Labor & Employment

U.S. Supreme Court Rules That Class Action Waivers in Employment Arbitration Agreements Are Enforceable

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By Stephen Rossi

Last week, in an important win for employers, the U.S. Supreme Court resolved a circuit-split on whether class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act (FAA), holding that they are.

The Court decided three cases, Epic Systems Corp. v. Lewis, Ernst & Young LLP v. Morris, and National Labor Relations Board v. Murphy Oil USA, Inc., and answered the question of whether class or collective action waivers contained in employment arbitration agreements violate the National Labor Relations Act (NLRA).  In 2012, the National Labor Relations Board (NLRB) ruled that employers violate the NLRA when they require employees, as a condition of employment, to agree to arbitration provisions containing class or collective action waivers, or clauses stating that employees must arbitrate any employment-related claims on an individual basis only (rather than on behalf of a class of other employees).  The U.S. Courts of Appeals for the Second, Fifth, and Eighth Circuits did not follow the NLRB’s ruling. The U.S. Courts of Appeals for the Seventh and Ninth Circuits reached the opposite result.

In a 5-4 decision, the U.S. Supreme Court held that neither the FAA nor NLRA prohibit class and collective action waivers in employment arbitration agreements.  The Court’s majority opinion, written by Justice Neil Gorsuch, first ruled that the “savings clause” in the FAA, which allows courts to refuse to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract,” applies only to general contract defenses (such as fraud, duress, or unconscionability).  It does not apply to defenses that specifically target arbitration, “either by name or by more subtle methods.”  The Court next held that class and collective actions are not “concerted activities” protected by Section 7 of the NLRA and that, for a variety of reasons, the NLRA does not trump the FAA in this instance.  Finally, the Court ruled that the NLRB’s decision was not entitled to the usual deference given to an administrative agency’s statutory interpretation because the decision interpreted the NLRA in a way that limited the FAA, which is not “administered” by the NLRB.  Justice Ginsburg authored a dissent joined by three other Justices.

The decision is a victory for employers, particularly those who already have such arbitration agreements in place.  Employers who do not have class or collective action waivers in their arbitration agreements should strongly consider adding them after consulting with qualified counsel.

New York City & State Implement Stronger Protections Against Workplace Harassment

New York City Dawn

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By Greg Hessinger

As states begin to focus heightened attention on sexual harassment in the workplace in the wake of the #MeToo movement, New York State (“NY State”) and New York City (“NYC”) have implemented stronger protections for employees against workplace harassment. The new requirements, which have been passed into law in NY State and NYC, will impact employers’ training, policies & procedures, and employment agreements for New York employees.

New York State: (more…)

Courts Rule on Salary History Bans

By Erica Parks

Last week, the United States District Court for the Eastern District of Pennsylvania partially enjoined an ordinance adopted by the Philadelphia City Council which banned employers from making salary history inquiries.  The court held that the portion of the ordinance prohibiting employers from asking about an applicant’s previous salary violates the First Amendment.  It also held that the portion of the law barring employers from relying on past salary is allowed.

The Eastern District of Pennsylvania’s ruling came on the heels of a decision by an 11-judge en banc panel of the U.S. Court of Appeals for the Ninth Circuit in Rizo v. Yovino, in which the Court ruled unanimously that prior salary history cannot be used at all, even in combination with other factors, to justify paying women less than men under the federal Equal Pay Act (“EPA”). The EPA prohibits employers from paying male and female employees a different wage for substantially equal work unless the employer can demonstrate that any pay differential is based on a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or “any other factor other than sex.” 29 U.S.C. § 206(d)(1) (emphasis added). (more…)

California Supreme Court Adopts “ABC” Test As Standard To Determine Independent Contractor Status Under the Wage Orders

By Tony Amendola and Samantha Becker

In Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court issued a unanimous decision adopting a new standard for determining whether a California worker is an employee or independent contractor under the wage orders adopted by California’s Industrial Welfare Commission. In adopting the new standard, the Court noted that, under the wage orders, “employ” has three alternative definitions: “(a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship.” Of these, the broadest definition is “to suffer or permit” to work. As the Court stated:

“We conclude that in determining whether, under the suffer or permit to work definition, a worker is properly considered the type of independent contractor to whom the wage order does not apply, it is appropriate to look to a standard, commonly referred to as the ‘ABC’ test, that is utilized in other jurisdictions in a variety of contexts to distinguish employees from independent contractors. Under this test, a worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.” (more…)

Free Speech Issues

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The following was written collectively by our Labor & Employment Department.

A. Anti-SLAPP (Strategic Litigation Against Public Policy)Law, Code of Civil Procedure § 425.16

1. Anti-SLAPP Statute Does Not Provide a Safe-Harbor Against Employee FEHA Lawsuits, Even if the Claims Arise Partially from Employer’s Protected Conduct

In Nam v. Regents of the University of California, 1 Cal.App.5th 1176, 1193 (2016), a resident in the anesthesiology department at UC Davis Medical Center brought a lawsuit claiming sexual harassment and retaliation against her employer. The resident accused her residency program director of sexual harassment, alleging that after she rebuffed his advances, he retaliated against her by, among other things, issuing an unwarranted disciplinary letter and placing her on investigatory leave. The resident further alleged that she was retaliated against because she complained about the clinical behavior of another doctor and serious patient care and safety issues. (more…)

Miscellaneous Employment Law Developments

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The following was written collectively by our Labor & Employment Department.

A. California WARN Act

1. Layoffs Of Any Length Require Compliance with Cal-WARN

In The Internat. Brotherhood of Boilermakers etc. v. NASSCO etc., 17 Cal. App. 5th 1105 (Nov. 30, 2017), the employer notified 90 employees, without prior notice, to not return to work for at least 3 weeks due to a lull in shipyard production work. NASSCO later extended the layoff period by several weeks for some of the employees. The WARN Act’s notice requirement provides that a covered employer “may not order a mass layoff, relocation or termination at a covered establishment unless, 60 days before the order takes effect, the employer gives written notice of the order to … the employees of the covered establishment…”

The employer argued that such short “furloughs” were not a mass “layoff” covered by Cal-WARN. The Court disagreed because the law defined “mass layoff” as “a separation from a position for lack of funds or lack of work.” (§ 1400, subd. (c)) (emphasis added). The Court reasoned that, based on the plain meaning of that statutory language, a “separation” can be either temporary or permanent and there was no temporal requirement. The Court also noted that the Cal-WARN act was meant to give greater protection to employees than the Federal WARN act, which requires notice only when a layoff will last more than six months.

Liability for violations of the Cal-WARN act can include compensatory damages, attorney fees, and statutory penalties. (more…)


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The following was written collectively by our Labor & Employment Department.

1. Excluding claims arising from Confidentiality provision from the arbitration clause was substantively unconscionable

In Farrar v. Direct Commerce, Inc., 9 Cal. App. 5th 1257, review filed 4/28/17, a successful entrepreneur, Farrar, negotiated with Direct Commerce (“Direct”) a contract to become its VP of Business Development. The contract excluded claims arising from the confidentiality provision from the arbitration clause. The Court of Appeal agreed with the trial court that the arbitration provision was substantively unconscionable, because it carved out more than provisional remedies and was therefore too “one-sided.” The Court of Appeal, however, found the offending provision could be severed so that the arbitration provision could be enforced. (more…)

Wage and Hour Law

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The following was written collectively by our Labor & Employment Department.

A. Federal Court Decisions

1.No Administrative Exemption for Mortgage Underwriters

In McKeen-Chaplin v. Provident Sav. Bank, 862 F.3d 847 (9th Cir. 2017), the Ninth Circuit reversed the district court’s holding that mortgage underwriters qualified for the “administrative exemption” under the Fair Labor Standards Act (“FLSA”). In particular, the plaintiff alleged that she and other underwriters often worked in excess of 40 hours in a workweek and, therefore, were owed overtime compensation. The defendant argued that mortgage underwriters were exempt under the administrative exemption, and the district court agreed. The Ninth Circuit reversed, and focused on the distinction, imposed by Department of Labor (“DOL”) regulations interpreting the scope of the FLSA exemptions, between “work directly related to running or servicing of the business” and “working on a manufacturing production line or selling a product in a retail or service establishment,” also known as the “administrative-production dichotomy.” According to the DOL, those engaged in management of the business are exempt from the overtime-pay requirements of the FLSA, while those involved in making the goods it sells or performing the services a business provides to the marketplace are not exempt. The Ninth Circuit noted that two other circuit Court of Appeals, the Second Circuit (which ruled underwriters are non-exempt) and the Sixth Circuit (which ruled they are exempt) have reached opposite conclusions.


National Labor Relations Act

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The following was written collectively by our Labor & Employment Department.

A. The “New” National Labor Relations Board Decisions and Memos

As of this past fall, following confirmation of Marvin Kaplan and William Emanuel as new members of the National Labor Relations Board (“NLRB”), that agency has obtained a 3-2 Republican majority for the first time in almost a decade. As expected, in the few short months thereafter, the Trump era NLRB has been on a path to reverse many of the decisions and actions taken by the Obama era NLRB. Here are the more significant NLRB decisions that fall in this category. Notably all were decided this past December.

1. NLRB Establishes New Standard Governing Workplace Policies

On December 14, 2017, in The Boeing Co., 365 NLRB No. 156, the NLRB overturned its standard for evaluating the legality of employee handbook policies. The standard that was overruled was established in Lutheran Heritage Village – Livonia, 343 NLRB 646 (2004). In Lutheran Heritage, the NLRB stated that a policy is illegal if employees could “reasonably construe” it to bar them from exercising their rights to engage in union or other concerted activities under the NLRA. In the Boeing case, the administrative law judge applied the Lutheran Heritage rule to Boeing’s workplace policy restricting workers’ use of camera-enabled devices and similar recording devices such as cellphones on company property violated the NLRA. Although Boeing’s “no-recording” policy would have violated the NLRA under Lutheran Heritage, the NLRB in Boeing stated that Lutheran Heritage’s “reasonably construe” standard entails a “single-minded consideration of NLRA-protected rights, without taking into account any legitimate justifications associated with policies, rules and handbook provisions.” (more…)

New California Laws

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The following was written collectively by our Labor & Employment Department.

New California Laws

1. California Salary History Ban

AB 168, which enacted California Labor Code Section 432.3, is intended to promote equal pay, particularly between men and women. In passing AB 168, which went into effect on January 1, 2018, California joins a handful of states (Massachusetts, Delaware and Oregon) and municipalities (New York City, Philadelphia and San Francisco) which have enacted similar measures. In sum, AB 168 prohibits all California employers (including public employers) from

  • Inquiring or seeking from job applicants, whether “orally or in writing, personally or through an agent,” salary history information (the law does not define the term “salary history); and
  • Relying on or considering salary history as a factor in determining whether to offer employment to an applicant or what salary to offer an applicant. (more…)