California District Court Releases Opinion Invalidating AB 51

Two Centuries of Federal Precedent Given Effect

We’ve blogged several times the ongoing saga involving AB 51, California’s attempt to prevent the mandatory arbitration of employment claims largely by sanctioning employers who use such agreements. (Oct. 11, Dec. 30 and Jan. 16) Much of that saga currently focuses on the case of Chamber of Commerce of the United States of America v. Bacerra, No. 2:19-cv-02456 (E.D. Cal.), a case brought to challenge AB 51’s implementation. Most recently, we noted that the district court in that case, by minute order, had preliminarily enjoined AB 51’s enforcement. (Feb. 3) Several days later, on Feb. 6, the district court explained the reasons supporting that order in a 36-page opinion reiterating its decision to enjoin enforcement of the Act.

As most of us learned in high school, the Constitutional Convention was called in 1787 to address crippling issues caused by the weak central governing structure of the Articles of Confederation. Chief among the problems was that the 13 former colonies acted too much like 13 different countries over the intervening decade or so, making interstate commerce impracticable. After extensive debate, the framers of the Constitution concluded that a more centralized federal government was necessary, and that its laws would be binding on the states. To effect that principle, Article VI, Clause 2 of the Constitution (the “Supremacy Clause”) provides:

This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding. Continue Reading

California District Court Denies Certification of Off-the-Clock Case

We’ve commented in the past that off-the-clock cases can make poor candidates for class certification, particularly when the employer’s policies require that employees perform work only while clocked in. A recent case involving a decade-old dispute again illustrates the basic problems with these kinds of claims.

In Troester v. Starbucks Corp., Case No. CV 12-07677-CJC(PJWx) (C.D. Cal. Jan. 27, 2020), the plaintiff worked as an hourly shift supervisor at a company-owned Starbucks restaurant. While it was undisputed that Starbucks paid him for the time in its system, and while Starbucks policy required that employees perform all work while on the clock, he contended that he spent 4-10 minutes per shift off the clock performing tasks like sending sales data to company headquarters, locking the door, and escorting coworkers to their cars. He brought suit under the usual series of California claims for unpaid wages, inaccurate wage statements, unfair competition, and the like.

The case had an extensive procedural history, but ultimately Starbucks moved for partial summary judgment on certain of the California claims, and the plaintiff moved for class certification. The court granted the company’s motion with respect to wage statements and liquidated damages under California law, leaving the claims for unpaid wages and for the derivative claim of unfair competition. It denied, however, the plaintiff’s motion to certify these remaining claims. Continue Reading

District Court Preliminarily Enjoins Enforcement of California’s A.B. 51 Anti-Arbitration Law

Since Oct. 11, 2019, we have been blogging about California’s new anti-arbitration law and the injunctive action filed before Chief District Judge Kimberly J. Mueller to enjoin it. Chamber of Commerce of the United States of America v. Bacerra, No. 2:19-cv-02456 (E.D. Cal.). See our blog articles of Oct. 11, 2019, Dec. 30, 2019 and Jan. 16, 2020.

Judge Mueller filed a Minute Order Friday granting the motion for preliminary injunction but will follow up “[i]n the coming days” with “a detailed, written order.” The Minute Order states, in pertinent part:

  1. Defendant Xavier Becerra, in his official capacity as the Attorney General of the State of California, Lilia Garcia Brower, in her official capacity as the Labor Commissioner of the State of California, Julie A. Su, in her official capacity as the Secretary of the California Labor and Workforce Development Agency, and Kevin Kish, in his official capacity as Director of the California Department of Fair Employment and Housing are:

a. Enjoined from enforcing sections 432.6(a), (b) and (c) of the California Labor Code where the alleged “waiver of any right, forum, or procedure” is the entry into an arbitration agreement covered by the Federal Arbitration Act, 9 U.S.C. §§ 1-16 (“FAA”); and

b. Enjoined from enforcing section 12953 of the California Government code where the alleged violation of “Section 432.6 of the Labor Code” is entering into an arbitration agreement covered by the FAA.

  1. There is no realistic likelihood of harm to defendants from preliminarily enjoining enforcement of AB 51, so no security bond is required. It is so ordered.
    (Emphasis added).

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Second Circuit Finds That Nurses Are Professionals, Even if They Work for Insurance Carriers

Not quite two years ago, the Supreme Court decided the case of Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134 (2018), a case we blogged here. The case itself involved the issue of whether service consultants at auto dealers were exempt from overtime under the FLSA. While the Supreme Court held that they were, the case had far broader implications because the Supreme Court rejected the view that the FLSA’s exemptions were to be construed narrowly, but, instead, were integral parts of the statute that should be given a “fair reading.” We noted at the time that this view likely undercut many of the arguments relied upon by plaintiffs’ counsel and some courts regarding potentially exempt work.

A recent case from the Second Circuit reflects just how that view can in practice defeat wage and hour class claims. In Isett v. Aetna Life Insurance Co., Case No. 18-3271-cv (Jan. 14, 2020), the plaintiff was a registered nurse who worked as a nurse consultant for a health insurance carrier, responsible for reviewing appeals regarding health benefit claims. She sought to assert claims on behalf of a class of similarly situated nurses, contending that she was misclassified as exempt and entitled to overtime. Continue Reading

Seventh Circuit Now Addresses When Notices of Collective Action Can be Given to Employees Who May Have Arbitration Agreements Waiving Their Right to Join

Whether to give notices of a collective action under the Fair Labor Standards Act (FLSA) to employees who may join presents some nuanced and challenging questions for district courts. The court must “respect judicial neutrality and avoid even the appearance of endorsing the action’s merits.” See Hoffmann-LaRoche Inc. v. Sperling, 493 U.S. 165, 171-174 (1989). Merely sending the notice can increase the settlement pressure on an employer regardless of the merits of the underlying claim. And, “[a] related danger is that notice giving . . . may become indistinguishable from solicitation of claims.” Id. Numbers do have a monetary impact. The notice decision becomes even more complex when some of the employees may have entered into arbitration agreements waiving their rights to proceed in an aggregate manner.

What does an employer have to show to establish an enforceable agreement and avoid the notice? In Bigger v. Facebook, Inc., (No. 19-1944) (decided Jan. 24, 2020), Judge Michael S. Kanne, writing for a Seventh Circuit panel, grappled with these impactful issues in a case of first impression. Continue Reading

California District Denies Certification of Race Claim Involving Claimed “English-Only” Restaurant Policy

While class actions may prove lucrative for the plaintiffs who bring them, most cases just aren’t suitable for class action treatment and many would likely fare far better if the plaintiffs simply limited themselves to a single employee or location.

Case in point. In Guzman v. Chipotle Mexican Grill, Inc., Case No. 17-cv-02606-HSG (N.D. Cal. Jan. 15, 2020), the plaintiffs sought to assert that all of the hundreds of California Chipotle restaurants operated under an unwritten policy requiring aspiring managers to speak at least good English and possibly only English. They sought to certify a class spanning the entire state (roughly 400 restaurants) and over 40,000 employees of either Hispanic or Mexican national origin.

Common sense tells you that the claims and their scope are going to be problematic. Many of those of Hispanic or Mexican national origin speak excellent English. Many class members (students, for example) may have career plans that don’t involve managing the fast food restaurant where they have worked as an hourly employee. Particularly in restaurants with significant numbers of workers who don’t speak Spanish, some level of English proficiency on the part of a manager may be necessary simply to direct the workforce. Continue Reading

Update on the TRO Issued in the Case Involving California’s AB 51 Anti-Arbitration Law

On Jan. 10, 2020 Chief District Judge Kimberly J. Mueller further defined the scope, issues and duration of the Temporary Restraining Order (TRO) she initially issued on Dec. 30, 2019. We blogged about the new California legislation and the TRO issued in Chamber of Commerce of the United States of America v. Bacerra, No. 2:19-cv-02456 on Oct. 11, 2019 and Dec. 30, 2019 respectively.

Now, in a Jan. 10, 2020 minute entry Judge Mueller explained the scope of the TRO and the supplemental briefing permitted. The minute entry stated:

After careful consideration of the parties’ arguments, the court granted the parties leave to file supplemental briefing . . . addressing jurisdiction, including standing, and the parties’ positions with respect to the severability of any provisions of AB 51, if the court grants the motion for preliminary injunction at least in part.  * * * Pending the court’s issuance of an order on the preliminary injunction motion, the Temporary Restraining Order the court issued on December 30, 2019 shall remain in effect until January 31, 2020, while MODIFIED to clarify that defendants are temporarily enjoined from enforcing AB 51 to the extent it applies to arbitration agreements covered by the Federal Arbitration Act.

These qualifications relating to jurisdiction, standing, severability and coverage likely resulted from the parties’ briefing and arguments on Jan. 10th. During oral argument, Defendants took the position that the new law does not directly attack arbitration agreements but instead addressed their formation. They also argued that the Chamber of Commerce lacked standing to challenge AB 51.           Continue Reading

Ninth Circuit (Barely) Acknowledges the Dukes Case in Discrimination Class Action Litigation

Ten years ago, the Ninth Circuit upheld the certification of a sprawling nationwide class action in Dukes v. Wal-Mart Stores, Inc., only to see that decision overturned a year later by the Supreme Court. Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). In the intervening decade, the Supreme Court similarly up-ended the Ninth Circuit authority that tried to limit the use of arbitration agreements design to rein in class action litigation. See, e.g., AT&T Mobility v. Concepcion, 113 S. Ct. 1740 (2011). For its part, the Ninth Circuit has side-stepped issues discussed in Dukes, such as perpetuating its own doubtful proposition that Daubert standards don’t apply at the certification stage. We’ve blogged that issue here.

A recent decision, however, gives at least grudging acknowledgment of Dukes’ central holdings. In Moussouris v. Microsoft Corp., Case No. 18-35791 (9th Cir. Dec. 24, 2019), the plaintiffs brought claims that were essentially identical to those that had originally been brought in the Dukes case many years earlier. They accused the employer of company-wide gender discrimination and sought certification of a class of over 8,600 women for claims of both disparate impact and disparate treatment under Title VII and state law. The district court refused to certify the proposed class and the plaintiffs sought appeal pursuant to Rule 23(f), a request the court granted. Continue Reading

Third Circuit Finds Multiple Problems With Certification of Off-the-Clock Claims

A recent case from the Third Circuit casts a spotlight on many of the problems inherent in so-called off-the-clock claims for overtime.

In Ferreras v. American Airlines, Case No. 18-3143 (3d Cir. Dec. 24, 2019), the plaintiffs claimed that various employer time-keeping policies resulted in employees not being paid for all hours worked. One was an automatic deduction of 30 minutes for meal breaks. Another was a “”grace period” for employees to clock in and clock out that assumed that employees worked only during their scheduled shifts. The company permitted employees to apply for pay if they did work outside of those periods or during a meal period but, they claimed, they were dissuaded from doing so.

The plaintiffs brought suit under the New Jersey counterpart to the Fair Labor Standards Act and sought certification under Rule 23. Incidentally, because the FLSA does not apply to air carriers, they likely could not have brought claims under federal law. 29 U.S.C. section 213(a)(1). The plaintiffs moved for class certification and the district court certified the case, dismissing many of the arguments raised by the defendant as either premature or inaccurate. We’ll discuss the grounds below. Continue Reading

District Court Temporarily Enjoins Enforcement of California’s AB 51 Anti-Arbitration Provision

A federal judge has issued a temporary restraining order halting the enforcement of Assembly Bill 51, California’s latest attempt to prevent arbitration of claims brought under the California Fair Employment and Housing Act. We initially wrote about this statute, which sought to criminalize the use of arbitration agreements, on Oct. 11, 2019.

AB 51, slated to take effect on Jan. 1, 2020, had three main aspects. It provided that:

  1. An employer cannot require that an employee agree to arbitrate any potential claim under FEHA as a condition of employment;
  2. An employer cannot threaten, retaliate or discriminate against an applicant for employment or an employee for refusing to consent to arbitration of a potential claim under FEHA; and
  3. An agreement that requires an employee to opt-out of a waiver or to take action to retain their rights “is deemed a condition of employment.”

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