Episode 197: Key 2024 Court Cases Affecting Employers

Welcome to the Workplace, a podcast by KAL Chamber. I'm Matthew Roberts, Associate General Counsel for Labor and Employment with the California Chamber of Commerce. Hello, listeners. Although there is no set defined busy season for the California and federal court systems, we do often look to springtime for impactful employment law decisions due to the United States Supreme Court's calendar, which sees its annual terms opinions released throughout the spring and into the summer. In addition to the US Supreme Court, California's own Supreme Court, as well as California and federal appellate courts continue to issue decisions throughout the year. Recently, there have been several opinions that impact employers and their practices and will provide guidance to help shape future employment policies. To discuss these new decisions, we welcome back Cal Chambers employment law subject matter expert Vanessa Green. Thanks for joining me today, Vanessa.

Good afternoon, Matt. Thanks for having me back on the podcast.

Yeah, I'm super excited. And, you know, before we get into this, we often get questions from members or we get the side eye from employers about why they should really care about individual cases, in large part because the facts are specific to that case and it doesn't, quote, unquote, apply to them. So, Vanessa, as we go along, why should employers stay tuned and care about these cases that we're going to be talking about?

That's a great question. And I've definitely gotten the side eye from employers before when I try to talk to them about case law. It's really crucial for employers to stay informed about these cases because when laws are passed, we often don't get practical insight into how these laws are going to play out in our workplace and how they're going to affect us. But these cases, they're kind of like magic little clues or insights that we can get into better understanding how to stay compliant. And so if we understand these cases, we can do things like proactively adjusting our policies and our practices, which hopefully will keep us out of the courtroom.

All right, good. Good backdrop for us to get started. So let's stay in house and start with a pair of recent wage and hour decisions from California's Supreme Court. Let's start with the bigger1, Huerta versus CSI Electrical Contractors. Vanessa, give us a quick rundown of the facts that gave rise to this case.

Sure. So there's two main issues in this case. One involves travel time. The other involves meal periods. So starting with a look at the facts related to travel time, we have these electrical contractor employees who are working on this solar project out in a really remote area near San Luis Obispo. So the employees, they start their shift by going to this employee parking area for the solar project. But to get there, they have quite the journey. So the employees first have to drive down this designated road where they have to pass a guard check. Then they have to drive several more miles to a security gate. When they get to the security gate, they have to spend about anywhere between five to 30 minutes undergoing a security check, and then after that, they have to drive another 10 to 15 minutes to finally get to the employee parking lot. So during all of this time, they're not being paid for any of the time they're spending driving through the security check getting to this employee parking area. Now, the facts related to the meal period issue. This was a situation where the employees were subject to two collective bargaining agreements that provided them with a 30 minute unpaid meal period, but exempted them from the other California specific meal break requirements. And during this unpaid meal period, the employer wasn't allowing employees to leave the work site and require the employees to stay in a dedicated break area during that meal period. So Huerta and the other employees filed suit for unpaid wages during that time that they spent driving to the employee parking lot, and then also for missed meal period premiums, basically arguing that the employer had sufficient control over the employees during both this travel time and this meal period time.

Yeah. And we know that control has really been a key factor for the Supreme Court in several decisions recently when talking about whether or not you owe somebody wages. So no surprise that we see that argument here. And this case, as I understand, wound its way up to the ninth Circuit Court of Appeals, who generally, when interpreting California law in this area, recently likes to ask the California Supreme Court for its opinion. So in this case, the ninth Circuit did ask three questions of the Supreme Court. The first was generally, is it hours worked that requires pay when an employee is awaiting and undergoing those exit procedures that you're talking about, like waiting at the security gate for badge swiping and vehicle inspection. So what did the Supreme Court say about the exit procedures in that area?

So the Supreme Court said, yes, this time does count as hours worked and must be compensated. And that's really because despite the employees being in their personal vehicles, the employees were subject to employer control because they were confined to their vehicles and they had to sit there for anywhere from 5 to 30 minutes and undergo this badge screening and a vehicle inspection.

Okay, so we've got compensable time for the exit procedures. Second question the ninth Circuit asked was, what about that travel time itself from the parking lot to that gate where that happened? Again, you said It's a substantial drive as we wind our way to the employee parking lot. We know travel time is compensable. Commutes are not. But where did the Supreme Court fall on this question, and why?

So with this question, the court kind of punted and declined to make a specific decision on whether this travel time from the security gate to the parking lot was compensable. But the court did give us some insight. It said that for travel time like that to be compensable, the employee's presence must be required for a reason other than accessing the work site. And in this situation, it really appeared there wasn't really any other reason other than the employee accessing the work site. Right. From them going to the security gate to the parking lot.

So in other words, it sounds like a commute.

Correct.

Okay, so last question the 9th Circuit asked. What about this idea that, you know, employees can collectively bargain for unpaid, on duty meal periods? We know generally that there's a CBA provision in the labor code that exempts you from some of the meal and rest break rules, but is this one one of them?

Yeah. So, interesting question. The court found that meal periods count as hours worked. If an employer is prohibiting an employee from leaving the premises or making them stay in a designated area, like was happening in this case, they were really restricting the employee from using that time freely for their own personal activities. So generally speaking, yes, we can have a CBA where we bargain away certain things around meal periods. But in this case, the court said you can't bargain away an employee's right to be paid for what is essentially turned into an on duty meal period where the employer is exercising all of this control over the employee.

Yeah, and I think that's a really good point, because a lot of times we'll get questions around organizations that do have CBAs, and we always get the question, I have a CBA. Does this apply to me? I have a CBA. Does THIS apply to me? I have a cba. Does this apply to me, like, in several areas of law? And in this case, this gives a good lesson, like, to go back, look at your agreements and make sure that they get written in a way that, as you said, doesn't bargain away their right to get paid for work. So a lot of really good lessons in this case. Vanessa, a stark reminder again, that we need to account for every minute of time when it's considered hours worked. And as we know, you know, wage and hour continues to be a very hotly litigated topic. All right, let's move on to the other California Supreme Court case that just came down the other week, Naranjo versus Spectrum Security Services Incorporated. The this case has actually provided a lot of judicial bang for our buck as it. This isn't the first decision in this case, is it?

So. That's right, Matt. So this case began in 2007. So way back then. And then in 2022, the California Supreme Court ruled in this case that we employers have to pay employees missed meal period premiums and that that time has to be wages included on their wage statement. So their pay stub. And that's the time that employers have to pay an employee for when they fail to provide that meal period that is required under California law. And then, quick reminder, California, you know, we do have these wage statement or pay stub requirements where we have a specific, a number of specific things that employers have to provide on the wage statement for employees. Otherwise, employers are going to be subject to fines and penalties for not having a compliant wage statement.

Okay, so I actually remember that case. I remember that it just seemed ridiculous that a penalty is now considered wages. But that's what we have, Vanessa. Of course, we don't make the rules, we just follow them. But how about this decision that we just got a couple weeks ago? What was the specific issue here?

Yeah, so the specific issue in this recent decision, Narano, the employee, he was arguing that his employer had failed to include those meal premium amounts on his wage statement, which we know they're supposed to be doing. The employer did fail to do this, but the issue really was whether or not this failure was knowing and intentional, which would mean that the employer would then be subject to fines and penalties for not having a compliant wage statement. So the court looked at the situation and said, okay, if the employer can show that they genuinely believed that they were complying with this law, they can really kind of overcome this knowing and intentional requirement and avoid these wage statement violations, even if their understanding was later found to be incorrect. So in other words, employers can establish what's called a good faith defense to these wage statement violations. And this is a really big win for employers because penalties for wage statement violations can be substantial and can add up really quickly if you have a lot of employees. So this was a great case for employers. You're probably wondering, you know, how might an employer establish a good faith defense? Right. Well, they have to be able to show that they did their best to comply with the law. So it would really recommend at this point that employers continue. Hopefully they're already doing this, but continue to follow best practices like auditing their wage statements, making sure they're accurate, making sure they have included all of the things that are required under the Labor Code, and also auditing their pay practices on a regular basis. That way they can make a better argument at a good faith defense for compliance.

Yeah, and that is a rare win for the employer at the California Supreme Court for sure. We do not see those very often, so take those lessons. Waging our audits and audits of just your practices in general are always a great idea and especially in this context to help try and establish that good faith defense you talked about. Vanessa. So let's then move to the US Supreme Court. Recently we got a unanimous opinion, which is frankly interesting to me, given the makeup and recent history of the U.S. supreme Court, of course, regarding a sex discrimination case. Now, the case is known as Muldrow versus the city of St. Louis. And what were the underlying facts of this one? Vanessa because this one's really interesting.

This was really interesting, Matt. So we have this officer Muldrow, she worked in the intelligence division for the St. Louis Police Department. Now she had a lot of different duties under her rule. She would investigate public corruption and human trafficking. She oversaw their gang unit and she served also as the head of gun crimes unit. And her other the other cool thing about her position is that it allowed her to hold FBI credentials. So she was deputized FBI task force member. She had this unmarked take home vehicle as a part of her position. Overall, it was a pretty sweet gig. So in 2017, her division got a new commander. Now, at the time, her outgoing commander tells the new commander Muldrow is a rock star and says, quote, if there's one sergeant I can count on, it's Muldrow. So we know she has a good track record.

But then something goes wrong because at some point down the road, her new commander decides to replace her with the male officer that he considers is a better fit. And we also find out this is kind of cringy to me that the new commander has started referring to Muldrow as Mrs. Muldrow rather than Sergeant Muldrow, which I just have to say as a military veteran and a female, if somebody would have called me Mrs. Green when I was in the Air Force rather than Airman Greene, it just would have been completely inappropriate. Nobody says that. So, yeah, we see some cringy facts going on here with this situation. Muldrow gets transferred, she gets put in this other role. Now, she has the same rank or salary, but she loses all kinds of other benefits related to her prior role. So she loses her FBI credentials, she no longer has an unmarked car. She's not in as a prestigious position as she had before. So she's doing like street patrol now and a lot of administrative work. And she also loses her Monday through Friday schedule. So now her new position, she has this rotating schedule that includes weekends. So not surprisingly, she files a sex discrimination lawsuit.

Okay, so what I heard sounds like a supervisor blatantly replacing a female employee out of a desire to hire a male employee. That sounds like obvious sex discrimination to me. How did this even get as far as the U.S. supreme Court?

That's a great question, Matt. And I was really thinking the same thing when I first heard about the facts of this case. So the key in this case really was whether this job transfer itself, without any change in pay, without any change in rank, whether that constituted enough harm to be actionable under sex discrimination laws.

So in other words, can we even bring a sex discrimination case under these facts? So how did the Supreme Court answer that question?

The Supreme Court said that for, for the transfer to be considered discriminatory, an employee has to show some disadvantage to their employment or that they were treated worse because of their protected trait because of their sex. So the employee did not have to show some kind of substantial or significant harm, which was that the lower court was saying. Really that meant that Muldrow could proceed with her sex discrimination claim because she was able to at least make the argument that there was a disadvantage to her employment or that she was treated worse because of the result of this transfer. And so some takeaways for employers from this case, we always want to make sure that all of our employment decisions, whether it's transferring someone to another department or terminating someone, all of those need to be rooted in a legitimate business reason. And also it's a really good practice for our employment decisions like this to be reviewed by either HR or some kind of top level manager, not just be made unilaterally by an employee, supervisor or manager.

Yeah, I think that's really good advice. It's always legitimate business reason. I don't know how many times I've said that in my career, but legitimate reason related to the business, why we are doing this, not just, well, I just want a man in the role, Vanessa, and so I'm going to do that. So obviously an issue there. So great advice on that case and great takeaways. Let's close with another U.S. supreme Court decision that we got last week around a very hot topic as always. Arbitration. I know the U.S. supreme Court and the California courts have been engaging in a lot of arbitration issues over the past several years. This year, obviously, is no exception. So in this case, Smith vs. Sperrizi, the question centered on really what to do with a court case when it is removed to arbitration pursuant to an arbitration agreement. So in other words, we have an arbitration agreement, a plaintiff files suit and the employer says, whoa, whoa, whoa, we have an arbitration agreement, we need to go to arbitration. And so the case gets moved there. What do we do with that court case that was initially filed? Because the law says that it needs to be stayed, meaning nothing happens with that court case while the arbitration is going on. But what some district courts have been doing is dismissing the case altogether. And so the question is, can courts do that? Can they just dismiss the case altogether, or do they need to keep it going while the arbitration is going on? And what the US Supreme Court said is, yes, in fact, the courts need to keep that case going on even though it stayed and nothing's happening with it while the arbitration is pending. So, Vanessa, I know this is really a litigation specific case, but what kind of lessons can employers draw from this decision?

Well, employers should really understand that even if their case is moved to arbitration, that underlying court case is going to remain active, not be dismissed. So it's really important to understand that. And also, when anytime employers are using arbitration agreements, you want to make sure they're carefully drafted, you want to make sure that you've had counsel look at them, and you just really want to be aware of any of these procedural nuances to avoid unnecessary complications with your arbitration situation.

Well, Vanessa, I think this was a great rundown of the recent major court decisions, and I think you've given our listeners a lot of things to double check about our policies and procedures. So thank you very much for joining us today. Vanessa.

My pleasure.

And thank you listeners for joining this discussion on the workplace. Please comment, share and subscribe to Cal Chambers podcast by visiting calchamber. Com.