August 10, 2021

Key California Employment Law Cases: July 2021

Ferra v. Loews Hollywood Hotel, LLC, No. S259172, 2021 WL 2965438 (Cal. Jul. 15, 2021)

Summary: The term “regular rate of compensation” under California Labor Code section 226.7 is synonymous with the term “regular rate of pay” used for calculating overtime premium payments.

Read our in-depth analysis HERE.

Pollock v. Tri-Modal Distrib. Servs., Inc., No. S262699, 2021 WL 3137429 (Cal. Jul. 26, 2021)

Summary: The statute of limitations in a failure to promote case brought under the harassment provision of FEHA begins to run when the employee knows or reasonably should know of the employer’s allegedly unlawful refusal to promote the employee.

Facts: Plaintiff Pamela Pollock filed suit against her employer, Defendant Tri-Modal Distribution Services, Inc., alleging that she was passed over for several promotions because she would not have sex with the executive vice-president of the company. The promotion at issue on appeal was given to another female employee; the offer of promotion was made in March 2017 and became effective on May 1, 2017. Applying the then-applicable one-year statute of limitations under the Fair Employment and Housing Act (“FEHA”), Defendant argued on summary judgment that Plaintiff’s administrative complaint to the Department of Fair Employment and Housing, filed in April 2018, was filed one month too late because the unlawful employment action took place in March 2017. Plaintiff did not dispute that the other employee received and accepted the promotion in March 2017, but maintained that the statute of limitations should run from the effective date of the promotion in May 2017. The trial court, finding no triable issue of fact, granted Defendant’s motion for summary judgment. The California Court of Appeal agreed that Plaintiff’s claim was time-barred and awarded costs on appeal to Defendant without analyzing whether Plaintiff’s underlying claim was “frivolous, unreasonable, or groundless when brought” under Government Code section 12965(b). Plaintiff filed a petition for review, which the California Supreme Court granted.

Court’s Decision: The California Supreme Court reversed, holding that (1) the statute of limitations in a failure to promote case brought under the harassment provision of FEHA begins to run at the point when an employee knows or reasonably should know of the employer’s allegedly unlawful refusal to promote the employee, and (2) that Government Code section 12965(b), regarding attorney’s fees for a prevailing FEHA defendant, applies to an award of costs on appeal. With respect to the limitations period, the court reasoned that while the word “occurred” in the statute is ambiguous, it should not mean the date of the promotion decision because an employer could decide not to promote an employee, never inform the employee of that decision, and then later rely on the employer’s own record of when the decision was made to assert that the limitations period for challenging the decision had expired. The court found this potential to be at odds with the principles underlying FEHA. Moreover, the court determined that the employer must carry the burden of proving that the employee knew or should have known of the adverse promotion decision, as the statute of limitations is an affirmative defense.

Practical Implications: This case is a good reminder to employers about the importance of communication with employees. Open communication about employment decisions is not just critical for morale and employee satisfaction, but it also has a direct impact on the available defenses should a lawsuit arise.

NLRB v. Nexstar Broad., Inc., No. 20-71480, 2021 WL 2909026 (9th Cir. July 12, 2021)

Summary: The “clear and unmistakable waiver” standard, and not the “contract coverage” standard, applies when determining whether an employer is permitted to make a unilateral change to terms and conditions of employment after expiration of the collective bargaining agreement.

Facts: Nexstar Broadcasting, Inc. (“Nexstar”) purchased a television station and adopted the operative collective bargaining agreement (“CBA”) with The National Association of Broadcast Employees & Technicians, the Broadcasting and Cable Television Workers Sector of the Communications Workers of America, Local 51, AFL-CIO (“Union”). The CBA expired nine months later without a successor agreement in place, despite Nexstar’s and the Union’s attempts to negotiate a new agreement. Within a month after the CBA’s expiration, Nexstar made two unilateral changes to the existing terms and conditions of employment relating to background checks and scheduling announcements. The Union filed charges with the National Labor Relations Board (“NLRB”) alleging that these two unilateral changes constituted unfair labor practices. The NLRB issued a complaint. The parties stipulated to the facts and submitted the dispute to an administrative law judge (“ALJ”) for decision. The ALJ held that the unilateral changes violated National Labor Relations Act (“NLRA”) sections 8(a)(1) and (5) because the Union had not “clearly and unmistakably waived” its right to bargain over them. The ALJ declined to apply the “contract coverage” standard, under which a collective bargaining agreement’s terms are analyzed to determine whether action taken by an employer was within the compass or scope of contractual language granting the employer the right to act unilaterally. Nexstar excepted to the ALJ’s ruling, but NLRB denied the exceptions, holding that the “clear and unmistakable waiver” standard, and not the “contract coverage,” standard applies in the post-expiration period. The NLRB ordered Nexstar to rescind the changes, bargain with the Union before imposing further changes, and post remedial notices. The NLRB petitioned for enforcement of those orders.

Court’s Decision: The Court of Appeals for the Ninth Circuit granted the NLRB’s petition for enforcement. The Ninth Circuit held that the NLRB’s decision was rational and consistent with the NLRA, where the NLRB applied its longstanding rule that after a collective bargaining agreement has expired, unilateral changes by management are permissible during bargaining only if the expired contract contains language explicitly providing that the relevant provision permitting such a change would survive the contract’s expiration. The court rejected Nexstar’s argument that it was entitled to make changes to the terms and conditions of employment under the “contract coverage” standard, concluding that that standard only applies to unexpired collective bargaining agreements. The Ninth Circuit concluded that the CBA contained no explicit language allowing Nexstar to make unilateral changes to terms and conditions of employment in the post-expiration period. 

Practical Implications: Employers should proceed cautiously when considering making changes to terms and conditions of employment if they find themselves operating under an expired collective bargaining agreement without a successor agreement in place.

Johnson v. Maxim Healthcare Services, Inc., No. D077599, 2021 WL 3075433 (Cal. Ct. App. Jul. 21, 2021)

Summary: Employee whose individual Labor Code claim against employer is time-barred may still pursue a representative PAGA claim.

Facts: Plaintiff Gina Johnson filed a California Labor Code Private Attorneys General Act (“PAGA”) action against her employer, Defendant Maxim Healthcare Services, Inc., claiming that the employment agreement she signed three years earlier violated Labor Code section 432.5 because it had a noncompetition clause. Plaintiff sought to represent all employees who had signed similar agreements. Defendant demurred, arguing that Plaintiff lacked standing because her claim was barred by PAGA’s one-year statute of limitations. The superior court sustained the demurrer, and Plaintiff appealed.

Court’s Decision: The California Court of Appeal reversed, finding that Plaintiff had a valid cause of action under PAGA. The court reasoned that a PAGA claim is legally and conceptually different from an individual employee’s right to sue for her own damages, and is designed primarily to provide relief to the general public, not to the individual employee. In turn, so long as the employee was “aggrieved” at some point, that employee has standing to bring a PAGA action. Relying on the California Supreme Court’s decision in Kim v. Reins International California, Inc., 9 Cal. 5th 73 (2020), the court held that PAGA standing does not depend on maintaining an individual Labor Code claim. The court analogized a plaintiff with a time-barred claim, like Plaintiff, to a plaintiff with individual claims that settled, like the plaintiff in Kim, to find that Plaintiff had standing under PAGA.

Practical Implications: This case is likely to increase the number of PAGA claims that are filed. Though it does not expand the liability period applicable to PAGA claims, this case does widen the pool of former employees who can bring a PAGA claim against their former employers.