United States: US Employment Litigation Round-Up - October 2015

A Review of Key Cases and New Laws Affecting Employers

Second Circuit Affirms NLRB's Decision That Facebook "Likes" Are Protected Activity

Decision: On October 21, 2015, in Triple Play v. NLRB, the Second Circuit Court of Appeal affirmed the finding by the National Labor Relations Board (NLRB) that the Facebook activity of two employees was Protected Concerted Activity (PCA) under the NLRA. The case arose when a former employee began a Facebook discussion by complaining that he owed additional state income taxes and commented: "Maybe someone should do the owners of Triple Play a favor and buy it from them. They can't even do the tax paperwork correctly!!! Now I OWE money ... Wtf!!!!" One current employee "liked" the comment and another added "I owe too. Such an asshole." Triple Play terminated both employees after learning about the posts.

In August 2014, the NLRB ruled that the terminations were unlawful because Triple Play had interfered with the employees' right to engage in PCA. The Board noted that, although the discussion included profanities, the statements were not sufficiently disloyal or disparaging to lose protection because they related to a dispute over taxes. In addition, the Board emphasized that clicking the "like" button to support a protected statement is also PCA.

Triple Play's primary argument on appeal was that, because the discussion included profanities and was visible to customers, the employees' activity was not protected. Siding with the NLRB, the Second Circuit held that the activity was a collective discussion about tax issues and the current employees' actions did not disparage Triple Play or undermine its reputation. The court emphasized that "[t]he board's decision that the Facebook activity at issue here did not lose the protection of the act, simply because it contained obscenities viewed by customers, accords with the reality of modern‐day social media use.... Almost all Facebook posts by employees have at least some potential to be viewed by customers."

Impact: In recent years, the NLRB has targeted employers whose actions and policies have a tendency to inhibit employees from using social media to engage in PCA. Triple Play and other recent NLRB decisions demonstrate that placing broad restrictions on social media is likely to run afoul of the NLRA. Therefore, employers should consult with counsel before implementing or revising a social media policy or taking any employment actions based on social media activity.

California Governor Vetoes Bill Prohibiting Mandatory Arbitration Agreements for Employees

Legislation: On October 13, 2015, California Governor Jerry Brown vetoed AB 465, a bill that would have prohibited employers from requiring their employees to sign arbitration agreements as a condition of employment. California would have been the first state to enact such an anti-arbitration measure.

In a letter accompanying his veto, Governor Brown said that he was unwilling to risk "years of costly litigation" over the blanket ban on mandatory arbitration agreements, when similar laws in other states have been consistently struck down under the Federal Arbitration Act (FAA). Brown noted that, while "there is significant debate" about the effectiveness and fairness of arbitration, California courts have already "addressed the issue of unfairness by insisting that employment arbitration agreements must include numerous protections to be enforceable," including the requirements articulated in Armendariz v. Foundation Health Psychcare Services, Inc.¸ 24 Cal. 4th 83 (2000): a neutral arbitrator, adequate discovery, no limitations on damages or remedies, a written decision by the arbitrator, judicial review, and limitations on the costs of the arbitration.

In closing, Brown noted that the US Supreme Court is currently considering two cases arising out of California courts that involve preemption of state arbitration policies under the FAA (DIRECTV, Inc. v. Imburgia and MHN Government Services, Inc. v. Zaborowski), and that he would "prefer to see the outcome of those cases" before signing a broad prohibition such as AB 465.

Impact: Employers should take this opportunity to review their arbitration agreements to ensure compliance with the requirements in Armendariz. In light of Governor Brown's comments about Imburgia and Zaborowski, reintroduction of a bill similar to AB 465 remains possible down the road.

California's New Equal Pay Law Could Be the Toughest in the Country

Legislation: On October 6, 2015, California Governor Jerry Brown signed into law a bill that, according to its supporters, contains the toughest equal pay protections in the country. The bill applies to public and private employers.

The bill amends Labor Code section 1197.5 in a number of ways. First, employers must pay female employees the same as their male counterparts who perform "substantially similar work," even if the male employees do not have the same title or work in the same office. Interpretations of the statute prior to the amendment, which protected equal pay for "equal work," required male and female workers to hold exactly the same job to mandate equal pay.

In addition, the amendment requires an employer to affirmatively demonstrate that any wage differential between male and female employees is based on one or more bona fide factors, such as seniority, merit or quantity or quality of production. The employer must also demonstrate that each factor relied upon is applied reasonably, and that the factors account for the entire differential. Employers also may not prohibit their employees from discussing wages, and the law prohibits retaliation against employees who invoke or assist in any manner the enforcement of the act, authorizing civil actions by such employees for reinstatement and for lost wages. The law can be enforced by private rights of action and by the state Division of Labor Standards Enforcement, which can request lost wages on the employee's behalf and institute a civil action if the employer refuses to pay.

Impact: Supporters of the Fair Pay Act say that it offers the strongest protection of any comparable law in the country and that it will do the most to close the wage gap between male and female employees. Critics fear that it will make it even more difficult for businesses to compete in California, causing them to flee the state. Whatever its effect, businesses can expect more equal pay lawsuits after the Fair Pay Act takes effect on January 1, 2016.

California's Revised PAGA Statute Provides Way for Companies to Avoid Penalties Arising from Wage Statement Violations

Legislation: On October 2, 2015, California Governor Jerry Brown singed into law AB 1506, a bill that allows employers to resolve technical violations of California's itemized wage statement requirements (Labor Code section 226(a)) and avoid the risk of costly Private Attorney General Act (PAGA) suits. (PAGA "deputizes" aggrieved employees to recover civil penalties for Labor Code violations as a proxy of the state's labor law enforcement agencies.) Since a 2013 revision to Labor Code section 226(a) made it easier to show injury for paystub violations, PAGA claims predicated on violations of section 226(a) have been pursued more aggressively by employees. Such claims expose employers to stiff penalties (generally $200 per employee per pay period) and attorneys' fees.

The amendment provides employers 33 days after receiving notice of an employee's anticipated PAGA claims (which is required under PAGA) to cure the underlying Labor Code violations. If the employer provides notice of having cured, the employee may not file suit under PAGA. "Cure" requires not only that the employer be brought into compliance with the underlying statute(s), but also that the employer makes whole each aggrieved employee.

There are additional cure requirements when the violations alleged are of two of section 226(a)'s requirements that are hyper-technical in nature: (i) the inclusive dates of the period for which the employee is being paid and (ii) the name and address of the legal entity that is the employer. In order to cure those alleged violations, the employer must provide compliant, itemized wage statements to each aggrieved employee for each pay period for the three-year period prior to the date of the written notice. No employer may avail itself of the notice and cure provisions "more than three times in a 12-month period for the same violation or violations contained in the notice, regardless of the location of the worksite."

Impact: The amendment to the PAGA statute may provide some much needed relief to certain employers, particularly in those cases where the only alleged violations are of section 226(a)'s very technical requirements (i.e., not related to alleged underpayment of wages). It is also possible that, in instances when such technical violations are at issue, the amendment itself will discourage class action plaintiffs' attorneys from initiating PAGA claims to begin with. Nevertheless, employers should be weary of relying on the "cure" procedures to address violations, as carrying out the cure requirements may in and of itself be costly.

Originally published October 30, 2015

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