Wage & Hour Class Actions; Arbitration Awards Can Be Questioned By the Courts
The Goldstein Law Firm
May 2010 Newsletter
“Wage & Hour Class Actions; Arbitration Awards Can Be Questioned By the Courts – How to Increase Your Chances that Your Arbitration Agreement Will Be Enforced in Court; and Commercial/Business Litigation Disputes”
By: Charles H. Goldstein, Esq.
1. Class Action Mania Continues
A. Dukes v. Wal-Mart Stores Inc.
This past week, the U.S. Court of Appeals for the Ninth Circuit approved the certification of up to 1.6 million current and former female employees who contend that Wal-Mart Stores unfairly discriminated against women in Wal-Mart’s pay and promotion practices. The evidence presented by the plaintiffs to support class certification was that more than two thirds (2/3) of Wal-Mart store employees are female, one third (1/3) of the lower managers are female, and fifteen (15) percent of the store managers are female. However, every Employer knows that 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 addition, female Wal-Mart managers included in the certified class were also decision makers who made decisions of whether or not to promote females.
Wal-Mart Stores has clearly indicated its intent to overturn this decision in the U.S. Supreme Court. Specifically, the U.S. Supreme Court will be asked by Wal-Mart Stores to decide the legality of the Ninth Circuit’s certification of such a large class of plaintiffs, whom the judges who dissented from the Court’s opinion described as having nothing more in common except for their sex and the lawsuit. 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 $300,000.00 per plaintiff.
While the plaintiffs’ claims may or may not be meritorious, the message that the Court’s action is sending to Employers of all sizes is clear – it continues to be open season on deep pocket Employers. Therefore, even though the Wal-Mart Stores case is based on discriminatory promotions practice and not wage and hour violations, Employers are still more likely to face costly and uninsurable wage and hour class actions and must protect themselves before a Complaint for Damages is ever filed in state and/or federal court.
B. Protecting Your Organization from Costly and 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 also knowledge of 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) or more employees flipping hamburgers and you, as their supervisor also flip hamburgers, you are probably exempt from the Fair Labor Standards Act wage and hour rules. However, under California law, you would not be exempt unless you spent over 50% of your time performing managerial job duties instead of flipping hamburgers.
5) You as the employer have the duty under the law to maintain accurate time records. Make certain that these records are maintained and make certain 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 that these files are stored in a safe place.
7) Make certain that you comply with California Labor Code Section 2802’s requirement that employees be reimbursed for expenses incurred in the performance of duties on behalf of 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 California Labor Code Section 2802, immediately take corrective action and secure a properly drafted release of claims from the affected employees.
3. Arbitration Awards Can Be Questioned By the Courts – How to Increase Your Chances that Your Arbitration Agreement Will Be Enforced in Court
I have always recommended that our clients have all employees sign properly drafted, up to date, pre-dispute arbitration agreements. From 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 major benefits of arbitration is that the decision of the arbitrator is final and binding and cannot be easily challenged and overturned.
However, in Pearson Dental Supplies, Inc. v. Superior Court of Los Angeles, the California Supreme Court recently spoke on the issue of challenging a “final and binding arbitration” when the Court ruled that an arbitrator’s legal error in failing to hear an employee’s claim – on the merits – was subject to judicial review. In this case, the Arbitrator had determined that a 67 year old employee was barred from raising a claim for age discrimination because of a one year statute of limitations contained in the arbitration agreement. This decision is important to all Employers because, for the first time, the California Supreme Court expressly ruled that the scope of judicial review over the decisions of an Arbitrator can be greater in the case of employment discrimination claims which encompass an employee’s non-waive able statutory rights.
A. 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 employers and employees with the same legal rights they would have if the matter were heard in a court, except the right to a jury. This 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-waive able rights such as: creating time limits for filing claims that are shorter than would be permitted in court as illustrated in the Pearson Dental Supplies, Inc. case, 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.
B. Tips for Significantly Increasing Your Chances 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 an arbitrator provides 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 of hire and the employer puts the agreement into the personnel file without having anyone from the company execute the agreement. Should the agreement be unsigned by the employer it is subject to the employee’s claim that he or she withdrew from the agreement before the agreement was fully executed by both parties. Therefore, 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.
4. Commercial/Business Litigation Disputes:
In my experience of litigating commercial/business disputes arising from a business contract in state and federal court, the best results are obtained when a clear, enforceable agreement exists between the disputing parties.
All too often commercial parties are faced with the prospect of having no agreement or having a “watered down” agreement in order to “get the job order”. When a commercial agreement’s terms and conditions are poorly negotiated, ambiguously drafted and no clear dispute resolution procedure exists – non-performing parties to that Agreement are effectively “invited” to ignore their duty to perform under the Agreement. By the time counsel is involved and attempts to enforce the commercial agreement, the damage has in large part already been done – e.g. non-payment of monies, non-delivery of goods, etc.
Therefore, the most cost effective way to increase your likelihood of enforcing commercial agreements is to have these agreements clearly and specifically tailored by outside counsel as though they were going to actually be enforced; and not merely “thrown together” with a signature. This is the best defense against performing under a contract and then having to write off and not collect money that you are due under the business contract.
The Goldstein Law Firm
8912 Burton Way
Beverly Hills, California 90211
Telephone: (310) 553-4746
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