Kimberly Kralowec, The Kralowec Law Group principal
Image: Jason Doiy/The Recorder
SAN FRANCISCO — In 2013, employment lawyers are looking to attend to some unfinished business. California courts have had a lot to say in recent years about class certification and mandatory arbitration — but they've skirted questions that would put state policy in direct conflict with evolving federal law.
The two issues on everyone's minds are the use of representational testimony and statistical analysis in seeking class certification, and how much room courts have to void arbitration provisions in employment agreements.
Perhaps most important is the Brinker effect. The California Supreme Court's long-awaited 2012 decision in a meal and rest break period case, Brinker Restaurants v. Superior Court, had something to offer everyone. But while both plaintiffs- and management-side employment lawyers declared victory, the opinion, issued more than three years after the court granted review, left unanswered questions about using representational testimony, surveys and statistical analysis to certify classes of plaintiffs.
By staying mum, the justices were able to sidestep a possible conflict with the U.S. Supreme Court's blockbuster 2011 decision in Wal-Mart v. Dukes, which curtailed the use of such methodologies. But in California trial and appellate courts, decisions on the admissibility of representational evidence are wide-ranging and inconsistent.
The California Supreme Court will also have to reconcile its precedent with federal case law in the mandatory arbitration arena. In September, the high court granted review in Iskanian v. CLS Transportation, S204032, a case that has become a household name for employment lawyers who fight or defend mandatory arbitration agreements. A First District Court of Appeal panel previously held that Gentry v. Superior Court, a 2007 state Supreme Court decision providing for the invalidation of class action waivers in arbitration agreements, is pre-empted by the U.S. Supreme Court's 2011 decision in AT&T Mobility v. Concepcion. Lawyers expect the California Supreme Court to finally settle the score on whether or not such agreements conflict with state law.
But even as the California Supreme Court reckons with increasingly employer-friendly U.S. Supreme Court decisions, employment lawyers say not to overlook the employee-friendly administration of freshly re-elected President Obama. New enforcement plans at federal regulatory agencies and a clear agenda of increasing workers' rights may add up to more trouble for American businesses and more work for the employment bar.
AT THE BRINK
Although it was one of the original questions presented in Brinker, the California Supreme Court has yet to rule on whether plaintiffs can use representative testimony and statistical analysis to make their cases.
But a month after they issued the ruling, the justices signaled they may be ready to try again by granting review in Duran v. U.S. Bank National Association, S200923. The case involves claims that employees were misclassified to deny them overtime. The plan developed in the trial court calls for testimony from 20 employees out of a potential class 10 times that size. A First District panel cited "fatal" flaws in that plan and cautioned that there is a high margin of error in statistical samples.
In a concurrence to her own opinion in Brinker, Justice Kathryn Mickle Werdegar wrote that statistical sampling was an appropriate methodology for plaintiffs to use to get their classes certified. But only one other justice, Goodwin Liu, joined her, and a number of other appellate panels appear to have sided with the First District's rationale in Duran.
"The true effect of Brinker is something the courts will now sort out," Sheppard Mullin Richter & Hampton partner Richard Simmons said.
Even the question that Brinker squarely addressed — whether employers need to ensure that employees do no work during their meal periods — hasn't really settled that issue. The California Supreme Court has indicated that subsequent decisions may have misread Brinker's holding that employers need only make a "bona fide" effort to provide employees with rest breaks, not force them to stop work. A few lower courts said that meant employers only need to "offer" breaks.
In a dramatic move, the state Supreme Court depublished two of those rulings — Lamps Plus Overtime Cases, 195 Cal.App.4th 389, and Hernandez v. Chipotle Mexican Grill, 208 Cal.App.4th 1487. In both cases, the Second District had denied class certification.
Kimberly Kralowec of The Kralowec Law Group said in both rulings the Second District had "misinterpreted the Brinker decision, in particular what employers have to do to comply with their meal period obligations." Depublishing, she said, "was a very strong signal that the court disagreed with the analysis" in those two cases.
Iskanian, too, will challenge the California Supreme Court to reconcile its own precedent with U.S. Supreme Court rulings on mandatory arbitration. In that suit, a Second District panel held that Gentry is inconsistent with federal law that favors enforcing arbitration agreements between employees and employers. The Second District panel relied heavily on the U.S. Supreme Court's decision in Concepcion, a consumer arbitration case, in its rationale. In October, the federal high court vacated a California Supreme Court decision in Sonic-Calabasas v. Moreno, 51 Cal.4th 659, that invalidated a mandatory arbitration agreement that prevented an employee from filing a certain kind of labor complaint with a regulatory agency, and remanded it back to the state Supreme Court for further review in light of Concepcion.
With the U.S. Supreme Court making it clear that state high courts must defer to the Federal Arbitration Act, Simmons said, "the California Supreme Court is now going to have to come clean on its views" on the disparities between state and federal precedent.
Robin Largent, a partner at Carothers DiSante & Freudenberger in Sacramento, said the U.S. Supreme Court action in Sonic-Calabasas has led to appellate rulings that are "all over the map." Iskanian is currently being briefed.
THE OBAMA EFFECT
But even as developing federal case law seems to be favoring employers, their lawyers worry about what they see as an increasingly muscular labor agenda at the White House. In particular, the National Labor Relations Board, they say, is actively fighting to give union-like rights to nonunion employees, delving into the legality of at-will employment agreements, social media policies and confidential internal company investigations. Those are areas of the law that aren't traditionally governed by the National Labor Relations Act, a decades-old piece of legislation passed to protect concerted efforts by employees to challenge unfair labor practices, according to Wilson Sonsini Goodrich & Rosati partner Fred Alvarez.
The NLRB is "really on a tear right now," he said. And the trend of aggressively litigating labor complaints made by nonunion employees will continue in 2013, he guessed, since the one Republican board member has termed out and it's up to Obama to make new appointments.
The Equal Employment Opportunity Commission, too, is stepping up enforcement efforts in areas of criminal background checks and pregnancy discrimination, Largent said, and the expanding rights of employees in those areas could prompt new filings.
New state regulations guarding against pregnancy discrimination, coupled with the EEOC's increased oversight, could prompt a new wave of discrimination suits in that area, lawyers from both sides of the bar say. So, too, could the decision in Harris v. City of Santa Monica, 181 Cal. App.4th 1094, the so-called "mixed-motive case," which was argued last month at the California Supreme Court. That case challenges whether or not a decision to fire an employee, in this case a pregnant woman, is discriminatory if a protected characteristic like pregnancy played any part in the decision.
According to David Lowe, a partner at Rudy, Exelrod, Zieff & Lowe, the case has the potential to force California into line with more employer-friendly federal case law that says you can't win a discrimination claim if the employer had valid nondiscriminatory grounds. California law, he said, has been more protective of employees.
Last year also saw the filing of several high-profile gender discrimination cases by high-wage earners like Ellen Pao, who sued her employer, investment firm Kleiner Perkins Caufield & Byers, for refusing to promote her based on her gender. In recent years, it's more typically been lower-wage workers filing gender bias suits, either individually or in classes, but lawyers say that may change in 2013.
If you combine Pao's case with other high-profile sex discrimination cases like that against Greenberg Traurig, said Dickson Geesman partner Kathryn Dickson, lawsuits filed by women are "percolating again." Defense-side lawyers Cheryl Orr of Drinker Biddle & Reath, and Wilson Sonsini's Alvarez said they, too, are seeing an uptick in gender discrimination cases, and expect an even more dramatic increase if the California Supreme Court sides with the plaintiff in Harris.
For Therese Lawless, of Lawless & Lawless, 2013 will be a year to educate the judiciary on new issues facing women in the workplace, arguing that employers are increasingly bringing summary judgment motions contending that alleged mistreatment of women isn't discrimination but just business.
"A lot of discrimination nowadays is not overt. It's insidious," she said.
