UPDATES FOR CALIFORNIA EMPLOYERS – AUGUST 2014

FAILURE TO ACCOMMODATE

In Salas v. Sierra Chemical Co., the plaintiff was an employee of Sierra Chemical who was not legally authorized to work in the United States when he was hired and had falsified eligibility documents to obtain employment.  Throughout the course of his employment with Sierra Chemical, plaintiff injured his back twice.  After his latest back injury, plaintiff and other employees were subject to a seasonal layoff, but were subsequently recalled to work.  Plaintiff’s supervisor asked him to bring in a doctor’s note indicating that he was released to return to work.  Plaintiff did not return with a doctor’s note, and instead, sued Sierra Chemical for alleged failure to accommodate a disability in violation of FEHA and for unlawful refusal to rehire him in retaliation.  Plaintiff sought lost wages, emotional distress damages, punitive damages, and attorneys’ fees.  The California Supreme Court held that plaintiff’s claims were not barred by the fact that he was not authorized to work in the United States and had falsified documents to obtain employment with Sierra Chemical.  The court held that the doctrines of after-acquired evidence and unclean hands may operate to reduce an employee’s damages and/or preclude reinstatement, but may only do so after the point of the employer’s discovery of the employee’s misconduct.  The doctrines do not preclude an employee from recovering lost wages for the time period after termination and prior to discovery of the employee’s misconduct.

COMMISSION CHECKS AND OVERTIME?

In Peabody v. Time Warner Cable, plaintiff was an account executive for Time Warner Cable who worked an average of 45 hours per week and earned salary plus commissions based on her monthly sales.  Plaintiff was classified as exempt from overtime under California’s commissioned salesperson exemption, which applies to a sales employee whose earnings exceed at least one and one-half times the minimum wage if more than half of those earnings represent commissions.  Time Warner Cable paid plaintiff’s salary biweekly, and paid her commissions monthly.  In pay periods that included a commission payment, Time Warner Cable paid plaintiff more than one and one-half times the minimum wage, and in those pay periods that did not include a commission payment, Time Warner Cable paid plaintiff less than one and one-half times the minimum wage.  Thus, at least one paycheck per month was comprised of only base hourly pay and did not reflect earnings exceeding more than one and one-half times the minimum wage.  However, the monthly commission check brought plaintiff’s wages for the month to more than one and one-half times the minimum wage.  Plaintiff sued, arguing that she was not properly paid overtime wages for hours worked in excess of 40 per week.  The California Supreme Court held that Time Warner Cable could only attribute commission wages to the pay period in which they were actually paid, and were not entitled to allocate commission wages over pay periods in which they were earned as a means to ensure that an employee’s pay was at least one and one-half times the minimum wage.  Accordingly, since Time Warner Cable had improperly paid plaintiff, she did not qualify for the commissioned salesperson exemption.

LIMIT EXPOSURE TO POTENTIAL CLASS ACTIONS

The California Supreme Court upheld class action waivers in employment arbitration agreements in Iskanian v. CLS Transportation Los Angeles, LLC.  The California Supreme Court reaffirmed that class action lawsuits are a procedural device that exist to make the resolution of certain claims more efficient, not a substantive right to which litigants are entitled.  Accordingly, class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act.  This ruling is significant because it establishes that the court’s 2007 holding in Gentry v. Superior Court is no longer good law.  Accordingly, California employers can now limit potential exposure to class actions by using arbitration agreements that include class action waivers.