Tuesday, May 29, 2012

Central District Concludes Employer’s Failure to Record Meal Breaks Precludes Employer MSJ As A Matter of Law, Post-Brinker: Ricaldai v. US Investigations Servs.

On May 25, 2012, Central District Judge Dean D. Pregerson, concluded that the California Supreme Court’s decision in Brinker (discussed previously here) precluded a defense summary judgment of a plaintiff’s meal period claims where the employer failed to main records of meal breaks having been taken:
[T]he court notes its agreement with Justices Werdegar and Liu that it is the employer's burden to rebut a presumption that meal periods were not adequately provided, where the employer fails to record any meal periods. Otherwise, employers would have an incentive to ignore their recording duty, leaving employees the difficult task of proving that the employer either failed to advise them of their meal period rights, or unlawfully pressured them to waive those rights. See Brinker, 139 Cal. Rptr. 3d at 353 & n.1 (Werdegar, J., concurring) (citing Cicairos, 133 Cal. App. 4th at 961 ("[W]here the employer has failed to keep records required by statute, the consequences for such failure should fall on the employer, not the employee." (internal quotation marks omitted))). Here, as mentioned, there is no dispute that USIS failed to record any meal periods.
See Ricaldai v. US Investigations Servs., LLC, 2012 U.S. Dist. LEXIS 73279, at 14 (C.D. Cal. May 25, 2012).

In addition, summary judgment was denied on the further ground that the plaintiff was unable to access off-duty breaks.  The Court’s opinion demonstrates the extremely low “discouragement” threshold necessary to establish a barrier to breaks, post-Brinker.  Despite the fact that the plaintiff in this case worked independently, and purportedly had control over her schedule, summary judgment was denied based on evidence that plaintiff was “implicitly trained” to take on-duty meal breaks and precluded from using time for her own purposes: 
However, even if the burden of proof were on Ricaldai, the court would still find a genuine issue of material fact….   
Ricaldai offers evidence that she was implicitly trained to take working lunches, expressly told that personal errands were prohibited without prior authorization, specifically directed to fill her entire day in each geographic area with job duties, and correspondingly discouraged from taking any time off. Viewing this evidence in the light most favorable to Ricaldai, a rational trier of fact could conclude that USIS pressured her to take working lunches instead of duty-free meal periods, in violation of California meal period law under Brinker.
Contrary to USIS' argument, it does not change the summary judgment analysis that USIS exerted no direct control over Ricaldai during her work day and allowed for overtime, and that Ricaldai therefore admitted at deposition that she technically could have scheduled her work day to incorporate a duty-free meal period while still completing her tasks. As discussed, there is sufficient evidence that, viewed in the light most favorable to Ricaldai, USIS nonetheless unlawfully discouraged Ricaldai from scheduling a meal period during her workday.
Ricaldai v. US Investigations Servs., LLC, 2012 U.S. Dist. LEXIS 73279, at 17-18.

Thursday, May 10, 2012

Two New Arbitration Decisions of Note: Samaniego v. Empire Today LLC and O'Brien v. Am. Express Co.

In Samaniego v. Empire Today LLC, 2012 Cal. App. LEXIS 540 (April 5, 2012), the First District (Division Three) upheld a trial court order which declined to enforce arbitration of class-wide wage claims based on a finding of unconscionability under the Armendariz test.  The Court’s decision builds on a growing list of circumstances satisfying the Armendariz factors which may be relied upon to overcome enforcement of an arbitration provision in the employment context.

With regard to the first element, the Court concluded that the evidence “amply” supported a finding of procedural unconscionability, as (1) employees “were told that they were ‘required’ to sign these documents, including the agreement, if they wanted to work for Empire” [See id., at 10], (2) “Empire failed to provide plaintiffs with a copy of the relevant arbitration rules”  [See id., at 11 (concluding that “[n]umerous cases have held that the failure to provide a copy of the arbitration rules to which the employee would be bound, supported a finding of procedural unconscionability.”)], and (3) the language of the arbitration provision was buried at the end of an 11 page document that was “neither flagged by individual headings nor required to be initialed by the subcontractor.” See id., at 12.
  • [Note: In Morvant v. P.F. Chang's China Bistro, Inc., 2012 U.S. Dist. LEXIS 63985 (N.D. Cal. May 7, 2012), Northern District Court Judge, Yvonne Gonzalez Rogers, concluded that continued employment – standing alone – does not prove acceptance of the terms of the Arbitration Agreement.  Rather, “[a]n employee's continued employment has been found to constitute implied acceptance of the changed terms of employment where the employee was informed that his or her continued employment would constitute acceptance of those changed terms.”  See Morvant, 2012 U.S. Dist. LEXIS 63985, at 8.]
With regard to substantive unconscionability, the Court concluded that the agreement was rendered one sided by terms that (1) unilaterally shifted fees only for the employer [which the Court noted was unlawful in the wage context], and (2) limited the statute of limitations of wage claims to 6 months.  As to the later issue, the Court refused to extend authority approving of this practice into the wage context, finding that an arbitration provision cannot be used as a means to undermine statutory rights:
[Empire] supports its argument only with authority for the general proposition that a contractual provision that unilaterally shortens a limitations period to six months, taken alone, does not necessarily render an adhesion contract substantively unconscionable. (See Soltani v. Western & Southern Life Ins. Co. (9th Cir. 2001) 258 F.3d 1038, 1043 [citing California cases].) The import of such a clause is quite different in the context of the statutory wage and hour claims asserted here.  The Labor Code provides the bases for the class claims, and it affords employees three or four years to assert them. (See Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1283 []; Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107, 117 [].)  Where, as in this case, arbitration provisions undermine statutory protections, courts have readily found unconscionability. (Nyulassy, supra, at p. 1283; Martinez, supra, at p. 117; Wherry v. Award, Inc. (2011) 192 Cal.App.4th 1242, 1249 [] (Wherry).) As noted in Armendariz, supra, “an arbitration agreement cannot be made to serve as a vehicle for the waiver of statutory rights created by the FEHA.” (24 Cal.4th at p. 101.)
See Samaniego, 2012 Cal. App. LEXIS 540, at 14.

In the second opinion – O'Brien v. Am. Express Co., 2012 U.S. Dist. LEXIS 64553 (S.D. Cal. May 8, 2012) – Southern District Magistrate Judge, Bernard G. Skomal, concluded that “under California law, Plaintiff may obtain limited discovery to make the argument that the arbitration agreement is unconscionable.”  See O'Brien, 2012 U.S. Dist. LEXIS 64553, at 11. As reasoned by the Court, “Concepcion … reaffirmed that the FAA ‘permits agreements to arbitrate to be invalidated by 'generally applicable contract defenses, such as fraud, duress, or unconscionability…’” and “[b]ased on these available defenses to the validity of an arbitration agreement, courts have permitted parties opposing a motion to compel arbitration to take discovery on the unconscionability of an arbitration provision, including ones with class action waivers, post-Concepcion.”  See id., at 7-9 (collecting cases). 

Post-Concepcion, engaging in discovery prior to opposing a motion to compel arbitration is becoming increaringly more important (if not essential) in the wage and hour context.  This was recently highlighted in the Second District’s decision in Kinecta Alternative Financial Solutions, Inc. v. Superior Court, __ Cal.App.4th __ (2012) – previously discussed here.  In that opinion, the Court held that an “AT&T Mobility LLC v. Concepcion … did not overrule Gentry”, but explained that an employee is “required to establish that the arbitration provision invalidly prohibited arbitration of class claims by making a factual showing of the four factors showing that class arbitration is likely to be a significantly more effective practical means of vindicating employees' rights than individual arbitration.”  Making such a showing in most cases would require discovery.

Wednesday, May 2, 2012

Southern District Finds Waiver Argument Unpersuasive Post-Brinker; Certifies Meal and Rest Period Claims On Behalf of “Piece Rate” Workers: Schulz v. Qualxserv

On April 26, 2012, Southern District Court Judge, Hon. Anthony J. Battaglia, certified a swath of wage and hour claims on behalf of computer repair “field service technicians” who were paid by way of a piece-rate compensation.  See Schulz v. Qualxserv, LLC, 2012 U.S. Dist. LEXIS 58561, 1-2 (S.D. Cal. Apr. 26, 2012).  The Court’s opinion contains excellent discussion on various issues, many unique to alleged wage violations occurring in the context of fixed piece-rate compensation (as opposed to an hourly compensation).  Moreover, the Court’s opinion would seem to be the first district court opinion addressing the impact of Brinker Restaurant Corp. v. Superior Court [discussed previously here, here and here] on the certification of meal and rest period claims.

Here, the plaintiffs sought certification on the grounds that liability could be commonly established based on the employer’s failure to maintain a policy affirmatively relieving employees for meal and rest periods, coupled with a systematic failure to record meal periods.  [The employer apparently did not maintain detailed break policies or record meal breaks because employees were paid by project and free to determine their own breaks.  See Schulz, 2012 U.S. Dist. LEXIS 58561, 12].  The employer opposed certification – citing to Brown v. Fed. Express Corp., 249 F.R.D. 580, 585-87 (C.D. Cal. 2008) – on the grounds that plaintiffs had failed to provide “evidence that it ‘deprived’ technicians of meal or rest breaks as a general policy and, therefore, highly individual questions predominate over any common issue.”  See Schulz, 2012 U.S. Dist. LEXIS 58561, at 22.

Significantly, the Court rejected the defense argument based on Brinker’s finding that an employer must first establish it maintained a policy of actually relieving employees of duty (and control) for legally compliant meal/rest period before leaping to the question of waiver [this is discussed more thoroughly in a previous post, here (at paragraph 2)].  As the Court explained, the standard articulated in Brinker provides “that ‘an employer's obligation is to relieve its employees of all duty with the employee thereafter [being] at liberty to use the meal period for whatever purpose he or she desires….’” See Schulz, 2012 U.S. Dist. LEXIS 58561, at 22-23 (quoting Brinker, at page 8).  In granting certification, the Court reasoned that “common questions [predominated] under this standard because Plaintiffs' challenge the Defendants' common corporate policy of failing to relieve the technicians of all work during the rest and meal breaks.”  See id., at 23-24.  Thus, as the plaintiff’s theory of liability was focused on the legal adequacy of the employer’s policy itself, issues of pertaining to waiver were not implicated and certification was appropriate.

In addition to the forgoing, the Court also rejected the employer’s argument based on the fact “Plaintiff's meal break claim is … based on Defendants' alleged failure to comply with Wage Order No. 4-2001, which requires the employer to ‘record’ unpaid meal periods.”  See id., at 24.  As previously discussed here (at paragraph 4), Brinker precludes an employer who fails to record meal breaks from benefitting from its misconduct by claiming individualized issue of waiver must now prelude class-wide adjudication. 

In all, the Court’s analysis signifies a fairly dramatic departure from the pre-Brinker treatment of waiver as a defense to certification.

[As an aside, the fact pattern in this case raises other interesting questions.  For example, an employer who pays employees on a piece rate basis presumably cannot simply assume by default that employees took meal breaks, as such a policy would impermissibly compensates employees who work through their breaks the exact same amount as those employees take breaks.  At a minimum, employees must receive compensation for all hours worked, even if the employee waived his or her break.  Similarly, would an employee ever receive a "paid" rest period (as required by the Wage Orders) absent a separate piece-rate dedicated solely to rest break pay?  Absent such a policy, employees are technically only paid for the piece-rate tasks performed and would necessarily receive the same compensation regardless of whether an off-duty rest break was ever authorized (resulting in the employer extracting 20 minutes of “free work” from the employee).  See Murphy v. Kenneth Cole Productions, Inc., 40 Cal. 4th 1094, 1104 (2007) (“If denied two paid rest periods in an eight-hour workday, an employee essentially performs 20 minutes of ‘free’ work, i.e., the employee receives the same amount of compensation for working through the rest periods that the employee would have received had he or she been permitted to take the rest periods.”). ]