Commission Wage Allocation Limited by California Supreme Court Ruling

The California Supreme Court ruling on June 14, 2014, limited commission wage allocation by holding that employers could not satisfy the California compensation requirements for commission sales exemptions by assigning commission wages paid in one pay period to alternate pay periods. The decision could have a notable impact on employers who regularly pay their employees on a commission basis. It could have a particularly significant impact on those who pay commission sales employees a base salary that falls near the minimum wage requirement.

California’s commissioned employee exemption requires (among other things) employee’s earnings to exceed one and a half times minimum wage. It also requires that more than half of the employee’s compensation be commissions.

In Peabody v. Time Warner Cable, Inc. Case No. S204804, the employer (Time Warner) argued that their former account executive wasn’t entitled to overtime pay due to the fact that she was a “commissioned employee” and was therefore exempt. As noted above, there are limitations as to which employees can fall under the commissioned employee exemption. In the case of Time Warner, Peabody was paid an hourly wage of $9.61. This did not fulfill the one and half times minimum wage minimum pay requirement. The wages were paid every other week. Total compensation of the plaintiff did exceed the minimum one and a half times minimum wage requirement when the hourly was combined with the commissions paid to the employee. Commissions were paid only once/month. The commissions paid were earned throughout the previous month.

Due to the pay structure set up by Time Warner, the employee’s compensation fell short of the one and a half times minimum wage requirement during some pay periods. It is also notable that there was no dispute regarding the fact that the employee worked 45 hours per week and was not paid any overtime. In an attempt to meet requirements set down in the commission employee exemption, Time Warner suggested that employee commissions should be reallocated to be paid during earlier pay periods (in which they were earned) rather than the bi-weekly pay periods that were in place. They felt that satisfying the exemption’s minimum wage earnings requirement in this manner should free them from the obligation to pay commission employees overtime. The California Supreme Court rejected their argument. It was concluded that the Time Warner’s attribution of commission wages to meet minimum requirements was impermissible.

If you need to discuss implications of the recent ruling and how it could affect you as a commission employee, contact Blumenthal, Nordrehaug & Bhowmik, the Southern California employment law experts. 

California Labor Lawsuit Led to Class Action v. Barnes & Noble

A class action suit against Barnes & Noble based out of New York has roots in California. The California labor lawsuit will continue – a New York judge refused to grant summary judgment for the defendants. Barnes & Noble, the major chain and online bookseller, is being accused of avoiding the payment of overtime to employees by purposefully misclassifying them as exempt. Allegations would leave Barnes & Noble in violation of the Fair Labor Standards Act (FLSA).

Court documents indicate that until 2005, Barnes & Noble classified all assistant store managers as FLSA exempt. This meant that no assistant store managers were eligible for overtime pay on hours worked above and beyond the standard workweek or workday. Generally speaking, managers (who are paid a salary and perform managerial tasks) are properly exempt in just this fashion. However, Barnes & Noble assistant store managers in California filed suit citing violations of California labor law.

The assistant store managers who filed suit in this California case made allegations that they performed tasks that fell outside of the managerial realm. They also indicated that despite their official title (assistant store manager) they had no actual authority over other employees.

The lawsuit resulted in Barnes & Noble reclassifying its assistant store managers in California as nonexempt. As nonexempt employees, they can now qualify for overtime pay. But Barnes & Noble apparently did not make the change at other stores in other locations throughout the country until a much later date.

Barnes & Noble did eventually (in 2010) reclassify all of its assistant managers as nonexempt throughout the states. This was the basis for Barnes & Noble’s petition for summary judgment in the lawsuit (originally brought in 2005 as an action citing California labor code). It would seem that the FLSA violations ended in June 2010, but the wider lawsuit was filed in January 2013. The defendants cited that the lawsuit fell outside the FLSA’s two-year statue of limitations.  

US District Court Judge John Koeltl disagreed, pointing out that the FLSA two-year limit extends to three years when there is proof, evidence or suspicion that there was a willful violation. Considering that Barnes & Noble reclassified California based assistant managers as a result of the California labor lawsuit, but failed to do so nationwide for 5 years, it would be easy to suggest that there was at least some evidence that a jury could perceive as willful violation.  

The three plaintiffs (named) in the current, New York based lawsuit, are all former assistant store managers for Barnes & Noble. They note that their duties were not limited to managerial duties, they often performed tasks performed by other non-exempt employees, such as working the cash register, processing product returns, etc.

If you feel you have been misclassified as an exempt employee, contact the employment law experts at Blumenthal, Nordrehaug & Bhowmik today. 

Landmark Iskanian Decision’s Effect on Private Attorneys General Act (PAGA) Claims

Attorneys are predicting an uptick in PAGA claims that open up California employers to greater financial exposure as a result of the California Supreme Court’s landmark Iskanian decision. The decision strengthened the enforceability of class waivers in arbitration agreements, but also held that PAGA (Private Attorneys General Act) claims can’t be waived in employment arbitration deals.

The decision allows employees to sue on behalf of other workers to recover California Labor Code violation penalties. The issue of whether PAGA and other claims will be decided in a single forum or separately via bifurcation with individual claims going to arbitration and the PAGA claim to litigation has been remanded by the Court. If bifurcated, the lower court could decide to stay one of the matters. Employers would be likely to push for arbitration of individual claims to proceed first in bifurcated matters since the arbitrator’s findings could make a difference in whether or not plaintiffs were able to proceed with PAGA claims in the court system. The argument that employers could present to obtain their end would be that arbitration going first would be more quick and efficient and that putting the individual claims on hold while the PAGA claim is determined isn’t the best use of the courts’ or involved parties’ resources and time. Courts who are overseeing bifurcated cases could potentially choose not to stay the arbitration or litigation. Individual actions are not necessarily dispositive of the issues in the PAGA action – this is something to consider as the potential differences between the individual pursuing a claim in arbitration and the end result the class as a whole is pursuing in court could be notable.

If you have questions on California employment law and how recent landmark decisions could affect your workplace situation, please contact the experts at Blumenthal, Nordrehaug & Bhowmik immediately. 

Preliminary Approval on Uncapped Settlement of Another NFL Concussion Lawsuit

U.S. District Court Judge Anita B. Brody rejected the previous $765 million concussion settlement between the NFL and former players with head trauma who were suing the league, but she offered preliminary approval of the more recent settlement produced saying the NFL would uncap the payments to former players suffering debilitating systems. The first settlement was thrown out because Judge Brody felt that the $765 million would be insufficient to cover the lifetime of the 65 year settlement. Her preliminary approval of the new settlement left the former players another step closer to receiving payment from the NFL. 

The plaintiffs are pleased with the preliminary approval and state that the settlement for retired NFL players and their families is extraordinary. It would apply to those suffering from neuro-cognitive illnesses today to any who suffered head injury without current signs of major damage, but who fear serious symptoms could develop in the future. The settlement would provide guaranteed benefits and long-term security. They look forward to finalizing the agreement.

The NFL’s response was to offer gratitude to Judge Brody for her guidance and thoughtful approach to the serious issues being addressed. They state that they will work with the plaintiffs’ counsel in order to implement the terms of the settlement as per the Court’s final decision.

According to the terms outlined for the compensation program, funds would be established and retired players would qualify to use the funds if they were to develop a qualifying neurocognitive condition. The plaintiffs now have 90 days to opt out or challenge the settlement. At that point in time Brody will be able to give her final approval of the settlement agreement.

For additional information or to ask questions regarding employment law please contact the experts at Blumenthal, Nordrehaug & Bhowmik. 

California Supreme Court and Questions Defining “Employers” Liable for Wage Violations

Ramifications of Ayala v. Antelope Valley Newspapers could result in changes for California workers. The California Supreme Court unanimously affirmed a Court of Appeal decision that reversed the denial of class certification in the independent contractor misclassification case. Judge Werdegar, Justice Baxter and Justice Chin all concurred that the Court of Appeal correctly reversed the trial court decision that denied certification in the case of Ayala v. Antelope Valley Newspapers. In the case, Newspaper delivery workers filed against a daily newspaper. They were classified as independent contractors and as such, were denied minimum wage payment, overtime pay, minimum rest and meal period premiums, as well as employer contributions toward Social Security.

The trial court held that there were too many individual inquiries necessary in order to determine how the various newspaper delivery workers handled their day to day operations, but the Supreme Court felt that the trial court missed the point of the case: whether a common law employer/employee relationship exists dependent upon the degree of the hirer’s right to define/control the relationship or how the end result is actually achieved. The Supreme Court further explained their decision by pointing out that while there was evidence of variation in work habits between newspaper carriers, which supports claims made by Antelope Valley’s position that they didn’t control their carriers’ work, this fact didn’t negate the actual question at hand. How much right does the employer (Antelope Valley) have to control what their carriers’ do?

This case reinforces the common proof method that turns to governing contracts: a common method used to determine the answer to the independent contractor vs. employee question. The Court has pointed out that at the certification stage, the form contract’s importance is not particularly in what it says, but in what degree of control it defines and whether it is uniform across the class.

Countless California workers are misclassified as independent contractors even though their employers retain control of their working conditions. If you are one of these California workers and you’d like to join with fellow workers to address the issue of misclassification claims, contact Blumenthal, Nordrehaug & Bhowmik. There’s precedence in the legal system that empowers you to raise your wage claim.

California Labor Law Update: Changes in Sexual Harassment Protection

New employment laws or amendments to existing laws are passed by the California legislature every year. The changes can directly impact the relationship between an employer and their employees as well as how they run their business. 2014 saw dozens of new labor laws go into effect.  

One important change that occurred in 2014 was a result of an amendment to Government Code 12940. It clarifies the definition of sexual harassment in the workplace. After a 2013 appellate decision, there was a question as to whether or not there needed to be sexual desire on the part of the perpetrator in order to establish a legitimate sexual harassment claim. Bill 292 addressed this issue.

The California legislature passed Senate Bill 292 in 2013 and we saw it go into effect on January 1, 2014. This amendment to the previous employment law defining sexual harassment in the workplace in California redefines the issue: sexual harassment is prohibited under California law without regard to the sexual desire of the perpetrator. It was reasoned that sexual harassment (like other forms of harassment) isn’t necessarily motivated by desire. In fact, harassment of all types is more often motivated by hostility. The passing of this bill addressed the confusion in the California courts regarding whether or not a sexual harassment claim can be established without a basis of desire. Senate Bill 292 clarifies what the California courts have been recognizing for years: that sexual motive or desire isn’t necessary in order to establish a sexual harassment claim and bring action against an employer. 

If you or someone you know has questions about what constitutes a sexual harassment claim or if you feel you work in a hostile work environment get in touch with the employment law experts at Blumenthal, Nordrehaug & Bhowmik. 

Ninth Circuit Clarifies with Recent Ruling: Delivery Drivers are Employees Not Independent Contractors

Plaintiffs in Ruiz v. Affinity Logistics Corporation performed delivery services in California for the defendant under contracts binding the drivers as independent contractors and governed by Georgia law. The putative class action asserted that under California law drivers should have been paid sick leave as well as other employment benefits, but because they were wrongfully classified, they were denied the benefits. Originally, the district court applied Georgia law and found in favor of the defendant due to the classification of the drivers as independent contractors. The drivers appealed.

The first appeal in 2012 resulted in the Court of Appeals disregarding the contract’s provision stating the employer/employee relationship would be handled according to Georgia law. Instead they applied California law to the disputes as they found Georgia law to be too favorable to the employer. The case was then remanded for application of California law. The district court again entered judgment in favor of the employer, and again, the plaintiffs appealed.

On June 16, 2014, the Ninth Circuit gave a different ruling. The ruling stated that despite the contract terms, delivery drivers were employees under California law and were not independent contractors. (This finding was in spite of the fact that all the drivers had independent contractor agreements, formed their own corporate entities, paid for their own vehicles, and hired their own help as needed. The ruling found that the drivers were wrongfully classified under California Law as independent contractors due to the employer’s right to heavily control their work regardless of the titles of the parties involved or how the employee/employer relationship was described. Some of the specific instances cited as “heavy control of work” included: tight control over driver routes and schedules, 100% adherence requirements to the detailed procedure manual, vacation policies (and other similar policies) indicative of employment, use of the drivers’ leased trucks by other drivers without additional compensation, required daily meetings, uniforms, inspections, monitoring of routes (real time), etc.

The case reminds us that merely stating that a relationship is that of an independent contractor is not enough when the relationship itself exhibits signs of an actual employee/employer relationship. It is prudent for companies to remember that the courts will not hesitate to rule that independent contractors should have been classified as employees if the actual working relationship defies what is agreed on paper.

For more information on differentiating between an independent contractor and an employee contact your Southern California employment law experts at Blumenthal, Nordrehaug & Bhowmik.