United States: US Employment Litigation Round-Up for April 2014: A Review of Key Cases and New Laws Affecting Employers

Keywords: PAGA actions, EEOC, FTC, background checks, Pre-Suit Investigation,

Defendants Face New Hurdles in Removing PAGA Actions to Federal Court

Decision: A recent decision by the US Court of Appeals for the Ninth Circuit has made it harder for employers targeted by lawsuits under the California Labor Code's Private Attorneys General Act of 2004, Cal. Labor Code § 2698, et seq. (PAGA), to remove the cases to federal court. In Baumann v. Chase Investment Services Corporation, a financial adviser filed a representative action under PAGA in California state court on behalf of himself and other "aggrieved" financial advisers, alleging various wage and hour violations. The complaint sought statutory penalties for each alleged violation but did not invoke the California class action statute.

In response to the defendant-bank's removal of the action to federal district court, the plaintiff sought to remand the case back to state court for lack of federal jurisdiction. The district court denied the plaintiff's motion, holding that the court had federal jurisdiction, inter alia, under the Class Action Fairness Act of 2005 (CAFA).

The Ninth Circuit disagreed, holding that representative actions under PAGA are "not sufficiently similar to [class actions under] Rule 23 to establish the original jurisdiction of a federal court under CAFA." The court noted that, unlike Rule 23, PAGA does not require unnamed aggrieved employees to receive notice of the lawsuit or permit such employees to opt out of the PAGA action. In addition, PAGA actions need not satisfy the "critical requirements" of Rule 23: numerosity, commonality, typicality or the existence of an adequate class representative. The court further focused on the fact that PAGA judgments do not have the same binding and preclusive effects as Rule 23 class action judgments; the aggrieved employees retain all rights to "pursue or recover other remedies available under state or federal law, either separately or concurrently with" the PAGA action.

Impact: As a result of this decision—and the Ninth Circuit's earlier decision in Urbano v. Orkin Services of California, Inc., in which it concluded that the $75,000 amount-in-controversy requirement for diversity jurisdiction could not be satisfied by aggregating the requested civil penalties under PAGA—employers are likely to encounter more difficulties when seeking to remove PAGA actions to federal court, unless those actions are also pled as class actions.


EEOC and FTC Issue Joint Guidance on Employer Use of Background Checks

Decision: The Equal Employment Opportunity Commission (EEOC) and the Federal Trade Commission (FTC) have jointly issued guidance explaining how anti-employment discrimination laws and the Fair Credit Reporting Act (FCRA) interact with respect to background checks performed for employment purposes.

The guidance reminds companies that, in addition to complying with the FCRA requirements related to background checks, employers that perform background checks should seek the same information and apply the same standards to all individuals, taking care when basing decisions on background information that may be more common among people with a particular protected characteristic. Also, if a background check policy disproportionately affects members of a protected group, the policy must be job-related and consistent with business necessity. The agencies also warned that employers should be prepared to make exceptions for problems revealed during a background check that were caused by a disability, at least allowing the individual to demonstrate his or her ability to do the job unless doing so would cause significant financial or operational difficulties.

Impact: This guidance marks the first time that the EEOC and the FTC have jointly addressed the issue of employer use of background checks. It serves as an important signal that both enforcement agencies are stepping up their scrutiny of employer practices in this area. Employers should periodically review their background check policies and practices to ensure that they comply with the FCRA, anti-discrimination laws and this new guidance.


EEOC's Failure to Adequately Fulfill Pre-Suit Investigation Obligations Leads to Dismissal

Decision: A federal judge in New York recently dismissed the EEOC's claims that Sterling Jewelers Inc., the parent company of Kay Jewelers, Jared and other retail jewelry stores, engaged in a nationwidepattern or practice of discriminating against female employees. In EEOC v. Sterling Jewelers Inc., the court adopted a magistrate judge's recommendation that partial summary judgment be awarded to Sterling because the EEOC's pre-suit investigation of the alleged policy was not national in scope. The magistrate's report and recommendation rejected the EEOC's contention that its investigation was not judicially reviewable, finding that, while courts may not be entitled to review the adequacy of the agency's investigation, they can determine whether an investigation actually occurred and whether the scope of that investigation encompassed the conduct forming the lawsuit's basis. In this case, the evidence indicated that the EEOC's lead investigator looked into stores in only two states.

Impact: This case is another in a series of cases dismissing EEOC claims because of the agency's failure to fulfill its pre-suit obligations. (For example, the Eighth Circuit Court of Appeals affirmed dismissal of the agency's sexual harassment claims in EEOC v. CRST Van Expedited Inc. because the agency had not properly investigated or conciliated the claims before filing suit.) The court's ruling in the Sterling Jewelers case demonstrates yet again that the EEOC's pre-suit investigation must match the scope of the allegations it raises when it actually files a lawsuit. Therefore, employers facing such lawsuits should attempt to get as much information as possible about the EEOC's investigation in order to determine if the agency fulfilled its pre-filing obligations.


Seventh Circuit Affirms Dismissal of Donning and Doffing Suit

Decision: In Mitchell v. JCG Industries and Koch Foods,the US Court of Appeals for the Seventh Circuit affirmed a district court's dismissal of a class action lawsuit brought by workers in a poultry processing plant alleging they were not compensated for time spent donning and doffing protective and sanitary clothing at the start and end of their meal periods, in violation of the Fair Labor Standards Act (FLSA) and Illinois minimum wage law.The FLSA has an important exception to its donning and doffing requirements. Section 203(o) of the statute excludes from compensable time "any time spent in changing clothes at the beginning or end of each workday which was excluded from measured working time ... under a bona fide collective bargaining agreement." Despite the existence of just such a collective bargaining agreement in Mitchell, the plaintiffs argued that Section 203(o) was inapplicable because the time spent donning and doffing before and after meal periods does not take place "at the beginning or end of each workday." The Court of Appeals disagreed, reasoning that "workers given a half-hour lunch or other meal break from work are in effect working two four-hour workdays in an eight-and-a-half-hour period."

The court also provided two alternative grounds for its holding: (i) time spent donning and doffing is part of the employees' uncompensated bona fide meal period, and the plaintiffs did not assert that the workers had not received a bona fide meal period and (ii) time spent donning and doffing was de minimis and undeserving of a remedy. In concluding that the time was de minimis, the Seventh Circuit conducted an in-chambers videotaped and timed experiment: three members of the court's staff changed in and out of the gear that the plaintiff employees were required to wear. The court concluded that the average time spent donning and doffing during the meal break was significantly less than the 10-15 minutes plaintiff contended. While acknowledging that the experiment was not "evidence," the court concluded that the findings nevertheless supported itsconclusion.

Impact: While this case was a victory for employers, it may not be one on which employers can rely in defending donning and doffing cases. The dissent charged the majority with "ignoring" the Department of Labor's "continuous workday" rule, and other courts may not be willing to interpret "workday" to be divisible into two four-hour workdays as the Seven Circuit did. The DOL defines "workday" as including all time within the period between commencement and completion on the same workday of an employee's principal activities, whether or not the employee engages in work throughout all of that period. Accordingly, Mitchell's impact may not be what employers would hope for.

Learn more about our Employment Litigation & Counseling practice.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2014. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.