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US Employment Litigation Round-Up for November 2013

A Review of Key Cases and New Laws Affecting Employers
18 November 2013
Mayer Brown Newsletter

Welcome to the inaugural edition of our US Employment Litigation Round-Up, which summarizes the rulings and implications of key US court decisions and new legislation affecting employers. If you have any questions about the matters addressed in this issue, please contact the author  or the US Employment practice chairs or .

Evidence that Some Employees Received Breaks Is Insufficient Basis on which to Deny Certification of Wage and Hour Class

Benton et al. v. Telecom Network Specialists

Decision: The California Court of Appeal reversed a trial court’s denial of class certification, holding that evidence that some employees worked under conditions that permitted them to take breaks was an insufficient basis for denying class certification. Rather, the trial court should have focused on whether the plaintiffs’ allegation that Telecom failed to adopt a meal and rest period policy was susceptible to common proof. According to the appellate court, “the employer’s liability arises by adopting a uniform policy that violates the wage and hour laws. Whether or not the employee was able to take the required break goes to damages … and the fact that individual employees may have different damages does not require denial of the class certification motion.” The court also held that Telecom could not escape liability as a result of a putative class member being co-employed by a staffing agency that had adopted a lawful meal and rest break policy. The applicable wage order imposes an affirmative duty on every employer to authorize and provide required meal and rest breaks.

Impact: This case serves as an important reminder to employers to adopt and implement their own meal and rest break policies and to not simply rely on the fact that some employees in fact took breaks to establish the existence of such policies. It demonstrates that wage and hour class actions are alive and well even after the Brinker decision, which held that, under California law, an employer must provide employees with meal periods but has no obligation to ensure that employees take them. The Benton decision also exposes a potential flaw in a common strategy for opposing class certification motions: simply submitting declarations highlighting that many employees took breaks may not be sufficient to overcome a class certification motion.

Ninth Circuit Invalidates Employer’s Arbitration Agreement as Unconscionable and Allows Putative Class Action to Proceed

Chavarria et al. v. Ralphs Grocery Co.

Decision: The US Court of Appeals for the Ninth Circuit Court invalidated an employer’s arbitration agreement because it was both procedurally and substantively unconscionable. A former employee brought a putative class action alleging that the defendant committed various wage and hour violations. The Ninth Circuit upheld the trial court’s denial of the defendant’s motion to compel arbitration, finding that the agreement was procedurally unconscionable because it was presented on a take-it or leave-it basis and because the terms of the agreement were not provided to the employee until three weeks after the employee agreed to be bound by the agreement. The court further held that the agreement was substantively unconscionable because (i) it would always result in an employer-proposed arbitrator even if the employee initiated the arbitration and (ii) it required each party to pay half of the arbitrator’s expected fees at the outset, and precluded the employee from recovering those fees, making many claims impracticable.

The Ninth Circuit rejected the employer’s arguments that the Federal Arbitration Act preempted the district court’s unconscionability analysis. In so doing, the court explicitly considered the Supreme Court’s Concepcion decision, which held that the FAA can preempt state laws having a “disproportionate impact” on arbitration. The Ninth Circuit determined that California’s procedural unconscionability rules do not disproportionately affect arbitration agreements because they apply to the formation of all contracts.

Impact: Even after Concepcion and its progeny, this case shows that courts are still willing to invalidate arbitration agreements that they view as overly favorable to employers. Chavarria highlights the risk that an employer’s arbitration agreement will be declared unconscionable if the employee is forced to shoulder excessive costs to arbitrate. While using an arbitration agreement is often advisable, employers should closely scrutinize these agreements to confirm that they are not susceptible to attack as excessively one-sided.

Recent Decisions Require EEOC to Reimburse Defendants’ Attorneys’ Fees and Costs

Equal Employment Opportunity Commission v. Peoplemark Inc. and Equal Employment Opportunity Commission v. CRST Van Expedited Inc.

Decisions: The US Court of Appeals for the Sixth Circuit upheld an order requiring the Equal Employment Opportunity Commission to pay defendant Peoplemark, Inc., nearly $752,000 in fees and costs. The EEOC had claimed that the company had a blanket, companywide policy of denying employment to convicted felons, and that this policy had a disparate impact on African-Americans. During discovery, the EEOC learned such a policy did not exist and yet continued to litigate the case. The court held that continuing the litigation in light of that development was unreasonable.

The Peoplemark decision followed a district court order in another case that required the EEOC to pay prevailing plaintiff CRST nearly $4.7 million in attorneys’ fees, costs and expenses associated with the company’s defense of the EEOC’s sexual harassment claims. All but one of the more than one hundred plaintiffs’ claims were dismissed. When the EEOC settled that one final claim, it argued that CRST was not a prevailing party and therefore was not entitled to recover its fees. The court rejected the EEOC’s argument as contrary to congressional policy and characterized it as an assertion that, “as long as [the agency] names one individual in a complaint and succeeds as to that individual, it can include as many frivolously allegations it wishes in a complaint using vague language and a class of similarly situated individuals without ever being liable for a defendant’s attorney’s fees.”

Impact: The US Supreme Court has cautioned that a plaintiff generally should not be assessed an opponent’s fees unless a court finds that the claim was frivolous, unreasonable or groundless, or if the plaintiff continued to litigate after it clearly became so. The Peoplemark and CRST decisions demonstrate that employers that are successful in defending those kinds of class claims against the EEOC can and should request an award of their fees and costs. Courts increasingly have been scrutinizing the EEOC’s activities and are pushing back on the agency when the EEOC pursues provably unreasonable or meritless litigation.

Courts’ Rulings on Employee Discipline for Facebook Activity May Foreshadow NLRB’s Stance on the Issue

Maria Gresham v. City of Atlanta et al., case number 12-12968, in the US Court of Appeals for the Eleventh Circuit & Bland v. Roberts, case number 12-1671, in the US Court of Appeals for the Fourth Circuit

Decision: In October 2013, the US Court of Appeals for the Eleventh Circuit affirmed the dismissal of an Atlanta police officer’s claims that the city and its police chief violated her First Amendment rights by denying her a promotion while she was under investigation for criticizing a colleague’s performance on Facebook. The plaintiff, Maria Gresham, had no protectable First Amendment rights in her Facebook post because the post raised a reasonable possibility of disruption of the department’s legitimate interests given that “public accusations of unethical conduct against fellow officers would have a natural tendency to endanger the esprit de corps and good working relationships amongst the officers.”

Impact: This decision is the second in recent weeks to address whether an employee’s Facebook activity is protected speech under the First Amendment. In Bland v. Roberts, the Fourth Circuit Court of Appeals held that a deputy sheriff could not be fired for “liking” the Facebook page of the current sheriff’s opponent because clicking Facebook’s “Like” button is speech protected by the First Amendment.

The Fourth Circuit’s decision could also have an impact on a case currently pending before the NLRB, Triple Play Sports Bar (34-CA-012915). The issue before the NLRB is whether clicking the “Like” button is protected by the National Labor Relations Act. Given the Fourth Circuit’s ruling that clicking the “Like” publishes an expression of support that is a “substantive statement,” it appears likely that the NLRB will find the action protected activity under the NLRA. The NLRB has also recently decided cases involving private employers’ discipline of employees for their Facebook activity, in most cases finding that the discipline infringed on the employees’ rights under the NLRA to engage in concerted protests or complaints about working conditions. However, like the Eleventh Circuit, the NLRB has not protected employees who post items on Facebook that complain about their employment but that are not directed at co-workers and to which co-workers never responded.

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