Associates Medical Group (MCA), which supplied physicians to the ward. Community Hospital contracted with MPHS to operate the Behavioral Health Unit. MPHS administered the unit and employed the unit’s director Keith Kohl. The Hospital separately contracted with MCA to provide physicians for the unit. Plaintiff Alexander repeatedly complained to the Hospital that Kohl favored gay men and discriminated against and harassed heterosexuals. After an incident with an unruly patient, two nurses reported Alexander and the other two plaintiffs for placing a patient in physical restraints without a physician’s order. Though other witnesses and the plaintiff’s denied that the plaintiffs had placed the patient in physical restraints, the three plaintiffs were suspended and then fired. All three found new jobs, but Community Hospital reported them to licensing authorities, who notified the Department of Justice, who arrested and prosecuted the three plaintiffs. All three were suspended and fired from their new jobs, though all three were later acquitted by a jury. A few weeks after their termination, other Community Hospital staff made similar complaints about Kohl, but none of the employers took action against Kohl for a year. The plaintiffs filed DFEH complaints against the Hospital, MCA, and Kohl, but never mentioned MPHS in an administrative complaint. They filed a lawsuit and later added MPHS as a Doe defendant, but still did not file a DFEH complaint as to MPHS. A jury found for the plaintiffs and against the Hospital on all causes of action, for MPA on all causes of action, and for the plaintiffs and against MPHS on some claims.
A DEFENDANT MUST BE NAMED IN EITHER THE CAPTION OR THE BODY OF THE DFEH COMPLAINT IN ORDER TO EXHAUST ADMINISTRATIVE REMEDIES
Since the plaintiffs did not file an administrative complaint against MPHS for their FEHA claims, or mention MPHS in their other administrative complaints, MPHS could not be held liable for FEHA violations. The Court rejected plaintiffs’ argument that MPHS was on notice via the other administrative complaints, finding no supporting case law. The Court also rejected plaintiffs’ argument that Kohl’s employment by MPHS was not reasonably discoverable. The plaintiffs did not file a DFEH complaint before adding MPHS as a Doe defendant in the lawsuit and produced a flyer that had MPHS’ name on it.
AQUITTAL IN A CRIMINAL TRIAL IS NOT ADMISSIBLE IN A CIVIL TRIAL AS EVIDENCE OF INNOCENCE
Because the trial court granted motions in limine to exclude all reference to the criminal proceedings, it was improper for plaintiffs to testify and argue that they had cleared their names. An acquittal in a criminal case is not competent evidence in a subsequent civil action to prove the innocence of the accused. Though the plaintiffs must be allowed to prove that the Hospital’s justification for their termination was pretextual, evidence that they were acquitted of criminal charges is inadmissible for that purpose. Though the plaintiffs would have been allowed to submit evidence than an agency cleared them, the did not do so. Admission of this testimony was error and prejudiced the Hospital. In addition, damages plaintiffs suffered after being fired from their new jobs were due to the state’s decision to prosecute them, not to Community Hospital. Any role Community Hospital had in the state’s decision was absolutely privileged.
HEARSAY EVIDENCE IN “ME TOO” LETTERS IS INADMISSIBLE FOR THE TRUTH OF THE MATTERS ASSERTED IN THE LETTERS
The post-termination “me too” letter complaints involving Kohl were only admissible for the purpose of proving the Hospital was on notice of Kohl’s behavior. Any other purpose was barred by hearsay rules. However, multiple witnesses testified regarding the letters, and the trial court gave contradictory instructions to the jury regarding the letters. Because plaintiffs focused on the letters extensively at trial, reliance on hearsay evidence in the letters was reasonably probable to have swayed the jury. The Court of Appeal found that the multiple errors combined to cause the Hospital an unfair trial.
COA 2nd Dist., Div. 1. Filed 2/13/20, publication ordered 3/10/20. 46 Cal.App.5th 238. Opinion by Justice Chaney.
LANGE v. MONSTER ENERGY COMPANY
Plaintiff Gerald Lange worked for Defendant Monster Energy Company as a “Monster Ambassador.” Upon his hire in 2006, Lange signed Monster’s arbitration agreement. In 2018, Lange sued Monster for disability discrimination and related claims. Monster moved to compel arbitration. After additional briefing regarding problematic aspects of the arbitration agreement, the trial court denied Monster’s motion. Monster appealed.
THE ARBITRATION AGREEMENT WAS PROCEDURALLY UNCONSCIONABLE AND HAD SEVERAL SUBSTANTIVELY UNCONSCIONABLE PROVISIONS
For an arbitration contract to be unconscionable, there must be both procedural and substantive unconscionability. The Court of Appeal agreed with the trial court that Monster’s arbitration agreement represented a low level of procedural unconscionability. The arbitration agreement was a contract of adhesion, but the arbitration provision was reasonably conspicuous, and Lange initialed it. The Court of Appeal then addressed substantive unconscionability, finding multiple provisions substantively unconscionable, including: (1) The punitive damages waiver. Regardless of mutuality, a plaintiff is entitled to seek all damages remedies that would have been available in court. (2) The equitable remedies clause allowing Monster to seek an injunction or other equitable remedy in court without a bond or a showing of irreparable harm. The provision allowed Monster to obtain an injunction without establishing the necessary elements. (3) The jury trial waiver. In addition to the general jury trial waiver in favor of arbitration, the agreement contained a provision requiring waiver of a jury trial for any part of the controversy determined by a court of law.
AN ARBITRATION AGREEMENT PERMEATED BY UNCONSCIONABILITY IS NOT ENFORCEABLE
Though the trial court stated that it could not sever the unconscionable provisions from the arbitration agreement because there was more than one provision, this interpretation was incorrect. An agreement may be considered permeated by unconscionability if it contains more than one unlawful provision, but the court has discretion. The trial court was however correct in its conclusion that it had no discretion to start reforming the whole contract. Though the trial court appeared to rely on an erroneous legal standard, it also appeared to find that unconscionable terms permeated the agreement. Since Monster did not address the trial court’s alternative grounds for denying severance, the Court of Appeal could find no abuse of discretion and agreed that the agreement was too permeated with unconscionability for severance to fix it.
CELA INVOLVEMENT
Congratulations to CELA members Shadie Berenji and Brittanee Marksbury of Berenji Law Firm!
COA 2nd Dist., Div. 1. Filed 3/12/20. 46 Cal.App.5th 436. Opinion by Acting Presiding Justice Chaney.
WOOD v. THE SUPERIOR COURT OF SAN DIEGO COUNTY (CFG JAMACHA)
CELA attorneys need to be especially aware of this case, as statements plaintiffs made before they retained an attorney may be discoverable.
PLAINTIFF COMPLAINED OF GENDER DISCRIMINATION
Plaintiff/Petitioner Wood, a transgender female, used a fitness facility named Crunch and owned by Defendants/Respondents. She alleged that she was refused use of the women’s locker room on multiple times, and alleged further that she was harassed while using the men’s locker room. She alleged that the company ultimately relented and allowed her to use the women’s locker room.
Plaintiff filed a complaint with the Department of Fair Employment & Housing (“DFEH”) alleging gender and gender expression discrimination in violation of the Unruh Act (Ca. Civ. Code §51), which is incorporated into the Fair Employment & Housing Act (“FEHA”).
The DFEH investigated the matter, and ultimately filed a complaint under Wood’s name on behalf of the State, seeking various remedies. Wood in turn filed her own lawsuit.
PLAINTIFF WOOD WITHHELD AN EMAIL TO A DFEH ATTORNEY ON GROUND OF ATTORNEY-CLIENT PRIVILEGE
During the course of discovery, Respondent CFG Jamacha requested, among other things, communications between Petitioner Wood and attorneys for the DFEH. In response, Wood withheld an email between her and those attorneys, asserting attorney-client privilege among other reasons (which other reasons were not asserted in her subsequent writ).
The trial court granted Respondent’s motion to compel, and Wood filed a writ, which the appellate court summarily denied. The California Supreme Court, upon petition, remanded the matter. The appellate court thereafter issued an order to show cause.
THERE WAS NO ATTORNEY-CLIENT RELATIONSHIP, AND THEREFORE NO ATTORNEY-CLIENT PRIVILEGE
The appellate court drew on multiple precedents to point out that government attorneys, like those from the DFEH, represent the State and no individual client. The DFEH website announces in several areas that their attorneys do not represent the complainant, even if they file a lawsuit under the complainant’s name. The lack of the attorney-client relationship was enough for the court to find that no privilege could exist.
Petitioner Wood provided the court with federal cases finding that the privilege existed between claimants and attorneys for the Equal Employment Opportunity Commission. The court dismissed these cases. It pointed out that the California privilege was statutory and narrowly construed, while the federal privilege was a creature of common law. Moreover, the federal cases relied on the common interest doctrine, allowing for the privilege to cover communication between an attorney and a party who that attorney does not represent if the communication is necessary to further the interests of that attorney’s client. The court found that the common interest doctrine does not exist in California, further distinguishing the federal cases.
The court addressed the language within Ca. Evid. Code §951, defining a “client” in part as one who “consults a lawyer for the purpose of . . . securing . . . advice from him in professional capacity.” That language seems to help Wood’s argument, because she consulted the DFEH attorneys in their professional capacity. The court did not see it that way, however.
CONCLUSION
The appellate court found that the public policy considerations could not allow it to go beyond the provisions of the enacting statute. Because the California Supreme Court has already expressed interest in this matter, we may hear from them further on this case.
COA, Fourth Dist., Div. 1, Filed 3/13/20. Opinion by Judge Guerrero.
Ninth Circuit
HERRERA v. ZUMIEZ, INC.
PLAINTIFF AND THE PUTATIVE CLASS WERE REQUIRED TO MAKE THEMSELVES AVAILABLE FOR “CALL-IN” SHIFTS
In addition to their scheduled shifts, employees at Zumiez were often scheduled for “call in” shifts. This meant that they had to call in to their supervisor prior to the shift to see if they needed to work that shift. If they had worked the previous shift, they had to check with their supervisor before leaving. In either case, the employee had to make themselves available to work “call in” shifts.
ZUMIEZ DID NOT PAY IF THE EMPLOYEE DID NOT WORK
If the supervisor decided that the employee was not needed to work, then the employee received no pay for the call in shift. This was true even though the employees had clear out their schedule, make themselves available for work, and could be disciplined if they refused to show when required to.
THE DISTRICT COURT DENIED JUDGMENT ON THE PLEADINGS
Zumiez moved in the trial court for judgment on the pleadings. Zumiez argued that the Wage Order’s use of the term “report for work” did not include telephonic reporting, but required a physical appearance. The district court rejected the argument, and denied the motion.
On Zumiez’ motion, the district court certified the question as to whether “report for work” required a physical appearance.
“REPORT FOR WORK” CAN INCLUDE TELEPHONIC REPORTING
Sitting in diversity, the Ninth Circuit applied California law. Looking to California Supreme Court precedent, the court found that the wage orders are to be interpreted “to favor the protection of employees.”
In this case, Wage Order 7 applied. That wage order required a half day’s pay (no less than 2 hours and no more than 4 hours) when an employee “is required to report to work and does report, but is not put to work” or works less than a half day.
During the pendency of the appeal, the California Appellate Court decided Ward v. Tilly’s, Inc., a case with facts substantially similar to this one. That case decided that telephonic call-in requirements could be sufficient to trigger the protections of the Wage Order. The California Supreme Court denied review.
Following the rule that, if the Supreme Court has not spoken it must follow a precedential lower court ruling unless there is “persuasive data” that the Supreme Court would rule otherwise, the Ninth Circuit followed Ward. That case found that “report for work” was an ambiguous term, with dictionary definitions of “report” allowing for different meanings.
Because reporting time pay can count as “hours worked” if the employee is subject to the employer’s control, the court also found factual issues as to whether Zumiez violated minimum wage laws.
CONCLUSION
Reporting time pay can be implicated when an employee is required to call in and be available for work, and, if subject to the employer’s control, can also implicate minimum wage laws.
Ninth Circuit, Filed 3/19/20. Opinion by Judge Paez.
SCALIA v. EMPLOYER SOLUTIONS STAFFING GROUP, LLC
THE PAYROLL PROCESSOR DISMISSED MULTIPLE COMPUTERIZED WARNINGS THAT SHE WAS PAYING OVERTIME HOURS IMPROPERLY
Defendant Employer Solutions Staffing Group was a staffing company that placed recruits at job sites and handled administrative tasks such as payroll. ESSG was an “employer” of these recruits under the Fair Labor Standards Act’s definition. ESSG contracted with Sync Staffing to place recruits at a grocery store. The store sent spreadsheets of employees’ work hours to Sync, which forwarded it to ESSG. ESSG sent Sync a report including overtime pay for employees who worked more than 40 hours per week. Sync told ESSG to pay overtime as “regular hours” instead, and ESSG complied. ESSG had to dismiss multiple computer error messages to code the time without overtime pay and understood that the error messages occurred because the time was not paid as overtime. ESSG processed all future spreadsheets this way. Secretary of Labor Eugene Scalia sued ESSG, Sync, and the grocery store for FLSA violations. After the other companies signed consent judgments, the Secretary moved for summary judgment against ESSG. The district court granted MSJ and found ESSG’s FLSA violation willful. ESSG appealed, and the Ninth Circuit affirmed.
BECAUSE A CORPORATION ACTS THROUGH ITS AGENTS, ESSG WAS RESPONSIBLE FOR THE PAYROLL PROCESSOR’S FAILURE TO PROPERLY PAY OVERTIME
ESSG argued that it was not responsible for its low-level employee’s payroll processing. The Ninth Circuit soundly rejected this argument, finding that a corporation acts through its agents. Because ESSG chose the employee as its agent for payroll processing, it could not disavow her actions. Requiring the employee to be a supervisor or manager would create an unintended loophole in the FLSA, so the employee’s actions were imputed to ESSG. An FLSA violation is willful when the employer knew or showed reckless disregard for whether its conduct was prohibited by the FLSA. ESSG’s employee dismissed pay error messages that employees might not be receiving proper overtime pay for over a year, without ever receiving an explanation from Sync as to why employees were not paid overtime. ESSG therefore recklessly disregarded the possibility that it was violating the FLSA.
9th Circuit. Filed 3/2/20. 951 F.3d 1097. Opinion by Judge Graber.