Patrick Maloney Appointed to LACBA Mediation and Arbitration Advisory Committee for 2020-2021 Term

Congratulations to Patrick Maloney, founding partner of The Maloney Firm, APC, who has been appointed to the Los Angeles County Bar Association’s Attorney-Client Mediation and Arbitration Services Advisory Committee for the 2020-2021 term.

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As part of the Los Angeles County Bar Association’s Dispute Resolution Services, the Advisory Committee oversees arbitrations and mediations of attorney-client fee disputes pursuant to Business and Professions Code Sections 6200-6208, as well as other fee disputes initiated by attorneys against clients, or attorneys against attorneys. 

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LACBA was founded in 1878 and is one of the largest voluntary metropolitan bar associations in the country, with more than 20,000 members.  LACBA serves attorneys, judges, and other legal professionals through 27 sections, committees, networking events, live and on-demand CLE programs, and pro bono opportunities, as well as public service and informational resources.

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For more information about the Los Angeles County Bar Association (LACBA) and its committees, please visit https://www.lacba.org.

Employer-Required Travel Time Must Be Paid

By Nicholas Grether, Esq., The Maloney Firm, APC

For this edition of Employment Law Insights, we analyze a recent California appellate court opinion on whether a collective bargaining agreement (“CBA”) allowed an employer to avoid paying employees for employer-required travel time.  Carlos Gutierrez v. Brand Energy Services of California, Inc.,(June 16, 2020) Appellate No. A154604, Alameda County Super. Ct. No. RG17846239.  A copy of the opinion can be found here.  The Court held that the applicable Wage Order and the California Labor Code do not permit an employer to agree in a CBA not to pay employees at least minimum wage for all time worked, including required travel.

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Plaintiff was Required to Ride the Employer’s Shuttle Bus

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Plaintiff Carlos Gutierrez (“Plaintiff”) worked at gasoline refineries owned and operated by defendant Brand Energy Services (“Brand”).  Plaintiff was a union member and his employment was subject to a CBA.  Brand was contracted to erect and dismantle scaffolding at various refineries in Northern California.

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During one assignment, Plaintiff arrived to the work site approximately 45 minutes before his scheduled start time.  After parking his vehicle, he would walk to the refinery gate, scan his badge, and then wait for a shuttle bus to take him to the lunch tent.  While at the lunch tent, Plaintiff put on his safety gear and proceeded to a mandatory safety meeting.  Plaintiff was required to take the shuttle bus; he was not allowed to take his vehicle to or be dropped off at the lunch tent.

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Brand considered the start of a shift to be when the safety meeting began.  After the workday was completed, Brand paid employees for the time spent traveling from the work site to their vehicles at the end of a shift.  This policy was referred to as “in on the employee’s time, out on the Company’s,” was adopted in a Letter of Understanding (“LOU”) and became part of the CBA.1  Plaintiff sued, alleging he should be compensated for the time spent scanning his badge, walking to and waiting for the shuttle bus, traveling by shuttle bus to the lunch tent, and donning his safety gear.

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The Wage Order for Construction Employees Requires Payment of Minimum Wage For Travel Time

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Brand countered that Plaintiff’s claims were barred under Industrial Welfare Commission Wage Order No. 16-2001, Section 5(D), which allows for an exemption to Section 5 if employees are covered by a valid CBA.  At issue was section 5(A), which provides, “All employer-mandated travel that occurs after the first location where the employee’s presence is required by the employer shall be compensated at the employee’s regular rate of pay or, if applicable, the premium rate . . . .”  Accordingly, Brand argued that the CBA exempted it from having to pay the employees for their travel between their parking site and the lunch tent where they attend safety meetings. 

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Plaintiff argued that the right to receive a minimum wage was governed by Section 4 and the presence of an otherwise valid CBA made no difference.  The trial court agreed with Brand and granted summary judgment in favor of Brand.  Plaintiff appealed. 

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Travel Time on the Shuttle Bus Should be Paid

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The appellate court (“Court”) explained that, as a general rule, employer-mandated travel time is compensable because an employee is under the employer’s control during that travel.  Morillion v. Royal Packing Co., (2000) 22 Cal.4th 575, 587-88.  This is consistent with California case law, which focuses primarily on whether an employee is under the employer’s control in determining what time is considered “hours worked” and when employees must be compensated.  Here, Plaintiff had to ride the shuttle bus from the refinery entrance to the lunch tent.  He was not permitted to be dropped off or use any other form of transportation.  The Court thus held that Plaintiff was under Brand’s control, and this time should be compensated as “hours worked.”

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The Wage Order Does Not Exempt Employers from the Requirement of Paying Minimum Wage 2

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The Court’s analysis turned on whether Wage Order No. 16-2001, Section 5(D) allowed an employer to agree in a CBA not to pay for employer-required travel time.  The Court found that nothing in the Wage Order allowed employees to waive their rights to minimum wages for time that is considered “hours worked.”  Noting that the CBA exception was limited to Section 5 of the Wage Order, the Court found that a CBA could only relieve an employer from paying for required travel time at the overtime rate.

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The Court then noted the inherent conflict between Brand’s interpretation of the Wage Order and Labor Code Section 1194, which prevents employees from working for a rate below the minimum wage.  When a conflict occurs between the Wage Orders and the Labor Code, the Labor Code controls.  Thus, the Wage Order cannot relieve an employer of its minimum wage requirements.  Lastly, the plain language of the CBA exemption did not explicitly apply to Section 4, which requires the payment of minimum wages.  For these reasons, the Court ruled that Brand was required to compensate its employees at least the minimum wage for all “hours worked,” including the time Plaintiff spent traveling between the refinery gate and the lunch tent.3

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What Can Employers Do?

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This opinion is another example of how California applies its control test to require compensation of employees.  Employers should be aware that California courts have consistently applied these laws in favor of employees.  Take care to ensure that employees are compensated for every minute they are under your control.  Ask yourself who the policy benefits?  Here, Brand’s policy requiring the use of shuttle buses benefited Brand since it made it more likely that employees were on time for the start of their workday and did not require Brand to pay the employees for traveling from the parking lot to the lunch tent.  If the policy benefits the employer, courts are more likely to find that the employees are not free of the employer’s control.  See our recent article on the requirement to pay employees for employer-mandated bag checks for additional discussion of these topics.  

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In addition, do not assume that a CBA or employment agreement will come to your rescue.  Make sure that employees comply with your requirements to clock in and clock out as soon as they begin and end work.  If you require your employees to use employer-provided transportation, that time must be compensated.  Lastly, review your employee handbooks to make sure they are up to date and provide the most accurate information to your employees.

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Notes:

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1 Interestingly, the LOU was agreed to after the lawsuit in this case was filed and Brand filed an answer claiming the CBA provided an affirmative defense.  The Court did not consider that fact in its analysis, but it may have appeared to the Court that Brand was trying to cover up a violation by amending the CBA.

2 Wage Order 16-2001 applies to employees in certain on-site occupations in the construction, drilling, logging, and mining Industries.

3 In contrast, public employment allows for a valid waiver of the requirement to pay at least the minimum wage when the CBA is approved by the State Legislature and signed by the Governor.  The CBA would then be considered a “legislative enactment” approving the agreed-upon terms that is chaptered into law.  Stoetzl v. Department of Human Resources, (2019) 7 Cal.5th 718.

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About the Author:

Nicholas Grether is an employment attorney in the Employment Law Department at The Maloney Firm, APC.  If you have questions regarding this alert, you may contact Nicholas Grether at 
ngrether@maloneyfirm.com.


Clients, Potential Legal Claims Against Your Former Attorney May Expire Sooner Than You Realize

By Sam Fogas, Esq., The Maloney Firm, APC

A client generally has one year from the time her attorney ceases representation to bring a legal malpractice and/or breach of fiduciary duty claim against said attorney. But when did the representation end? As the California Court of Appeal recently explained in Nguyen v. Ford (2020) 49 Cal.App.5th 1, it is up to you, the client, to see the writing on the wall and know when your attorney has stopped representing you. While knowing when your attorney has ceased representing you may seem like a simple matter, Nguyen muddies the waters. Consider that even if your attorney has not formally withdrawn from every matter in which she represents you, withdrawal in one matter may begin running the statute of limitations on any claims you have against your attorney in any matter.

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In Nguyen, attorney Karen Ford and her law firm, Ford & Associates, LLC, represented client Huyen Nguyen in a discrimination lawsuit against her former employer in federal district court. Ford’s retainer agreement with Nguyen specifically excluded work to potentially be performed during the appeals process. After Nguyen’s former employer won summary judgment in the district court, Nguyen asked Ford to appeal to the Ninth Circuit; and she then signed a separate retainer agreement with Ford for the appeal. However, the attorney-client relationship broke down during the appeal and the Ninth Circuit granted Ford’s motion to withdraw as counsel. Nguyen obtained new counsel and ultimately lost the appeal.

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Six months after the Ninth Circuit ruled on Nguyen’s appeal, Nguyen sued Ford for breach of fiduciary duty and legal malpractice, among other things. In turn, Ford objected to the lawsuit on statute of limitations grounds, arguing that the one-year statute of limitations, or time in which Nguyen’s claims must be filed, had expired. In Nguyen’s opposition to the objection, she argued that despite withdrawing from her appeal, Ford remained attorney of record in the district court and had not followed the district court’s formal procedures to withdraw from the district court proceeding, thereby tolling the statute of limitations. The unpersuaded trial court agreed with Ford and dismissed Nguyen’s complaint without leave to amend.

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In affirming the trial court, the Court of Appeal noted, “whether termination of representation has ended for purposes of [the statute of limitations] does not depend on whether the attorney has formally withdrawn from representation, such as by securing a court order granting permission to withdraw.” Further, “the inquiry into when representation has terminated does not focus on the client’s subjective beliefs about whether the attorney continues to represent him or her in the matter. Instead, the test is objective and focuses on the client’s reasonable expectations in light of the particular facts of the attorney-client relationship.” Ultimately, it was up to Nguyen to know when Ford had ceased representing her and the statute of limitations on Nguyen’s claims began to run.

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Nguyen presents an unsurprising yet potentially problematic result: whether an attorney continues to represent a client is determined objectively from the facts of the particular attorney-client relationship and whether a reasonable person under the circumstances would believe that the attorney continues to represent her. With the benefit of hindsight, it may seem apparent that Ford’s representation of Nguyen ended when Ford withdrew from the representation in the Ninth Circuit. However, understanding when your attorney has withdrawn and the statute of limitations on your claims against your attorney has begun to run will likely take a more nuanced analysis. Even a short email, call, or text can potentially affect the status of the representation and the statute of limitations.

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Accordingly, if you think you have a claim against your former attorney for legal malpractice, breach of fiduciary duty, or similar grounds, do not delay. Besides prolonging a potential recovery, your claims may be expiring. If you have any concerns about the statute of limitations on your claims against your former attorney or any other questions about your claims, seek help from a competent legal professional immediately.

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Greg Smith represents attorneys in disputes over legal fees and legal malpractice. Sam Fogas is a civil litigation attorney. If you have questions regarding this article contact Greg Smith at gsmith@maloneyfirm.com or Sam Fogas at sfogas@maloneyfirm.com.

Checking Employees’ Bags Must Be Done on the Clock

By Nicholas Grether, Esq., The Maloney Firm, APC

For many years, courts have attempted to define exactly what time spent by an employee before and after the workday must be compensated.  While the courts have provided a number of illustrative decisions, bright-line rules tend to be in short supply.  For example, the following must be paid: time spent putting on and taking off employer-required protective gear (IBP, Inc. v. Alvarez, 546 U.S. 21 (2005)); time spent traveling in company vehicles to the worksite when required by the employer (Morillion v. Royal Packing Co., 22 Cal.4th 575 (2000)); and time spent performing tasks for the benefit of the employer on a regular basis, no matter how short the time (Troester v. Starbucks Corp., 5 Cal.5th 829 (2018)).  By contrast, using a commuting option provided by the employer as an optional benefit does not have to be paid (Overton v. Walt Disney Co., 136 Cal.App.4th 263 (2006)).  

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But what about an employer-required check of an employee’s bag, purse, or backpack in order to deter theft?  Employers have argued there is no need to bring a bag, while employees have argued they were under the control of their employers and should be paid.  In Frlekin v. Apple Inc., 8 Cal.5th 1038 (2020), the California Supreme Court ruled that the time employees spend waiting for a bag check must be paid even if the bag was brought purely for personal convenience.  This time is considered “hours worked” and therefore compensable in California.  The ruling will directly impact employers who utilize bag checks and requires employers to modify their policies and procedures to ensure that employees are paid while waiting for their bags to be checked.

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Apple’s Bag Check Policies

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Employees who worked at Apple, Inc. (“Apple”) retail locations were subjected to a bag check if they brought a bag and/or personal Apple device to work.  The policy applied equally to briefcases, purses, and backpacks.  The employees claimed that they waited 5 to 20 minutes, and on occasion, up to 45 minutes to have their bags checked.  Employees were required to clock out, stay in the store, find a manager or security guard to perform the bag check, open bags for inspection, and remove Apple devices for inspection.  Apple did not compensate its employees for this time and acknowledged that the purpose was to prevent theft. 

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The employees argued they were under the control of their employer and were entitled to be paid.  Apple argued that employees could choose not to bring a bag and/or Apple device to work, and thus would not be subject to the check.  Since the time spent waiting for and undergoing the bag check was considered voluntary, Apple argued that it did not control the employees. 

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A class action lawsuit was filed in federal court, claiming the employees were not paid at least the minimum wage for the time spent waiting for, and undergoing bag checks.  The trial court ruled that the time was not compensable and granted Apple’s motion for summary judgment.  On appeal, the 9th Circuit asked the California Supreme Court to decide as a matter of California law if the time spent waiting for, and undergoing “required exit searches of packages or bags voluntarily brought to work purely for personal convenience by employees compensable as ‘hours worked’”?

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The Court Focused on the Benefits to the Employer

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Apple tried to analogize its bag checks to the rule for commuting to and from work.  While commuting, if required to meet at a certain place or time and use a certain method of transportation, time must be paid once you are subject to the employer’s control.  However, if a transportation option is voluntary, such as allowing employees the option to use a company vehicle or a shuttle to transport the employee from the parking lot to the worksite, that time may not need to be paid.

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The Court disagreed, noting the inherent differences between commuting to work and an employer-mandated bag check.  For the former, the only arguable interest of the employer during the commute is that the employee arrives to work on time; the employer does not particularly care how an employee gets to work or if she stops somewhere else on the way.  For the latter, the employer has the interest of deterring theft and the employee is not free to pursue their choice of activities while waiting for the bag check.

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Providing an Option to Avoid the Bag Checks is Not a Deciding Factor

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The Court was not persuaded by Apple’s argument that bringing a bag and/or Apple device to work for personal convenience was similar to choosing to use employer-provided transportation.  The Court noted that 70% of employees brought bags, that employees were required to cover their Apple clothing while on breaks (necessitating employees to bring extra clothing to be able to leave the store), and that employees were required to wait for a bag check even if an employee only brought a personal Apple device.  The Court explicitly stated that the ability to avoid an employer-controlled activity is not the only factor that determines whether the employees’ waiting time has to be paid. 

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What Should Employers Do?

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Now the Court has made clear that time waiting for a bag check must be paid, examine the reasons behind bag-check policies and determine if those goals can be accomplished in other ways.  It is certainly understandable for a business to try to limit theft by employees and customers.  However, now is a good time to audit your practices to see if they are even effective at deterring theft. 

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Apple required not only backpacks to be checked, but also small purses and personal Apple devices.  Limiting the size/type of bag that must be searched will allow some employees to leave right away without additional cost to the employer.  Providing employees with smaller, clear bags may be an option for some businesses.  Be aware that if the employer wants to have an employee verify that they have no bags that must be searched, this should also occur while the employee is on the clock.  The key component for determining hours worked in California is control, and until an employee is free of the employer’s control they must be paid.

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If bag checks are necessary, make sure the employee stays clocked in until their bags are checked.  A machine for clocking out near where the search will be conducted could allow the employee to clock out immediately after being searched.  If you utilize non-exempt employee to conduct bag checks they must complete the bag checks while on the clock.

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Employers should update their policies to reflect the fact that non-exempt employees will be compensated for time spent on personal bag checks and that disciplinary consequences will be imposed for employees who clock out prior to a bag check.  Similar to employees who fail to clock out for lunch breaks, employees who clock out before getting their bags checked should face discipline to ensure compliance with the policy as well as be paid for the time. 

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About the Author: Nicholas Grether is an employment attorney in the Employment Law Department at The Maloney Firm, APC.  If you have questions regarding this article, you can contact Nicholas Grether at ngrether@maloneyfirm.com.

Employer Alert: LA City and County Minimum Wage Increases July 1, 2020

 

By Nicholas Grether, Esq., The Maloney Firm, APC

 

As California continues to be hit with COVID-19, employers in the Southland may need a reminder the minimum wage is going up in both the City of Los Angeles and unincorporated areas in the County of Los Angeles on July 1, 2020.  For small businesses (25 or fewer employees) and non-profit corporations, the minimum wage will be going up to $14.25 per hour.  For all other employers (26 or more employees) the minimum wage will be $15.00 per hour. 

 

Santa Monica, Pasadena, and Malibu also have similar city ordinances increasing the minimum wage to either $14.25 or $15.00 per hour depending on the number of employees, as of July 1. On July 1, 2021, all employers in the City and unincorporated areas in the County of LA will be required to pay a minimum wage of $15.00 per hour. 

 

In the next few years, all of California will be moving closer and closer to a minimum wage of $15.00 per hour.  On January 1, 2021, the State of California’s minimum wage will be going up to $13.00 per hour for employers with 25 or fewer employees and $14.00 per hour for employers with 26 or more employees.  On January 1, 2022, the State of California’s minimum wage will be going up to $14.00 per hour for employers with 25 or fewer employees and $15.00 per hour for employers with 26 or more employees.  On January 1, 2023, all employers in California will be required to pay a minimum wage of $15.00 per hour.

 

For more information on the minimum wage, please visit these resources. 

https://www.dir.ca.gov/dlse/faq_minimumwage.htm

https://lacounty.gov/minimum-wage/

https://lacounty.gov/government/about-la-county/unincorporated-areas/

https://wagesla.lacity.org/

 

If you have questions regarding this article, contact The Maloney Firm at 310.540.1505.

 

 

 

Creating a Return-to-Work Policy

By Nicholas Grether, Esq., The Maloney Firm, APC

Note: This article was posted on June 18, 2020 at 10:30 PDT. Because the COVID-19 situation is rapidly changing as the federal government and State of California continue to fight this pandemic, individuals and businesses should consult with their counsel for the latest developments and updated guidance on this topic.

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As California continues to reopen, many businesses are faced with the question of how to do so safely for employees and customers.  Guidance from Governor Gavin Newsom explains that counties will have to meet certain benchmarks regarding testing and hospitalizations to reopen lower-risk businesses.  The individual counties will then request permission from the State of California (“California” or “State”) to reopen additional businesses.  For example, Los Angeles County is in Stage 2, where offices and lower-risk workplaces, such as retail and manufacturing, are permitted to reopen.  These businesses need to have a policy prepared to ensure equitable treatment of their employees and to make reopening as safe as possible.  The businesses that will hopefully be able to reopen in Stage 3 should take this time to make sure they are ready to reopen.

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Confirm Your Business is Using the Right Information

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The State has been providing statistical benchmarks for the reopening of certain businesses as we move through various stages of reopening.  Lower-risk workplaces were able to reopen in Stage 2 and higher-risk workplaces are in the process of reopening in Stage 3 (to begin with limited personal care and recreational venues with workplace modifications).  California’s plan is to only end the Stay-At-Home order once COVID-19 therapeutics have been developed.  This means businesses should be prepared to deal with these restrictions for the foreseeable future.  However, be aware that cities and counties are permitted to adopt more restrictive orders than the State. 

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Make sure your business is complying with the appropriate order.  This will depend on the location of your business, and can be confusing where the State, county, and city have issued various restrictions and guidelines.  For example, if your business is located in Long Breach but your employees live in Orange County, your business will be required to comply with orders from the City of Long Beach, County of Los Angeles, and State of California.  For businesses with multiple locations, each site will have to comply with the rules applicable to its respective city and county.  

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Use Your Common Sense

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Many workplaces adhere to a rule something to the tune of, “If you feel sick, don’t come into the office or go home.”  This needs to be stressed by the employer and adhered to by employees.  As more businesses reopen and employees come into contact with more persons, the easiest way to prevent the spread of COVID-19 is to keep your sick employees away from the healthy ones.  At this time, it is probably best to eliminate common touch and gathering points such as a shared coffee maker.  On the other hand, devices like a touchless water dispenser could be safe to use if sanitized frequently. 

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Working from Home/Teleworking

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If your operations allow, continue to let employees to work from home.  Some county and city officials have advised that employees should continue to work from home even if the business has reopened.  For example, Orange County is allowing offices to reopen only where working from home is impossible, and Los Angeles County is strongly encouraging employees to continue working from home as long as they can. 

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As businesses reopen, make any determinations about who can work from home based on your business needs.  Do not use factors such as age or medical condition/disability that may subject your business to liability for discrimination.  If, on the other hand, an employee is sick or experiencing symptoms of COVID-19, you may direct that employee to work from home or stay out of the workplace.  While COVID-19 is considered a pandemic by the Centers for Disease Control (“CDC”) or other governmental health authority, an employee exhibiting symptoms may be sent home because they are considered a “direct threat.”

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Where an employee has a medical condition/disability that makes him or her more likely to have a severe case of COVID-19, allowing work from home may be required as an accommodation.  Also note that if your employees have been working from home already, it will be more difficult to deny those employees’ requests to work from home.  If an employee requests to work from home as a result of their medical condition/disability, engage in an interactive process by meeting with the employee, their supervisor, and Human Resources to discuss the employee’s work responsibilities and what is needed for the accommodation.  If working from home is possible with reasonable expense, it will likely be considered a reasonable accommodation that must be provided to employees with medical conditions/disabilities. Be careful not avoid these conversations with your employees—open and honest communication will help in the long run. 

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Protect Your Employees and Customers

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Ensuring the availability of personal protective equipment (“PPE”) will help employees and customers stay as safe as possible.  You may need to rearrange your workplace to allow employees to maintain 6 feet (or more) of separation while working.  If employees need to be within 6 feet at times, make sure to provide sufficient PPE so that they can be safe as possible.  Studies from Korea and Japan have shown that the likelihood of indoor transmission is higher the more people are speaking.  For that reason, in-person meetings should be limited.  As one of the success stories thus far, Korea advised its businesses that meetings should be “fewer, smaller, shorter.”  Open windows if possible, since it has also been shown that air conditioning vents may carry COVID-19 droplets further.  Some business may not be able to safely operate due to their nature. For example, a business like a call center cannot prevent the spread of COVID-19 if it operates with small distances between workers who are constantly talking.   

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Your business will also need to take additional precautions for customers entering the business.  If possible, try to set up a “traffic flow” system with a designated entrance and exit so that customers move in one direction instead of crossing paths repeatedly.  Take chairs out of conference rooms so that all attendees can maintain 6 feet of distance.  Open windows and install clear barriers where appropriate to provide even more protection.  You’ve likely seen these plastic screens when checking out at the grocery store recently.  Your workplace and business needs will need to adapt to the particular circumstances imposed by your workforce and architecture.  Additional guidance is available from the Centers for Disease Control.  https://www.cdc.gov/coronavirus/2019-ncov/index.html

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Create Procedures to Help Slow the Spread

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Develop a cleaning and sanitization procedure.  Your landlord or building manager should have created some protocols, but you must make sure that necessary cleaning is done within your office or business.  Provide disinfectant wipes, hand sanitizer, and face masks.  Remember that if you choose to require employees to wear face masks (or the government requires it) while at the workplace, these should be provided at the employer’s expense.  You may choose to reimburse employees for purchasing masks, but we recommend providing them to avoid additional reimbursement requests.

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Check your insurance policies and contact your insurance broker to see if COVID-19 claims by visitors/customers will be covered.  If your insurance does not cover claims by visitors/customers, establishing set protocols will be necessary to avoid claims of negligence if a visitor or customer contracts COVID-19. 

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Each of the procedures and practices created in order to reopen should be written and incorporated into a new version of the company handbook or become a COVID-19 addendum that is signed by each employee.  Also, many of the federal and state laws passed in response to COVID-19 require specific notices be displayed in places of business; these posting rules must be strictly followed.  Local governments and industry groups may provide specific restrictions and guidelines to follow for your industry.  Most government health agencies also provide specific materials to post and distribute amongst your workforce. 

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However, your business must be aware that it has a responsibility to keep your employees and customers safe.  Developing safety protocols and procedures now may result in some short-term losses, but healthy employees and customers are more valuable.  Now is also a good time to evaluate your business as a whole.  The pandemic may end up having a profound change on business as many industries are adapting to working from home.  Businesses should be prepared to confront these new realities even as we get closer to a return to normalcy.

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If you have questions regarding this article, contact The Maloney Firm at 310.540.1505.

Maloney Firm Attorneys Selected to the 2020 Southern California Super Lawyers Rising Stars List

Maloney Firm attorneys Gregory Smith and Carl Mueller have been selected to the Super Lawyers 2020 Southern California Rising Stars list. This is an exclusive list, recognizing no more than 2.5 percent of attorneys in Southern California.  This is the fifth year Greg has appeared on the list, and the first year for Carl.  Greg earned the further distinction of being named to the Up-and-Coming 100, an elite sub-list.

 

Firm attorneys Patrick Maloney and Lisa Von Eschen have also consistently being recognized by Southern California Super Lawyers.

 

Super Lawyers, a Thomson Reuters business, is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The annual selections are made using a patented multiphase process that includes a statewide survey of lawyers, an independent research evaluation of candidates and peer reviews by practice area. The result is a credible, comprehensive and diverse listing of exceptional attorneys.

 

The Super Lawyers lists are published nationwide in Super Lawyers Magazines and in leading city and regional magazines and newspapers across the country. Super Lawyers Magazines also feature editorial profiles of attorneys who embody excellence in the practice of law. For more information about Super Lawyers, visit SuperLawyers.com.

Don’t Delay! File Your Motion to Compel Arbitration Today!

By Nicholas Grether, Esq., The Maloney Firm, APC

In the recent case of Fleming Distribution Co. v. Younan (May 15, 2020) Appellate No. A157038, Sonoma County Super. Ct. No. SCV-263702, the appellate court held that an employer waived its right to compel arbitration of a dispute over unpaid wages by delaying filing a motion to compel arbitration and participating in an administrative proceeding before the Labor Commissioner.

In June 2017, Alfons Younan filed a complaint with the Labor Commissioner’s Office, seeking his unpaid commissions, plus penalties and interest. In August 2017, Fleming Distribution, Co. (“Fleming”) sent a letter to the Labor Commissioner asserting that the complaint should be dismissed because Younan agreed to arbitrate his claims. If the Labor Commissioner did not dismiss the complaint, Fleming stated it would file a motion to compel arbitration in the superior court. When the Labor Commissioner did not dismiss the complaint, Fleming instead filed an answer, a motion to dismiss, and participated in the Labor Commissioner’s proceedings.

In December 2018, the Labor Commissioner awarded Younan $22,000 in commissions and $5,412.60 in in penalties and interest. Fleming filed a notice of appeal in the superior court and a new trial was scheduled for March 2019. In February 2019, Fleming filed a motion to compel arbitration. The motion, however, was denied because the trial court found Fleming had waived its right to arbitrate Younan’s claims.

On appeal, the Court determined the facts supported the ruling that Fleming waived its right to arbitrate. The Court looked to a number of factors to determine if a party has waived its right to arbitrate. For example, among the factors considered are the substantial use of “litigation machinery,” length of delay, taking advantage of judicial discovery procedures not available in arbitration, amount of preparation for trial/hearing, and whether the delay misleads the opposing party. Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1204. Simply participating in some phase of litigation is unlikely to waive the right to arbitrate, but courts look at the party’s actions as a whole in determining whether conduct is inconsistent with an intent to arbitrate. Id.

Upholding the trial court’s ruling, the Court of Appeal identified that Fleming waited 20 months from the filing of the complaint to file its motion to compel arbitration. While Fleming stated its position that Younan’s claims ought to be arbitrated on several occasions, Fleming participated in the hearing with the Labor Commissioner. The Court of Appeal noted the Labor Commissioner hearing was conducted at taxpayer expense, and Fleming only tried to compel arbitration after an adverse result.

Fleming argued that it was nonetheless entitled to compel arbitration because the lower court did not establish that Younan had been prejudiced. The Court found delay itself could support a finding of prejudice. Additionally, while Younan was unrepresented in the hearing with the Labor Commissioner, he thereafter retained counsel after Fleming’s appeal, incurring attorney’s fees and costs. The Court also noted that Younan was forced to wait several years to collect his wages and any benefits arbitration provides of a speedier resolution had been lost.

This case has several takeaways for employers: When utilizing arbitration agreements, do not delay in asserting that right, even when an employee asserts a claim in a forum other than the courts. The lower court and appellate court both noted that Fleming participated in the hearing before the Labor Commissioner and did not file a motion to compel arbitration for 20 months. Courts are more likely to find waiver where an employer has delayed bringing a motion to compel to “see how it goes” in one forum, before moving the dispute to arbitration. Further, arbitration rights must be asserted even where an employee is pursuing their rights in front of the Labor Commissioner. Employers who receive a notice of a complaint with the Labor Commissioner should immediately consult with their counsel to determine if the claims can be compelled to arbitration.

Yet, perhaps the most important lesson for employers is that arbitration agreements should be reviewed for clarity and to make sure they are compliant with the current state of the law. One issue raised in the trial court that was not addressed on appeal was that Fleming’s arbitration agreement “explicitly carve[d] out [] petitions for judicial review of a decision issued after an administrative hearing.” Fleming, at p. 5. The lower court determined in this procedural context there was no agreement to arbitrate the dispute. Hypothetically, if Fleming had not waived its right to arbitrate, it made compelling arbitration more difficult with an ambiguous agreement.

In sum, employers who wish to use arbitration as the forum to resolve employment disputes must be careful to craft clear arbitration agreements and timely enforce them. Current arbitration agreements should be reviewed and updated by counsel to make sure they are clear and enforceable.

A copy of the opinion can be found here.

About the Author:

Nicholas Grether is an employment attorney in the Employment Law Department at The Maloney Firm, APC. If you have questions regarding this alert, contact Nicholas Grether at ngrether@maloneyfirm.com.

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California’s Court of Appeal Provides Guidance on the Application of Arbitration Clauses

By Craig Reese, Esq. and Carl Mueller, Esq., The Maloney Firm, APC

In April the California Court of Appeal, Second District, addressed the interpretation and applicability of arbitration terms in consumer agreements in Dennison v. Rosland Capital LLC (Case No. B295350). Practitioners should take note of the Court’s decision as guidance in both drafting and interpreting arbitration clauses.

Specifically, the Court upheld the trial court’s order denying Defendant’s motion to compel arbitration. In reaching its decision, the Court evaluated whether a term in a purchase agreement properly gave an arbitrator the authority to decide whether disputes arising from the contract were subject to arbitration.

Plaintiff/Respondent in this case was an 82-year old widower and retired Naval aviator. After seeing Defendants’ television advertisements promoting investment in precious metals, Plaintiff contacted Rosland Capital and purchased nearly $50,000 of gold and silver coins. Thereafter, Rosland Capital’s agent allegedly contacted Plaintiff repeatedly, with Plaintiff eventually placing approximately $200,000 in total orders. Plaintiff filed suit against Defendants in California Superior Court, alleging the price he paid for the coins was significantly higher than their actual value. The seller moved to compel arbitration based on the Customer Agreement signed by Plaintiff when he placed his first order. The trial court denied the motion to compel; Defendants appealed that decision.

The Customer Agreement was described by the Court of Appeals as a standard form agreement: “two pages long, in two compressed side by side columns, printed in extremely small font. It is impossible to read without a magnifying glass.” The Agreement itself contained an arbitration clause providing that the “Customer agrees to arbitrate all controversies between Customer and Rosland . . . arising out of or relating in any way to the products or this agreement, including the determination of the scope or applicability of this agreement to arbitrate . . .” Plaintiff argued the Agreement was procedurally and substantively unconscionable, making the arbitration clause unenforceable. Defendants argued that the Agreement delegated the authority to determine the unconscionability of the Agreement to the arbitrator, not the Court.

The Court noted that, under California Law, a presumption exists that the trial court will determine arbitrability in the absence of clear and unmistakable evidence that the parties intended the arbitrator to decide arbitrability.(i) The Agreement contained language purporting to grant to the arbitrator the authority to determine the scope or applicability of the arbitration agreement. However, the Agreement also contained a severability clause providing that “[i]f any provision of this agreement is held by a court of competent jurisdiction to be void, invalid, or unenforceable,” such term was severable.

Where a contract includes a severability clause stating that a court of competent jurisdiction may excise an unconscionable provision, there is no clear and unmistakable delegation to the arbitrator to decide if the arbitration agreement is enforceable, and therefore the issue of scope of arbitration remains with the court.(ii) Given the severability clause in the Agreement, the Court reasoned, there was no clear and unmistakable delegation of authority to the arbitrator to determine if the provision as to arbitration of the scope of the Agreement itself is unconscionable.

Having determined that the trial court, and not an arbitrator, was the proper authority to determine arbitrability of the action, the Appellate Court evaluated the trial court’s determination that the Agreement was unconscionable de novo. The Appellate Court found ample evidence that the Agreement was unconscionable. The Court disagreed with Defendants’ assertion that Plaintiff could not show procedural unconscionability because his lifetime of experience, including his military service, should have allowed him to negotiate the terms of the Agreement: “An 82-year-old consumer who calls a telephone number displayed in a television ad to make his first-ever investment in the highly volatile precious metals market, no matter how sophisticated he may be in other matters, cannot reasonably be expected to consider negotiating the terms of a form contract in such tiny print it cannot be read without a magnifying glass.” The Court further noted that in the context of consumer contracts, the Supreme Court has never required a party to show that it attempted to negotiate standardized contract provisions as a prerequisite to establishing unconscionability.(iii)

Moreover, the Appellate Court found the contract lacked mutuality in the application of the arbitration clause, limited Defendants’ liability, and limited the statute of limitations for claims against Defendants. Due to the pervasive nature of the Agreement’s unconscionable clauses, the Court of Appeals determined it could not serve the interests of justice by severing any single provision of the contract. An agreement to arbitrate is permeated by unconscionability where it contains more than one unconscionable provision, indicating a systemic effort to impose arbitration on the non-drafting party where it would work to the drafting party’s advantage. As in this case, where a court cannot reform the contract by striking a single clause, but instead would have to augment it with additional terms, the court must void the entire agreement.(iv) In so finding, the Court of Appeals upheld the trial court’s denial of the motion to compel arbitration, and awarded costs to Plaintiff.

For practitioners, the key takeaways from this decision are twofold. First, to carefully draft or evaluate clients’ arbitration clauses to determine the applicability of clauses purporting to grant to an arbitrator the decision of arbitrability, because that may be defeated when used in connection with severability clauses. Second, as always, attorneys must be careful to not overreach when drafting arbitration clauses, as an agreement “permeated by unconscionability” will be voided by the court.

About the Authors:

Craig Reese and Carl Mueller are attorneys at The Maloney Firm, APC, and represent parties in business litigation as well as disputes between attorneys and clients. Mr. Reese may be reached at creese@maloneyfirm.com. Mr. Mueller may be reached at cmueller@maloneyfirm.com.

Notes:
i Aanderud v. Superior Court, (2017) 13 Cal.App.5th 880, 891-892.
ii Baker v. Osborne Development Corp., (2008) 159 Cal.App.4th 884, 891-894.
iii Sanchez v. Valencia Holding Co., LLC, (2015) 61 Cal.4th 899, 914.
iv Magno v. The College Network, Inc., (2016) 1 Cal.App.5th 277, 292.

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