The LA Times appears to be the only major California paper to cover Gentry. (Unless I missed it somewhere else–please send links.)

“For many workers, class-action lawsuits are the only type of
lawsuits they can bring against their employer” because attorneys are
reluctant to take on individual suits in which the potential awards are
small, said Michael Rubin, a San Francisco lawyer who represented a
former Circuit City worker in the case that went to the state Supreme
Court.

Man, the Labor Commissioner just gets no love. Not from the Supreme Court, not from the Plaintiff’s lawyer. Couldn’t be because you don’t necessarily get an attorneys’ fee award there, could it? I’m also not sure why an epidemic of plaintiff’s attorneys failing to take cases is the responsibility of employers (there is no such epidemic in the first place). In other systems, like the UK, small dollar litigation is much more swift and efficient, and solicitor’s fees can be publicly funded. Maybe something like that is worth a look-see.

Although the Gentry decision binds only California employers, it
will probably undermine arbitration waivers nationally. California law
tends to set the standard in labor cases, Regan said. “National
companies really desire consistency in their human resources policy, so
they set the bar at California,” she said.

But I thought employers were fleeing the world’s 8th largest economy because of our bad laws? I’m confused. Of course, if you had been my client, you never would have played stunt-man with these highly dubious devices, and, therefore never been disappointed. But I don’t earn $1,000/hr. and have offices on Wilshire, so what do I know. (Yes, I am jealous. (; )

The writing has been on the wall regarding the California Supreme Court’s and Legislature’s feelings about arbitration (Discover) and class actions (Sav-On), as distinct subjects, for a while. But, I guess someone has to be on the bleeding edge.

P.S. Is my journey to the “dark side” complete?

Seriously, my favorite legal blog is That’s What She Said, which takes scenes from the US version of The Office and calculates their legal consequences. Law profs take note: an episode of that show would make a great final exam fact pattern.

Well, I finally called one. I guess even a stopped clock is right twice a day. (= Though Wage Law was right on, calling the split.

In another 4-3 split employment opinion, the Supreme Court did not hold that class action waivers in employment contracts are per se unenforceable. However, it laid down a new multi-factor test to determine whether “class arbitration would be a significantly more effective way of vindicating the rights of affected employees.” (Slip Op. 2.) The Court distinguished its opinion in Discover Bank on the grounds that employee wage and hour claims are based on statutory rights. (Slip Op. 8-9.) The Court set out four factors for determining whether class status should be granted notwithstanding a lass action waiver:

1. modest size of potential individual recovery (the Court implied that even $37,000 was not enough [Slip Op. at 13], but implied that $269,000 was sufficient [Slip. Op. 15-16]);
2. the potential for retaliation against the members of the class;
3. the fact that absent members of the class may be ill-informed of their rights; and,
4. other “real world obstacles to the vindication of class members’ rights to overtime pay through individual arbitration.”

(Slip. Op. 21.) These factors should inform the court whether “[1] class arbitration is likely to be a significantly more effective practical means of vindicating the rights of the affected employees [;and, 2] the disallowance of the class action will likely lead to a less comprehensive enforcement of overtime laws.” (Ibid.)

Class-action waiver provisions, despite all of this, are severable, and do not void the entire agreement. . . necessarily. (Slip Op. 27.)

The Court added that its foregoing analysis was based on statutory rights, and not unconscionability. (Ibid.) It goes on to address unconscionability, however. It holds that the circumstances present in employment contract negotiations usually contain some element of procedural unconscionability due to the lack of legal sophistication by the employee and unequal bargaining power/economic power. (Slip Op. 31-35 [rejecting two Ninth Circuit cases with contrary results, both involving Circuit City].) As such, the Court says the lower courts should check for elements of substantive unconscionability. (Slip. Op. 37.) I interpret this to imply that most employment contracts are tainted with procedural unconscionability, which I do not think is a new concept.

It is worth pointing out that, though not expressly holding that this ruling applies to FEHA claims, or even other kinds of wage/hour claims, the Court did analogize the statute-based public policy origin of overtime wage and hour laws to rights under the FEHA. (Slip. Op. 11.) Therefore, public-policy-based claims of any stripe are probably covered by this analysis.

Interestingly, the Court completely dismissed the DLSE as an enforcement vehicle suitable for enforcing individual claims, even though it is free. “It is true that an employee may seek administrative relief from overtime violations with the Labor Commissioner…[b]ut a losing employer has a right to trial de novo in superior court, where the ruling of the Labor Commissioner’s hearing officer is entitled to no deference. . . Thus, Berman hearings may result in no cost savings to the employee.” (Slip. Op. at 24.)

Of course, if the employee recovers one cent more than the DLSE awards, he is entitled to attorneys’ fees, and may be represented at no cost by a DLSE attorney in that matter. Since the court was so focused on practicalities, I was surprised that it missed that part of it.

But, the Court said, this was not practical because a “flood” of claims would over-burden the DLSE. (Ibid.) That sounds like a problem for the Legislature to me. Wouldn’t the Superior Courts be equally over-burdened if many individual claims were filed? Does that mean that, as a practical matter, employees can’t use the Courts? Doesn’t that violate the First Amendment? What’s interesting is that, in the context of employment claims, there are administrative agencies interested in enforcement, which may or may not be the case in other claims (is there a special court to file claims against Discover card?) yet this does not matter to the court.

Though the court did at times seem to make pains to refer to “class arbitration waivers,” at other times it seems to mix language, implying this applies to class action waivers outside of arbitration. (Slip. Op. 10-11.) Given the implication that this ruling applies to many of the oft-litigated employment statutes, it appears this kind of class action waiver is a bad idea for employers, except under very special circumstances (associates at a law firm?).

UPDATE:

The UCL Practitioner has a blurb, here. She should have more soon.

Wage Law has this analysis:

Thought equivocal in the holding, it would appear that the factors that the Supreme Court requires the lower courts to consider would favor permitting class arbitrations in the vast majority of wage and hour cases. The majority opinion discussed, at length, three factors that favor permitting arbitrations to proceed as class actions.

I agree. In fact, I think if you really look at those factors, you are left with situations where the Plaintiff will not even elect to sue as a class much of the time. They add:

[T]he opinion strongly favors the rights of employees in wage and hour class actions and in wage cases generally. The language in Gentry v. Superior Court is so interesting that it instantly becomes one of those cases that every wage and hour practitioner should keep in a Word file with a shortcut to it on their desktop.

I agree with that too (except for the part about a Word document–use OpenDoc!). I think the practical effect of this case will far exceed its holding. In fact, I expect it to add new dimensions to practically every employment case. If every employment contract of this kind has some procedural unconscionability, and that allows an analysis of potentially unconscionable substantive terms, isn’t the mere signing the employee to the agreement a violation of the law? (Application Group v. Hunter Group.)

the following transaction has occurred in:
GENTRY v. S.C. (CIRCUIT CITY STORES)
Case: S141502, Supreme Court of CaliforniaDate (YYYY-MM-DD): 2007-08-29
Event Description: Notice of forthcoming opinion posted
For more information on this case, go to:
http://appellatecases.courtinfo.ca.gov/search/dockets.cfm?dist=0&doc_id=412962

From the e-mail notifier.

Case will be published tomorrow at 10:00 a.m. I hope to have something up before the end of the day tomorrow.

Boy, did the San Francisco Chronicle get this one wrong. Some of you may know that the person who writes the headline is usually not the person who wrote the article, but check this out: “State’s high court ruling favors retailers in workers’ comp case.”

Though part of the Workers’ Compensation Act did play a role in the decision, this was not a workers’ comp case from the outset, nor was that really the main issue. The spokespeople for the two sides are also off point:

The court expressly
repudiated the 2003 appellate decision in Thursday’s ruling, an action
that relieved Diane Kimberlin, lawyer for the California Grocers
Association.

The appellate ruling, and arguments by the plaintiff in the current
case, “endangered the use of profit-based bonus compensation systems,”
Kimberlin said.

Brooks disagreed, saying employers managed to preserve bonus systems
after the 2003 appellate ruling by calculating net revenue without
including workers’ compensation costs or other illegal factors.

Plans like the one at Ralphs, he said, “have been used to pressure
employees not to make workers’ compensation claims and to seek
treatment outside the workers’ compensation system.

I didn’t read the original complaint, but if the claim is that this system is discouraging the filing of workers’ compensation claims, the remedy lies in a different kind of claim. Here the issue related to permissible deductions, not coercion.

When I moved to TypePad, I thought it was a much better solution than Blogger.  I’m not so sure anymore.  WordPress also seems to be quite a bit ahead.

I’m designing a new site that will be based on one of those technologies.  I plan to include podcasts, video, and panel discussions.  I’ve realized that the one small thing that sets this site apart just a little bit from most legal blogs (I think the term "blawg" is dead, isn’t it?) is that I do do some original investigative reporting, instead of just analysis, opinion, and citation.

Unfortunately, not a lot of that has resulted in printable reporting.  A few times, yes.  I plan to expand on that with interviews and more comment from parties who have taken positions on bills. (Another aspect that is, as far as I know, mainly different is that I follow laws from ideas to bills to statutes to case law, as they develop.)

Stay tuned.  Unfortunately, another URL change is probably inevitable.

A FEHA disability discrimination Plaintiff, not the Defendant, bears the burden of proof with respect to whether the Plaintiff was qualified to perform the essential functions of the job with or without reasonable accommodation.

This is a fairly significant wage & hour opinion. 

The kernel of this opinion is captured in this sentence:

[A]n employer [does not] violate[] California wage-protection laws by providing, as Ralphs did, supplementary compensation designed to reward employees, over and above their regular wages, if and when their collective efforts produced a positive financial result for the store where they worked.

(Slip. Op. 3.) (Emphasis added.)

So, what does this mean? Essentially, because the bonus plan references a formula contingent on an external event, and the expectations with respect to that pay was determined by that plan. (Slip. Op. 10.)  Significant to the majority was that

no employee was offered or promised a specified bonus or commission that was based upon, and immediately measurable by, his or her individual sales or managerial efforts, but was then subject to deductions to cover employer costs.  Instead, under the ICP, all eligible employees’ supplementary incentive compensation was equally and collectively premised, at the outset, on store profits, a factor that necessarily considers the employer’s expenses as well as its income.

(Slip. Op. at 21.)  I’m not being tongue in cheek when I say I think this is a distinction without a difference.  Either way you slice it, the employee gets less and the store gets more–or at least loses less.  It’s easier to understand if the difference is based on expectations, whether or not it stems from individual or collective losses, whether or not the income and expenses are considered, which the Court seems to want to head towards at 22-24. 

For better or worse, that’s what we’ve got.  Though there is dicta that goes further, this opinion appears only to allow the kind of plan set out, with some kind of attenuation between the employee’s own acts and the calculation of the bonus.  As such, it does not overrule Kerr’s Catering and its progeny.

The dissent’s deliberately wide citation to Labor Code 3751 would seem to create a claim for failing to keep wages at the same percentage of a company’s gross revenues, because it would "indirectly" be passing "part" of their workers’ compensation costs on to the employees. (Slip. Dis. 1.) The statute does not intend to create accounting micromanagement.

In some sense, the employee always carries the burden of losses, to paraphrase the dissent (Slip. Dis. 7).  The deduction statute references deductions like taxes, etc. that come out of the prior wage.

Will the Legislature act on this? I’ll see.

UPDATE: Here’s Sheppard Mullin’s take:

Because compensation under the Plan was paid in addition to employees’ regular wages, which were certain and not subject to unlawful deductions, the Court concluded that the Plan appeared to be a lawful incentive program, rather than a plan designed to unlawfully pass along the costs of Ralphs’ business to its employees.

Though they point out that the opinion limits that a little:

Under Ralphs’ Plan, by contrast, the basic measure of compensation is the overall profitability of the enterprise, not an employee’s personal fforts. "All eligible employees’ supplementary incentive compensation was equally and collectively premised, at the outset, on store profits, a factor that necessarily considers the employer’s expenses as well as its income." Accordingly, Ralphs did not retain or recapture anything that was promised to employees, because eligible employees were never promised anything under the Plan other than their share of their store’s profit, which by its nature takes into account the listed
expenses.

I think that’s the essence of this opinion–and it’s a little more narrow than saying you can do what you want with bonus plans.  I won’t pretend that I understand how that difference does any good for anyone, but there it is nonetheless.

From the Sac Bee:

Perata, the Senate leader, has vowed that he will not take up any non-budget issues until a state spending plan is passed.

“No committees will meet, no bills will get through until we have a budget,” spokeswoman Alicia Trost said.

With the budget fiasco, there has been little action on much else. There are a few bills of note that continue to progress.

AB 14 - Harmonizes “protected classes” throughout California law. Set for third reading.
AB 71 - Would have indexed minimum wage to inflation. Now a shell bill for health care credits.
AB 510 - Alternative work-weeks. Died in committee.
AB 948 - Would have altered exemptions for highly compensated employees. Now set to mandate a study, but held in committee.
AB 1043 - Agreeing to choice of law other than California void. Set for third reading.
Ab 1425 - Apparently dead in committee.
AB 1467 - Further restrictions on workplace smoking. Set for third reading*
AB 1469 - Tweaks to alternative workweek voting. Amended from simply majority to 55%, re-referred to committee, but stalled there.
AB 1707 - Changes to record retention laws. Now amended to include a $750 fine and criminal penalty as an “infraction” for failure to allow inspection of employment records. Keep an eye on this one. It is on the verge of passing the senate, and has cleared the assembly.
AB 1708 - Shell bill changed to other pu
rpose.

SB 189 - Stalled in committee.
SB 549 - Entitlement to bereavement leave. Passed senate, looks to clear assembly.
SB 622 - Crackdown on independent contractor misclassification. Well on its way, in committee, but has passed senate.
SB 836 - New protected class of familial status. Passed senate, looks to clear assembly.

I will seek comment from the Governor’s office on whether they have taken a position on the bills in bold. The usual answer is not to comment until they’re on his desk. I would anticipate a veto of all the bolded bills except AB 14, which to me appears to be mostly ministerial.

UPDATE: (8/17/07) As anticipated, I received an answer of “no comment” from the Governor’s office. I will follow up as they are presented to his office, if they reach that stage.

I would like to take this opportunity to express that I have, without fail, always been treated respectfully and professionally by the offices of all of the state assemblymen, state senators, and the Governor any time I contact them regarding the progress of legislation. I don’t think most people realize that it’s really just a matter of picking up the phone and asking a polite, competent, and professional question. (My guess is they are elated to talk to someone who isn’t complaining.) This applies to members of both parties. I thank them all.

SB 737, the spot bill prepared in advance of a the Kenneth Cole ruling, is apparently dead. I interpret this to mean that the pro-employee decision was unanticipated, and that the bill was only being prepared in case it went the other way to seek some sort of compromise between labor and business. Since it went the other way, the issue has apparently been dropped.

The proposed Arbitration Fairness Act (Feingold/Johnson) would essentially ban arbitration agreements in employment. While I’m skeptical of this bill’s chances of success in getting a vote in the Senate, or in being signed by the President, and I believe this mostly is done to show that someone is “doing something,” I think it’s something to take note of.

This site has contained an editorial skepticism about arbitration as a panacea for employment disputes, and has maintained a professional skepticism about the long-term viability of overly aggressive arbitration agreements. This bill’s introduction marks the beginning of the blow-back phase that, in my view, was inevitable.

Politicians in this country aren’t functioning as some sort of court of final review. If they are working to overturn court decisions, or change the law, they are doing so because they have detected, most likely through polling data, some political support for what they are doing. This political support has come from overly aggressive employers putting their hands in the arbitration cookie jars and getting caught one too many times.

The next interesting result will be the California Supreme Court’s take on class action waivers in arbitration agreements. While a pro-employer victory would be wonderful for our side of the bar, I believe it would result in considerable political blow-back.

And the thing about political blow-back is that it doesn’t often return things to the status quo ante; instead, it tends to go even further.