Employment and Wage & Hour Law Class Action Mania Continues and What You Can Do to Protect Your Organization
The Goldstein Law Firm
May 2010 Newsletter
“Employment and Wage & Hour Law Class Action Mania Continues and What You Can Do to Protect Your Organization; and Arbitrators Can Have Their Decisions Questioned by the Courts When Depriving Employees of a Right to a Hearing on Discrimination and Harassment Claims”
By: Charles H. Goldstein, Esq.
1. The Employment Law Class Action Mania Continues and Will Be Spurred On By the Ninth Circuit Decision in Dukes v. Wal-Mart Stores Inc.
This past week the Ninth Circuit U.S. Court of Appeals approved the certification of the nation’s largest class in which classes of up to 1.6 million current and former female employees contend that Wal-Mart Stores unfairly discriminated against women in its pay and promotion practices. No doubt Wal-Mart will seek review of this decision by the U.S. Supreme Court. This case will probably take decades to resolve and could eventually involve billions of dollars in damages, including potential punitive damage awards of up to $300,000 per plaintiff. If this case goes forward Wal-Mart will be put in the position of having to justify the statistical disparities in their hiring and promotion practices.
The plaintiffs’ claims may or may not be meritorious, but the message that the Court’s action is sending is that it continues to be open season on deep pocket employers and that regardless of the criteria for certifying a class action, (i.e. which requires a showing of a predominance of class issues over individual issues), a class will be certified by California and Federal Courts.
The evidence presented by the plaintiffs to support class certification was that more than 2/3rds of the Wal-Mart store employees are female, 1/3 of the lower managers were female and 15 percent of the store managers were female. However, every employer knows promotion decisions are individually based and involve a weighing of many factors, including the employee’s length of service, job performance, the employee’s individual job preferences and the employer’s needs. In the Wal-Mart case female managers who were in the certified class also were decision makers who made decisions of whether or not to promote females.
The U.S. Supreme Court will now be asked by Wal-Mart to decide the issues raised by the Court’s certification of such a large class of plaintiffs who the dissent described as having nothing in common except for their sex and the lawsuit.
What Can You Do to Protect Your Organization from the Wal-Mart effect- “An ounce of prevention is worth whole lot money.”
1. Employers who are in the retail business should have outside counsel conduct independent audits of their present promotional policies to make certain that they have no disparately affected female employees by disproportionately denying them promotional opportunities.
2. You should review your workforce to determine how many of your regional managers, store managers and assistant store managers are female and or members of protected classes.
3. If you determine there are significant shortfalls of female and protected minority employees among regional managers, store managers and assistant managers, you should determine the reason for this disparity and work with outside counsel to take corrective action.
4. Corrective action may include setting up a mentoring program to encourage female employees and protect minority employees to become assistant managers, managers and regional managers.
5. Establish training programs under the guidance of outside counsel to encourage all employees to upgrade their supervisor and managerial skills and take steps to encourage female and protected minority applicants to apply for and attend these training programs.
6. Continue to monitor your organizations internal promotions to make certain that female and protected minority applications for promotion are treated fairly in the promotional process.
The Wal-Mart Effect will also continue to spur California Wage and Hour Class Actions
Almost every day class actions based on California’s unique, Wage Orders and Labor Code are being filed all over the state. Many of these cases were traditionally heard as minor wage disputes by the California Labor Commissioner. However, under California Labor Code and unique overtime laws requiring employers to pay overtime for hours worked over 8 hours in a day rule for private sector employers; California Courts interpretations of meal and rest period requirements; and the Private Attorney General Act for Labor Code violations (“PAGA”) have all contributed in recent years to triggering a landslide of wage and hour class actions.
Protecting Your Organization from Costly Uninsurable Wage and Hour Class Actions
1. Make certain that your employees are properly classified as exempt and non-exempt from overtime.
2. There are basically 4 types of employees who are exempt from overtime whether or not the employee is paid a salary. They are executive/managerial employees; administrative employees; outside sales employees; and professional employees.
3. Determining who is exempt and not exempt must be done with knowledge not only of an employee’s job title; job duties; but what the employee actually does.
4. California law on who is exempt is stricter than federal law. Under federal law if you supervised two (2) more employees flipping hamburgers and you as their supervisor flip hamburgers you are probably exempt from the Fair Labor Standards Act wage and hour rules. Under California law you would not be exempt unless you spent over 50% of your time performing managerial job duties.
5. You as the employer have the duty under the law to maintain accurate time records. Make certain that these records are maintained and that the employee certifies that they are accurate.
6. Make certain that the ½ hour meal period and two (2) ten (10) minute breaks for an employee who works an eight (8) hour shift are properly documented and those files are stored in a safe place.
7. Make certain that you comply with California Labor Code Section 2802, reimbursement of employees for expenses incurred in the performance of duties for the employer.
8. Clarify any policies in your employee handbook or elsewhere that could be interpreted to violate the California Wage Orders and/or other Labor Code provisions.
9. Any wage and hour audits conducted by a third party should be conducted by a licensed California attorney so that the results of the audit are protected by the attorney client privilege.
10. If you find any violation of the wage and hour laws and/or Labor Code Section 2802 take corrective action and secure a properly drafted release of claims from the affected employees.
2. Arbitration Awards Can Be Questioned By the Courts When the Arbitrators Fails to Properly Apply the Law to Deprives an Employee of their Right to a Hearing on a Non-Waiveable Statutory Right
I have always strongly recommended that our clients have all employees sign a properly drafted, up to date, pre-dispute arbitration agreement. From my almost 50 years of experience, I believe that arbitration provides both employers and employees with a more qualified and knowledgeable neutral fact finder and decision maker chosen jointly by the parties. One of the other benefits of arbitration is that the decision of the arbitrator is final and binding and cannot be easily challenged and overturned.
However, on April 26, 2010 the California Supreme Court issued a decision in Pearson Dental Supplies, Inc. v. Superior Court of Los Angeles in which the Court stated that an arbitrator’s legal error in failing to hear an employee’s claim on the merits was subject to judicial review. In the Pearson Dental case the arbitrator had determined that a 67 year old employee was barred by a one year statute of limitations in the arbitration agreement from hearing the employee’s claim for age discrimination.
The importance of this decision is that the California Supreme Court expressly ruled the scope of judicial review over arbitration decisions may be somewhat greater in the case of a mandatory employment arbitration discrimination claim that encompasses an employee’s non-waiveable statutory rights. The Court in Pearson Dental overturned the arbitrator’s decision based on his failure to properly apply the law.
The Arbitration Process Should Be Fair and Provide Both Parties with All Legal Rights, Except a Jury Trial
I have always taken the position that the arbitration process should provide both employees and employers with the same legal rights they would have if the matter were heard in a court, except the right to have a jury composed of laypersons decide the outcome of the case. That is why I advise our clients to make certain that their Arbitration Agreements do not have any provisions that in any way deprive employees of their non-waiveable rights, such as creating time limits for filing claims that are shorter than would be permitted in court, limiting the pre-trial discovery process in arbitration, limiting the types of claims that are covered by arbitration, and/or requiring that the employee pay part of the cost of the arbitration.
The arbitration agreements that I draft and have our clients use are intended to be enforceable and have been enforced in Courts, should they be challenged by plaintiffs or their attorneys.
Tips for Making Certain that Your Arbitration Agreement Will Be Enforced in Court Make certain that your arbitration agreement:
1. Is properly drafted to comply with the California legal requirements for upholding pre-dispute arbitration agreements.
2. Does not limit the damages that any employee could otherwise be awarded if the case was heard in Court.
3. Does not limit discovery sufficient to adequately arbitrate the statutory claims, such as discrimination and harassment.
4. Requires that arbitrator to provide a written arbitration decision and judicial review sufficient to ensure the arbitrator complies with the provisions of the statute.
5. Requires that the employer pay all costs associated with the arbitration, such as the arbitrator’s fee and the cost of administration. Provisions of arbitration agreements that can be construed to require the employee to pay more than the fee that he or she would pay in a court filing may cause the Court to deny enforcement of the arbitration agreement.
6. Is signed by all parties before the dispute arises. Many times employees sign the arbitration agreement at the time or hire and the employer puts the agreement into the personnel file with having anyone from the company execute the agreement. Should the agreement be unsigned by the employer is it subject to the employee claiming to have withdrawn from the agreement before the agreement was fully completed. Make certain that all of the arbitration agreements signed by your employees are signed by a duly authorized representative of the company.
7. Finally, make certain that your arbitration agreements are reviewed by outside counsel on an annual basis or if you have any arbitration agreement that may not comply with the required legal criteria consult with outside counsel to obtain new legally conforming agreements.
The Goldstein Law Firm
8912 Burton Way
Beverly Hills, California 90211
Telephone: (310) 553-4746
Facsimile: (310) 282-8070