March 09, 2021

Faulty Pay Stubs Result in Over $100M Award to Employees

March 09, 2021/ Blog Author

The Ninth Circuit heard a California employer's appeal of a $102 million damages award for a class action suit alleging California Labor Code violations. Over $48 million of the award was designated for violations of the California Labor Code's itemized wage statement requirement. The additional $48 million covered penalties under PAGA (Private Attorneys General Act). Additional penalties were assessed against the employer due to PAGA penalties for violating the Labor Code's final wage statement provisions and PAGA penalties for violations of meal period mandates.

Details of the Case: Robert Magadia v. Wal-Mart Associates, Inc.

Court: United States District Court, N.D. Cal.

Case No.: 5:17-cv-00062

Does Proposition 22 Apply in this Situation?

Currently, Proposition 22 is limited to app-based rideshare app and delivery companies. However, this legislation's passage could spur activists in other industries to bring serious arguments for independent contractors classification to California voters.

Summary of the Case: Robert Magadia v. Wal-Mart Associates, Inc.

The plaintiff in the case had no monetary loss from the technical pay stub violation. The argument in the case focused primarily on whether the plaintiff suffered any injury sufficient enough to confer standing to sue under PAGA. The only alleged harm the plaintiff suffered was the inability to confirm he was paid fair compensation for his work as agreed. However, according to the plaintiff in the case, his injury was not the main issue. He argued that under PAGA, he was entitled to enforce state law and pursue relief on behalf of workers in similar situations (the class of aggrieved workers in the case was approximately 50,000). The violation claim occurred after the company failed to identify how bonuses were calculated into their workers' hourly rate for overtime calculations.

Was the Labor Law Violation Intentional?

Another question that came up during the case was whether or not the pay stub violation was intentional, which is required by statute before assessing damages. The ruling of the Ninth Circuit could narrow the trial courts' ability to impose PAGA penalties on California employers in cases where the plaintiff has not suffered financial harm. However, inadvertent violations that seem harmless can lead to significant penalties for California employers, particularly in situations where wage statements are not fully compliant with California Labor Code.

If you have questions about California labor law violations or how employment law protects you against labor law violations, please get in touch with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Experienced employment law attorneys are ready to assist you in various law firm offices located in San Diego, San Francisco, Sacramento, Los Angeles, Riverside, and Chicago.

March 05, 2021

Workplace Retaliation: Claim Fails When Employees Age Discrimination Opposition Seen as Unclear

March 05, 2021/ Blog Author

In a recent workplace retaliation case, the claim failed when a California appeals court ruled that the employer could not possibly have been aware of their former employee's actions taken to oppose the age discrimination of a co-worker at the company.

All the Details of the Case: Susan Colborn, Plaintiff and Appellant, v. Chevron U.S.A. Inc., Defendant

Court: Court of Appeal of the State of California, First Appellate District, Division Two

The Plaintiff, Susan Colborn, is a former employee of the Defendant, Chevron. The Plaintiff alleges she worked for Chevron from 1988 until she was terminated in March 2011.

History of the Case: Susan Colborn v. Chevron U.S.A. Inc.

Colborn alleges that in January 2011, Chevron management assigned her direct report a low-performance rank - lower than what they previously agreed on. As a result, Colborn claims she contacted HR to lodge a complaint that the final ranking given to her direct report was not fair. According to the suit, the HR department advised Colborn that the performance rank would not be changed.

Details of the Case: Susan Colborn v. Chevron U.S.A. Inc.

The direct report in receipt of the allegedly unfair performance rank was supposed to be put on a performance improvement plan. However, Colborn refused to do so. She also refused to meet with HR about the issue. On February 23, 2011, Colborn received her own ranking, and it was the lowest ranking she had ever received in her history with the company (23 years of employment). On March 10, 2011, Colborn was fired.

Lawsuit Filed Claiming Wrongful Termination and Retaliation:

Colborn filed a lawsuit after Chevron terminated her employment. Plaintiff claimed that she was terminated in retaliation, which is a violation of California labor law. According to court documents, the Plaintiff alleged Chevron fired her because she complained that her direct report's performance ranking was discriminatory due to age.

The Trial Court Dismissed the Complaint:

Colborn brought her retaliation claim under the California Fair Employment and Housing Act (FEHA). The Act makes it unlawful for an employer to fire an employee because they opposed an unlawful practice. However, before the case went to trial, the trial court dismissed Colborn's complaint. So she appealed.

The Burden to Introduce Facts in FEHA Retaliation Claims:

The California Supreme Court adopted a three-state burden-shifting test for discrimination claims, the McDonnell Douglas test. The test applies to any FEHA discrimination and retaliation claims. Under the McDonnell Douglas test, Plaintiff must produce facts that a jury could use to infer discrimination occurred in the situation. Plaintiffs must show that they engaged in activities protected by FEHA, the employer took adverse employment action against them in response, and there was a causal connection between the two.

A Prima-Facie Case of Retaliation:

If the Plaintiff can present facts fulfilling the three above requirements, this is known as a prima-facie case. When the Plaintiff fulfills the burden to present the necessary facts, a presumption of discrimination arises and shifts the burden of producing evidence showing there was no discrimination onto the employer who must present facts showing they acted for nondiscriminatory reasons. The Defendant in this case successfully argued that the Plaintiff did not establish a causal link as required, and that even if they did, the case should be dismissed because the employer met its burden to establish a legitimate nonretaliatory reason for the adverse employment action. The appeals court agreed and affirmed the trial court's decision to dismiss because there was no evidence to show that the employer knew that the Plaintiff's actions were based on her belief that the employer was engaging in age discrimination against her direct report. As such, a causal connection was not established.

March 03, 2021

2020 Chipotle Case Could Have Fundamentally Changed How FLSA Cases are Litigated

March 03, 2021/ Blog Author

One of the most significant cases in class and collective litigation in 2020 was Chipotle Mexican Grill v. Scott.

Details on the Case: Chipotle Mexican Grill v. Scott

Case No.: 17-2208, 2nd Circuit

The U.S. Supreme Court weighed in on a critical issue connected to collective action under the FLSA in 2020. The court was asked to consider what it means for a putative class of workers to be “similarly situated” for purposes of being considered a collective under FLSA.

Who is “Similarly Situated” for FLSA Collective Actions?

During Chipotle Mexican Grill v. Scott, parties involved claimed there was an “intractable conflict” among the federal courts on the issue of determining who is “similarly situated” for FLSA collective actions. This question and the resulting litigation could have had ground-shifting implications. However, after the parties involved signaled their intent to settle on December 31, 2020, the court did not take up the case even though it could have fundamentally reshaped how FLSA cases, in general, are handled and litigated. Even though this particular case wasn’t litigated, 2020 saw a steady shift in the courts on the issue of defining “similarly situated” for FLSA collective actions.

The Plaintiffs: Chipotle Mexican Grill v. Scott

In Chipotle Mexican Grill v. Scott, seven named plaintiffs represented six putative classes (under Federal Rule of Civil Proc. 23(b)(3)). The plaintiffs also filed suit on their own behalf and on behalf of 516 additional individuals that opted in on a conditionally certified collective action under the FLSA (Fair Labor Standards Act). The plaintiffs alleged that the company misclassified workers as exempt in violation of state labor laws. Collective plaintiffs alleged that the company misclassified them as exempt in violation of the FLSA.

The “Similarly Situated” Issue: Chipotle Mexican Grill v. Scott

After the district court denied class certification, the Second Circuit affirmed the order denying class certification based on a lack of predominance and superiority. According to the record, the court could not find that the district court’s conclusion was outside the range of permissible decisions. However, the court did vacate the district’s court order to decertify the collective action based on a legal error. The Second Circuit Court found that the district court improperly analogized the standard for maintaining a collective action (under the FLSA to Rule 23 procedure). As the district court’s decision was based on the inaccurate analogy when they determined that the named plaintiffs and opt-in plaintiffs were not “similarly situated,” the 2nd Circuit Court vacated the order. The improper application of the “sliding scale” analogy to Rule 23 in this case improperly conflated section 216(b) with Rule 23 and the latter rule’s stricter requirements.

If you have questions about California labor law violations or how employment law protects you against labor law violations, please get in touch with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Experienced employment law attorneys are ready to assist you in various law firm offices in San Diego, San Francisco, Sacramento, Los Angeles, Riverside, and Chicago.

March 01, 2021

The “Gig” Driver Misclassification Issue Outlasted the Pandemic of 2020

March 01, 2021/ Blog Author

The outcome of some recent California lawsuits could alter how California handles issues of classification for employees and independent contractors in the gig economy.

Details About Referenced Cases:

People of the State of California v. Uber Technologies, Inc., et al

Filed: 10/22/2020 in the Court of Appeal of the State of California First Appellate District Division Four

A160701, A160706 (City and County of San Francisco Sup. Ct. No. CGC-20-584402)

Dynamex Operations West, Inc. v. Superior Court of Los Angeles County

Court: Los Angeles County Superior Court

Case No: BC332016

Rideshare Company Drivers: Employees or Independent Contractors

The California Court of Appeals upheld a trial court ruling that major rideshare companies Uber and Lyft both classify their California drivers as employees rather than independent contractors (People of the State of California v. Uber Technologies, Inc., et al.) The suit started over claims that both companies were violating California state law AB-5, which requires employers classify their workers as employees unless they can prove that the worker is "free from the control and direction of the hiring entity in connection with the performance of the work." The trial court ruled in favor of the state.

Distinguishing Between Employees and Independent Contractors:

Courts attempting to differentiate between employees and independent contractors using similar wording usually focus their determinations on the level of independence or control the worker retains compared to the employer. However, determining how much control the employer retains over their worker while performing their work is not the only factor. The issue often hinges on the individual's work itself - and whether or not it falls "outside" the hiring entity's usual course of business.

Are Drivers Performing Work Outside Uber & Lyft's Usual Course of Business?

The trial court ruled in favor of California, granting a preliminary injunction prohibiting the two major rideshare companies from classifying their drivers as independent. They found that their drivers were not performing work outside the company's "usual course" of business. Uber and Lyft appealed the trial court's decision. However, Justice Jon Streeter of the Court of Appeals upheld the lower court's decision. He stated that the drivers' misclassification would cause significant irreparable harm noting the lack of wage protections, rest periods, meal breaks, overtime pay, health insurance, etc.

Prop 22 Opposes General Push of California Case Law Toward Greater Classification as Employees:

While California case law's general direction reflects a push toward a greater classification of California workers as employees, Proposition 22 presented a challenge when California voters adopted it in the November 2020 election. This proposition counteracted AB-5. The proposition was backed by the rideshare companies and organizations supporting the classification of gig-economy workers as independent contractors instead of employees. The California Supreme Court's decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles resulted in a "presumption that a worker who performs services for a hirer is an employee for purposes of claims for wages and benefits arising under wage orders issued by the Industrial Welfare Commission." AB-5 took this presumption and codified the decision of the court. Proposition 22 presented a different definition in opposition to the presumption created by the court's findings in Dynamex Operations West, Inc. v. Superior Court of Los Angeles and the subsequent AB-5. According to Proposition 22, drivers are only considered "engaged" after picking up a passenger, delivery, etc. The definition created by Proposition 22 removes a significant amount of time previously considered to be engaged in work such as when the driver is marked as "available" for a pickup. As such, drivers cannot receive payment for this time or mileage, and they cannot accrue any other type of benefits.

In our increasingly technology-driven society, the debates for handling gig-economy workers will continue. In addition to rideshare drivers for companies like Uber and Lyft, the issue directly affects many other workers connected to different industries like Grub Hub, and Uber Eats delivery drivers, etc. The debates defining when an individual is "engaged" in work will significantly narrow the definition of when a worker should be classified as an independent contractor.

February 25, 2021

Covid-19 Pandemic Violations Posted a Significant Challenge for California Employers in 2020

February 25, 2021/ Blog Author

Many agree that the pandemic and related issues were the most significant challenge California employers faced in 2020. As we approach the end of the first quarter of 2021, Covid-19 related litigation continues to evolve along with California workplace standards. While hundreds of Covid-19 related employment complaints were filed in 2020, only a small percentage were collective actions or class actions, but this could change in 2021.

Covid-19 Pandemic Could Cause Increase in Wage and Hour Collective Actions in 2021:

Many expect a significant increase in the number of wage and hour collective and class actions in 2021 as the nation adjusts to the pandemic's fallout and the lingering effects on the public and the economy. One of the main factors for the change is the drastic increase in telecommuting during 2020. By the end of 2020, there were twice as many employees telecommuting as employees working on site. While restrictions may lessen, this scenario is not expected to revert to "normal," at least not immediately. An increase in telecommuting workers naturally leads to an increase in "off-the-clock" claims by nonexempt employees and class action wage and hour lawsuits claiming unpaid business expenses due to home office costs.

At-Risk Areas for California Employers:

Many California employers are at risk of employment law violations due to timekeeping practices and policies that are not appropriate for a virtual workplace. Many California employers who abruptly transferred in-office employees to telecommuting status during the pandemic never addressed issues of non-compliance related to employee hour tracking, rules and policies regarding off-the-clock work, and compliant practices for business expense reimbursement. Without adjusting these practices and policies, California employers will have difficulty not violating employment law.

California Employers at Risk for Wage and Hour Class Actions:

In addition to concerns regarding updated policies and procedures to address a telecommuting workforce, specific industries and types of employers find themselves more at risk for wage and hour class actions filed by on-site employees. Many on-site, essential workers subject to waiting in line for new, mandatory temperature scans may have legitimate overtime or off-the-clock claims. On-site, exempt management employees are stepping in to perform an unusual amount of nonexempt work to decrease payroll costs and cover for employees out due to sickness, etc., due to the pandemic. Many may claim the situation makes them nonexempt employees.

2021 will see the number of other pandemic-related class action lawsuits increase, as well: discrimination cases connected to which employees are selected to return after extended furloughs, claims in connection with employers requiring COVID-19 vaccinations, etc.

February 23, 2021

Jimmy John's Agrees to Pay $1.8M to Resolve Overtime Pay Dispute

February 23, 2021/ Blog Author

In recent news, Jimmy John’s agreed to pay $1.8 million to settle wage and hour claims. Employees brought form wage and hour claims against Jimmy Johns under the Fair Labor Standards Act.

Details About the Case: Jimmy John’s Overtime Litig., N.D. Ill., 2/15/21

Case Numbers: 14-CV-5509, 15-CV-1681 & 15-CV-6010

Court: Northern District of Illinois Eastern Division

The Plaintiffs in the Wage and Hour Claims Case:

Sixty-six assistant managers from various Jimmy John’s corporate-owned locations that opted into the FLSA collective will receive a settlement check from a $272,500 fund. Additionally, more than 500 Jimmy John’s managers at different independent Jimmy John’s franchisees will receive gift cards totaling $300. The Jimmy John’s gift cards are transferable and can be resold for cash. Two plaintiffs initially filed the suit in July 2014, alleging assistant store managers were misclassified, leaving them exempt from overtime pay. In 2015, the lawsuit became a collective action after numerous other suits were filed. Plaintiffs involved in the case were employed at various Jimmy Johns franchises nationwide, and all allege they were cheated out of overtime pay due to misclassification.

Seeking a Settlement to Resolve Misclassification, Wage and Hour, and Overtime Pay Claims:

The plaintiffs’ counsel submitted a motion o Feb. 15th to Judge Charles P. Kocoras of the U.S. District Court for the Northern District of Illinois seeking $1.1 million in attorneys’ fees, $250,000 in litigation costs, and $2,500 service award for each named plaintiff in the case. The settlement proposal was intended to resolve three consolidated collective actions alleging FLSA violations stemming from the alleged misclassification.

February 15, 2021

According to the California Supreme Court, Dynamex Applies Retroactively

February 15, 2021/ Blog Author

When the Ninth Circuit asked the question, “Does your independent contractor ABC test in Dynamex Operations West, Inc. v. Superior Court (Dynamex) apply retroactively?” in Vazquez v. Jan-Pro Franchising International (Vazquez), the California Supreme Court’s answer was “Yes.”

The Court’s Conclusions in the 2018 Dynamex Case:

In 2018, in relation to the Dynamex case, the Court concluded that under California wage orders, workers are presumed to be employees entitled to the protections afforded by wage orders, and that an employer can avoid this presumption for independent contractors if they are able to establish certain standards.

Standards Required to Classify a Worker as an Independent Contractor:

In order to avoid the presumption of employee status and wage order protections, employers must establish that the worker is an independent contractor if:

The worker is free from the employer’s control and direction when it comes to completing their work (both under the employment contract and in fact),
the worker performs a job that is outside the employer/company usual course of business, and
the worker is usually engaged in a trade that is independently established and the same type of work they perform for the employer.

The “ABC Test” detailed above was codified into California state law by Assembly Bill 5, known as AB 5.

Before the ABC Test California Employers Used the Borello Test:

Prior to Dynamex and the ABC Test, California courts and employers used a different, multifactor test referred to as the Borello Test (S.G. Borello & Sons, Inc. v. Department of Industrial Relations). The Borello test focused on how much control an employer had over a worker based on multiple factors. The more control the test indicated an employer held over a worker, the less likely the worker would be classified as an independent contractor.

The ABC Test is More Stringent than the Previously Used Borello Test:

The ABC Test provides a stricter set of standards allowing a California worker to be appropriately classified as an independent contractor. Since the standards set by the new test are more strict, many California employers argue they shouldn’t be held to the newer standard in misclassification lawsuits predating the Dynamex opinion that set the standard. However, the California Supreme Court disagreed with the Vazquez case. The court concluded that there was no reason to depart from the generally accepted rule that judicial decisions are considered retroactive.

If you need to discuss misclassification or if you need to file a California misclassification lawsuit, please get in touch with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Experienced employment law attorneys are ready to assist you in any one of various law firm offices located in San Diego, San Francisco, Sacramento, Los Angeles, Riverside, and Chicago.

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