Employment Law

Class Certification Denial Reversed in Wake of Augustus

Why it matters

Applying the California Supreme Court’s recent decision in Augustus v. ABM Security Services, a California appellate panel reversed a trial court’s denial of a class certification motion and remanded the case. A group of employees of American Medical Response charged their employer with violating state labor code and wage orders by failing to provide the mandated meal and rest periods, seeking to certify multiple classes. A trial court denied the motion and the plaintiffs appealed. Applying Augustus to the facts of the case, the appellate panel reversed in part. A rest period during which a worker remains “on call” must be compensated, the court explained, and the trial court held that if an employee is on call but not interrupted, the time should be considered off duty and not compensable. Because of this incorrect legal assumption about the nature of rest periods, the appellate panel vacated the denial of certification on the claim and remanded the case to the trial court for additional consideration.

Detailed discussion

Four employees of American Medical Response filed a putative class action against their employer, alleging that they did not receive the meal and rest periods to which they were entitled under Labor Code Sections 226.7 and 512 and the applicable wage orders. The EMTs and dispatchers moved to certify a class composed of two subclasses based on the different positions of the workers.

The employer opposed the motion, arguing that the plaintiffs failed to identify classwide policies regarding meal and rest periods that were consistently applied and emphasizing the discrepancies among the workers in each of the subclasses, with 18 different geographic operations and communications centers, which AMR said had different approaches to meal and rest breaks.

A trial court sided with AMR, ruling that the plaintiffs did not satisfy the community of interest requirement and denying the motion to certify. The court based the decision in part on its conclusion that a meal or rest period during which an employee remains “on call” but is not actually interrupted is properly characterized as an “off duty” period.

The plaintiffs appealed. While the case was pending, the California Supreme Court issued Augustus v. ABM Security Services, holding that on-call rest periods are impermissible under state law and that employers must provide employees with off duty rest periods where they are relieved of all duties. “[O]ne cannot square the practice of compelling employees to remain at the ready, tethered by time and policy to particular locations or communications devices, with the requirement to relieve employees of all work duties and employer control during 10-minute rest periods,” the court wrote.

In light of the decision, the appellate panel elected to exercise its discretion to treat the appeal as a petition for extraordinary writ, recognizing that the trial court reached its decision without the benefit of the Supreme Court’s decision in Augustus.

“Because the trial court’s decision to deny class certification with respect to AMR’s overarching rest period policy rests on its legal conclusion that a rest period during which an employee remains on call may be considered an off-duty rest period, and because that conclusion is incorrect under Augustus, we must reverse and remand even if other reasons not relied upon might support the trial court’s decision,” the court wrote.

The appellate panel noted that “other bases” may exist for the trial court to conclude that the plaintiffs have not shown the predominance of common issues required for class certification of their rest period claim. “For example, although plaintiffs presented evidence that AMR’s policy is for employees to be on-call during rest periods, and that AMR has no policy or practice of paying additional compensation to employees who are not provided a rest period, as required by the wage order, AMR presented evidence that different policies and practices have applied at different times and places and to different types of employees,” the court said.

Vacating the denial of certification with respect to rest periods, the appellate panel left the question of whether to certify the claims to the trial court on remand.

However, the court affirmed the trial court’s decision not to certify a class with regard to meal breaks. AMR came forward with evidence to show that employees in different operations were dispatched and took meal periods in different ways, with substantial evidence to support the trial court’s conclusion that individual inquiries would predominate, the appellate panel wrote.

To read the opinion in Bartoni v. American Medical Response West, click here.

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New York’s Highest Court to Consider Alcoholism Discrimination Claims

Why it matters

Does New York City law permit an employee to bring suit alleging disability discrimination on a perception of untreated alcoholism? The state’s highest court will provide an answer to this question, certified from the U.S. Court of Appeals for the Second Circuit. A pair of police officers was referred to the New York Police Department’s internal counseling services unit for an alcoholism assessment. Both received treatment, but the parties agreed neither was an alcoholic. The officers sued, asserting violations of city law, state law and the Americans with Disabilities Act based on disability discrimination. The employer countered that city law does not permit “regarded as” claims for untreated alcoholism, but the district court disagreed, analogizing to both state law and the ADA. The employer appealed, but the Second Circuit found itself unable to “predict with confidence” how the state’s highest court would rule. The law itself was intended to have a broad, remedial purpose, the panel noted, but on its face provides narrower protection for employees with regard to alcoholism than what is required under state law or the ADA. Given the uncertainty, the Second Circuit certified the question to the New York Court of Appeals.

Detailed discussion

New York Police Department officers for several years, Kathleen Makinen and Jamie Nardini were both referred to the internal counseling services unit, which offers treatment and rehabilitation for officers struggling with substance abuse. Each woman received an alcohol-related diagnosis and was directed to undergo treatment, but the parties agreed neither was actually an alcoholic.

The women filed suit, claiming that the NYPD and city of New York mistakenly perceived that they were alcoholics and discriminated against them on the basis of that perceived disability, in violation of the New York City Human Rights Law (NYCHRL), the New York State Human Rights Law (NYSHRL) and the ADA.

A district court judge granted partial summary judgment in favor of the defendants, and a jury rendered a verdict in favor of the plaintiffs on their NYCHRL claims, awarding compensatory and punitive damages. The defendants moved for a new trial and judgment as a matter of law, arguing that the NYCHRL does not extend to untreated alcoholism.

After the district court denied the motion, the defendants appealed to the U.S. Court of Appeals for the Second Circuit. The panel began with the language of the NYCHRL.

Section 8-107(1)(a) prohibits employment discrimination based on an “actual or perceived … disability,” with “disability” defined as “any physical, medical, mental or psychological impairment, or a history or record of impairment.” The statute also states that “[i]n the case of alcoholism,” the NYCHRL narrows the definition of “disability” in Section 8-102(16)(c) so that it “shall only apply to a person who (1) is recovering or has recovered and (2) currently is free of such abuse.”

The defendants argued that the plain text of the statute foreclosed a “regarded as” discrimination claim for an untreated alcoholic, as only recovered or recovering alcoholics are defined as having a disability. The plaintiffs countered that the limitation applies only “in the case of alcoholism,” or only when a plaintiff in fact suffers from the disease and not when she is mistakenly perceived to be an alcoholic.

Considering the issue, the Second Circuit found tension between the language of the statute and the intent behind the NYCHRL, meant to afford plaintiffs all of the protections guaranteed by state and federal law. The city council even recently amended the statute to emphasize the NYCHRL’s “uniquely broad and remedial purposes,” the panel noted.

The state and federal counterparts—the NYSHRL and ADA—treat alcoholism as an impairment that can form the basis of a disability discrimination suit, and both statutes also prohibit discrimination on the basis of a perceived impairment.

“On the one hand, as the plaintiffs argue, because the NYSHRL and ADA prescribe a floor below which employee protections may not fall, the NYCHRL should not be interpreted to exclude untreated alcoholics,” the Second Circuit wrote. “On the other hand, we recognize that neither the NYSHRL nor the ADA contains a ‘similarly worded provision’ comparable to the NYCHRL’s limitation on the definition of disability in the form of alcoholism.”

At a loss, the panel certified the question to the state’s highest court. No state court has addressed the issue, which presents important issues of New York law and policy, the court said.

“In the absence of authority from New York courts, we cannot predict with confidence how the New York Court of Appeals would reconcile the broad, remedial purpose of the NYCHRL with the specific language of section 8-102(16)(c),” the Second Circuit wrote. “Accordingly, we defer decision on this appeal and cross-appeal in order to certify the following question: ‘Do sections 8-102(16)(c) and 8-107(1)(a) of the New York City Administrative Code preclude a plaintiff from bringing a disability discrimination claim based solely on a perception of untreated alcoholism?’”

To read the decision in Makinen v. City of New York, click here.

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Truck Drivers’ Class Certification Motion Crashes

Why it matters

A proposed class of truck drivers alleging they were not paid for rest periods requires individualized inquiries that are not appropriate for certification, a California federal court judge recently determined. Sadashiv Mares filed a putative class action in 2015 claiming that Swift Transportation Co. failed to provide its drivers with 10 minutes of paid rest time per every four hours spent driving as required by California state law, instead paying them at a piece rate based on the number of miles they drove. When Mares moved to certify a class of workers, the employer objected, arguing that the employees failed to meet the necessary predominance and superiority requirements of Federal Rule of Civil Procedure 23(b). The court agreed, writing that moving forward with a class action would require the court to “individually examine each class member’s wage statements and load files,” making the inquiry too individualized for certification.

Detailed discussion

According to Sadashiv Mares, he and other drivers for Swift Transportation Co. were paid a piece rate according to the number of miles they drove, and thereby the employer failed to authorize and permit rest periods in accordance with Section 226.7 of the California Labor Code. Mares then moved for class certification.

Swift objected. The employer argued that Mares failed to satisfy the requirements of Federal Rule of Civil Procedure 23, as the inquiry into whether employees were class members was too individualized. After working her way through each of the requirements of Rule 23(a) and (b), U.S. District Court Judge Virginia A. Phillips agreed.

Mares satisfied all of the Rule 23(a) requirements: numerosity (with “thousands” of drivers in California paid on a similar piece-rate basis), commonality (whether, as a matter of law, a piece-rate pay plan fails to compensate employees for rest period time), typicality (by asserting the same claim as other potential class members for rest period penalties) and adequacy of representation (on the part of both Mares and his counsel).

But the plaintiff tripped up when faced with the mandates of Rule 23(b). The “far more demanding” criterion of predominance “tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation,” focusing on the relationship between the common and individual issues, the court explained.

The drivers faced a potential problem with individual choice of law issues, as many of the drivers delivered goods throughout the United States and spent a great deal of time outside of California, raising concerns about the extraterritorial application of California law.

Judge Phillips agreed that if the plaintiffs’ claims were based on work performed outside of California, a detailed inquiry into the employment laws of each state, the number of rest breaks each class member was due in each state and the amount of contact each class member had with each state would be required. While Mares argued that excluding the out-of-state claims would allow common issues to predominate, the court reached a different conclusion.

“Even when Plaintiff’s claims are limited to those based upon rest breaks owed to drivers while they were working within California, however, the Court holds individual issues will predominate the claims,” the court wrote. “This is because Plaintiff claims the putative class members are entitled to separately compensated rest breaks under Wage Order 9.”

For a driver to be included in the class, he or she would need to work at least three and a half hours per day solely at a piece rate, and these three and a half hours would need to be worked within California. To determine if a driver met these requirements would require fact-intensive inquiry, the court said, beginning with whether each driver worked in California for at least three and a half hours—an important question, as many drivers regularly left the state before working the time period necessary in order to be entitled to a rest period.

“Thus, to establish Defendant’s liability to each putative class member, the Court would need to examine each class member’s wage statements and load files to determine if they were in California long enough to be entitled to a rest period,” the court wrote. “In addition, at the liability stage of the proceedings, if the Court needed to determine the amount of damages due to each putative class members, this would require ‘a manual review of [each putative class member’s] wage statements,’ which Defendant has presented evidence showing would take at least four hours per putative class member.”

Adding to the complication, Swift demonstrated it had 29 different methods of payment in addition to mileage-based pay, some of which were hourly rates and therefore not relevant to the dispute over the piece-rate policy, the court said.

While the need for individualized findings as to the amount of damages does not defeat class certification, “individualized questions predominate not only putative class members’ damages inquiries, but also whether each putative class member has any damages stemming from Defendant’s actions,” Judge Phillips said. “Indeed, drivers who (1) were paid on solely an hourly basis when they took rest breaks or (2) were paid on a piece rate basis and always left California within three and a half hours of beginning work would not be able to show their liability ‘stemmed from [D]efendant’s actions.’ Thus, as the Court would need to examine driver logs and related documents to determine whether each driver worked at a piece rate for at least three and a half hours in California, individual issues would predominate.”

For similar reasons, the court found that Mares failed to satisfy the superiority requirement as well, given the need to individually examine each class member’s wage statements and load files. Unable to satisfy Rule 23(b), the plaintiff’s motion for class certification was denied.

To read the order in Mares v. Swift Transportation Co. of Arizona, LLC, click here.

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RI Court Permits Suit Based on Medical Marijuana Use

Why it matters

For employers concerned about the impact of the growing number of states legalizing marijuana use, a recent decision from a Rhode Island court is worth reading. When applying for a paid internship, Christine Callaghan disclosed that she had a medical marijuana card and would not pass Darlington Fabrics Corp.’s required pre-employment drug test. Callaghan sued when she was not hired, alleging discrimination under the state’s disability law as well as the medical marijuana statute. Relying on language in the statute that nothing in the law “shall be construed to require … [a]n employer to accommodate the medical use of marijuana in the workplace,” the employer moved for summary judgment. But the court sided with the plaintiff. Implying a private right of action from the state’s medical marijuana statute, the court said employers cannot refuse to hire a medical marijuana cardholder even if the applicant would fail a drug test, because the law prohibits the refusal to employ a worker due to his or her status as a cardholder. Further, Callaghan’s disability claims survived because she could demonstrate discrimination against a class of disabled people (those with disabilities best treated by medical marijuana). Finally, the court held the Controlled Substances Act did not preempt the action. While marijuana laws vary from state to state, employers should prepare themselves for the issue to be raised in other jurisdictions.

Detailed discussion

A master’s student studying textiles at the University of Rhode Island, Christine Callaghan sought an internship as a requirement of her program, applying at Darlington Fabrics Corp. During a meeting with a human resources coordinator, Callaghan disclosed that she held a medical marijuana card, authorized by the state’s Edward O. Hawkins and Thomas C. Slater Medical Marijuana Act (the Hawkins-Slater Act).

She signed a statement acknowledging that she would be required to take a drug test prior to being hired, and during a later phone conversation indicated that she would test positive on her drug screening. Darlington later informed Callaghan that the company was “unable to hire her.”

Callaghan then filed suit alleging employment discrimination in violation of the Hawkins-Slater Act, and the parties filed cross motions for summary judgment. Considering a matter of first impression, Rhode Island Superior Court Judge Richard A. Licht granted summary judgment in favor of Callaghan.

The first question for the court: Does the Hawkins-Slater Act provide a private right of action through which Callaghan could seek relief? The statute—which states in Section 21-28.6-4(d), “No school, employer, or landlord may refuse to enroll, employ, or lease to, or otherwise penalize, a person solely for his or her status as a cardholder”—does not provide an express private right of action.

But the court determined that such a right exists. Although state courts are hesitant to imply private rights of action, Judge Licht said that without an enforcement mechanism, the Hawkins-Slater Act would be devoid of any purpose, inefficacious or nugatory. The law does not list any penalties for violations, and no state department was granted authority to administer its mandates. “[W]ithout a private right of action, Section 21-28.6-4(d) would be meaningless,” the court said.

Having established the plaintiff’s ability to bring suit, the court then considered the relevance of Section 21-28.6-7(b)(2), which states: “Nothing in this chapter shall be construed to require … [a]n employer to accommodate the medical use of marijuana in any workplace.” Darlington pointed to this language to argue it could not be liable for its refusal to hire Callaghan.

But the court was not persuaded. “The natural conclusion is that the General Assembly contemplated that the statute would, in some way, require employers to accommodate the medical use of marijuana outside the workplace,” Judge Licht wrote, undermining the defendant’s argument that its actions did not violate the statute by refusing to hire Callaghan based on her inability to pass a drug test.

The court was also not swayed by Darlington’s distinction that Callaghan was not hired based not on her status as a cardholder, but on her inability to pass a drug test. Characterizing this argument as “incredulous,” the court found it hard to believe that the state legislature meant to create different legal protections for cardholders and users of medical marijuana. “Defendants would have the court believe that a patient cardholder might never use medical marijuana,” the court wrote. “[I]t is absurd to think that the General Assembly wished to extend less protection to those suffering with debilitating medical conditions and who are the focus of the Hawkins-Slater Act.”

Reading the statute broadly, as required, “this Court gleans that the Hawkins-Slater Act provides that employees cannot refuse to employ a person for his or her status as a cardholder, and that that right may not be denied for the medical use of marijuana,” the court wrote. “If the Court were to interpret Section 21-28.6-4(d) as narrowly as Defendants propose, Plaintiff and other medical marijuana users would be lumped together with nonmedical users of marijuana. The protections that Section 21-28.6-4(d) affords would be illusory—every medical marijuana patient could be screened out by a facially-neutral drug test.”

Applying this standard to the facts of the case, the court said Darlington violated the Hawkins-Slater Act and granted summary judgment in Callaghan’s favor.

The court did add one final note about federal preemption, writing that the Controlled Substances Act did not preempt the Hawkins-Slater Act. Employment law and antidiscrimination law are two examples of powers traditionally delegated to the states, Judge Licht said, finding the purpose of the CSA to be “quite distant” from this realm.

“To read the CSA as preempting either the Hawkins-Slater Act or [state antidiscrimination law] would imply that anyone who employs someone that violates federal law is thereby frustrating the purpose of that law,” the court wrote. “That connection must, at some point, be deemed too attenuated.”

Further, Congress is well aware of the various states’ medical marijuana laws and has even passed an amendment preventing funds from being used to hamper the states from implementing them, “a direct and unambiguous indication that Congress has decided to tolerate the tension, at least for now, between the federal and state regimes,” the court said.

To read the decision in Callaghan v. Darlington Fabrics Corporation, click here.

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Sixth Circuit Sides With NLRB on Class Action Ban

Why it matters

The U.S. Court of Appeals for the Sixth Circuit affirmed a decision from the National Labor Relations Board that an employer ran afoul of the National Labor Relations Act by prohibiting employees from pursuing class or collective actions in any forum, joining the Seventh and Ninth Circuits and splitting from the Fifth and Eighth Circuits. The case involved a field technician performing installations for Dish Network. As a condition of employment, he signed an arbitration agreement that banned class or collective actions. When the technician later filed a charge with the NLRB related to changes made by the employer with regard to pay structure, the board found the policy violated the NLRA, which protects workers’ right to concerted activity. On appeal, the Sixth Circuit upheld the decision, holding that the Federal Arbitration Act does not trump the NLRA. While the decision broadens the circuit split, an answer is forthcoming: The Supreme Court is set to hear oral argument on the issue next term.

Detailed discussion

Employees at Alternative Entertainment Inc. are required to sign an agreement titled “AEI ALTERNATIVE ENTERTAINMENT, INC. OPEN DOOR POLICY AND ARBITRATION POLICY,” which states, “Disputes between you and AEI (or any of its affiliates, officers, directors, managers or employees) relating to your employment with the Company” must, at the election of the employee or the company, be resolved “exclusively through binding arbitration.”

The agreement also states, “By signing this policy, you and AEI also agree that a claim may not be arbitrated as a class action, also called ‘representative’ or ‘collective’ actions, and that a claim may not otherwise be consolidated or joined with the claims of others.”

James DeConner, a field technician, worked at AEI from August 2006 until he was fired in December 2014. The dispute arose when the employer changed its compensation structure. Believing that the changes negatively impacted his salary, DeConner spoke out against them in conversations with supervisors, in an email to the company president and in conversations with his fellow technicians. DeConner was ultimately fired and told the “relationship wasn’t working out.”

He then filed a charge against AEI with the NLRB. An administrative law judge determined that the employer violated the NLRA by prohibiting DeConner from discussing his concerns over changes in compensation with coworkers and discharging him for engaging in protected activity in violation of Section 8(a)(1). The ALJ also declared the requirement that employees waive their right to pursue class or collective action in all forums, arbitral and judicial, violated the same provision of the statute.

The NLRB affirmed, and AEI appealed to the U.S. Court of Appeals for the Sixth Circuit, where the panel recognized the current split among the federal appellate panels. On one side are the Seventh and Ninth Circuits, which have agreed with the NLRB; on the other, the Fifth and Eighth Circuits, which have determined that arbitration provisions mandating individual arbitration of employment-related claims do not violate the NLRA and are enforceable under the Federal Arbitration Act (FAA).

With this “robust debate” already underway—and the Supreme Court set to hear oral argument on the issue next term—the Sixth Circuit sided with the Seventh and Ninth Circuits.

AEI’s arbitration provision implicates two federal statutes, the court said: the FAA and the NLRA. But the two statutes do not conflict, the Sixth Circuit concluded. “The NLRA and FAA are compatible because the FAA’s savings clause addresses precisely the scenario before us,” the panel wrote. “The NLRA prohibits the arbitration provision on grounds that would apply to any contractual provision, and thus triggers the FAA’s savings clause. Because of the FAA’s savings clause, the statutes work in harmony.”

The NLRA prohibits mandatory arbitration provisions barring collective or class action suits because they interfere with employees’ right to engage in concerted activity, not because they mandate arbitration, the court emphasized. “These are grounds that would apply to any contract,” the court said. “Because the NLRA makes such a contractual provision illegal on generally applicable grounds—interference with the right to concerted activity—the FAA does not require enforcement.”

Agreeing with the Fifth Circuit that Rule 23 class action procedures are not a substantive right, the Sixth Circuit explained that the Section 7 right to act concertedly, whether to pursue arbitration or litigation, is. “Mandatory arbitration provisions that permit only individual arbitration of employment-related claims are illegal pursuant to the NLRA and unenforceable pursuant to the FAA’s savings clause,” the court wrote.

The panel also distinguished Supreme Court precedent in cases involving mandatory arbitration agreements, including AT&T Mobility LLC v. Concepcion, which the court said addressed a rule hostile to arbitration, unlike the NLRA, which is, “if anything, in favor of arbitration.” “The problem with the AEI agreement is not that it mandates arbitration or that it prohibits collective arbitration; it is that it prohibited concerted legal action in any forum,” the court said.

Turning to the other issues on appeal, the Sixth Circuit affirmed the NLRB’s ruling that AEI violated Section 8(a)(1) by forbidding DeConner from discussing compensation with coworkers and terminating him for doing so.

One member of the panel dissented with regard to the arbitration agreement, noting that the NLRA does not create an express exemption from the FAA or expressly prohibit class action waivers by name, adding that “there is nothing inherently ‘concerted’ about the class action.”

To read the opinion in National Labor Relations Board v. Alternative Entertainment, Inc., click here.

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