Employment Law

Manatt’s Employment and Labor Practice Receives Ratings for Excellence in Chambers USA 2015

Manatt was ranked as a leading Employment and Labor law firm in California by Chambers USA: America’s Leading Lawyers for Business.

Beyond the practice ratings, Manatt partners Rebecca Torrey and Alan Brunswick were individually ranked as leading lawyers.

Coming Soon to an In-Box Near You: An EEOC Charge

Why it matters

Employers, take note: the Equal Employment Opportunity Commission (EEOC) has initiated the rollout of its electronic complaint program, the first step in moving toward an all-digital system of filing charges with the agency. The “ACT Digital” pilot program began earlier this month in 11 of the agency’s field offices (including the San Francisco and Charlotte districts). Instead of a paper form for EEOC charges, employers will receive an e-mail notifying them that a charge has been filed containing a link to an online portal. Once logged in to the secure portal, an employer can view and download the charge, submit representation information and position statements, review and respond to the invitation to mediate, and otherwise communicate with the EEOC. The agency intends for all field offices to be participating in the ACT Digital program by October 2015. Employers should ensure that the agency has the correct e-mail address for the company’s EEOC representative and that the representative is ready to respond to any e-mails from the Commission.

Detailed discussion

The Equal Employment Opportunity Commission (EEOC) has begun the process of a completely digital charge system. In early May, 11 of the agency’s 53 field offices launched Phase One of the Action Council for Transformation to a Digital Charge System (ACT Digital), under which all employers—including public and private employers, employment agencies, and unions—will no longer receive paper forms when facing an EEOC charge.

Instead, the Commission will send the employer’s designated EEOC representative an e-mail notification that a charge has been filed. The e-mail will include a link to the agency’s secure online portal. Once logged in, the employer can learn about the charge and respond.

The portal offers employers the opportunity to view and download the charge, provide information about representation, submit position statements, update the designated contact information or provide other information about the company, review and respond to the invitation to mediate, and communicate with the EEOC.

“The EEOC’s pilot of a digital charge system is an important first step forward that will benefit the public and our staff,” Commission Chair Jenny R. Yang said in a statement about the program’s launch. “This will improve our responsiveness to the public, efficiently utilize our resources, and protect the security of documents in our online system. We encourage employers to provide candid feedback and suggestions during the pilots so we can make adjustments to strengthen the system.”

For those employers that have not supplied an e-mail address for the designated EEOC representative, the agency will mail a paper notice to inform the company of the charge along with instructions for logging in to the portal.

The EEOC intends to complete the rollout to all 53 field offices by October 1, 2015. A number of the agency’s field offices began the program (including Charlotte, Greensboro, Greenville, Norfolk, Raleigh, and Richmond, North Carolina; Oakland, San Francisco, and San Jose, California; and Seattle). Next up: Denver, Detroit, Indianapolis, and Phoenix.

Employers do have the choice to opt out of the online charge program and continue to receive and submit all documents and communications in paper form. However, it is unclear how long that option will exist.

As the ACT Digital program moves forward, the Commission will expand the capabilities of the online portal, including the ability to file electronic submissions of responses to Requests for Information and a portal for individuals who file a charge of employment discrimination.

Why the change? The agency is striving for compliance with Executive Order 13571, “Streaming Service Delivery and Improving Customer Service,” which mandated that federal agencies improve customer experience by expanding online services, among other requirements.

“The EEOC receives about 90,000 charges per year, making its charge system the agency’s most common interaction with the public,” the Commission explained in a statement about the program’s launch. “The EEOC’s ACT Digital initiative aims to improve customer service, ease the administrative burden on staff, and reduce the use of paper submissions and files.”

To read more about the ACT Digital program, click here.

To view the EEOC’s User’s Guide to the online portal, click here.

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New York Takes on Fast-Food, Nail Salon Industries to Increase Worker Protections

Why it matters

The New York government has taken on two industries to increase employee protections: fast-food workers and nail salon employees. Governor Andrew Cuomo first announced the formulation of a state Wage Board tasked with investigation and making recommendations on increasing the minimum wage in the fast-food industry. The Wage Board—whose recommendations do not require legislative approval to be enacted—will hold two public hearings and release its recommendations in July. As for nail salon employees, a recently released report from the state’s Department of Labor triggered action by workers and government alike. The report documented underpayment and nonpayment of wages, as well as verbal and physical abuse of workers who are often immigrants and/or do not speak English. In response, Governor Cuomo announced the creation of an emergency task force geared toward implementing new regulations for the industry and helping recover unpaid wages for workers, and at least one putative class action suit has already been filed by a pair of salon workers.

Detailed discussion

Close scrutiny of two industries in the state of New York looks to result in higher wages and increased employee protections for fast-food workers and nail salon employees.

Having previously criticized the earnings of fast-food workers in the state, Governor Andrew M. Cuomo announced that he had instructed Acting State Labor Commissioner Mario J. Musolino to empanel a New York State Wage Board to investigate and make recommendations on an increase in the minimum wage in the fast-food industry.

Composed of at least three members, the Wage Board strives to represent different perspectives, with equal representation from labor, employers, and the public. Representing employers on the Wage Board will be Kevin Ryan, Chairman and Founder of Gilt, MongoDB, Business Insider, and Zola, as well as Vice Chairman of the Partnership for New York City; representing the public will be Byron Brown, Mayor of Buffalo; and on behalf of labor, Mike Fishman, Secretary-Treasurer of the Service Employees International Union.

“If you work full time, you should be able to provide for yourself and your family and move beyond poverty,” Governor Cuomo said in a statement. “That is what the minimum wage is all about, but for too many fast-food workers in New York today that is simply not the case. The minimum wage must be a wage that allows for a decent living—not one that condemns hard-working people to an endless cycle of poverty and government assistance—and that is why I am taking this action. We must fulfill the promise of honor and justice for fast-food workers in New York, and I urge the Wage Board to stand up for what is right and help us move forward.”

Pursuant to state law, an appointed Wage Board may recommend changes to the minimum wage law or classification for a specific industry, and its suggestions do not require legislative approval to be enacted. The Wage Board will hold two public hearings on the issue: one in Buffalo and one in New York City, and is expected to release its recommendations in July. The Labor Commissioner will then have 45 days to act on the proposal and potentially increase the minimum wage for fast-food workers in the state.

The Governor then turned his attention to the nail salon industry. A report released by the state’s Department of Labor documented multiple problems for workers like manicurists and aestheticians, who are often immigrants and unable to speak English. In response, Governor Cuomo announced the creation of a multiagency task force that will establish new health and safety regulations for nail salon workers as well as recover unpaid wages. Businesses that fail to comply will be shut down.

Violations ranging from underpayment and nonpayment of wages to discrimination to exposure to dangerous chemicals were documented in the report, which the state agency released after investigating 29 salons in the state over the last year, uncovering a total of 116 labor law violations.

New safety regulations will include the use of personal protective equipment (such as face masks and gloves), and the addition of a personal fan at each workstation to improve ventilation for workers exposed to chemicals found in nail polish like formaldehyde and toluene.

Workers will also be paid a legal wage, according to the announcement, and the task force will work to recover wages owed. Salons will be required to either secure a bond or beef up insurance policies to cover claims for unpaid wages as a condition of licensure going forward. Workers will also be informed of their rights via mandatory postings.

To read Governor Cuomo’s statement on the formation of the Wage Board, click here.

To read Governor Cuomo’s announcement about the emergency task force, click here.

To read the complaint in Fernandez v. Nailsway, Inc., click here.

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New Suit Challenges Employer Tracking via Smartphone App

Why it matters

Employers in California should keep an eye on a new lawsuit brought by an employee who claims she was terminated in retaliation for turning off a tracking app in her employer-provided smartphone that she said violated her privacy rights. As a sales rep at Intermex Wire Transfer, Myrna Arias was instructed to download an app that included GPS tracking. According to her state court complaint, Arias objected that the app would violate her privacy during the times she was not working. Although she initially complied and downloaded the app, she removed it a few weeks later and was reprimanded and then terminated, she alleges. In addition to invasion of privacy and retaliation, Arias asserts claims under the Private Attorney General Act (PAGA) as well as wrongful termination in violation of public policy.

Detailed discussion

Myrna Arias was hired as a Sales Executive, Account Manager on February 10, 2014, in the Bakersfield, California, office of Intermex Wire Transfer. Arias was recruited from NetSpend, a competitor, but Intermex agreed to let her continue working for her prior employer for a brief period to maintain her medical benefits as she was undergoing medical treatment at the time.

During her tenure at Intermex, Arias performed well, meeting her sales quotas and earning about $7,250 per month. But trouble began in April when Intermex asked employees, including Arias, to download the Xora application to their smartphones. Xora features a GPS function that tracks the exact location of the person possessing the smartphone on which it was installed. Arias and some of her coworkers questioned management about whether Intermex would be monitoring their movements while off duty.

A regional vice president admitted that employees would be monitored and, according to Arias’ complaint, “bragged” that he knew how fast she was driving at specific moments since she had installed the app on her phone. Arias said she objected to the app’s GPS function during non-work hours (analogizing Xora to “a prisoner’s ankle bracelet”) and was told she should tolerate the intrusion and keep her phone’s power on “24/7” to answer phone calls from clients.

When Arias later deinstalled the app to protect her privacy, she was “scolded” and fired just a few weeks later. Making the problem worse: she claims that someone at Intermex placed a call to someone at NetSpend and she was terminated for a second time.

Arias then filed suit in California state court. She alleges invasion of privacy based on the intentional intrusion by Intermex management during her off-duty time, including the monitoring of her driving behavior and whereabouts on weekends. “Plaintiff is unsure to what extent other managers and coworkers intentionally intruded on her privacy,” the complaint adds.

Intermex retaliated against her, Arias claims, after she complained that the company was violating her and her coworkers’ rights of privacy by requiring them to download the Xora app. She is also pursuing claims under the Private Attorney General Act, intentional interference with contract, negligent interference with prospective economic relations, wrongful termination in violation of public policy, and unfair business practices.

The complaint requests economic, noneconomic, and punitive damages in excess of $500,000, as well as attorneys’ fees and costs and injunctive relief to prevent Intermex from monitoring employees’ off-duty whereabouts and conduct in violation of their rights of privacy.

To read the complaint in Arias v. Intermex Wire Transfer, click here.

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California Supreme Court Raises Standard for Employers to Recover Fees in FEHA Suits

Why it matters

To recoup costs in a Fair Employment and Housing Act (FEHA) suit, a prevailing employer must prove that a discrimination suit was “objectively groundless,” the California Supreme Court has ruled. “In FEHA cases, even ordinary litigation costs can be substantial, and the possibility of their assessment could significantly chill the vindication of employees’ civil rights,” the unanimous court wrote, citing statutory language and legislative history for support. The dispute over costs began with a discrimination suit filed by Captain Winn Williams against the Chino Valley Independent Fire District. When the fire department prevailed, it sought to recover its costs. A trial court agreed, ordering Williams to pay about $5,400. An appellate panel affirmed. But the state’s highest court said that most FEHA plaintiffs “probably experienced some period of unemployment,” and the possibility for a costs award to an employer “would tend to discourage even potentially meritorious suits by plaintiffs with limited financial resources.” The decision sets a difficult obstacle for employers to overcome to recover an award of costs, even when victorious in a FEHA suit.

Detailed discussion

Captain Winn Williams sued his former employer, the Chino Valley Independent Fire District, alleging disability discrimination in violation of the California Fair Employment and Housing Act (FEHA). A trial court granted summary judgment for the employer and the District requested costs as the prevailing party.

The court ordered Williams to pay $5,368.88 and the plaintiff appealed. He argued that in the absence of a finding that his action was frivolous, unreasonable, or groundless, the District should not have been awarded its costs. An appellate panel affirmed the order.

But emphasizing the statutory purpose behind FEHA, the state’s highest court reversed.

The question presented to the court involved the intersection of the state’s Civil Code with FEHA, the court explained. Code of Civil Procedure section 1032(b) guarantees prevailing parties in civil litigation awards of the costs expected in the litigation.

At the same time, Government Code section 12965(b) provides that “In civil actions brought under [FEHA], the court, in its discretion, may award to the prevailing party, including the department, reasonable attorney’s fees and costs, including expert witness fees.”

Williams argued that Government Code section 12965(b) operated as an express exception to Civil Code section 1032(b) and that the court’s discretion included an asymmetric understanding that a plaintiff’s action must be groundless before a cost award could be made to a prevailing defendant, pursuant to Christianburg Garment Co. v. EEOC, 434 U.S. 412 (1978), where the U.S. Supreme Court held that a prevailing defendant can receive an award of attorneys’ fees only if the plaintiff’s action was objectively groundless in certain federal civil rights actions.

Christianburg involved a Title VII claim, and the Justices wrote that the discretionary provision found in that statute was evidence of Congress’s desire to create a different standard for awards of fees to prevailing defendants than to prevailing plaintiffs. To award fees to a defendant simply because the plaintiff was ultimately unsuccessful would “substantially add to the risks” and “undercut the efforts of Congress” to promote the enforcement of Title VII, the high court said.

As Christianburg involved attorneys’ fees, several courts have held that the decision does not apply to court costs, including the Second, Fifth, Seventh, Eighth, and Ninth U.S. Circuit Courts of Appeals. However, the California Supreme Court noted that the Ninth Circuit has applied Christianburg to costs in actions under the Rehabilitation Act as well as the Americans with Disabilities Act (ADA), “a provision of which gives trial courts discretion to award the prevailing party” reasonable attorneys’ fees—and costs, unlike Title VII.

The court first determined that the FEHA statute expressly directed the use of a different standard than the general costs statute, concluding that “Government Code section 12965(b) is an express exception to Code of Civil Procedure 1032(b) and the former, rather than the latter, therefore governs costs awards in FEHA cases.” Disavowing prior case law that appeared to direct otherwise, the court acknowledged that “[w]e spoke too broadly.”

An asymmetrical rule restricting awards to prevailing defendants was “consistent with the federal court interpretations of similar language in the ADA,” the court added, analogizing FEHA to the ADA and distinguishing it from Title VII, which does not have a provision making the award of costs discretionary with the trial courts.

Turning to the issue of how such discretion should be exercised when a defendant has prevailed, the California Supreme Court adopted the standard set forth in Christianburg. While Government Code section 12965(b) does not distinguish on its face between awards to FEHA plaintiffs and defendants, the legislative history and underlying policy distinctions reflected in that history “persuade us the Legislature intended that trial courts [should] use the asymmetrical standard of Christianburg as to both fees and costs,” the court wrote.

“We find inescapable the inference that the Legislature, in giving the trial courts discretion to award fees and costs to prevailing parties in employment discrimination suits, intended that discretion to be bounded by the Christianburg rule, or something very close to it,” the court said.

The court rejected the employer’s argument that the legislative intent as reflected in the Code of Civil Procedure would also be frustrated by not allowing a prevailing defendant the recovery of costs. “Though we have no estimate of the average FEHA costs award or of the average FEHA plaintiff’s financial resources, we note that the most common basis for FEHA litigation is wrongful termination of employment,” the California Supreme Court wrote. “Even if FEHA plaintiffs have found new jobs by the time they pursue litigation, many have probably experienced some period of unemployment. The Legislature could well have believed the potential for a costs award in the tens of thousands of dollars would tend to discourage even potentially meritorious suits by plaintiffs with limited financial resources.”

In FEHA cases, even ordinary litigation costs can be substantial, the court said, “and the possibility of their assessment could significantly chill the vindication of employees’ civil rights. Statutory language and legislative history thus point in the same direction.”

Therefore, “we conclude the Christianburg standard applies to discretionary awards of both attorney fees and costs to prevailing FEHA parties under Government Code section 12965(b),” the court wrote. “To reiterate, under that standard a prevailing plaintiff should ordinarily receive his or her costs and attorney fees unless special circumstances would render such an award unjust. A prevailing defendant, however, should not be awarded fees and costs unless the court finds the action was objectively without foundation when brought, or the plaintiff continued to litigate after it clearly became so.”

To read the opinion in Williams v. Chino Valley Independent Fire District, click here.

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Continued Employment = Lawful Consideration for Noncompete in Wisconsin

Why it matters

Continued employment constitutes lawful consideration to enforce a noncompete agreement in Wisconsin, the state’s highest court recently ruled. The company asked all of its employees to sign restrictive covenants in 2009. A 15-year employee did so and worked there for another two years before he was terminated. When he began working for a competitor, the company sued, relying on the noncompete agreement. The employee moved for summary judgment, arguing that the agreement was unenforceable because it lacked consideration. Answering a certified question from the intermediate appellate court, the Wisconsin Supreme Court wrote that “an employer’s forbearance in exercising its right to terminate an at-will employee constitutes lawful consideration for signing a restrictive covenant.” Jurisdictions nationwide are split on the issue, the court noted, joining the majority by concluding that continued employment was lawful consideration.

Detailed discussion

In 2009, Runzheimer International required all of its employees to sign restrictive covenants. The company gave employees two weeks to sign the agreement or be fired. David Friedlen, a 15-year employee of the company, elected to sign the covenant. He then worked for Runzheimer for another two years before he was terminated in 2011.

After consulting independent counsel as to the validity of the restrictive covenant (the lawyer opined that it was not enforceable), Friedlen then began working for a competitor, Corporate Reimbursement Services (CRS). When Runzheimer learned of his new job, it sued both CRS and Friedlen in Wisconsin state court, alleging the defendants breached the restrictive covenant. Friedlen and his new employer moved for summary judgment, arguing that the covenant was unenforceable for lack of consideration. A trial court granted the motion, and Runzheimer appealed.

Finding that Wisconsin law failed to adequately address whether an employer’s forbearance of its right to terminate an existing at-will employee in exchange for the employee agreeing to a restrictive covenant constitutes lawful consideration, the intermediate appellate court certified the case to the state’s highest court.

The Wisconsin Supreme Court reversed. “We hold that an employer’s forbearance in exercising its right to terminate an at-will employee constitutes lawful consideration for signing a restrictive covenant,” the court wrote. “Although, theoretically, an employer could terminate an employee’s employment shortly after having the employee sign a restrictive covenant, the employee would then be protected by other contract formation principles such as fraudulent inducement or good faith and fair dealing, so that the restrictive covenant could not be enforced.”

The court began with a definition of “consideration” as “a detriment incurred by the promise or a benefit received by the promisor at the request of the promisor … Neither the benefit to the promisor nor the detriment to the promisee need be actual.” The court also noted that in 1933, the Wisconsin Supreme Court ruled that the requirement to sign a restrictive covenant as part of a hiring contract constituted lawful consideration in Wisconsin Ice & Coal Co. v. Lueth. But noting the different circumstances between a new hire and an existing employee—such as the inability to transfer easily to an equivalent job or age and family responsibilities—the court declined to rely exclusively on the Lueth decision.

Instead, the court considered two of its prior decisions on at-will employees and restrictive covenants (which it found unpersuasive) as well as opinions from other states. While jurisdictions are split on the issue, those “that hold that a promise not to fire is not lawful consideration for a covenant not to compete represent the ‘distinct minority,’ ” the court said.

Other principles might also apply, the court said. If an employee was terminated shortly after signing a restrictive covenant, the agreement would likely be a voidable contract under principles of contract law. Or an employer could breach the doctrine of good faith and fair dealing by acting in a deceitful manner.

“[W]e hold that an employer’s forbearance in exercising its right to terminate an at-will employee constitutes lawful consideration for a restrictive covenant,” the court concluded. “Although, theoretically, an employer could terminate an employee’s employment shortly after having the employee sign a restrictive covenant, the employee would then be protected by other contract formation principles such as fraudulent inducement or good faith and fair dealing, so that the restrictive covenant could not be enforced.”

Because the record lacked a determination as to the reasonableness of the covenant’s terms, the court remanded the case for further proceedings.

In a separate concurrence, Chief Judge Shirley S. Abrahamson characterized the majority opinion as “ambiguous and troublesome” as it effectively “transforms the parties’ at-will employment contract into an employment contract for a reasonable duration.”

“The majority opinion is in effect holding that Runzheimer implicitly promised not to terminate Friedlen’s employment for a reasonable time. Unless Runzheimer’s promise is so interpreted, the doctrines of fraudulent inducement and good faith and fair dealing are not applicable to the instant case,” Abrahamson wrote. “I understand the majority opinion as in effect holding just that: In exchange for Friedlen’s signing the covenant not to compete, Runzheimer promised not to terminate Friedlen’s employment for a reasonable time. I therefore agree with the majority opinion.”

To read the opinion in Runzheimer International Ltd. v. Friedlen, click here.

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