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US Employment Litigation Round-Up for January 2015

A Review of Key Cases and New Laws Affecting Employers
28 January 2015
Mayer Brown Newsletter

NLRB Holds that Employees Have Right To Use Employers’ Email Systems for Non-Work Purposes

Decision: In Purple Communications, the NLRB recently held in a 3-2 decision that employees have the right to use their employers’ email systems during non-work time for non-work purposes, including for the purpose of union organizing. Noting that “the use of email as a common form of workplace communication has expanded dramatically in recent years,” the NLRB reasoned that “[c]consistent with the purposes and policies of the act and our obligation to accommodate the competing rights of employers and employees, we decide today that employee use of email for statutorily protected communications on nonworking time must presumptively be permitted by employers who have chosen to give employees access to their email systems ….”

The ruling overturned the NLRB’s 2007 decision in Register Guard that employees had no rights under the National Labor Relations Act to use their employers’ email system to engage in activities protected by the Act. Two board members dissented in Purple Communications. They questioned the majority’s presumption that limiting the use of an employer’s email system to business purposes posed an unreasonable impediment to self-organization. They further opined that the ruling violated the First Amendment by forcing employers to pay for speech with which they disagree.

Impact: While this is a major reversal in the NLRB’s stance on non-work use of employer email systems, the holding in Purple Communications is limited to situations where the employer has granted employees access to the employer’s email system. Further, a business may justify a complete ban on the non-work use of email if it can demonstrate that special circumstances make the ban necessary to maintain productivity and discipline. Given the change in the NLRB’s position, employers should consider having counsel review their email policies to ensure that they comply with the current state of the law.

California Appellate Court Upholds On-Duty Rest Periods

Decision: In Augustus v. ABM Security Services, Inc., a California Court of Appeal reversed a $94 million judgment in a wage-and-hour class action, rejecting the plaintiffs’ theory that the company violated wage-and-hour laws by requiring some employees to remain “on call” and carry radios during rest breaks. The class of approximately 15,000 former and present security guards sought unpaid wages, interest and penalties, alleging that the company had violated California law by them of off-duty rest breaks. The trial court granted summary adjudication and summary judgment to the plaintiffs, holding that California law requires employers to relieve their workers of all duty during rest breaks.

The Court of Appeal disagreed, holding: “Labor Code section 226.7, contrary to the trial court’s ruling, prescribes only that an employee not be required to work on a rest break, not that he or she be relieved of all duties, such as the duty to remain on call. Remaining on call does not itself constitute performing work.” The court further observed that the security guards were permitted to, and did, engage in various non-work activities, including smoking, reading, making personal telephone calls, attending to personal business and surfing the Internet during their rest periods.

Impact: The Appellate Court’s decision further clarifies an employer’s obligations with respect to rest periods under California law. It also highlights the differences between the break requirements for meal periods and rest periods discussed by the California Supreme Court in Brinker. Although employers must authorize and permit their non-exempt employees to take timely rest periods, employees need not be relieved of all duty during that time period, unlike during meal periods.

Ninth Circuit Upholds Substantial Punitive Damages Award in Sexual Harassment Case Despite Award of Nominal Compensatory Damages

Decision: In State of Arizona v. Asarco, an en banc Ninth Circuit panel held that a $300,000 punitive damages verdict in a sexual harassment case in which only nominal damages were awarded comported with due process. The plaintiffs in the underlying case successfully established liability for sexual harassment under Title VII; the jury awarded no compensatory damages, $1 in nominal damages and $868,750 in punitive damages. After trial, the district court denied the defendant’s motion for judgment as a matter of law, but capped the punitive damages award at $300,000 pursuant to 42 U.S.C. § 1981a. A three-judge panel for the Ninth Circuit vacated the $300,000 punitive damages award, finding the ratio between the punitive and nominal damages excessive. The Ninth Circuit agreed to rehear the case.

On rehearing, the Ninth Circuit unanimously upheld the $300,000 punitive damages award, concluding: “Here, Aguilar has asserted a claim under a statute, Title VII, which includes a carefully crafted provision, § 1981, that imposes a cap on punitive damages.” The court explained that Title VII “clearly sets forth the type of conduct, and mind-set, a defendant must have to be found liable for punitive damages.” It also “sets a cap on certain types of compensatory damages, combined with punitive damages,” which is graduated to the size of the employer, topping out at $300,000 for the largest employers. As such, Title VII puts employers on notice about the largest possible awards, while “dramatically reduc[ing] the chance of random, arbitrary awards, because the statute articulates the degree of culpability that a defendant must have before being subject to liability and restricts damages awards to a range between $0 and $300,000.” The court concluded that “[w]hen a statute narrowly describes the type of conduct subject to punitive liability, and reasonably caps that liability, it makes little sense to formalistically apply a ratio analysis devised for unrestricted state common law damages awards.”

Impact: In light of the Ninth Circuit’s decision, employers should be aware that their potential exposure when sued under Title VII may be the entire amount up to the punitive damages cap, irrespective of the amount of compensatory or nominal damages awarded. To minimize the amount of any potential liability for punitive damages in Title VII cases, employers should consider reviewing their anti-discrimination policies to ensure there is a clear process for reporting, documenting and investigating discrimination complaints so that such complaints can be addressed in a timely and organized fashion.

New York State Eliminates Wage Theft Prevention Act’s Annual Notice Requirement

Development: On December 29, 2014, New York Governor Cuomo signed a bill amending the New York Wage Theft Prevention Act (WTPA) to eliminate the requirement that employers send annual WTPA wage rate and pay date notices to active employees between January 1 and February 1 of each year.

Impact: The amendment took immediate effect, so employers are not require to send notices for 2015. Employers, however, are still required to issue WTPA notices to all new employees at the time of hire and to retain those notices.


  • Ruth Zadikany
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  • Lori A. Zahalka
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