Employment Law

Manatt Adds Prominent Employment Litigator in Washington, D.C.

Deborah P. Kelly has joined Manatt's Washington, D.C., office as a partner in the employment and labor practice. Ms. Kelly has extensive experience in a wide variety of industries, including financial services, professional services and technology, regarding such matters as noncompete cases and alleged breaches of restrictive covenants and trade secrets. She regularly counsels boards of directors on complex, high-level employment matters and conducts anti-discrimination training. Ms. Kelly's training sessions also include best practices on equal employment opportunity compliance and social media policies for employers, including board of directors, in-house counsel, managers, human resources staff and other employees.

For more information, click here.

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Ninth Circuit Sends Employment Dispute to Arbitration

Why it matters

The U.S. Court of Appeals for the Ninth Circuit sent an employment dispute to arbitration, reversing a denial of the employer's motion to compel arbitration. Each December, the plaintiff employee signed an "Incentive Bonus Agreement" to receive her bonus from C.H. Robinson Company. The one-page document had eight provisions, including one on dispute resolution where both parties agreed to waive all claims unless submitted to mediation, followed by binding arbitration; another provision featured a class or collective action waiver. When the employee was terminated, she demanded mediation, alleging she was misclassified as exempt from overtime pay requirements. Mediation was unsuccessful and she filed a class action which included a California Private Attorneys General Act (PAGA) claim. The federal district court denied the employer's motion to compel arbitration based on certain aspects of the agreement that the court felt were unenforceable, but the Ninth Circuit reversed. An adhesion contract is not per se unconscionable, the panel said, and the agreement at issue had only a small amount of procedural unconscionability with limited elements of substantive unconscionability. As for the class action waiver, the Court agreed that it was invalid with regard to the PAGA claim, but found the waiver of other representative, collective, or class action claims did not render the agreement unenforceable.

Detailed discussion

An account manager for C.H. Robinson Company, Lorri Poublon, signed an "Incentive Bonus Agreement" each December in order to receive a financial bonus. The one-page document had eight provisions. The seventh provision, titled "Dispute Resolution," required the parties to submit employment-related claims to a mediator and then, if mediation was not successful, final and binding arbitration, and also prohibited collective, representative or class actions. It also contained a judicial carve-out that preserved the employer's right to seek judicial relief for certain claims seeking injunctive or equitable relief, and included language permitting the agreement to continue in full force even if any part of that provision was determined to be void or unenforceable.

After she was terminated in February 2012, Poublon alleged that her former employer misclassified her as exempt from overtime pay requirements and submitted her claim to mediation. When mediation was unsuccessful, she filed a class action suit against C.H. Robinson, including a count under PAGA.

Pursuant to the agreement, the employer moved to compel arbitration. The federal district court denied that motion, holding that the dispute resolution provision was both procedurally and substantively unconscionable and therefore unenforceable. C.H. Robinson appealed to the U.S. Court of Appeals for the Ninth Circuit.

Beginning its analysis with a nod to the Federal Arbitration Act's mandate to respect arbitration agreements, the federal appellate panel noted that California's standard for unconscionability is a sliding scale involving both procedural and substantive unconscionability.

While the adhesive nature of a contract is sufficient to establish some degree of procedural unconscionability, "the California Supreme Court has not adopted a rule that an adhesion contract is per se unconscionable," the panel wrote, and "the adhesive nature of a contract, without more, would give rise to a low degree of procedural unconscionability at most."

The fact that C.H. Robinson did not provide Poublon with a copy of the applicable American Arbitration Association's rules or the employer's Arbitration Procedure handbook did not make the agreement oppressive, the Court found. The Court was also not persuaded that Poublon felt forced into signing the agreement not only in order to receive her bonus but also to keep her employment with the company.

"[T]here is no evidence in the record that C.H. Robinson ever stated or suggested that Poublon would be fired for failing to sign the agreement," the Ninth Circuit wrote. "To the contrary, the record shows that in response to Poublon's question regarding what would happen if she did not sign the agreement, [her supervisor] responded only that she would not receive her bonus."

The panel then worked its way through each of the eight provisions in the agreement to evaluate their substantive unconscionability.

Although agreeing with the district court's finding that the judicial carve-out provision for certain types of claims was substantively unconscionable, the Ninth Circuit reached a different conclusion regarding the waiver of representative claims. The parties did not dispute that the California Supreme Court's decision in Iskanian v. CLS Transportation prohibits the waiver of PAGA claims.

But just because the waiver of a representative PAGA claim is unenforceable does not also make the provision unconscionable, the Ninth Circuit held. Combined with suggestions from the U.S. Supreme Court "that arbitration agreements can generally waive collective, class-wide, and representative claims," the Ninth Circuit ruled that the provision was not substantively unconscionable even with the unenforceable PAGA waiver in it.

The Court also found no unconscionability with respect to the agreement's provisions on the subjects of venue, confidentiality, sanctions, unilateral modifications, discovery limitations and a reaffirmation clause. Weighing both the procedural and substantive unconscionability it had actually found in the agreement, the Ninth Circuit elected to enforce the remainder of the agreement without the unconscionable provisions.

Although Poublon contended that an agreement is necessarily permeated by unconscionability if more than one clause in the agreement is unconscionable or illegal, the Ninth Circuit disagreed. "California courts have not adopted such a per se rule," the Court said. "In this case severance [of the improper provisions] is appropriate."

The Court determined that there was just one unconscionable clause in the dispute resolution provision, the judicial carve-out. "This provision can be extirpated without affecting the remainder of the paragraph and is 'collateral to the main purpose of the contract,' which is to require arbitration of disputes," the panel wrote. Further, "the waiver of representative claims is unenforceable to the extent it prevents an employee from bringing a PAGA action. This clause can be limited without affecting the remainder of the agreement."

The agreement itself supports this approach of excising any invalid portion of the agreement, the Court added, as the language of the dispute resolution provision allows for modifications "to the extent necessary, consistent with [the agreement's] fundamental purpose and intent, in order to make it enforceable."

"Accordingly, we conclude that the dispute resolution provision is valid and enforceable once the judicial carve-out clause is extirpated and the waiver of representative claims is limited to non-PAGA claims," the Court said, reversing the denial of the motion to compel arbitration.

To read the opinion in Poublon v. C.H. Robinson Company, click here.

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Employer Had Obligation to Seek Details on FMLA Request

Why it matters

An employer should have made more of an effort to determine if an employee was eligible for Family and Medical Leave Act (FMLA) leave, the U.S. Court of Appeals for the Second Circuit held while reversing summary judgment in the employer's favor. When he requested leave to care for his seriously ill grandfather, Frantz Coutard alleged that Municipal Credit Union told him categorically that the statute did not cover leave to care for grandparents. Coutard sued for interference with his FMLA rights, arguing that his grandfather had, in loco parentis, raised him as a child, meaning that the employee should have been eligible to take leave to care for him. A district court sided with the employer, reasoning that, although care for a person with whom an employee had an in loco parentis relationship would have been covered by the FMLA, Coutard failed to inform his employer of that status. The Circuit Court reversed, noting that the employer denied the request categorically without requesting additional information. Instead, the employer "had an obligation to specify any additional information that it needed to determine whether plaintiff was entitled to such leave," the Court wrote.

Detailed discussion

An employee of the Municipal Credit Union (MCU), Frantz Coutard, lived with his grandfather, Jean Manesson Dumond. After Coutard's father died when he was three years old, Dumond raised him as his son until Coutard was about 14. Dumond, who suffered a stroke in 2011, was 82 years old and suffered from a number of chronic medical conditions, including diabetes, hypertension, asthma, prostate cancer, high cholesterol, and heart disease.

When Dumond was diagnosed with bronchitis in January 2013, Coutard decided to stay home and care for him until he was able to secure the assistance of a home health aide. Coutard sought Family and Medical Leave Act (FMLA) leave from MCU but his employer denied the leave, allegedly informing Coutard that the statute does not apply to grandparents. When Coutard remained at home to care for Dumond, MCU terminated his employment.

Coutard filed suit, alleging interference with his FMLA rights. MCU moved for summary judgment, arguing that, although the statute provides that an eligible employee may be entitled to leave to care for a person with whom he had an in loco parentis relationship as a child, Coutard failed to explain the circumstances. A district court granted the employer's motion to dismiss the case.

Coutard appealed, asserting that his failure to mention the nature of the relationship with his grandfather was not dispositive. Given that the company did not inform him that an in loco parentis relationship could entitle him to FMLA leave and did not inquire whether Coutard had such a relationship with his grandfather—instead categorically responding that Coutard was not entitled to leave to care for a grandparent—the employer erred, he argued.

Reversing summary judgment for MCU, the U.S. Court of Appeals for the Second Circuit agreed. "We hold that because plaintiff met the eligibility requirements for FMLA leave and requested that leave expressly to care for his seriously ill grandfather, defendant as an employer covered by the FMLA had an obligation to specify any additional information that it needed in order to determine whether plaintiff was entitled to such leave," the unanimous panel wrote.

MCU was required to make further inquiry of Coutard before denying his request for FMLA leave, the Court held. The statute permits leave to care for a "parent," defined to include "an individual who stood in loco parentis to an employee when the employee was a son or daughter."

At the time of Coutard's request to take leave, the relevant FMLA regulations stated: "When an employee seeks leave for the first time for a FMLA-qualifying reason, the employee need not expressly assert rights under the FMLA or even mention the FMLA … The employer will be expected to obtain any additional required information through informal means."

"In light of these regulations, we conclude that the obligation of an employee to give notice of his need for FMLA leave is not the obligation, imposed by the district court on Coutard, to provide the employer with all of the necessary details to permit a definitive determination of the FMLA's applicability at or before the time of the request," the Court wrote. "Rather, in the absence of a request for additional information, an employee has provided sufficient notice to his employer if that notice indicates reasonably that the FMLA may apply."

Coutard was not required to provide MCU with all the information it needed to determine with certainty that his requested leave was within the FMLA at the time of his request, the Court concluded. Instead, Coutard was required initially "only to provide sufficient information to indicate that the FMLA 'may' apply."

Using this standard, the Second Circuit found "no serious question that an employee's request for leave to care for his seriously ill grandfather … 'may' qualify for FMLA protection. Although MCU argues that it was not required to inquire as to whether Coutard had a '[u]nique' relationship with his grandfather, a grandparent's raising of a child in loco parentis is hardly unique," the Court said.

The very reason Congress included individuals who stood in loco parentis to employees "was to 'reflect the reality that many children in the United States today do not live in traditional 'nuclear' families with their biological father and mother,' and are increasingly raised by others including 'their grandparents,'" the Court explained.

It was "reasonable for MCU to understand that Coutard's request for leave in order to take care of his seriously ill grandfather might come within the FMLA," the Court concluded, reversing summary judgment in the employer's favor.

To read the decision in Coutard v. Municipal Credit Union, click here.

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FCRA Suit Against Amazon Moves Forward

Why it matters

A Fair Credit Reporting Act (FCRA) suit against Amazon can move forward in Florida federal court, a judge recently ruled. Donovan Hargrett accused the online retailer of violating the statute by failing to provide two separate forms for his job application and background check authorization at a fulfillment center. Amazon moved to dismiss, arguing that the lack of a stand-alone disclosure document was not sufficient to create standing (i.e., the right to sue) to pursue an FCRA violation. But the court disagreed, denying the motion. "The court recognizes the split in persuasive authority as to this issue, however, it is convinced that Article III standing is sufficiently established in this case inasmuch as plaintiffs have at least three kinds of harm: invasion of privacy, informational harm and risk of harm," the judge wrote. Further, the court noted that the allegations may amount to a willful violation of the FCRA because Amazon included a liability waiver with the disclosure form despite the statute's clear mandate that no "extraneous information" be added to the FCRA disclosure.

Detailed discussion

In 2015 Donovan Hargrett sought employment as a "fulfillment associate" at Amazon's fulfillment center in Ruskin, Florida. During the online application process, Amazon notified individuals of its intent to procure a background check report, including criminal background information, from Accurate Background, Inc.

The online application form completed by Hargrett was accompanied by a second document that consisted of two forms: one titled "Background Check Disclosure," which explained that, pursuant to the FCRA, Accurate or another consumer reporting agency acting on behalf of Amazon would process a "background check" on the applicant and furnish it to Amazon.

It also asked applicants to review and sign the second form, the "Background Check Authorization," if the applicant authorized a background check to be conducted on behalf of and provided to Amazon.

Only after selecting "I Accept" and "Save & Continue" for the "Background Check Disclosure" form was the applicant directed to the "Background Check Authorization." By signing the Authorization, the applicant agreed that he had read and understood both the Authorization and the Disclosure forms and "consent[ed] to the preparation and release of consumer and/or investigative consumer reports to the Company."

Underneath a heading titled "Additional State Law Notices," the Authorization form also featured paragraphs of information regarding rights under the laws of certain states (none of them applicable to Hargrett).

Hargrett brought suit under the FCRA, asserting that Amazon violated Section 1681(b)(2)(A) because the online employment application forms included "extraneous information." Amazon did not utilize a stand-alone FCRA disclosure or authorization form, he said, and the disclosure form was included within and as part of the online job application form, accompanied by a liability release and extraneous information.

The putative class action did not request actual damages but sought an award of statutory damages for Amazon's willful FCRA violation. Hargrett's case was consolidated with a similar action filed by two other applicants.

Amazon moved to dismiss for lack of standing. The case was stayed pending the outcome of the U.S. Supreme Court's decision in Spokeo, Inc. v. Robins.

Once the justices published their opinion in that case, U.S. District Court Judge Richard A. Lazzara determined that the plaintiffs suffered a concrete injury from Amazon's alleged FCRA violations sufficient to establish Article III standing to sue Amazon.

Spokeo "reaffirmed well-established Article III standing principles—that 'intangible injuries can nevertheless be concrete,' just as can injuries based on a risk of harm," the court held. "The Supreme Court further explained that '[i]n determining whether an intangible harm constitutes injury in fact, both history and the judgment of Congress play important roles.' The Court recognizes the split in persuasive authority as to this issue, however, it is convinced that Article III standing is sufficiently established in this case inasmuch as Plaintiffs have at least three kinds of harm: invasion of privacy, informational harm, and risk of harm. The invasion of Plaintiffs' right to receive a stand-alone disclosure document required by the FCRA is not hypothetical or uncertain."

For support, Judge Lazzara cited post-Spokeo decisions finding an injury-in-fact may exist solely by virtue of statutes creating legal rights, the invasion of which creates standing, from the U.S. Court of Appeals for the Eleventh Circuit as well as district courts in Florida and Virginia.

Most recently, the Ninth Circuit found standing in a nearly identical FCRA case, holding that a prospective employer violates Section 1681(b)(2)(A) when it procures a job applicant's consumer report after including a liability waiver in the same document as a statutorily mandated disclosure.

Judge Lazzara noted that the forms at issue "include no less than five pages of 'eye-straining, tiny typeface writing,'" with additional information such as five different state law notices (none of which applied to the plaintiffs) and a statement indicating that applicants could either consent to the terms or would not be hired.

All of these extraneous additions to the form stretch what should be a simple disclosure form to five full pages of writing, the judge wrote. "Neither of the two forms at issue here constitute a document consisting solely of a disclosure that a background check will be procured for employment purposes," the court said. "Because these were the only two forms Defendant provided to Plaintiffs prior to procuring a report on them, the Court must agree with Plaintiffs that Defendant violated Section 1681(b)(2)(A)(i) and (ii)."

The plaintiffs also sufficiently alleged that Amazon's violation was willful, the court added. Accurate, the national consumer reporting agency hired by Amazon to procure its consumer reports, readily made available information on the FCRA's requirements—including stand-alone documents—in white papers and guidance on its website.

In addition, Amazon had already been accused of FCRA violations in litigation involving thousands of employees across the country, making it "illogical for Defendant to argue that it was unaware of its obligations under the FCRA as it has been involved in high-stakes FCRA class litigation for nearly an entire year," starting before Hargrett's lawsuit, the court said.

Accordingly, Judge Lazzara denied Amazon's motion to dismiss.

To read the order in Hargrett v. Amazon.com, click here.

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Termination for Cake Theft May Have Been Pretext, Ninth Circuit Rules

Why it matters

Firing an employee over a cake theft may have been pretextual, the U.S. Court of Appeals for the Ninth Circuit ruled in reversing dismissal of a Title VII gender discrimination suit. Katie Mayes frequently took cakes from the bakery department's "stales" cart to share with and motivate the workers on the night shift she supervised at a WinCo grocery store. But after the store terminated her and issued a 100-year ban when she was caught taking a cake on camera, she sued. Arguing that the practice by supervisors of taking stale cakes was common and accepted, Mayes alleged that the employer used the purported cake theft as pretext for gender discrimination. She cited a number of comments by supervisors where, for example, she was removed from leading a safety committee because a "man would be better," was told that "a girl" shouldn't be running the freight crew, received criticism for leaving work to care for her children when a male counterpart did the same thing without comment, as well as her replacement by a man with just three weeks' time at the company and no supervisory experience. A district court granted summary judgment in favor of the employer but the unanimous Court of Appeal panel reversed, finding "ample direct evidence of discriminatory animus, as well as specific and substantial indirect evidence challenging the credibility of WinCo's motives."

Detailed discussion

Katie Mayes began working at a WinCo grocery store in 1999. During her 12 years on the job, she was promoted to a supervisory position over employees on the night-shift freight crew. She also served in a leadership role on the store safety committee and received positive reviews throughout her tenure.

Mayes stated that she was given permission to take cakes from the bakery to motivate the freight crew, to boost morale and to encourage the crew to stay past the end of their shifts when big loads required extra work. She discussed taking the cakes with other supervisors, and several employees agreed that taking cake from the store to the break room was a common, accepted practice. The bakery later instructed Mayes and the other freight crew supervisor only to take cakes that could no longer be sold from the "stales" cart.

In July 2011 it was reported that a different employee had taken a cake from the shelves to eat in the break room. While viewing video footage of the time in question, the general manager observed Mayes taking a cake from the stales cart. Mayes was terminated and banned from the store for 100 years. Because WinCo said that her behavior rose to the level of gross misconduct, the company denied her (and her seven children) benefits under the Consolidated Omnibus Budget Reconciliation Act (COBRA), as well as credit for accrued vacation days.

Mayes sued. She claimed that WinCo fired her not for theft and dishonesty but in order to put a man in charge of the freight crew. She claimed that the general manager removed her as the chair of the safety committee and told her that "a male would be better in that position" and that a fellow supervisor warned her to "stay away" from the general manager because she did not like that "a girl" was running the freight crew.

The general manager criticized Mayes because she could not stay late or come in on her days off because she was taking care of her children, but did not make similar comments to Mayes' male counterpart, she alleged, and her replacement was a man who had no supervisory experience and had only worked at the company for three weeks. Her complaint stated violations of Title VII, state law and COBRA.

WinCo moved for summary judgment and a district court judge granted the motion. But the U.S. Court of Appeals for the Ninth Circuit reversed.

Since the district court found that Mayes established a prima facie case of gender discrimination, and that WinCo proffered a legitimate, nondiscriminatory reason for terminating her, the federal appellate panel focused on whether Mayes had presented sufficient evidence that WinCo's proffered reason for her termination was pretextual.

"Direct evidence of discrimination is often not easy to come by," the Court wrote. "Here, however, Mayes has offered multiple examples of direct evidence that implicate gender discrimination."

Specifically, Mayes alleged that the general manager said that she did not like "a girl" running the freight crew, remarked that a man "would be better" leading the safety committee and criticized Mayes, and not her male counterpart, for leaving work early to care for her children.

"These remarks directly concerned Mayes and the decisional process for retaining and promoting employees," the Court noted, and the plaintiff's failure to provide precise dates for the remarks or establish a closer temporal link between the comments and her termination did not defeat her claims.

WinCo argued that the general manager did not fire Mayes, but the Court found that the record remained unclear regarding who had actually terminated Mayes. The employer admitted in an interrogatory answer that the general manager "participated" in the termination decision, and the GM testified in Mayes' unemployment hearing that she was involved in the decision to terminate Mayes.

"Even if the supervisor does not participate in the ultimate termination decision, a 'supervisor's biased report may remain a causal factor if the independent investigation takes it into account without determining that the adverse action was, apart from the supervisor's recommendation, entirely justified," the Court explained.

The Court rejected WinCo's contention that the general manager's comments were "stray remarks" insufficient to establish discrimination. "If Mayes's testimony is believed, reasonable jurors could decide that [the general manager's] comments … demonstrate overt hostility to having women in leadership roles," the Court held, adding that the fact that the general manager is also a woman was irrelevant.

While the plaintiff's direct evidence was sufficient on its own to defeat summary judgment, the Court found that her claims were bolstered by indirect evidence. Multiple employees testified that it was a common, accepted practice for supervisors to take cakes to the break room.

"That WinCo purportedly fired Mayes for following a practice described by some witnesses as 'common,' and that another [supervisor] thought was authorized, is specific and substantial evidence that WinCo's proffered explanation for her termination is not believable," the Court said. "Mayes could not have stolen a cake that she had permission to take. Nor could management have reasonably thought that Mayes lied about having permission if they knew that [supervisors] were allowed to use stale cakes to motivate employees."

Mayes also presented evidence that she received no negative performance reviews over the course of 12 years with the company, including five in a supervisory position, and was replaced with a less qualified male employee.

"In sum, circumstantial evidence raises a material dispute of fact regarding pretext," the Court concluded, reversing summary judgment on Mayes's Title VII claims. "This is particularly true when the circumstantial evidence is viewed in conjunction with the powerful direct evidence of [the general manager's] discriminatory comments."

For similar reasons, the Court reversed summary judgment on the state law and COBRA claims as well.

To read the opinion in Mayes v. WinCo, Holdings, Inc., click here.

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