Employment News Alert: Arbitration Clauses, Commuting Time, Managers Beware & Supreme Court Cases to Watch

The California Courts Speak Again on the Legality of Arbitration Clauses in Employment Arbitration Agreements

The Second District Court of Appeal in California in the case of Sonic-Calabasas A, Inc. v Moreno, 174 Cal. App. 4^th 546 (2009) upheld the parties’ arbitration agreement, in spite of the fact that the agreement precluded the employee from pursuing employment-related disputes in any other administrative forum.  The plaintiff in that case was barred by the agreement from filing an administrative wage claim for unpaid vacation with the Labor Commissioner’s office.  In making its ruling, the Court concluded that there was no evidence that the plaintiff lacked the knowledge, skills or ability to vindicate his statutory claims in the arbitral forum.  This decision reversed the lower court.  Accordingly, now, the mere fact that an arbitration agreement bars an employee from independently pursuing Labor Commissioner claims does not invalidate the agreement under the recent California Supreme Court decisions of Armendariz v Foundation Health Psychcare Servs., Inc., 24 Cal. 4^th 83 (2000) and Gentry v Superior Court, 42 Cal. 4^th 443 (2007).

 However, the U.S. District Court for the Northern District of California in Jackson v S.A.W. Entertainment Ltd., 629 F. Supp. 2d 1018 (N.D. Cal. 2009) invalidated an arbitration agreement that purported to waive class actions and class arbitrations, while shortening the statute of limitations for filing an arbitration action.  It concluded that such an agreement was both procedurally and substantively unconscionable, inasmuch as it found that there was strong evidence that the employer was attempting to impose an inferior forum on its employees, rather than provide a cost-effective and fair alternative to litigation.  Due to its fundamental lopsidedness, the Court refused to compel arbitration by severing the offensive provisions.

The current position of both the federal and state courts of California is that arbitration clauses can be drafted in a way that they will be upheld.  The key is to insure that the arbitration procedure is a real alternative to court proceedings, and that the employee’s ability to present his or her claims is not compromised in any way.  The fact that one administrative forum is replaced with an arbitration forum does not invalidate the agreement, whereas an arbitration process that prohibits entirely the pursuit of certain types of claims will not be enforced.

Neither FLSA Nor the California Labor Commissioner have an Automatic Rule Rendering Commuting Time Compensable

The Ninth Circuit in Rutti v Lojack Corp., 578 F. 3d 1084 (9^th Cir. 2009) found that neither plaintiff, nor the class he purported to represent are entitled to compensation for driving to his first job of the day, for organizing his route, or for transmitting information to the office at the end of the day, despite the fact that he drove a company-owned vehicle during the business day.  In affirming a motion for summary judgment in the company’s favor, the Court held that commuting time is not compensable as a matter of law, in that the type of activities for which plaintiff was seeking compensation were “preliminary” and not integral to the employee’s principle activities.  It remanded the case to the lower Court for a determination of whether the activities at the end of the day were integral or more than “de minimis”.  Hence, as a result of this decision, it would appear that there will be a more thoughtful analysis of the nature of activities before a determination is made as to whether commuting activities are compensable.  It is not automatic.

Managers Beware:  At least One California Decision has Found Managers Individually Liable for Unpaid Wages under FLSA

Once again the Ninth Circuit has issued a dubious opinion in Boucher v Shaw, 572 F.3d 1087 (9^th Cir, 2009).  In that case, a few former employees and their local union sued their individual managers under FLSA and Nevada law.  Despite the fact that the Nevada Supreme Court found that the managers were not liable, the 9^th Circuit was undeterred, and concluded that three individual managers, including the CEO, CFO and HR Director could be considered “employers” within the meaning of FLSA.  High level executives should be concerned if they own significant stakes in the company based upon this decision.

Cases Pending Before the California Supreme Court to Watch

The Brinker Restaurant Corp. v Superior Court (Hohnhaum), 165 Cal. App. 4^th 25 (2008), review granted, remains a big question mark.  At issue is whether, under California law, an employer is obligated to monitor its employees to ensure that they take their paid rest or unpaid meal breaks; or whether it is enough that an employer make available to employees paid rest breaks and unpaid meal breaks.  The District Courts in California generally take the position that an employer only needs to make the time available.  At present, the parties have fully briefed their positions to the California Supreme Court.  Pending also are the cases of Brinkley v Public Storage, Inc., 167 Cal. App. 4^th 1278 (2008) and the more recent case of Bradley v Networkers Int’l LLC, 2009 Cal. App. Lexis 347 (2009) which are in a holding pattern and awaiting a decision in Brinker.  The number of cases pending before the California Supreme Court that are dependent upon a finding in the Brinker case is a clear indication of how important that case is to California wage and hour policy and the interpretation of the Labor Code. 

This document is intended to provide you with general information about employment related issues.  The contents of this document are not intended to provide specific legal advice.  If you have questions about the contents of this alert, please contact Ann Liroff at 415-546-7500 or aliroff@hbblaw.com or contact your regular Haight Brown & Bonesteel, LLP attorney.  This communication may be considered advertising in some jurisidictions.