In Harris v. Superior Court, the California Supreme Court tries to clarify the administrative exemption as it applies to claims adjusters

(Whether it was successful is another matter entirely.)  After spending the majority of December out sick, I have a good deal of case commentary to cover before I'm current here.  In no particular oder, I begin with the California Supreme Court's opinion in Harris v. Superior Court (December 29, 2011).  Harris stems from four coordinated class action lawsuits contending that claims adjusters employed by Liberty Mutual Insurance Company and Golden Eagle Insurance Corporation were erroneously classified as exempt "administrative" employees.  The trial court certified a class of "all non-management California employees classified as exempt by Liberty Mutual and Golden Eagle who were employed as claims handlers and/or performed claims-handling activities."  Plaintiffs moved for summary adjudication of defendants' affirmative defense that plaintiffs were exempt under IWC wage order No. 4. (Cal. Code Regs., tit. 8, § 11040 (Wage Order 4).) Defendants opposed the motion and moved to decertify the class.  The trial court then decertified a portion of the class, depending upon whether the earlier, less specific version of Wage Order 4, or the later, more detailed version of Wage Order 4, applied to the class members.

On appeal, the Court of Appeal majority concluded that, under the terms of that wage order, plaintiffs could not be considered exempt employees, either before or after the amendment to Wage Order 4.  In a nutshell, the Supreme Court reveresed that ruling to the extent it set a bright line rule, holding, instead:

[I]n resolving whether work qualifies as administrative, courts must consider the particular facts before them and apply the language of the statutes and wage orders at issue. Only if those sources fail to provide adequate guidance, as was the case in Bell II, is it appropriate to reach out to other sources.

Slip op., at 22.

Between that summary of its holidng, and the explanation of the facts and procedural history, is a long and painful journey through the federal regulations incorporated into the current version of Wage Order 4.  In case you were wondering, the regulations incorporated as they existed in 2001 are: 29 C.F.R. Sections 541.201-205, 541.207-208, 541.210, and 541.215.  Next, in parsing the regulations, the Court's analysis turned on assessing when work is "directly related" to management policies or general business operations.  As the Court explained:

Work qualifies as "directly related" if it satisfies two components. First, it must be qualitatively administrative. Second, quantitatively, it must be of substantial importance to the management or operations of the business. Both components must be satisfied before work can be considered "directly related" to management policies or general business operations in order to meet the test of the exemption.

Slip op., at 10.  The Court then explained that the plaintiffs in the trial court below moved for summary adjudication of the affirmative defense of exemption by challenging defendants' ability to show one part of the conjunctive test for "directly related."  The plaintiffs argued that the defendants could not show that the work of the adjusters in that case was administrative in nature, the "qualitative" element.  The Supreme Court focused its analysis on that argument only, explicitly declining to review the record for triable issues on any other element of the exemption defense, including the "quantitative" element of the "directly related" regulatory language.

Turning to the administrative/production worker dichotomy discussed in Bell v. Farmers Ins. Exchange, 87 Cal. App. 4th 805 (2001) (Bell II) and the other Bell decisions, the Court explained that the Bell II decision was predicated on the older Wage Order 4 that lacked the detailed definitions included in the current version.  The Court also noted that the Bell II based its analysis on an undisputed record that the work of the employees at issues was "routine and unimportant."  One key fact from the Bell II analysis noted by the Supreme Court here was the limited settlement authorizations provided to the adjusters in that case.  It is important to note, however, that the Court did not invalidate the administrative/production worker dichotomy.  Rather, it stated that the dichotomy could not stand as a dispostive test in lieu of the Wage Order language.  Instead, the dichotomy is an analytical tool available when the language of the Wage Order and incorporated federal regulations is insufficient to resolve the classification question.

Turning to the current case, the Court criticized the creation of a rigid rule defining any employee carrying out day-to-day business as a production worker.  Instead, the Court cautioned against examining the duties of employees in one business to determine the correct classification of employees in another.  In other words, the administrative exemption is fact-specific test for which the Court offers no guidance in its application.

The Court reversed the Court of Appeal but directed it to re-consider the denial of summary adjudication while applying the correct legal standard.

Disclosure:  Spiro Moss represented one of the named plaintiffs, though other firms handled the appellate activities.

California Supreme Court activity for the week of December 12, 2011 [with Brinker Bonus!]

The California Supreme Court held its (usually) weekly conference on December 14, 2011.  Notable results include:

• Brinker news!  The submission of the matter is vacated and additional briefing is requested.  Wait. You thought that a decision was imminent after oral argument?  So precious!  This is BRINKER we are talking about.  Your children will be writing supplemental briefs for this decision.  The California legislature will have withdrawn and re-enacted an entire Labor Code before a decision is rendered (at which point it will again be vacated for briefing on the impact of changed law retroactively).

The downside of this news is that I will need to create a 2012 edition of my Brinker News graphics.

Oral argument comes and goes in Brinker; many prognosticators see a Court rejecting the "ensure" standard

Oral argument was finally held in Brinker last week.  Wagering on appellate court outcomes after listening to oral arguments is not a smart use of gambling funds in most instances, and it seems dangerous here as well.  But most assessments of the argument seem to agree on two things.  First, the consensus is that the Justices appeared to direct a more critical set of questions to plaintiffs' counsel, Kimberly Kralowec, on the issue of whether employers must "ensure" that meal periods are taken, rather than simply "provide" employees with an opportunity to take a meal period.  Second, on the issue of when a meal must occur, at least Justice Liu appeared to take exception with an interpretation that would allow an employer to schedule meal period after more than five hours of work.

Here are a few examples of coverage of or opinions about the oral argument:

• Howard Mintz, California Supreme Court hears arguments in showdown over worker rest and meal breaks (November 8, 2011) San Jose Mercury News
• Alison S. Hightower, What is the duty to "provide" a meal period? Oral argument before the California Supreme Court in Brinker Restaurant Corp. v. Superior Court (November 8, 2011) Lexology
• Kathy Robertson, Supreme Court wages hearing focuses on enforcing meal breaks (November 8, 2011) Sacramento Business Journal

In something approximating 90 days we will finally know the answer to this great mystery.

California Grocers Association v. City of Los Angeles holds that City may regulate wholesale replacement of a workforce after purchase of a business

In California Grocers Association v. City of Los Angeles (July 18, 2011), the California Supreme Court considered whether a worker retention ordinance -- regulating the ability of some employers to summarily replace a workforce after purchasing the business -- is preempted as intruding upon either matters of health and safety already regulated by the state or matters of employee organization and collective bargaining fully occupied by federal law.  The six Justices in the majority explained in their 38-page opinion that the neutral ordinace promulaged by the City of Los Angeles did not run afoul of preemption landmines.  The dissenting opinion, all 27 pages of it, concluded otherwise, essentially on the ground that the NLRA is intended to confer upon employers the right to hire anyone they want.  The majority wasn't persuaded by this analysis, opining instead that the NLRA was actually passed to protect employees and regulate employers.  Crazy talk.

The City of Los Angeles passed an ordinance much like those passed in other municipalities.  The Los Angeles Ordinance, focused on grocery stores, was summarized by the Court:

For grocery stores of a specific size (15,000 square feet or larger) that undergo a change of ownership, the Ordinance vests current employees with certain individual rights during a 90-day transition period. First, the incumbent owner is to prepare a list of nonmanagerial employees with at least six months' employment as of the date of transfer in ownership, and the successor employer must hire from that list during the transition period. (L.A. Mun. Code, § 181.02.) Second, during that same period, the hired employees may be discharged only for cause. (Id., § 181.03(A)-(C).) Third, at the conclusion of the transition period, the successor employer must prepare a written evaluation of each employee's performance. The Ordinance does not require that anyone be retained, but if an employee's performance is satisfactory, the employer must "consider" offering continued employment. (Id., § 181.03(D).) If the workforce is unionized, however, the union and the employer may agree on terms that supersede the Ordinance. (Id., § 181.06.)

Slip op., at 2.  The California Grocers Association did not like this ordinance and sued to enjoin its implementation.

The Court began its analysis with state law preemption in the health and safety field.  The majority had little difficulty explaining why an ordinance regulating mass terminations had little direct impact on any health and safety regulations controlling how food is handled in grocery stores.

Next, the Court examined federal preemption:

We consider as well whether the Ordinance is preempted by the NLRA, a federal law enacted to protect "the right of employees to organize and bargain collectively." (29 U.S.C. § 151.)

Slip op., at 11.  Summarizing the post-Machinists preemption cases, the Court first explained that preemption was directed at regulations of bargaining process, not local employment laws setting substantive minimum labor standards for all employees.  Next, the Court considered whether there was evidence of a clear and manifest congressional intent to bar at any level the regulation of employee retention during ownership transitions.  Working their way through the history of such decisions, the Court found solid support for the notion that the NLRA was silent as to an obligation to hire the employees of a purchased business.  The Court finished its analysis by concluding that the retention ordinance should not have a meaningful impact on successorship obligations.

Finally, the Court declined to set aside the ordinance on equal protection grounds, observing that a rational relationship exists between the stated goal of the ordinance and the decision to focus on large grocery stores.

The dissent contested the majority's decision by asserting, again and again, that the NLRA provides employers with a protected right to hire as they see fit.  The majority directly dispatched this argument with great brevity, and the length of the dissent does not make it more persuasive in my view.

Sullivan v. Oracle Corporation addresses how California law applies to nonresident employees working both in and outside California

Today, the California Supreme Court issued an Opinion following its acceptance of questions about the construction of California law from the United States Court of Appeals for the Ninth Circuit.  In Sullivan v. Oracle Corporation (June 30, 2011), the Court addressed (1) whether the Labor Code's overtime provisions apply to plaintiffs' claims for compensation for work performed in this state [with the ancillary question of whether the same claims can serve as predicates for claims under California's unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.)], and (2) whether the plaintiffs' claims for overtime compensation under the federal Fair Labor Standards Act of 1938 (FLSA) (29 U.S.C. § 201 et seq.; see id., § 207(a)) for work performed in other states can serve as predicates for UCL claims.

The Court responded "yes" to the first question group, and "no" to the second.

On the first issue, the Court said:  "The California Labor Code does apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week. (See Sullivan III, supra, 557 F.3d 979, 983.)"  (Slip op., at 18.)

On the related UCL question, the Court said: "Business and Professions Code section 17200 does apply to the overtime work described in question one. (See Sullivan III, supra, 557 F.3d 979, 983.)"  Slip op., at 19.)

The full answer to the last issues was:  "Business and Professions Code section 17200 does not apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs in the circumstances of this case based solely on the employer's failure to comply with the overtime provisions of the FLSA."  (Slip op., at 23.)

The Opinion was issued by a unanimous Court.

Update on Thursday, June 30, 2011 at 10:41AM by The Complex Litigator

The post title was corrected after the initial posting.

California Supreme Court activity for the week of May 16, 2011

The California Supreme Court held its (usually) weekly conference on May 18, 2011.  Notable results include:

• As has been the practice in all prior published cases on this issue, on a petition for review, review was granted, and the matter held, in Tien v. Tenet Healthcare (February 16, 2011) (affirmed the trial court's order denying class certification of meal period, rest break, and waiting time penalty claims). The opinion spent a substantial amount of time discussing the meal period compliance question under review in Brinker.

California Supreme Court activity for the week of May 9, 2011

The California Supreme Court held its (usually) weekly conference on May 11, 2011.  Notable results include:

• On a petition for review, review was granted, and the matter held, in United Parcel Service Wage And Hour Cases (February 24, 2011) (fees not available to defendant prevailing on Labor Code section 226.7 claims), covered previously on this blog here.  Review was previously granted in a case addressing this issue: Kirby v. Immoos Fire Protection, Inc. (July 27, 2010).
• On a petition for review, review was denied in Price v. Starbucks Corporation (February 17, 2011).

Supreme Court activity for the week of April 25, 2011

The California Supreme Court held its (usually) weekly conference on April 27, 2011.  Notable results include:

• On a petition for review, review was denied in Arechiga v. Dolores Press, Inc. (February 7, 2011) (construing Labor Code section 515(d)), covered previously here.
• On a petition for review, review was denied in Safaie v. Jacuzzi Whirlpool Bath, Inc. (February 22, 2011) (death knell doctrine), covered previously here.
• On a petition for review, review was denied in Kullar v. Foot Locker Retail, Inc. (January 18, 2011) (disqualification issues), covered previously here.

Overall, a rough day in the land of class actions.

Supreme Court activity for the week of April 18, 2011

The California Supreme Court held its (usually) weekly conference on April 20, 2011.  Notable results include:

• On a petition for review, review was denied in MKJA, Inc. v. 123 Fit Franchising, LLC (January 4, 2011) (arbitration issues), covered previously on this blog here.
• On a petition for review, review was denied in Telscape Communications v. Superior Court (Gallardo) (March 7, 2011)

California Courts website may be redirecting to new site now

I just attempted to view www.courtinfo.ca.gov and was redirected to www.courts.ca.gov.  It is possible that dns setting are being updated now.  However, opinions are still displaying from courtinfo.ca.gov, so I don't know what will happen when the full transition is completed.  If everything at courtinfo.ca.gov redirects to courts.ca.gov, links on this site to slip opininos may end up broken.  But you weren't relying on slip opnions for more than a few weeks at most, were you?