SUPREME COURT CLOSES OFF CLASS ACTION FORUM SHOPPING TACTIC

In 2005, Congress enacted the Class Action Fairness Act, or “CAFA” as it is popularly known. CAFA is a piece of tort reform legislation.  It was enacted against the backdrop of a number of notorious state jurisdictions where a large proportion of class actions were filed and where huge verdicts against corporate defendants were rendered.  CAFA prevents this type of state court “forum shopping” by granting jurisdiction to the federal courts over class actions involving more than 100 class members and more than $5 million in controversy, among other requirements.  Under CAFA, defendants have the ability to remove class actions meeting these requirements from state court to federal court.  Predictably, CAFA has inspired creative approaches by plaintiffs’ counsel to avoid federal removal.  One frequently employed approach is to concede that less than $5 million is being sought in the action.  On March 19, 2013, the U.S. Supreme Court closed off that approach.

In Standard Fire Insurance v. Knowles, the plaintiff had filed a putative class action against a large insurance company in an Arkansas state court, claiming that property losses paid by the company unlawfully failed to include general contractor fees.  The complaint alleged that the amount in controversy in the case was below $5 million, and for good measure attached a sworn stipulation to that effect.  The insurance company removed the case to federal court under CAFA.  The plaintiff objected, citing the stipulation.  The federal court remanded the case back to state court, even though the evidence showed that potential damages exceeded $5 million, because it considered the plaintiff’s stipulation binding.  The case was eventually taken up by the U.S. Supreme Court. 

In a unanimous opinion, the Supreme Court reversed.  It held that that before a class action is certified as a class action, any stipulation about damages the plaintiff makes cannot be binding.  The reason is that prior to class certification, the named plaintiff does not represent the class.  While that plaintiff can stipulate as to his own damages, he does not have power to bind anyone else in the class as to their damages.  Rather let a stipulation control, courts must examine the evidence and add up the value of all potential class claims to determine the amount in controversy. 

What This Means For You:  Despite the relatively obscure jurisdictional question in this case, the Standard Fire decision will have a major impact on California employers.  Plaintiffs’ counsel prefer California state courts for wage and hour class actions, in part because it is easier to obtain class certification than in federal court.  For many years, wage/hour class action plaintiffs have attempted to prevent removal to federal court through the same tactic used in Standard Fire:  alleging in the complaint that less than $5 million was being sought and/or was “in controversy.”  That tactic was generally successful because the Ninth Circuit had set a very high bar for establishing amount in controversy under CAFA.  In a 2007 case called Lowdermilk v. U.S. Bank Nat’l Ass’n, the Ninth Circuit had held that where the complaint asserts an amount below the $5 million threshold, the defendant must establish with “legal certainty” that the amount in controversy exceeds $5 million to trigger CAFA.  Standard Fire effectively overrules Lowdermilk.  In doing so, it gives California employers new opportunities to remove appropriate cases to federal court, thereby enhancing their ability to defeat certification and stop wage/hour class actions in their tracks. 

Felicia R. Reid

 

When It Comes To Employee Privacy, What You Say Is As Important As What You Do

This week’s California Court of Appeals decision in Ignat v. Yum! Brands, Inc. is a reminder to employers to be careful what they say about employees’ private matters.  Yum! Brand, the parent company to Taco Bell, Pizza Hut, and KFC, employed Ignat in its real estate title department.  Ignat took a medical leave of absence to care for her health.  She alleged that upon returning to work, her supervisor informed her that she told everyone in the department that Ignat was bipolar.  Ignat claimed that her coworkers thereafter avoided and shunned her, and one co-worker asked her supervisor if she was going to “go postal” at work.  A few months later, Yum! Brands terminated Ignat’s employment. 

Ignat subsequently sued – alleging a single cause of action for common law invasion of privacy by public disclosure of private facts.  Yum! Brands, Inc. obtained summary judgment of Ignat’s lawsuit on the technicality that Ignat did not have any documents showing a disclosure of private facts.  In fact, the trial court was correct that a claim for invasion of privacy required proof of a statement made in a document; an oral statement would not suffice.  Apparently, this anachronism dated back to the development of the common law in earlier times where the only concrete proof of such a statement was a writing. 

The California Court of Appeals reversed the dismissal, holding a verbal disclosure of private facts is enough to violate the common law right to privacy.  The court stated any rule requiring documents to show a violation of the common law right to privacy is outdated as verbal disclosures of private matters can be just as harmful.  It did away with the seemingly irrational requirement that a writing exist to prove the claim.

But, it did leave Yum! Brands with one other possible means of defeating the case.  The court noted that “liability for the common-law tort requires publicity; disclosure to a few people in limited circumstances does not violate the right . . . .”  So, to prevail, Ignat is going to have to show that there was a wide disclosure of her medical condition, not merely disclosure to a few people. 

Interestingly, a claim under the California constitutional violation of privacy (which, for some reason, Ignat did not allege) focuses on institutional record-keeping and does not require a wide dissemination of private information.  Therefore, it is possible that constitutional privacy claims require a writing component. 

This case is an example of why it is important for employers to ensure safekeeping of employees records and train their managers regarding employees’ privacy.  Management employees should be trained on what information they must keep confidential and that they should only disclose such information to other management employees who have a legitimate, business-related need for the information and even then, everyone should know not to disclose the information any further.   

The court’s decision is available here

- Alison Hamer (Los Angeles)

U.S. Supreme Court To Decide Whether Section 1983 Suits Are Precluded By The ADEA

The U. S. Supreme Court has granted certiorari in an important public sector employment case.  Specifically, the Supreme Court will decide whether an employee of a state or local government can bring suit for age discrimination under 42 U.S.C. §1983 (Section 1983) to enforce the Equal Protection Clause of the Fourteenth Amendment  or whether such suits are precluded by the Age Discrimination in Employment Act (ADEA). 

The decision will be significant to public sector employers for at least five reasons:

(1)  State employees cannot recover damages against their employer under the ADEA because such claims are barred by sovereign immunity, but there is no such bar under Section 1983.

(2)  The ADEA does not allow for suit against individual defendants, but Section 1983 does.

(3) The ADEA expressly limits or exempts claims by certain individuals, including elected officials and certain members of their staff, appointees, law enforcement officers, and firefighters, but Section 1983 contains no such limitation.

 (4)  The ADEA requires employees to file an administrative charge of discrimination with the EEOC and holds aggrieved employees to strict statutes of limitation, but Section 1983 allows employees direct access to courts without those hurdles; and

 (5) Section 1983 allows for potentially unlimited damages whereas suits under the ADEA are subject to a damages cap.

Simply, Section 1983 opens a huge can of worms for public sector employers.

For you history buffs out there, Section 1983 was enacted during Reconstruction by providing a remedy to individuals denied constitutional rights by states or “under color of state law.”  The purpose of Section 1983 was to provide a remedy for individuals aggrieved by a state where none previously existed.

Before last August, every federal appellate court to address the issue, including the Ninth Circuit, had found that the ADEA precluded a claim for age discrimination under Section 1983.  Generally speaking, when a statute allows for a “comprehensive remedial device,” claims under Section 1983 are precluded.  All of the appellate courts to have considered this issue had found that the ADEA offered a comprehensive remedy to aggrieved state employees and thus refused to allow claims under Section 1983.

Last August, however, in Levin v. Madigan, the U.S. Court of Appeals for the Seventh Circuit became the first appellate court in the country to find that the ADEA did not preclude a claim for age discrimination under Section 1983.  Although it acknowledged that it was a “close call,” the Seventh Circuit found that the ADEA did not preclude a claim to enforce a constitutional provision, but rather only precluded a claim arising out of a statute.

The Supreme Court does not tip its hand as to why it took up a case or how it is leaning, but to be sure, it took this case to resolve the split between the circuit courts.  The Supreme Court has a mixed record on Section 1983 preclusion cases, but recently it has found claims to be precluded in a variety of contexts,.  But, it recently found that Title IX of the Education Amendments of 1972, which prohibits discrimination by educational institutions, did not preclude a claim for damages under Section 1983 claim despite Title IX’s broad remedial scheme.  The case should be decided in the Fall Term of 2013 and we will keep you posted with any updates. 

 - Dan Handman

Is It Fair to Have a Chair? Is It Sweet to Have a Seat?

If only class actions were as easy as a Dr. Seuss book.  It has been several years since “suitable seating” cases gained popularity among the plaintiff’s bar, leaving employers in California to wonder, what’s next.  Fortunately, as a recent ruling from the U.S. District Court for Central District of California demonstrates, some courts share that sentiment, particularly with these kinds of case. 

As employers now know, Section 14(A) of Wage Order No. 4 states that “[a]ll working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.”  This requirement to provide “suitable seats” is not new—it has been on the books since 1913.  What is new is the Private Attorneys’ General Act or “PAGA”.  Enacted in 2003, PAGA permits private parties to seek civil penalties for violations of the California Labor Code and related regulations.  In 2010, seven years after PAGA came into effect, California courts held that “suitable seating” claims could be asserted through PAGA. 

The California Supreme Court has made it easy to assert PAGA claims, finding that they are not class actions and, as a result, it is not necessary to meet the sometimes onerous procedural requirements of a class action.  See Arias v. Superior Court (2009) 46 Cal. 4th 969.  In federal court, however, there is a difference of opinion: some federal courts subject PAGA actions to the rigorous procedural hurdles of a class action. 

In a recent case, a federal court showed just how dangerous those procedural hurdles can be for plaintiffs in PAGA actions.   In Henderson et al. v. JP Morgan Chase Bank, the plaintiff sought to certify a class of 8,500 bank tellers employed at Chase branches in California, but the court refused to allow it.  Ultimately, the judge found that there was not sufficient “commonality,” in order to satisfy a class action – namely that there were not common questions of law and fact.  The 2011 decision of the U.S. Supreme Court in Wal-Mart Stores, Inc. v. Dukes added this important wrinkle:  “commonality” does not mean just common questions of fact and law, but questions which are capable of providing a common answer that make class treatment sensible and efficient.  Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2548 (2011). 

Here, the court ruled that there was a slew of evidence that made clear that a “common answer” would not be forthcoming:  different subclassifications of tellers, different duties for such tellers, different physical configurations from one branch to another, and different demands from location to location based upon the volume of business, i.e., how busy the branch was.  Because of those variables, the court found this case could not proceed as a class action. 

Takeaways

The upshot, then, is this:  if your employees are presently not provided with seats, you should ask if the work they do “reasonably permits” them to sit.  Obviously no blanket statement can be made in this regard.  Depending on the business, one job position would “reasonably permit” sitting while another would not.  What is clear, however, is that a thoughtful analysis is warranted, and that employers cannot simply continue to have employees stand because that is that way it has been done since the dawn of time. 

The second takeaway from Henderson is that, for purposes of avoiding a potential class certification, individual inquiries regarding sitting or not sitting are a good thing.  Although not conclusive, a company-wide policy against such workplace seating is the type of evidence that can tip the scales toward class certification.   

One big caveat:  as explained at the outset, whether one is litigating in federal or California State court, at least for the present, makes a substantial difference.  If an employer is forced to defend itself in a California State court, all of the above-discussed class certification issues go away.  If an employer is defending itself in federal court, these class action issues become paramount.  Eventually, there will be Ninth Circuit authority to guide the parties in such cases, but for the present, defending a “suitable seating claim” harkens the old real estate adage: “location, location, location.” 

- Monte Grix

Did You Know That ObamaCare Also Protects Whistleblowers?

Another whistleblower regulation has hit the books that may snare the unwary employer.  The federal Occupational Safety and Health Administration (OSHA) recently published an interim final rule governing the handling of whistleblower retaliation complaints under the Affordable Care Act, President Obama’s signature health care law (which some call ObamaCare).   

Many employers are likely unaware that the ACA includes a provision that allows employees to bring retaliation and whistleblower claims against their employers.  While the ACA is primarily aimed at decreasing the number of uninsured Americans and reducing health care costs, it also contains protections for whistleblowing employees who report to their employer, the federal government, or state attorney generals any alleged consumer protection violations of the ACA and are thereafter subjected to an unfavorable employment action.  Employers cannot retaliate against employees who receive a federal tax credit to buy insurance through their employer or who participate in a future health insurance exchange to offset health care costs.  And, employers cannot take an unfavorable employment action against employees who complain about the denial of health coverage to those with pre-existing conditions or the imposition of lifetime limits on insurance coverage.  Prohibited unfavorable employment actions include termination, reducing pay or hours, demotion, denial of benefits, denial of overtime, failure to promote, and making threats.  Those assisting with any proceeding under this law, such as witnesses or those interviewed by OSHA, are also protected by the retaliation provisions. 

An aggrieved employee must file a retaliation charge with OSHA within 180 days.  Once OSHA receives a charge of retaliation, it will determine if the employee reasonably believed that his employer violated the law when the employee blew the whistle.  OSHA will require that the complaining employee acted in good faith and actually believed that the conduct at issue violates the ACA.  The agency will examine if the employee acted in good faith by considering the knowledge available to a reasonable person in the same factual circumstances with the same training and experience as the aggrieved employee.  As is the case with whistleblowing cases under comparable employment laws, an employee does not need to demonstrate that the conduct complained of actually constitutes a violation of the law. 

OSHA will dismiss a whistleblower complaint in the preliminary investigation process if (1) the employee fails to show that the protected activity (either the complaint or the employee’s exercise of the ACA’s means to control healthcare costs) was a contributing factor in the unfavorable employment action; or (2) the employer rebuts the employee’s claim through clear and convincing evidence that it would have taken the same adverse action absent the protected activity.  The clear and convincing standard is a high burden to meet.   If OSHA pursues the case beyond its initial investigation, the employee must prove that the alleged protected activity was a contributing factor (or, any factor, alone or in connection with other factors tends to affect in any way the outcome of the decision) in the alleged adverse action.  Once the employee meets this burden, the employer must prove by clear and convincing evidence that it would have taken the same action in the absence of the protected activity in order to avoid liability.   Should OSHA find a violation, the employer must make the employee whole, including back pay, reinstatement, or other relief the administration finds necessary.  If a party disagrees with OSHA’s findings, they may appeal to the Department of Labor for a hearing before an administrative judge.   Litigation in federal courts is still feasible, however, as the ACA gives the employee the right to file a complaint in United States District Court if OSHA does not issue a final agency order within 210 days from the date the complaint is filed or 90 days after the employee receives OSHA’s findings. 

OSHA’s rule is effective now, but may be revised following a 60-day window for public comments.  This regulation only adds to the numerous protections already afforded whistleblowers under discrimination, safety, and wage and hour laws, to name a few.  Employers should be mindful of this addition and be certain that any adverse employment action does not stem from an employee’s complaint about violations of the ACA, or their use of the insurance credits afforded by ObamaCare.

- Kristin Oliveira

California Supreme Court Will Decide The Scope Of The “Honest Belief” Defense Under The CFRA

The California Supreme Court has agreed to review a lower court’s decision which prohibited the so-called “honest belief” defense used by California employers in response to claims under the California Family Rights Act (CFRA).  The high court’s review is notable because California courts have permitted employers to assert the “honest belief” defense in discrimination cases under the Fair Employment and Housing Act (FEHA).

In Richey v. AutoNation, Inc., the California Court of Appeals rejected an employer’s defense that it terminated an employee on CFRA leave based on an “honest belief” that he had lied about a back injury. In particular, while the plaintiff was on an approved leave, the employer dispatched another employee to conduct surveillance, and in the process the plaintiff was observed working in a restaurant and doing all sorts of physical activities may have gone beyond the restrictions imposed by his doctor.  The employer did not, however, do any further investigation of the incident or make any effort to speak to the employee or his doctor before firing him.   

The issues in the litigation of the matter was whether the employer’s “honest belief” that the employee had exceeded his doctor’s restrictions was enough to satisfy its burden of proof under the CFRA.  Although the CFRA allows an employer to assert a defense that reinstatement was denied because the employee lied about the need for leave, the Court of Appeal found that an “honest belief” as to that reason was not sufficient. 

This has proven to be a tricky issue for the courts.  Under the FEHA, an employer’s burden is merely to offer a “legitimate business reason” for terminating an employee and the employee must offer proof of “pretext,” namely that the employer’s offered reason is a cover up for unlawful discrimination.  In applying that so-called burden shifting analysis, the Court of Appeals has adopted the honest belief test, finding that “it is the employer’s honest belief in the stated reasons for firing an employee and not the objective truth or falsity of the underlying facts that is at issue in a discrimination case.”  On the other hand, federal courts have been split as to whether the federal Family and Medical Leave Act (on which the CFRA is premised) allows for such a defense – the Seventh Circuit allows such a defense, but the Ninth Circuit does not. 

The statute itself offers little guidance; notably, the honest belief defense is not mentioned anywhere in the statute.  But, by the same token, it is not codified anywhere in the FEHA and the courts have been allowing employers to assert the defense for many years.  

Ultimately, the decision may turn on the unique nature of the rights afforded by the CFRA and the FMLA.  In particular, the CFRA affirmatively requires employers to provide qualified employees with up to 12 weeks of leave and makes it so that an employer, not an employee, bears the burden of justifying the decision to terminate an employee who is on an otherwise approved leave.  By contrast, cases dating back nearly 40 years make it clear that under discrimination statutes, an employee always bears the burden of proving that he was the victim of unlawful discrimination. 

This is a scenario which we see all the time: one employee observes another employee on leave for a supposedly debilitating condition playing softball, repairing his car, doing housework or something else which appears to exceed what his doctor has allowed.  Don’t end your investigation there – conduct a full investigation and especially make an effort to talk to the employee so you can confirm if the employee really was exceeding his doctor’s limitations, whether those limitations have changed and if based on those changed circumstances, he is ready to return to work.  The more fully developed your investigatory record, the more likely a court will be to uphold it – regardless of what the ultimate decision in Richey (which we may not see for at least a year). 

- Dan Handman

Just When You Thought The FMLA Could Not Get Any More Complicated . . .

On March 8, 2013, the Wage and Hour Division of the U.S. Department of Labor’s Final Rule implementing the 2010 amendments to the federal Family and Medical Leave Act (“FMLA”) takes effect.  Keep in mind that Final Rules do not change the law, they simply explain it better and, as we all agree, the FMLA could definitely use greater explanation.  With the roll out of this Final Rule, the DOL had an opportunity to clean up some issues with its 2008 regulations and to update the Final Rule it issued in 2008 to track the 2010 amendments to the FMLA.

The biggest changes of which you should be aware are that:

  1. Employees who request qualifying exigency leave to spend time with military members on Rest and Recuperation may now take up to a maximum of 15 calendar days, which is up from the previous five days of leave in the 2008 regulations.
  2. The DOL has replaced the term “covered military member” with “military member” as members of the National Guard, Reserves, and Regular Armed Forces are all now covered by the amended FMLA.
  3. Protections for veterans are also laid out in the Final Rule.
  4. “Active duty” now requires the military member’s deployment to a foreign country.
  5. The seven categories of care that qualify for exigency leave have been expanded to include parental care leave, so that employees can now take leave to care for parents in the military.
  6. Pre-existing conditions aggravated by service are now included as qualifying serious injuries or illnesses.

If you updated your handbook to incorporate the 2010 FMLA amendments, you should not need to do anything further at this point, but if you are the cautious type, resting easy at night might be worth a little time with your favorite HK lawyer.

For those who want their information straight from the horse’s mouth (or the DOL, in this case), you can visit the DOL’s website on the Final Rule that contains additional links to helpful information about the Final Rule such as a summary of major provisions, a FAQ list, and fact sheets.

- Kirstin Muller

Another “Guns in Trunks” Bill Enacted in Favor of Weapons in the Workplace

Over the last several months, it is harder to determine which is more frequent – incessant news headlines concerning the latest workplace or school massacre involving easy access to guns, or yet another state that has come out in overwhelming support of those who wish to take their weapons to work, over the cautions proposed by a varied array of employers voicing safety concerns.  As my partner Dan Handman observed in his excellent article on gun laws in the United States [link], workplace homicides are at least three times as likely to occur in those workplaces where guns are permitted on employer premises; yet, state legislative activity continues in support of “parking lot” laws, culminating at the end of 2012 with 17 states allowing for at least some right to possess a weapon on employer premises.

Make that 18 states.  Last Thursday, Tennessee was the latest to declare that state residents who hold handgun carry permits will be able to take those handguns to work as long as they are kept locked in their cars on the employer’s premises.  This “safe commute” bill (more accurately described as the “guns in trunks” law) overcame the lobbying of the Tennessee Chamber of Commerce & Industry, and large employers, including Volkswagen.  This is a direct reversal of prior law that permitted any public or private employer to prohibit possession of weapons, including guns locked in vehicles, anywhere on their property.  

Republican state representative Jeremy Faison, sponsor of the legislation, explained that “the least we can do is allow them [the “400,000 law-abiding citizens” who have obtained handgun carry permits] to keep this gun locked in their car as they go to work and carry on their daily lives in the state of Tennessee.”  This reasoning conjures up images of highway shoot-outs, with well-armed residents defending themselves against bandits preying upon otherwise vulnerable commuters simply trying to get to their jobs. 

But while the image may invoke a sad, bemused chuckle, the realities – and limitations – of guns in the workplace as a security tool are all too apparent.  As part of my workplace violence prevention/threat management work, I have had the unwelcome task of being brought in by an employer, post-homicide, to review forensic investigations.  All too often, during the crisis, a well-intentioned employee, caught up in the mayhem of an active shooter, has taken that permitted gun from their vehicle and drawn down on the murderous individual, letting loose several rounds.  Sadly, however, these understandably frantic efforts are rarely successful in stopping an individual who has moved from “troubled” to “troubling,” who over a significant amount of time has traveled down the pathway to ultimate violence; far more often than not, that well-meaning gun owner becomes another victim of that horrifying ordeal. 

If only these states would invest the same legislative initiative and effort into workplace violence prevention educational mandates, and enhanced mental health programs, we would be able to make true progress against the plague of workplace and campus violence.  If only…

- Glen Kraemer

Dan Handman Published in L.A. Daily Journal On Guns In The Workplace

After the massacre at Sandy Hook Elementary, the issue of gun control rose to the forefront of the political debate.  While legislators debate assault weapons and magazine cartridges, what went largely unnoticed was the fact that employers in 17 states are prohibited from keeping employees from bringing guns to work.  Unlike most other gun control legislation which must go through a divided Congress, the issue of guns in the workplace is one which the Obama Administration could tackle on its own. 

HK Partner Dan Handman addressed the issue of guns in the workplace in a recent article published in the Los Angeles Daily Journal.  You can read the article here and contact Dan at dhandman@hkemploymentlaw.com.