Technology Employment Law

Technology Employment Law

Legal Insight for Technology, Media, and Telecommunications Employers

Five High-Level Issues to Consider in Shaping Employee Benefit Offerings – Take 5 Newsletter

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In this month’s Take 5 newsletter, I share my thoughts regarding five important issues that TMT companies should consider as they shape their employee benefits programs.  Below is an excerpt:

The workplace that we know today is rapidly changing. Competition for highly skilled workers is fierce, employees have become more mobile (due, in part, to alternative work arrangements or outsourcing), and there are often several generations of employees working alongside one another with different workplace approaches and perspectives. Developing employee benefit and compensation programs that are meaningful to a diverse group of workers with varied needs will become increasingly more challenging. This month’s Take 5 discusses the following five high-level issues to consider in shaping your organization’s employee benefit offerings:

  1. There Is a “Retirement Crisis” in America
  2. Healthy Employees Are More Productive and Less Likely to Be Absent
  3. Offer Benefits Programs that Appeal to a Multigenerational Workplace
  4. Prudent Outsourcing Can Assist Plan Sponsors Manage Benefit Plans
  5. Address Employee Benefits Early in Corporate Transactions

Read the full Take 5 newsletter here.

ESI in the Cloud: What You Don’t Know (or Don’t Ask) Can Hurt You

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Companies who utilize cloud vendors to store their data on cloud-based applications should be advised: failing to understand the application’s storage and retrieval capabilities, and failing to preserve such data during litigation could lead to sanctions for both the company and its counsel.  That’s the lesson to be learned from a recent case in the Southern District of Ohio, one of the first of its kind to directly address the intersection between the cloud and its impact on litigation strategy.

In Brown v. Tellermate Holdings, Ltd., Case No. 2:11-cv-1122, 2014 U.S. Dist. LEXIS 90123 (S.D. Ohio July 1, 2014), plaintiffs, in an age discrimination suit against former employer Tellermate, Inc. (“Tellermate”), sought electronically stored information (“ESI”) from accounts that they and other employees maintained with Salesforce.com (“Salesforce”) during their employment to aid their argument that their terminations were due to their ages, and not due to performance issues.  Salesforce is a cloud-based vendor with whom Tellermate had contracted to provide Tellermate employees with a sales tracking tool to record all customer-related activity.

The Salesforce contract gave Tellermate access to the accounts and provided the ESI remained the property of Tellermate.  However, Tellermate erroneously informed its counsel that it could not gain access to the ESI.  Tellermate’s counsel, who the Court found unreasonably relied on Tellermate’s representations and misconstrued the Salesforce contract, repeatedly misrepresented to the Court that the ESI residing on Salesforce’s cloud could not be accessed.

The Court ordered Tellermate to produce the requested ESI.  Nevertheless, Tellermate waited nine months from receiving the Order before asking Salesforce about its backup policy, thus learning for the first time that Salesforce did not keep backup files for more than three to six months from the current date.  Tellermate’s failure to timely ask its cloud vendor about its backup system or promptly take measures to either suspend Salesforce’s policy, or obtain a backup copy of the ESI early in the litigation, guaranteed that the ESI was unreliable, if not irretrievable.

The Court found that the actions of Tellermate and its counsel were “simply inexcusable,” and ordered that Tellermate could not present or rely upon evidence that it terminated the plaintiffs’ employment for performance-related reasons either at the summary judgment phase or at trial.  The Court also ordered Tellermate and its counsel to jointly pay the plaintiffs’ reasonable attorneys’ fees and costs incurred in the various ESI-related discovery motions.

The Brown decision emphasizes the importance that employers who use cloud-based applications understand the terms of the agreement with the cloud-based provider, including (1) who maintains control and ownership of the ESI; (2) the provider’s backup policy; and (3) the options for preserving the ESI to maintain its reliability.  By fully understanding the intricacies involved in using cloud-based technology and taking appropriate steps at the beginning of a litigation to preserve discoverable ESI, an employer and its counsel can prevent misrepresentations to the court and take measures to avoid sanctionable conduct.

Epstein Becker Green’s Wage and Hour App Is Now Available for iOS, Android, and BlackBerry

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Wage & Hour Guide App for Employersby Michael Kun

We’re very pleased to announce that a brand-new version of our free, first-of-its-kind app, the Wage & Hour Guide for Employers, is now available for Apple, Android, and BlackBerry devices. The new app takes advantage of a software-as-a-service programming platform developed by Panvista Mobile.

Our newest version of the app is not only available to users of a variety of devices, but it offers simpler, faster, and more useful ways for employers to locate wage and hour information at the touch of a fingertip.  As new issues are constantly emerging in this area, we’re pleased to provide updated information and critical tools to help employers address wage and hour laws and regulations, such as recent minimum wage increases.

Key features of the updated app include:

  • The Android version is now available for the first time on the Google Play store – also it is also available for BlackBerry devices
  • Updated iPhone and iPad versions are now available on the App Store
  • New summaries of wage and hour laws and regulations are included, including recent minimum wage increases in California, Connecticut, Georgia, Illinois, Maryland, Massachusetts, New Jersey, New York, Texas, Virginia, and the District of Columbia
  • Direct feeds of EBG’s Wage & Hour Defense Blog
  • Easy sharing of content via email and social media
  • Access to EBG’s @ebglaw Twitter feed
  • Rich media library of publications from EBG’s Wage and Hour practice
  • Expanded directory of EBG’s Wage and Hour attorneys

Existing iOS users should visit the App Store to download the new iPhone and iPad versions; the previous edition of the app is retired.

Five ACA Issues that Employers Should Be Following

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Our Epstein Becker Green colleagues have released a new Take 5 newsletter: “Five ACA Issues that Employers Should Be Following” by David W. Garland, Adam C. Solander, and Brandon C. Ge. Below is an excerpt:

Employers have about three months to finalize their employer mandate compliance plans under the Affordable Care Act (“ACA”). While most employers are in the final stages of planning, this month’s Take 5 will address five ACA issues that employers should be aware of as they move forward:

  1. ACA-related litigation
  2. Employer mandate reporting
  3. Section 510 liability
  4. Alternatives to traditional plan offerings
  5. The looming Cadillac tax

Read the full newsletter here.

How The Apple Class Certification Ruling Affects All Tech Companies

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By Ian Carleton Schaefer, Meg Thering and Gregg Settembrino[1]

The unrelenting wave of wage and hour suits continues to roll through the high-tech industry.

On July 21, 2014, in Felczer v. Apple Inc., Judge Ronald S. Prager of the Superior Court of California granted class certification as to a class of  approximately 21,000 current and former Apple retail and corporate employees on claims alleging Apple failed to provide timely meal and rest breaks as required under California Law. The California Labor Code, with a few exceptions, requires employers to provide non-exempt employees with 30-minute unpaid and duty-free meal breaks for every five hours worked. Additionally, employers must authorize and permit all non-exempt employees to take paid rest periods for a duration of 10 minutes for every four hours worked. The penalty for failing to provide statutory meal and rest periods is a one-hour meal period premium for each employee for each missed meal or rest period, at his or her regular hourly rate of pay.

The Court also certified a class on Plaintiffs’ claims that Apple failed to properly pay them their final paychecks and seek the unpaid wages and waiting time penalties because meal and rest period premiums were not included in their final paychecks. The California Labor Code requires an employee whose employment is terminated to be paid his or her final paycheck upon termination of employment. Employees who provide 72-hours’ notice that they are quitting must be given their final paycheck on either their last day worked or within 72 hours of having given notice if they stop working before the 72-hour notice period has run. Plaintiffs allege Apple failed to pay them premium or timely payments pursuant to Cal. Lab. Code §201 and §202 and thus are liable for waiting time penalties under Cal. Lab. Code §203. Waiting time penalties are available in California when an employer willfully fails to pay any wages owed to an employee who is fired or quits. Waiting time penalties are calculated at the employee’s daily rate of pay per day of pay violation, for up to 30 days.

Additionally, the Court granted class certification on the Plaintiffs’ claim that Apple failed to provide them with accurate itemized employee wage statements. Cal. Lab. Code §226(a) requires employers to provide their employees with accurate itemized wage statements that include: (1) gross wages earned; (2) total hours worked by the employee (unless the employee is a salaried exempt employee); (3) number of piece-rate units earned and the applicable piece rate, if applicable; (4) deductions; (5) net wages earned; (6) inclusive dates of the pay period; (7) employee’s name and employee ID number; (8) name and address of the legal entity that is the employer; and (9) applicable hourly rates in effect during the pay period worked and the corresponding number of hours worked. The claim in this action is not that Apple did not provide a wage stub or all of the required information on the wage stub, but that because the Apple did not comply with meal and rest period laws, the information on the wage stub was incorrect. As such, Plaintiffs allege that because Apple knowingly and intentionally failed to comply with Cal. Lab. Code §226, Plaintiffs are entitled to receive the greater of all actual damages of $50 for the first pay period in which the violation occurred and $100 per employee for each violation in a subsequent pay period, not exceeding the total penalty of $4,000, for one year along with the costs of reasonable attorney’s fees pursuant to California Labor Code § 226(e).  

Plaintiffs also allege a violation of California Labor Code §2698, et seq., the Private Attorneys Generals Act (PAGA). This law permits an employee to pursue civil penalties on behalf of the State of California Labor and Workforce Development Agency (LWDA). For the first violation of a provision of the Labor Code, a penalty of up to $100 per employee can be issued; for each subsequent violation, $200. And, generally speaking, each pay period for which there is a Labor Code violation is considered a violation, such that employers that pay employees bi-weekly can be sued for 26 violations per year per employee. Ultimately, 75% of any PAGA recovery must be provided to the LWDA, with the employees themselves retaining the remaining 25%.

In their complaint, Plaintiffs seek nominal damages, compensatory damages, restitution of all monies due from Defendant’s alleged unlawful business practices, declaratory relief, injunctive relief, and interest accrued to date. While the Plaintiffs have not yet stated how much money they are seeking in the aggregate, the possible exposure could be significant.

Why Are Tech Companies Being Targeted?

Apple is not the first tech company to be targeted by plaintiffs’ attorneys in California, and it likely will not be the last. Plaintiffs’ attorneys are going after tech companies both because they view them as deep pockets and because they believe they may be able to procure higher awards or settlement fees in such cases due to the fact that tech companies tend to employ large numbers of people at high hourly rates. Since the premium for a missed meal or rest period is an hour’s worth of pay, there is a greater potential recovery for plaintiffs and their attorneys in the tech industry than in cases brought against smaller companies with fewer employees and/or lower hourly rates. Additionally, whether true or not, some plaintiffs’ lawyers believe that due to the nature of tech work, it is harder for the employer to show that an employee’s meal period was not interrupted.

Where the certification of the class in the case against Apple may have its greatest impact is that it will embolden other lawyers to sue tech companies and to try to use this case as a blueprint. Accordingly and unfortunately, other tech companies can now expect to see lawsuits with similar claims, theories, discovery, experts, and trial plans. And they can expect to see plaintiffs’ counsel in those cases insisting that classes should be certified for the same reasons that they were certified in the claims against Apple.

Tech employers should work with counsel now to take steps to protect themselves against such claims. It is vital that California employers comply with applicable state law on meal and rest periods, final paychecks, and wage statements. To the extent a tech employer determines it needs to revise its policies and practices to comply with California law, it must be exceedingly careful in doing so in order to avoid inviting the very class action lawsuit it is seeking to avoid – and to avoid creating evidence that could be used against them in that litigation. EBG’s experienced California employment attorneys can help employers in reviewing and addressing these issues. For the latest developments in wage-hour law, please also visit our Wage & Hour blog and download our wage hour app.


[1]Gregg Settembrino is a paralegal at Epstein Becker & Green, P.C. and a law student at New York Law School.

The New Jersey Technology Council: Informative Discussions at the 2014 Annual Meeting

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By Michelle Capezza, Ian Carleton Schaefer, and Arthur O’Brien (upSKILL Project Manager, NJIT)

The New Jersey Technology Council (NJTC) is a not-for-profit, trade association which focuses on connecting decision-makers and thought-leaders from technology and technology support companies through access to financing opportunities, networking, and business support. Through its programs, the NJTC provides timely business information to help its members grow and succeed and provides forums for member companies to work together to advance New Jersey’s, and the region’s, status as a leading technology center. At NJTC’s Annual Meeting held in July at The Forsgate Country Club in Monroe, NJ, the NJTC furthered its mission by hosting a series of discussions on topics of import to today’s technology companies. The meeting was abuzz with various conversations and idea exchanges on various topics including the current U.S. patent system, forging partnerships between academic institutions and industry to meet workforce needs, early stage funding, and cloud management/hosting colocation as well as presentations from corporate CEOs regarding the challenges facing their companies.

The Epstein Becker & Green Technology, Media and Telecommunications (TMT) strategic industry group had the privilege of facilitating two roundtable discussions regarding Attracting/Retaining Employees and Managing Workforce Risk in the 21st Century. NJTC members who attended our roundtable discussions raised many important issues challenging technology companies in this regard including: (i) finding and hiring the right people, (ii) providing employees with the right skills to manage others as well as overall professional development, (iii) managing employees working remotely and in other offsite-locations, (iv) developing workplace policies to foster work-life balance, (v) incentivizing employees to join and remain with their companies, and (vi) addressing organizational culture issues. One of our roundtable participants was Arthur O’Brien, upSkill Project Manager at the New Jersey Institute of Technology. As Mr. O’Brien explained, “upSKILL is a grant funded by the US Department of Labor and is designed to offer information technology (IT) and science, technology, engineering and mathematics (STEM) training to unemployed professionals and veterans in New Jersey. The purpose of the grant is to enable these U.S. citizens and permanent residents to upgrade their skills so they can successfully compete for jobs currently in high demand in NJ. Classroom and online courses are provided at the six academic partner institutions on the grant: NJIT (the lead partner), Rutgers-Newark and the Community Colleges in Bergen, Essex, Morris and Passaic Counties. The students are able to receive training in web development, mobile apps, big data, project management and Lean Six Sigma. To insure the students are receiving training in areas where NJ companies have skill gaps, the grant management team works closely with the NJ Talent Networks, Workforce Investment Boards and Professional Trade Organizations e.g. the NJ Tech Council and the Commerce and Industry Association of NJ”. The work of Mr. O’Brien, the New Jersey educational institutions and industry organizations provides an example of the important efforts that are underway to forge partnerships between academic institutions and industry to meet workforce needs and prepare the workforce of tomorrow to fill the demand for highly skilled positions.

It is clear that the workplace is changing and attracting and retaining the right workers, with the right skills will be key to growing a TMT company in the future. It will be imperative to design workplace policies as well as compensation and benefits packages that both serve to attract, motivate and retain employees as well as comply with applicable laws. As members of the workforce prepare themselves and retrain for the jobs of the future, employers are in turn called upon to create organizations of excellence to attract and retain these employees, and, foster long term growth of their people and their organizations. Our TMT Group at Epstein Becker Green is well poised to assist employers in developing the necessary workplace policies and programs to serve these needs.

If you are an employer that is interested in hiring skilled IT or STEM professionals, you can contact Arthur O’Brien at AOBRIEN@NJIT.EDU with job descriptions you would like to fill and he can connect you with upSKILL candidates. You can also contact him if you are an IT or STEM professional interested in applying for the program.

For more information regarding The New Jersey Technology Council, visit www.njtc.org.

NJ Technology Council

NJ Technology Council

Igniting a Firestorm at Tinder with Flammable Allegations

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By: Christopher M. Farella, Jennifer L. Nutter, and Margaret C. Thering

Whitney Wolfe, former marketing vice president and co-founder of the company responsible for the popular mobile dating app, Tinder®, recently filed suit in California state court alleging sexual harassment and discrimination surrounding her experience and eventual departure from the company.  Tinder Inc.’s parent companies, IAC and Match.com, are also named as defendants.  While the complaint is only one side of the story, the exhibits attached to the complaint, which contain text messages between Wolfe, Chief Marketing Officer Justin Mateen (Wolfe’s supervisor and alleged harasser), and Chief Executive Officer Sean Rad suggest where there is smoke, there may actually be fire.  While Tinder Inc. is not the first burgeoning tech company to be involved in a salacious lawsuit, it does provide a cautionary tale on important legal issues for start-ups.

Wolfe alleges that she began experiencing discriminatory behavior as Tinder® became more popular and it only escalated after a failed romantic relationship with Mateen.  For example, despite being considered a co-founder of the company, she was left out of business articles appearing in more traditional business outlets because she was a “girl” and her male counterparts did not want people to think the company was “an accident.”  After Wolfe officially ended her relationship with Mateen, Mateen allegedly stripped Wolfe of her co-founder title, reportedly telling her that having a “24‐year-old girl” as a co-founder made the company “seem like a joke.”

As support for her claims of a harassing and hostile environment, Wolfe also alleges Mateen called her a “whore” in front of CEO Rad. Many of Mateen’s other expletive-filled text rants contain inappropriate comments.  Further, Mateen also appear to threaten Wolfe’s job in a text, writing, “[I]f I can not get along with you and it starts to effect [sic] my work too much not bc of me but the effect will be that ur gone.”  Wolfe claims to have asked Mateen to stop this behavior, claiming, “Please don’t do this during work hours” and she said she would ask the CEO to intervene to stop the harassment.

When she tried to complain to Rad, she alleges, the CEO stated that she was being “dramatic” and “annoying.”  Eventually, Wolfe claims, she was forced to leave, and although she wished to do so with just her vested equity and a severance package, her offer was rejected, leading to the filing of this suit.

Once the lawsuit went public, Tinder Inc. took action.  Mateen was suspended pending an ongoing internal investigation and there was a condemnation of the language in the publicized texts.  Nevertheless, the company stated that the allegations were unfounded.  (The company has not yet filed an Answer to the Complaint.)

The allegations present several legal touchpoints that all companies, but especially tech start-ups, should follow:

  • Have Clear and Effective Policies in Place.  There are no factual allegations in Wolfe’s lawsuit suggesting that Tinder Inc. had policies in place to prevent this type of discrimination and harassment in the workplace.  While Tinder Inc. may have had such policies, it is also important that such policies be well-publicized.  All employers should have and publicize such policies as a way to set the proper tone in the office and to serve as a first line of defense to situations such as this.  California, where Plaintiff was employed, requires employers to prevent sexual harassment. California employers are required by law to display a government posting entitled “California Law Prohibits Workplace Discrimination and Harassment” and to give all employees information sheets on sexual harassment.  One bedrock policy is an anti-harassment/discrimination policy with clear pathways for employees to come forward with complaints. Employees should be given multiple choices of persons to whom to complain so that they are not forced to complain about sexual harassment to the harasser.
  • Train Employees About Your Policies That Prohibit Sexual Harassment.  Employees should be trained about the employer’s policies prohibiting sexual harassment, and employees should be trained about how they can report harassment and what to do if the person to whom they report harassment ignores their complaints. This training should occur on a regular basis, not just when one begins employment. California law requires all employers with 50 or more employees to provide such training to supervisors every two years.
  • Romantic Relationships Should Be Managed.  Wolfe contends that when the relationship began to turn downward, Mateen stepped up his harassing behavior.  The text messages attached to the complaint arguably show that Mateen was using his position to subject Wolfe to continued harassment.  Indeed, in the text mentioned above, Mateen could be said to threaten Wolfe’s employment.  Given his position in the company, this threat could be seen as carrying real weight.  Besides insulting Wolfe, Mateen seems to have insulted others with whom she associated.  After one particularly intense exchange, Wolfe writes, “I need to be more clear.  We are not together.  You have no right to my personal life.  I answered your question, yet you continue to ask the same thing 100 times over.  Then you threaten me.   Unacceptable.”   Relationships at work are sometimes unavoidable, but ones between supervisors and subordinates are fraught with potential difficulties thus demanding immediate attention.  Companies may want to consider mandating that romantic relationships have to be disclosed to management to assist in preventing the all-too-familiar scene Wolfe describes in her complaint. Some companies implement policies that prohibit or discourage workplace romances, but the problem with such policies is that if an employer would not enforce the policy against its two best employees who entered into an office romance (which few employers would), then it is possible that the policy could lead to discrimination complaints. Upon learning of an intra-company romantic relationship, companies need to take action to avoid what has played out here.  Among the steps to take are to appoint a different supervisor to the subordinate.  This way, the romantically involved supervisor does not have the power to affect the subordinate’s working conditions negatively should the relationship sour.
  •  Take Employee Complaints Seriously.  Wolfe alleges that when she complained to Sean Rad, Tinder Inc.’s CEO, and then post-separation, to IAC’s CEO, neither of them took her complaints seriously.  In fact, Rad allegedly responded by calling her “dramatic” and “annoying.”  When an employee is reaching out to others in management to complain about the behavior of another executive, steps should be taken immediately to investigate the complaints. Blaming or belittling the person who makes the complaint only serves to increase feelings of alienation, persecution, and retaliation; and it also almost guarantees a lawsuit.  Investigations can go far in both restoring confidence in the affected employee and addressing a situation before it gets well out of hand. Legal defenses to lawsuits of this nature, in some jurisdictions, can be asserted where prompt steps were taken to remediate the harm allegedly being caused.  If nothing is done, this defense is unavailable. In contrast to federal law, California law requires employers to take reasonable steps to prevent harassment, and it requires employers to investigate complaints of harassment. Additionally, unlike federal law, California law does not provide an affirmative defense for employers who take reasonable steps to prevent harassment and were unaware that the employee was being harassed. California law does allow employers who show this, however, to reduce their damages.
  •  The “Permanent Record”.  A long time ago, school children were threatened to behave or else a report would go into their “permanent record” which would seemingly follow you the rest of your life.  That threat was probably hollow then, but has never been more real than it is today.  Texting and email have become the preferred methods of communication, especially in the business setting.  While texts and emails may be helpful as reminders to negotiations or agreements, companies need to be vigilant with employees about the content of these communications.  As is seen from the texts attached to Wolfe’s complaint, a “permanent record” of a conversation is created each time a text or email is sent.  These “permanent records” will become the inevitable focal point for discovery and trial.  Effective policies and training need to be implemented to minimize the risks associated with the unfiltered use of today’s communication tools.
  • Don’t Let Ego Control.   Wolfe alleges that at some point, she felt beaten down and offered to resign.  She tried to work out a resolution where she would retain her equity and also receive severance.  In a text, Rad agreed to the equity, but called the request for severance a “ridiculous ask” since she was quitting.  From a business perspective, what is more ridiculous – paying a departing co-founder a sum of money that can be made contingent upon waiving any legal claims against the company and keeping the matter confidential, or allowing things to fester, become a public lawsuit, and expose the company to embarrassment and loss of market confidence?  In a world where allegations, whether true, false or somewhere in between, can live permanently in the searchable public archives, public airings (and the subsequent debates and dialogues that proliferate online) of potentially embarrassing personal exchanges can spook investors and damage an emerging (or even established) brand.  Better to swallow pride and get past an unfortunate situation in private.

Tinder Inc. will have its chance to rebut these allegations and explain certain decisions it made with respect to Wolfe.  Nevertheless, the facts as alleged should send a message to companies that this situation could occur within their walls and steps should be taken today to minimize the risks.

OSHA and NLRB Agreement Opens New Door To Whistleblower Claims

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On Epstein Becker Green’s OSHA Law Update blog, Eric Conn reviews the agreement between the NLRB and OSHA, which allows employees to file out-of-date safety related whistleblower claims to be filed with the NLRB.

Following is an excerpt from the blog post:

On May 21, 2014, the National Labor Relations Board (NLRB) published a memorandum discussing a new agreement between NLRB and OSHA regarding a backdoor route for employees to file safety related whistleblower claims that are too stale to be filed with OSHA. The NLRB memo directs OSHA representatives to “notify all complainants who file an untimely [OSHA] whistleblower charge of their right to file a charge with the NLRB.” As a result of this agreement, employers should expect an increase in the number of unfair labor practice claims filed by employees alleging retaliation for protected safety related whistleblower activity.

To access the full blog post, please click here.

 

Stuart Gerson on the Supreme Court’s Harris and Hobby Lobby Decisions

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Our colleague Stuart Gerson of Epstein Becker Green has a new post on the Supreme Court’s recent decisions: “Divided Supreme Court Issues Decisions on Harris and Hobby Lobby.”

Following is an excerpt:

As expected, the last day of the Supreme Court’s term proved to be an incendiary one with the recent spirit of Court unanimity broken by two 5-4 decisions in highly-controversial cases. The media and various interest groups already are reporting the results and, as often is the case in cause-oriented litigation, they are not entirely accurate in their analyses of either opinion.

In Harris v. Quinn, the conservative majority of the Court, in an opinion written by Justice Alito, held that an Illinois regulatory program that required quasi-public health care workers to pay fees to a labor union to cover the costs of wage bargaining violated the First Amendment. The union entered into collective-bargaining agreements with the State that contained an agency-fee provision, which requires all bargaining unit members who do not wish to join the union to pay the union a fee for the cost of certain activities, including those tied to the collective-bargaining process. …

An even more controversial decision is the long-awaited holding in Burwell v. Hobby Lobby Stores, Inc. Headlines already are blasting out the breaking news that “Justices Say For-Profits Can Avoid ACA Contraception Mandate.” Well, not exactly. …

Both sides of the discussion are hailing Hobby Lobby as a landmark in the long standing public debate over abortion rights. It is not EBG’s role to enter that debate or here to render legal advice, but we respectfully suggest that the decision’s reach is already being overstated by both sides. In the first place, the decision does not allow very many employers to opt out of birth control coverage – only closely-held for-profit companies that have a good-faith ideological core, as clearly was the case for Hobby Lobby. That renders such companies functionally the same as non-profits that are exempted from the mandate by the government. Publicly-held companies are not affected by the decision (though some are likely to argue that Citizens United might require such an extension. Nor are privately-held companies that can’t demonstrate an ingrained belief system.

Read the full post here.

California Supreme Court Opens the Door to Class Action Waivers, Shuts Door to Waiver of Representative Actions

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By Marisa S. Ratinoff and Amy B. Messigian

One of the main battlegrounds between employers and employees relates to the ability of employers to preclude class actions by way of arbitration agreements containing class action waivers. In California, the seminal case of Gentry v. Superior Court (“Gentry”) has had the practical effect of invalidating class action waivers in employment arbitration agreements since 2007. Gentry held that an employment class action waiver was unenforceable as a matter of California public policy if the class action waiver would “undermine the vindication of the employees’ unwaivable statutory rights” under the Labor Code. Thus, California technology, media and telecommunications industry employers and national technology, media and telecommunications industry employers with a business presence in California have found it extremely difficult, if not impossible, to enforce class action waivers in their employment arbitration agreements over the past seven years and have seen scores of California wage and hour cases proceed in court under the harsh hand of Gentry.

The landscape changed drastically in 2010 when the United States Supreme Court issued its decision in AT&T Mobility, LLC v. Concepcion (“Concepcion”). There, the Supreme Court held that the Federal Arbitration Act (“FAA”) preempts state laws or policies that deem arbitration agreements unconscionable and unenforceable on the basis that they preclude class actions. While the Concepcion case related to a consumer arbitration agreement, many have questioned whether its impact extended to employment arbitration agreements, such as the ones invalidated on public policy grounds under Gentry.

Iskanian v. CLS Transportation Los Angeles, LLC is the first case to test this issue before the California Supreme Court. The decision takes one step forward and one step back. First, the Court held that Gentry has been abrogated by Concepcion. As such, courts may not refuse to enforce an employment arbitration agreement simply because it contains a class action waiver. The Court further rejected the argument that a class action waiver is unlawful under the National Labor Relations Act.

However, the Court also found that an employee’s right to bring a representative action under Private Attorney General Act (“PAGA”) is nonwaivable. Under PAGA, an employee may bring a civil action personally and on behalf of other current or former employees to recover civil penalties for Labor Code violations. Of the civil penalties recovered, 75 percent goes to the State of California and the remaining 25 percent go to the “aggrieved employees.” The Court held that “an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.” The Court also found that “the FAA’s goal of promoting arbitration as a means of private dispute resolution does not preclude [California’s] Legislature from deputizing employees to prosecute Labor Code violations on the state’s behalf.” The Court explained that PAGA waivers do not frustrate the FAA’s objectives because the FAA aims to ensure an efficient forum for the resolution of private disputes, whereas a PAGA action is a dispute between an employer and the State, which is being brought in a representative capacity by the employee. Because the State derives the majority of the benefit of the claim and any judgment is binding on the government, it is the “real party in interest,” making a PAGA claim more akin to a law enforcement action than a private dispute. Because of this, it is within California’s police powers to enact PAGA and prevent the waiver of representative PAGA claims.

The practical effect is that even if a class action waiver is enforceable, any purported waiver of a representative PAGA action will be unenforceable. As a result, a complaint filed in court that includes a PAGA cause of action will arguably remain with the court unless the claims are bifurcated. As for Iskanian and his former employer, the Court left these questions to the parties to resolve. While it is possible that Iskanian will be appealed to the United States Supreme Court for guidance, at least for the foreseeable future employers should expect plaintiffs’ counsel to include PAGA causes of action in order to frustrate employer efforts to move wage and hour claims to arbitration.

Going forward, technology, media and telecommunications industry employers may want to consider adopting agreements with their California employees that expressly permit representative PAGA claims to be brought in arbitration while waiving all other class claims to the extent allowed by law. Alternatively, employers may revise their agreements to allow for bifurcation of claims or expressly exclude PAGA claims from the scope of the agreement. In either case, employers should use this opportunity to review the terms of their arbitration agreements and put new agreements in place with California employees, if necessary.

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