Employment Law

First Circuit: Age May Be Just a Number

Discriminatory animus cannot be inferred simply because a 62-year-old employee was replaced by a 36-year-old worker for a new position that was inferior to the plaintiff’s previous job, the U.S. Court of Appeals for the First Circuit has ruled.

Wilbur L. Hoffman-Garcia was laid off by Hospital Metropolitano in 2012 after almost two decades of working for the company. At the time of his termination, he served as physical plant director, with duties that included managing the department’s budget, attending meetings with other senior personnel at the hospital, handling maintenance issues, hiring contractors, and maintaining the safety and security of the premises.

Besides Hoffman-Garcia, the hospital laid off all the staff employed in the Physical Plant Department, including Hoffman-Garcia’s deputy, Giovanni Martinez. However, Martinez was hired a few months later for the newly created position of safety officer.

Hoffman-Garcia sued in response, asserting that the rehire of the younger employee constituted age-based discrimination in violation of the Age Discrimination in Employment Act (ADEA). The trial court granted summary judgment in favor of the hospital, holding that the employer had facially legitimate, nondiscriminatory grounds to close the department and terminate Hoffman-Garcia’s position.

A jury trial was held on the issue of whether the hospital treated age neutrally when it rehired Martinez rather than Hoffman-Garcia. At the close of evidence, the court granted judgment as a matter of law for the employer. The plaintiff appealed to the First Circuit, arguing that a jury question existed as to the hospital’s motivations.

But the federal appellate panel disagreed.

“[H]ere, Hoffman-Garcia plainly failed to meet his burden of showing that his previous position of Physical Plant Director, or a position involving comparable duties and responsibilities at the hospital, was subsequently filled by a younger person, or that he applied for a position and did not get the job because the employer preferred a younger candidate,” the court wrote.

The court highlighted the “fatal and uncontradicted defects” in the plaintiff’s theory of liability. The physical plant director position was eliminated entirely, and the new position paid a fraction of the salary—just $2,183 per month for the safety officer job as compared to $7,432 for the director role.

Hoffman-Garcia himself never applied for the new position, the panel pointed out, and the duties between the two jobs “at best minimally overlapped.” The new role featured no director-level decision-making responsibility, budget oversight or supervision of contractors.

“That Martinez in his new position inherited Hoffman-Garcia’s responsibility for safety issues is not sufficient, for this was but a small portion of Hoffman-Garcia’s duties,” the court wrote. “Nor can discriminatory animus be inferred solely from the subsequent hiring of a younger employee for a position plainly inferior to the plaintiff’s previous position.”

To read the opinion in Hoffman-Garcia v. MetroHealth, Inc., click here.

Why it matters: The First Circuit had little trouble affirming judgment as a matter of law for the employer, finding multiple fatal defects in the plaintiff’s prima facie case, including the fact that he never even applied for the subsequent position, as well as the minimal overlap in duties between his prior job and the new position. The federal appellate panel refused to infer discrimination based simply on the difference between the age of the plaintiff and that of the subsequent rehire.

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DOL Issues Joint Employer, ‘Regular Rate’ Proposals

The Department of Labor has been busy recently, issuing proposals to update the joint employer standard as well as the “regular rate” requirements.

On April 1, the agency issued a Notice of Proposed Rulemaking (NPRM) with a proposed rule “to revise and clarify” the responsibilities of employers and joint employers to employees in joint employer arrangements. The DOL hasn’t meaningfully revised its regulations on the topic since 1958.

Pursuant to the Fair Labor Standards Act (FLSA), multiple parties may be jointly responsible for an employee’s wages where a determination is made that they are joint employers.

To make such a determination, the DOL proposed a four-factor test that would consider whether the potential joint employer actually exercises the power to hire or fire the employee, supervise and control the employee’s work schedules or conditions of employment, determine the employee’s rate and method of payment, and maintain the employee’s employment records.

The primary question, according to the agency, is whether the purported joint employer “exercises substantial control over the terms and conditions of the employee’s work.”

Included in the NPRM are illustrations to provide further clarification. For example, an individual works 30 hours per week as a cook at one restaurant and 15 hours per week as a cook at a different restaurant affiliated with the same nationwide franchise. The restaurants are locally owned and managed by different franchisees that do not coordinate with respect to the employee. Are they joint employers of the cook?

They are not, under the DOL’s proposed joint employer standard, because the restaurants are not associated in any meaningful way with respect to the cook’s employment. “The similarity of the cook’s work at each restaurant, and the fact that both restaurants are part of the same nationwide franchise, are not relevant to the joint employer analysis, because those facts have no bearing on the question whether the restaurants are acting directly or indirectly in each other’s interest in relation to the cook,” the agency explained.

However, if the cook’s schedule was the same but the two restaurants were owned by the same person and coordinated the cook’s schedule of hours at each location every week, deciding together to pay the cook the same rate, they would be joint employers of the cook, the DOL said.

The NPRM also explained that certain business practices—such as providing a sample employee handbook to a franchisee or jointly participating in an apprenticeship program—do not make joint employer status more or less likely; nor do certain business agreements (requiring an employer to institute workplace safety measures or sexual harassment policies, for example).

“This proposal will reduce uncertainty over joint employer status and clarify for workers who is responsible for their employment protections,” Secretary of Labor Alexander Acosta said in a statement. “Providing public notice and comment is the best way to move forward with another significant deregulatory proposal.”

In a second proposal, the DOL seeks to amend the rule for the forms of payment employers can include and exclude in the “time and one-half” calculation for determining overtime rates. The tweaks to the “regular rate” requirements would be the first in 50 years, the agency noted.

The FLSA requires employers to pay nonexempt employees overtime at a rate of 1.5 times their regular rate for all hours worked over 40 in a given week. Although the regular rate is defined as all “remuneration for employment paid to, or on behalf of,” the employee, divided by the total number of hours worked that week, other forms of compensation and benefits can throw a wrench in the calculations.

To provide clarity for employers, the DOL’s NPRM attempts to better define the regular rate for modern workplaces. Specifically, the proposal would allow employers to exclude from an employee’s regular rate of pay the cost of providing wellness programs, on-site specialist treatment, gym access and fitness classes, as well as employee discounts on retail goods and services.

Payments for unused paid leave (including sick leave), tuition programs (such as reimbursement programs or repayment of educational debt), discretionary bonuses—emphasizing that a bonus’s label is not determinative—and benefit plans (including accident, unemployment and legal services) would all be excluded.

Other exclusions include reimbursed expenses (even if they were not incurred “solely” for the employer’s benefit) and reimbursed travel expenses that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System and that satisfy other regulatory requirements.

The NPRM also clarifies that pay for time that would not otherwise qualify as “hours worked,” including bona fide meal periods, may be excluded from an employee’s regular rate unless an agreement or established practice indicates that the parties have treated the time as hours worked.

“The regular rate proposal would provide clarity for employers to allow them to add more benefits to their employees without unknown overtime consequences or litigation,” Keith Sonderling, acting administrator for the department’s Wage and Hour Division, said in a statement. “This proposed rule offers a positive path forward to employers and employees alike.”

To read the Federal Register notice for the joint employer standard, click here.
To read the Federal Register notice for the “regular rate” rules, click here.

Why it matters: Employers should take advantage of the opportunity to weigh in on NPRMs, with comments accepted on the proposals until June 10 (for the joint employer standard) and May 28 (on the “regular rate” requirement). The joint employer standard has also been the subject of an NPRM from the National Labor Relations Board, with the board indicating its plans to issue a final rule by the end of 2019.

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PAGA Claims Cannot Be Split, California Appellate Court Rules

If an employee brings a solitary Private Attorneys General Act (PAGA) claim, may a trial court split that claim, sending the employee to arbitration to recover his underpaid wages but retaining jurisdiction to award the additional, statutorily prescribed amounts?

No, a California appellate court has ruled, affirming a denial of the employer’s motion to compel arbitration.

The dispute began when Arthur Zakaryan sued The Men’s Wearhouse in 2017, alleging that the national clothing retailer misclassified its store managers as exempt from California’s laws regarding overtime as well as meal and rest breaks. His sole claim was under PAGA.

Relying on two different arbitration agreements Zakaryan signed during his 14 years with the company, The Men’s Wearhouse moved to compel arbitration of the portion of the plaintiff’s PAGA claim seeking reimbursement of underpaid wages. The employer relied upon Esparza v. KS Indus., L.P., a 2017 California appellate court decision that sanctioned such an order.

When the trial court denied the order, the employer appealed. But the appellate panel affirmed the denial, emphasizing the role of the plaintiff in a PAGA action as “the proxy or agent of the state’s labor law enforcement agencies.”

“Nearly every contour of a PAGA claim flows from the ineluctable premise that a PAGA action is ‘fundamentally a law enforcement action designed to protect the public and not to benefit private parties,’” the court wrote. “Just as an action by the agency would be on behalf of all aggrieved employees, the individual PAGA plaintiff also represents all other aggrieved employees.”

While recognizing that arbitration agreements are enforceable as a matter of federal law, the court also noted that the California Supreme Court carved out an exception to the general rule when it held that an employee could not contractually agree to give up a potential PAGA claim against his or her employer in Iskanian v. CLS Transportation.

Putting these pieces together, the court concluded that splitting a PAGA claim based on the remedies sought was both legally impermissible and inconsistent with labor and arbitration law.

Splitting a PAGA claim into two claims “runs afoul of the primary rights doctrine because it impermissibly divides a single primary right,” the panel wrote. “That is because an individual employee bringing a PAGA claim is vindicating one and only one ‘particular injury’—namely, the injury to the public that the ‘state labor law enforcement agencies’ were created to safeguard.”

The individual PAGA plaintiff’s “personal claim” for underpaid wages is not at stake, the court said, and other aggrieved employees represented by that PAGA claim may still bring separate individual claims for underpaid wages.

“Because an individual PAGA plaintiff is at all times acting on behalf of the agency when seeking underpaid wages as well as the $50/$100 penalty, his pursuit of both remedies ‘involv[es] the same parties seek[ing] compensation for the same harm’ and thus involves ‘the same primary right,’” the court said. Plaintiffs filing lawsuits under other statutes may sometimes wear two hats, but “the employee who brings a solitary PAGA action always wears but one.”

Labor law also posed an obstacle to the employer’s desire to split the PAGA claim, the court said, as the statute’s text mandates the allocation of a single, indivisible “civil penalty” between the agency and aggrieved employees in a 75/25 split. As the later-enacted statute, PAGA’s allocation rule trumped that of the state’s labor law found at section 558 of the Labor Code.

Further, a PAGA claim is fundamentally a representative claim, the panel added. “Breaking off the portion of a PAGA claim seeking underpaid wages on the ground that those wages constitute ‘victim-specific relief,’ as The Men’s Wearhouse urges, ignores the representative nature of a PAGA claim as well as one of the cornerstone principles of Iskanian.”

Finally, the court said that an aggrieved employee’s choice to bring a solitary PAGA claim is his or hers to make. “Where, as here, the employee-plaintiff elected to file a solitary PAGA claim, splitting that claim into two effectively rewrites his complaint into one asserting an individual claim for underpaid wages (which is shunted to arbitration) and a PAGA claim (which is not),” the panel wrote. “This makes the employee’s choice meaningless.”

As for arbitration law, splitting a PAGA claim “eviscerates Iskanian’s mandate because it sends the chief issue underlying a PAGA claim—that is, whether the employer violated labor law (thereby entitling the employee to underpaid wages)—to arbitration,” the court said. “It also offends Iskanian’s reasons for barring arbitration because it effectively allows the employee, by contract, to bind the agency to arbitration.”

The panel rejected the position “that any portion of a PAGA claim is ‘private’ because ‘the real party in interest’ for a PAGA claim is at all times ‘the government entity on whose behalf the [employee-]plaintiff files suit.’”

To read the opinion in Zakaryan v. The Men’s Wearhouse, Inc., click here.

Why it matters: The California appellate panel recognized that sister courts have reached different conclusions on the issue of the division of PAGA claims, but held that courts may not split a solitary PAGA claim and send it to two different fora, emphasizing the unique nature of the plaintiff’s position as a PAGA plaintiff, in a representative action where the employee stands in the shoes of a governmental agency.

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Employer Checks Consent Box With Intranet Site, Court Says

A California federal court sided with an employer to hold that by checking a box on the company’s intranet site, the employee provided consent to arbitrate future employment disputes.

A Southwest Airlines flight instructor, Suzanne Tanis, sued the airline for wage and hour violations on behalf of herself and similarly situated employees. In response, the employer moved to compel arbitration.

Southwest uses an intranet site called “SWALife” to distribute certain employment policies to its workers, the company explained. If Southwest makes an announcement through the site, it appears on the main page when an employee logs on to the system. The announcements provide employees with electronic links to the written policies and instruct them to “CHECK THE BOX” to acknowledge that they have received, read and reviewed the policies and that they understand and agree to comply with them.

The announcement appears on the main page of SWALife until either the employee electronically signs the acknowledgment or 14 days have passed.

Southwest provided the court with an exhibit documenting that on August 14, 2017, Tanis executed the Q3 announcement, which included the employer’s alternative dispute resolution (ADR) program. The system showed that the plaintiff saw the announcement and checked a box affirming receipt of the policy.

Although Tanis did not directly address whether or not she clicked the box on the intranet site, she told the court it was possible to bypass SWALife announcements and argued that she may not have been the one who accessed the system on August 14 or checked the box.

U.S. District Judge Cynthia Bashant was not persuaded. First overruling the plaintiff’s evidentiary objections and finding the exhibit admissible under the business record exception, the court then found the plaintiff failed to present a disputed material fact as to whether she actually checked the box.

Tanis did not attest that anyone else had access to her username and password; instead, she merely speculated that the employer may have had a list of each employee’s username and password. “Someone using Plaintiff’s username and password logged into Plaintiff’s SWALife account and clicked the box,” the court said. “The evidence shows this action could only have been done by plaintiff.”

The plaintiff did not dispute that she checked the box and did not even state that she could not recall whether or not she checked the box, Judge Bashant noted. “She only generally declares that she ‘could bypass’ the announcements, and ‘if’ she checked the box, she did not understand what she was doing.”

As California law recognizes the validity of electronic signatures, which are legally binding if they are in compliance with the Electronic Signatures in Global and National Commerce Act, the court found that Southwest had met its burden of authenticating the plaintiff’s signature. This same evidence demonstrated that Tanis checked the box after acknowledging the ADR agreement, meaning she consented to arbitration, the court added.

Tanis was also unsuccessful with her fallback argument that her consent was invalid because the agreement was inconspicuous.

“The SWALife announcement is a total of four paragraphs, the second of which is titled ‘Alternative Dispute Resolution Program,’” and provided a hyperlink to the policy itself, Judge Bashant wrote. “Simply because Plaintiff may not have clicked the hyperlink (and was not required to before checking the box), does not make its existence hidden or unclear. The agreement to arbitrate is valid.”

Finding no dispute of material fact as to whether the parties formed an agreement to arbitrate, the court granted the employer’s motion to compel arbitration.

To read the order in Tanis v. Southwest Airlines, Co., click here.

Why it matters: A victory for Southwest, the California federal court decision provides reassurance for employers who use electronic acknowledgments for policies, including arbitration agreements.

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