Rounding Policies Are Legal Under California Labor Code

Last week, the California Supreme Court declined to review a challenge to an appellate decision on the lawfulness of timekeeping policies that round employee punch in and out times.  The case, See’s Candy Shops, Inc. v. Superior Court, provides key guidance to California employers with rounding policies, because no state statutory authority or case law previously authorized the practice.  Under federal law, on the other hand,  an employer’s practice of rounding a worker’s starting and stopping times to the nearest 5 minutes or to the nearest tenth or quarter of an hour is permissible as long as the practice averages out over a period of time so that the worker is compensated for all time worked. 

In See’s Candy Shops, Inc. v. Superior Court, the employer had a timekeeping system that rounded in and out punches up or down to the nearest tenth of an hour.  The Court held that a rounding policy is permissible if it is fair and neutral on its face, and does not result in the failure to properly compensate the employee.  In reaching its holding, the Court relied on the federal rounding standard (which California’s Department of Labor Standards Enforcement also follows).

Employers with rounding policies should ensure that their policies are in writing and communicated to all employees, and do not operate to deprive employees of wages for all time worked.

- Amy Durgan

Will The State’s Minimum Wage Go Up?

In President Barack Obama’s 2013 State of the Union address, he called on Congress to raise the Federal Minimum Wage to $9.00 per hour.  Currently, California’s Minimum Wage is $8.00 per hour with a few exceptions.  If this new Federal law is passed, all California employees will be entitled to earn the new national Minimum Wage of $9.00 per hour, representing an increase of 12.5%. 

While it is unlikely that any minimum wage increase would be passed through a divided Congress, the President’s comments may prompt California’s Legislature, controlled by a Democratic super-majority, to seek a similar increase.  Currently, California has the lowest minimum wage of any state on the West Coast (though the City of San Francisco has a minimum wage of $10.24/hour).  Late last year, a bill was introduced in the Assembly which would raise the minimum wage to $9.25 per hour by January 1, 2016, but it has not been passed.  We will keep you posted on any developments at the state and federal level.  

- Olivia Perry

President Renominates Two To The NLRB

As we previously posted, the U.S. Court of Appeals for the D.C. Circuit found that President Obama’s recess appointments of two union-friendly members to the National Labor Relations Board was unconstituional.  Although the Administration has expressed its disagreement with the decision, it nonetheless renominated those members — Sharon Block (a former aide to Sen. Ted Kennedy) and Richard Griffin (former General Counsel to a national union) –  to the Board.

In this polarized Congress, the nominations are not expected to go far.  The Republican minority in the Senate has indicated its willingness to stall any union-friendly Board nominations and to filibuster any nominations that somehow make their way to the floor. 

Barring some compromise or a change in the Senate rules, you can expect more of the same from the Board in the President’s second term. 

- Dan Handman


“50 Shades Of Grey” Book Groups At Work?

We’ve all been there before.  It’s a normal day at work, you have a cup of coffee, sit down to the computer and then out of the blue someone asks you to join their 50 Shades of Grey book group (what ever happened to Jane Austen?).  HK partner Glen Kraemer was interviewed at length in Forbes magazine about the introduction of sexual content in the workplace, as with 50 Shades book groups at work.  Have a look – you will definitely find it interesting.

Internal Investigations: “The Good News Is That We Concluded That You Didn’t Do Anything Illegal; The Bad News Is That You Lied To Us During The Investigation, So You’re Fired.”

As courts and agencies battle over the standards applied to internal investigations, California courts have surprisingly sided with employers.  In a recent case, the California Court of Appeal found that while the FEHA protects an employee against retaliation based on his participation in such an investigation, it “does not shield an employee against termination or lesser discipline for either lying or withholding information during an employer’s internal investigation of a discrimination claim.”

In McGrory v. Applied Signal Technology, Inc., the employer hired an outside attorney to conduct an independent investigation of a complaint made by Dana Thomas, who alleged that her supervisor,  John McGrory, had unfairly put her on a performance improvement plan (PIP) based upon her gender and sexual orientation.  The attorney-investigator concluded that McGrory placed Thomas on a PIP in the good faith belief that her performance was substandard, but he also found that McGrory had violated the employer’s policy against making jokes about race and sex. 

The attorney-investigator’s conclusions about McGrory’s conduct during the investigation were troublesome.  In particular, McGrory refused to turn over written performance appraisals he had done on other, similarly situated employees and he refused to identify other employees who had supposedly complained about Thomas.  McGrory was terminated based on the investigator’s report, namely his lack of cooperation with the investigator and his inappropriate jokes. 

McGrory sued for wrongful termination, claiming specifically that he was fired because he participated in an internal investigation. The trial court granted the employer’s motion for summary judgment, and the Court of Appeal affirmed.  The court explained that, although the FEHA prohibits retaliation against an employee for participating in an internal investigation, such “participation” does not include lying to the investigator or withholding requested information, and that an employer can terminate an employee for such actions.   

The McGrory decision also re-affirmed two principles of effective internal investigations – principles that have been highlighted in other California cases recently:   

(1) In an internal investigation, an outside attorney is held to a “good faith” standard.  In other words, an outside attorney’s conclusions need not be correct, but have to be “objectively reasonable and based upon good faith.” See also Joaquin v. City of Los Angeles 202 Cal.App.4th 1207 (2012); Richey v. AutoNation, Inc., 210 Cal. App. 4th 1516 (2012);  Cotran v. Rollins Hudig Hall International, Inc. 17 Cal.4th 93 (1998).

(2) So long as outside counsel conducts an investigation in “good faith,” a court will be unlikely to second-guess personnel decisions made by the employer as a result of the investigation.  As this court stated, “we are not concerned with the wisdom of the termination, just with whether the Employer has proffered nondiscriminatory reasons.”

The McGrory decision serves as good guidance for one of the other central principles of internal investigations:  the purpose of the investigation is not to determine whether the law has been violated, but rather whether an employer’s policies have been.   The plaintiff’s “jokes” here may well have been found by a court to be isolated or sporadic, but the question the outside attorney investigating the complaint faced was not what a court would do but whether the employer’s zero tolerance policy had been violated.

- Monte Grix (Los Angeles)

The NLRB Is Pro-Union? What Makes You Say That?

In recent years, the NLRB has earned a reputation for issuing pro-union decisions.  Whether this is fair is an open question – but the NLRB’s January 30, 2013 Advice Memorandum concerning Wal-Mart’s unfair labor practices charge against the United Food & Commercial Workers International Union (“UFCW”) will only strengthen this perception.  In November 2012, Wal-Mart had filed the charge against the UFCW alleging that the union, and its subsidiary groups OUR Wal-Mart and Making Change for Wal-Mart (actually called “Making Change at Wal-Mart), had violated the National Labor Relations Act (“the Act”) by picketing in front of many Wal-Mart stores for more than 30 days without filing a petition to be recognized as the employees’ bargaining representative or to organize a bargaining unit.  Such conduct would constitute a serious violation of the Act.

While the NLRB was considering this charge, the UFCW contacted the NLRB’s Office of General Counsel and claimed that it was not the union’s intent to try to organize Wal-Mart’s workers collectively; rather, its intent was to “help [Wal-Mart]’s employees as individuals or groups in their dealings with [Wal-Mart] over labor rights and standards…” (in spite of the fact that the UFCW has been engaged in a nationwide, multi-year campaign to unionize Wal-Mart workers!).  In making this statement to the NLRB, UFCW admitted that OUR Wal-Mart and Making Change at Wal-Mart were its creations and that it had in fact organized the illegal picketing outside Wal-Mart stores.  In spite of these admissions, the NLRB accepted UFCW’s explanation on its face, as well as several weak commitments from the union promises to put a disclaimer on OUR Wal-Mart and Making Change at Wal-Mart’s websites that those organizations did not have any organizational objectives, not to engage in any further picketing or similar activity for 60 days, and to mail a notice to the members of its subsidiaries that there was no organizational objective.  In exchange for these promises, the NLRB’s Office of General Counsel directed the Regional Office processing the charge to hold the charge in abeyance and dismiss the charge, once the UFCW and its subsidiaries fulfilled their commitments.

That the NLRB’s punishment was ineffective is best exemplified by a posting on Making Change at Wal-Mart’s website.  In that posting, which is actually made in the name of its sister organization OUR Wal-Mart, the group says:

In the resolution, OUR Walmart agreed to refrain from “picketing” or other actions that can be construed as “picketing” for a 60 day period.  This does not affect or limit OUR Walmart members’ and supporter’s ability to otherwise protest, demonstrate against or strike because of Walmart’s unfair practices and poor record on labor rights and standards or otherwise help Walmart employees as individuals or groups in their dealings with Walmart over such issues and their efforts to have Walmart publically commit to adhering to labor rights and standards.  

The groups will not picket for 60 days, but may otherwise protest, demonstrate or strike during that time period?  Had an employer made written such a post, it likely would have received some nasty correspondence from the NLRB.  No word on whether the Board has contacted Making Change at Wal-Mart about its post. 

- Rob Flemer (Los Angeles)

Harris v. City of Santa Monica: Great For Employers, But Will It Last?

Today, the California Supreme Court issued the much-awaited decision in Harris v. City of Santa Monica, a case which tested the viability of the so-called “mixed motive” defense for employers in a discrimination case.  Our e-Alert on the case can be found here.

In a 6-0 opinion, the court found that an employer had a complete defense to all claims for damages if it could establish that its decisions were motivated by both legitimate and discriminatory reasons.  The court also found, however, that employees could pursue claims for injunctive or declaratory relief and their attorneys could recover their fees in appropriate cases.

Although it’s a major win for employers, the real question is whether the decision will stand the test of time.  In 1989, the U.S. Supreme Court issued a similar decision as to “mixed motives” under Title VII, allowing the defense as a complete bar to discrimination claims, only to have a Democratic Congress amend the statute two years later.  With Democrats holding a super-majority in both the State Assembly and the Senate and a Democratic governor, one could reasonably question whether the Legislature will follow that lead and amend the FEHA to do away with the mixed motive defense.  Time will tell. 

- Dan Handman

California Employees Lose An Important “First To File” Case Involving Non-Compete Agreements

Because of California’s employee-friendly laws on agreements containing restrictive covenants, whenever possible, employers include foreign state choice of law and forum selection provisions.  This frequently leads to a proverbial “race to the courthouse” with the first filing party arguing that its case should be heard and the later filed case stayed or dismissed.  This artifice – sometimes the difference in hours or minutes — has left the enforceability of such agreements uncertain. 

Enter the recent decision of the Appellate Division of the Supreme Court of New York County (the state’s intermediate appellate court) in the matter of Aon Risk Services v. Cusack.   In that case, New York court affirmed the grant of a preliminary injunction to Aon, an insurance company, enjoining a former sales employee who had worked for the company in California for 15 years from violating a non-compete agreement that had a New York forum selection clause.  The former employee unsuccessfully argued that the action should be stayed or dismissed because he had filed a declaratory judgment action in California about the enforceability of the same agreement a few days earlier.  But, the New York court was not buying the argument.  It attached no significance to the fact that the former employee had lived in California for 15 years and instead enforced the forum selection clause.

The long term effect of this important decision remains to be seen.  On the one hand, California courts will enforce forum selection clauses but they do place significant weight on forum non conveniens arguments – namely that an individual defendant does not have the resources to litigate in a foreign jurisdiction.  And, California courts have been very assertive in enforcing the State’s public policy disfavoring non-compete agreements as an unlawful  “restraint on trade.”  These often conflicting public policies have left an uncertain legal landscape for California employers.

Will courts outside of California follow this lead and take a dim view of California public policy positions?  Will California courts continue to favor forum non conveniens arguments advanced by employees in these cases?  Will the California courts stand down when other state courts enforce forum selection clauses.  We will keep you informed over the next several months of any changes and strategies moving forward.  In the interim, employers would be well advised to include foreign forum selection clauses, particularly if there is a nexus to New York, in restrictive covenants wherever possible. 

- Greg Glazer (Los Angeles)