The Letter of The Law: August 2014

IN THIS ISSUE:

EMPLOYMENT LAW: Breaking News: California Supreme Court Rules in Favor of Employers in Regards to Class Action Waivers, But Not in Regards to PAGA Claims

EMPLOYMENT LAW: Privacy Rights and the Public Records Act

EMPLOYMENT LAW: No Duty to Reasonably Accommodate Employees for Medical Marijuana Use

CONSTRUCTION LAW: Design Professional Liability

NEVADA LAW: Defending Against Requests for Taking Depositions of Apex Witnesses

Breaking News: California Supreme Court Rules in Favor of Employers in Regards to Class Action Waivers, But Not in Regards to PAGA Claims

By: Allyson Thompson

On June 23, 2014, the California Supreme Court issued a long awaited opinion in Iskanian v. CLS Transportation Los Angeles, LLC (2014 WL 2808963). Long awaited is an understatement, as the underlying case was filed in 2006. The issue of whether class action waivers in arbitration agreements are enforceable has been ruled on differently by several courts over the past several years, based on reliance on Gentry v. Superior Court (2007) 42 Cal.4th 443. In Gentry, the California Supreme Court previously ruled that class action waivers in arbitration agreements were unconscionable and against public policy, and were not preempted by the Federal Arbitration Act (FAA).

Court's Rulings

The Iskanian Court took into consideration the AT&T Mobility LLC v. Concepcion (2011) 131 S.Ct. 1740 case in reaching its decision. The United States Supreme Court in Concepcion held that even if a class waiver is exculpatory in a particular case, it is nonetheless preempted by the FAA. In the recent Iskanian ruling, the California Supreme Court ruled that under the logic of Conception, the FAA does preempt Gentry's rule that restricts enforcement of class action waivers. This is a big win for employers.

Another issue that the Court addressed was whether class action waivers were unlawful under the National Labor Relations Act (NLRA). Plaintiff Iskanian contended that even if the FAA preempts Gentry, the class action waiver in his case is invalid under the NLRA. Iskanian adopted the position of the National Labor Relations Board (Board) in D.R. Horton Inc. & Cuda (2012) 357 NLRB No. 184 (2012 WL 36274), wherein the NLRA prohibited contracts that compel employees to waive their right to participate in class proceedings to resolve wage claims.

The Iskanian Court rejected this argument and ruled that the class action waiver at issue in the case was not unlawful under the NLRA in light of the FAA's "liberal federal policy favoring arbitration'" (citing to Concepcion, supra, 131 S.Ct. at p. 1745). Sections 7 and 8 the NLRA do not represent "a contrary congressional command"' overriding the FAA's mandate, (citing CompuCredit v. Greenwood (2012) 132 S.Ct. 665.) This was also a win for employers.

There was one win for employees. The Court held that employees' right to 'representative actions' under the Private Attorney General Act (PAGA) may not be waived, and the FAA does not preempt California law as to the unenforceability of PAGA waivers. Plaintiff Iskanian contended that the PAGA, which authorizes an aggrieved employee to file a claim "on behalf of himself or herself and other current or former employees" ( Labor Code§ 2699, subd. (a)), does not permit an employee to file an individual claim. The Court agreed and concluded that where an employment agreement compels the waiver of representative claims under the PAGA, it is contrary to public policy and unenforceable as a matter of state law.

The Court also ruled that PAGA is not preempted by the FAA. "Simply put, a PAGA claim lies outside the FAA's coverage because it is not a dispute between an employer and an employee arising out of their contractual relationship. It is a dispute between an employer and the state, which alleges directly or through its agents - either the Labor and Workforce Development Agency or aggrieved employees - that the employer has violated the Labor Code."

What Does The Ruling Mean for Employers?

The murky aspect of the ruling involves to how courts and arbitrators will handle claims alleging both class and PAGA allegations. The Iskanian Court did remand the case back to the trial court, so hopefully we will get some insight as to how that court will rule. We anticipate that the trial court will likely rule for separating out the claims, allowing the non-PAGA claims to be arbitrated and the PAGA claims to be resolved either as a class action or in some other forum.

The ruling was also a coup for the enforceability of arbitration agreements in the employment context. In light of the historical legal turmoil regarding enforceability of class action waivers in arbitration agreements, employers can now breathe a sigh of relief that these particular clauses will be enforceable. Employers should still ensure that their arbitration agreements meet the requirements sets forth in the hallmark case Armendariz v. Foundation Health Psychcare Services (2000) 24 Cal.4th 83, to ensure that the terms are neither substantively or procedurally unconscionable.

Feel free to contact Allyson Thompson if you have any questions about the enforceability of your arbitration agreement.

Privacy Rights and the Public Records Act

By: Kyle D. Kring

Competing interests of transparency in government and elected officials and government employees' right to privacy has stirred up a debate throughout California. A recent California appellate court ruled that government officials and employees' private communications sent on personal devices and not stored on public servers are not subject to the California Public Records Act (CPRA). City of San Jose v. Superior Court (2014) 169 Cal. Rptr.3d 840. This case addresses the important debate encompassing transparency in public agencies versus a public employee's right to privacy. The scope of this issue is evident as the California Supreme Court has recently decided to step in and settle the heated debate.

This issue has gained momentum with the dramatic increase in the ability of a person to store personal information and data on personal devices over the past few years. While the CPRA allows for transparency into public records, there must be a line drawn to respect and guarantee the privacy of these public individuals and define what exactly shall be considered "public records". Currently, the definition of public records remains vague and provides that public records are "any writing containing information related to the conduct of the public's business prepared, owned, used, or retained by any state or local agency regardless of physical form or characteristics." Gov. Code § 6252(e).

Public officials and employees are not the only ones to be affected by the high court's upcoming ruling. The debate parallels similar issues within the private workplace and will likely have an effect on future rulings related to the handling of private employee personal communications.

As California remains one of the enduring states in the diminishing pool of those yet to develop clear rules or fundamental case law on the issue, the Supreme Court's ruling will be vital in settling the debate and creating a stronger sense of what is protected and unprotected by the CPRA. The Appellate Court's decision essentially allows public officials and employees to store and arguably "hide" public documents on personal devices or accounts. A practical yet somewhat unrealistic goal would be to have a system where personal devices were prohibited from having any public information stored on them, and not subject to the CPRA. The California Supreme Court will presumably draw the line and set a much needed precedent on the debate by clarifying whether public documents "possessed, used, owned, or retained" on personal devices or accounts are subject to disclosure under the CPRA and included in the definition of "public records". We will keep you posted on this very interesting privacy case.

No Duty to Reasonably Accommodate Employees for Medical Marijuana Use

By: Kyle D. Kring and Grace Pak

The increased decriminalization of marijuana use raises questions of whether employers are required to reasonably accommodate employees who use it for medical reasons, and whether they can terminate the employee for failing a drug test. As prudent employers, it is always a good idea to contemplate how the change in law will affect the workplace. Although sixteen states have legalized medical marijuana, along with two states that legalized recreational use, marijuana is nonetheless an illegal drug under federal law. Consequently, employers are not required to accommodate the use of marijuana, especially during work hours or on the employer's property.

In California, an employee may argue that it is unlawful for an employer to refuse to employ or discharge a person from employment because of a physical disability or medical condition, and that an employer is required to engage in a good faith interactive process to determine reasonable accommodations for disabled employees under the California Fair Employment and Housing Act (FEHA). Furthermore, an employee is likely to claim that FEHA works together with the California Compassionate Use Act (Proposition 215) to shield him/her from discrimination in the work place.

However, the California Supreme Court in Ross v. Raging Wire (2008) 42 Cal.4th 920 held that FEHA does not require employers to accommodate the use of marijuana and that the Compassionate Use Act does not apply in the employment context. The employee in Ross was prescribed medical marijuana because he suffered from strain and muscle spasms as a result of injuries. When the employee was offered a job, he was required to take a drug test which tested positive for tetrahydrocannabinol (THC). The employee had shown his physician's recommendation for marijuana and explained it was for medical purposes.

The Ross Court reasoned that the Compassionate Use Act was enacted in a narrow sense to protect physicians and users from criminal liability. The Court further reasoned that a state law cannot completely legalize marijuana for medical purposes because the drug remains illegal under federal law. As a result, an employer may terminate an employee for failing its drug test, even with a prescription for marijuana use.

The recurring theme in California and other states is, in the absence of laws that specifically allow the lawful use of marijuana in places of employment, employers are not required to accommodate an employee's use of marijuana during work hours or on work premises even with medical prescriptions. If an employer has a drug free workplace policy, hiring one person who has a prescription for medical marijuana and then denying another for the same type of position could open the employer for other discrimination-related litigation. It is always prudent to be consistent across the board for all hires.

Design Professional Liability

By: Brendan J. Coughlin

The California Supreme Court has agreed to review a case greatly affecting construction defect litigation. All working contractors and subcontractors know how difficult it can be to force design professionals to be involved in construction litigation, even when their work is clearly at issue.

From the beginning of a case, established law tips in the favor of design architects and engineers. These are the very persons and firms that make the initial architectural, structural, and landscaping determinations that guide all subsequent work on a project. Simply suing such firms requires an expert's Certificate of Merit, unlike other parties, confirming that the claim is justified.

The California Supreme Court has granted review in Beacon Residential Community Association v. Skidmore, Owings and Merrill LLP (2012) 211 Cal.App.4th 1301. In this case, an appellate court reversed the holding of the trial court that two architectural firms could not be sued by a homeowner's association for negligence and violation of residential construction standards contained in California's Right to Repair Act of 2002, also known as SB 800. The basis for the trial court's decision was the fact that the homeowner's association and homeowners did not contract directly with the architects. Generally, without privity of contract, residential Plaintiffs cannot sue planners for negligent design.

However, in reversing the trial court, the Court of Appeal found that the language and legislative intent of the Right to Repair Act imposed potential third party liability upon design professionals. In other words, SB 800 itself supports possible negligence liability on design engineers and architects to owners.

Active construction contractors and subcontractors can see the potential impact of this development. For now, all await the California Supreme Court's decision. The architectural firms petitioned the Supreme Court for review, arguing that expanded liability for designers and planners should not become the law of our state.

Defending Against Requests for Taking Depositions of Apex Witnesses

By: Merielle Enriquez

An "Apex Witness" is the person that sits at the highest level of a large organization, such as the Chairman of the Board, President of the Company, or Chief Executive Order. Most courts throughout the country recognize that deposition notices directed at an official at the apex of a company creates tremendous potential for abuse or harassment. Celerity, Inc. v. Ultra Cleaning Holding, Inc., 2007 WL 205067 (N.D. Cal. 2007). As such, it is prudent to file a Motion for Protective Order to prevent the deposition of the apex witness, especially when it is clear that there are other less intrusive means of obtaining the same discovery.

A generalized claim that a "corporate president has ultimate responsibility for all corporate decisions or has knowledge of corporate policy is insufficient to establish that the corporate president has unique or superior knowledge of discoverable information." In re El Paso Healthcare System, 969 S.W.2d 68, 74 (Tex. Ct. App. 1998). The Court in AMR Corp. v. Enlow, 926 S.W. 2d 640, 644 (Tex. App. 1996) has held "testimony that a chairman of the board would have ultimate authority over any policy by virtue of his position is nothing more than a simply recognition that the highest-ranking corporate officer of a corporation has ultimate responsibility for all corporate decisions."

When determining whether to allow an apex deposition, the Court should consider the following:

(1) Whether or not the high-level deponent has unique, first-hand, non-repetitive knowledge of the facts at issue in the case; and

(2) Whether the party seeking the deposition has exhausted other less intrusive discovery methods, such as Interrogatories and Depositions of lower level employees.

Affinity Labs of Texas v. Apple, Inc., 2011 WL 205067 (N.D. Cal. 2011).

In our practice, Kring & Chung has successfully suppressed requests for depositions of apex level employees by the filing of a Motion for Protective Order. This shifts the burden to the requesting party to demonstrate to the Court why the deposition of the high-level official is necessary, that the high-level individual has unique knowledge, and why the evidence cannot be obtained through less intrusive means. One added benefit is that if the requesting party is forced to oppose a Motion for Protective Order, the motivations for the deposition will be revealed.

In defense of the Motion, reasonable alternatives should be provided such as offering the deposition of lower level employees who may actually have more knowledge of the facts and issues at hand. Offering a reasonable solution should work to increase the odds that the Court will grant the Protective Order.

NEWS AND EVENTS:

Michelle Philo Chairs the Social Committee for the YLD

Michelle Philo is featured on the cover of the Orange County Lawyer magazine's July 2014 issue for her involvement in the Orange County Bar Association's Young Lawyers Division ("YLD"). The YLD allows new attorneys up to their fifth year of practice to come together to exchange ideas, grow professionally, and also give back to the community.

As the Social Chair, Philo believes the relationships built through social networking as young lawyers develop into professional referral sources. Philo and her committee plan and execute social events including Day at the Races in Del Mar, happy hour mixers and the YLD annual holiday party.

Alis M. Moon Joins Kring & Chung's Irvine, CA Office

Kring & Chung is pleased to announce that Alis Moon has joined its Irvine, CA office as an Associate attorney. Moon specializes in the areas of employment law and business litigation. She represents and advises employers in labor and employment matters including unpaid wages, misclassification, wrongful termination and discrimination to name a few. In addition, she represents individuals and classes of employees in matters relating to wage and hour laws.

2014 California HR Conference - Anaheim Convention Center

Kyle Kring and Laura Hess will present "So You Received a Sexual Harassment Complaint, What Not to Do, a Trial Lawyer's Perspective," on Wednesday, August 27, 2014 from 8:00 AM to 9:15 AM at the 2014 California HR Conference taking place at the Anaheim Convention Center. The workshop will include discussions on failing to implement appropriate policies and procedures prior to the alleged incident, failing to perform mandatory sexual harassment training, conducting a timely investigation and documenting the investigation, retaliating against the victim and many other topics that will assist you when dealing with a sexual harassment complaint.

Our attorneys have represented employers in all aspects of employment law. They defend employers against claims for sexual harassment, wrongful termination, retaliation, disability and age discrimination, failure to accommodate whistleblower, gender discrimination, misclassification and unpaid wages.

SCORE Workshop - Common Legal Questions for Start-up Businesses

Michelle Philo of our Irvine, CA office will be conducting a workshop on August 28, 2014 from 6:00 AM to 9:00 PM at the Digital Media Center located at 1300 S. Bristol, Santa Ana, 92704 regarding common legal questions for start-up businesses. New business owners often have questions regarding the formalities required to get their business off the ground. This workshop assists the small business owner in determining the best legal structure for their business. In addition, it will address the common types of contracts small business owners encounter and provides attendees with tips for entering contracts. Finally, the workshop will also touch on protecting the intellectual property of a small business. There is no cost for this workshop.

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