United States: US Employment Litigation Round-Up For August 2018

Decision: On August 15, 2018, a unanimous panel of the Sixth Circuit held in Goffers v. Kelly Services, Inc. that the Fair Labor Standards Act ("FLSA") does not prohibit employers from requiring employees to execute arbitration agreements with class or collective action waivers. A former employee had filed an FLSA collective action against his former employer, Kelly Services, alleging that the company had failed to pay its call center workers for the time they spent logging into and out of the company's computer network. After the district court conditionally certified a class and more than 1,600 employees opted into the lawsuit, Kelly Services moved to compel individual arbitration of the claims of approximately 800 of the employees who had signed individual arbitration agreements.

The Sixth Circuit upheld Kelly Services' arbitration agreements, rejecting challenges to the class waiver in those agreements made under the National Labor Relations Act ("NLRA") and the FLSA. The court explained that the Supreme Court's recent decision in Epic Systems Corporation v. Lewis, 584 U.S. __ (2018) foreclosed the argument based on the NLRA. In Epic, the Supreme Court held that class and collective actions are not "protected concerted activities" under the NLRA and that agreements to arbitrate on an individual basis are generally protected by the Federal Arbitration Act ("FAA"). The Sixth Circuit also held that there is no inherent conflict between the FLSA and the FAA because the FLSA does not include language demonstrating a "clear and manifest" congressional intent to preclude the enforcement of individual arbitration agreements. The court pointed out that agreements to arbitrate individually (and thereby waive the use of class and collective actions) are voluntary: "[E]mployees who do not sign individual arbitration agreements are free to sue collectively, and those who sign individual arbitration agreements are not."

Impact: The Goffers decision joins other federal courts of appeal in holding that claims under the FLSA are subject to agreements to arbitrate on an individual basis. Goffers follows a long line of Supreme Court precedent consistently holding that federal statutes cannot be interpreted to prohibit arbitration agreements—including agreements with class waivers—unless the statute reflects a "clear and manifest" congressional intent to preclude arbitration. That said, arbitration agreements remain subject to potential challenges under generally applicable state law rules (such as unconscionability) reaching the manner in which employees agree to arbitration and the fairness of arbitration procedures.

Ninth Circuit: Settlement of State Law Wage-and-Hour Class Action Claims Precludes FLSA Collective Action Claims Predicated on Same Facts

Decision: On August 16, 2018, the Ninth Circuit in Rangel v. PLS Check Cashers of California held that a settlement of class claims in an opt-out class action asserting only state law wage-and-hour claims also released the plaintiff's FLSA claims arising from the same allegations on which her state claims were predicated. Prior to Rangel, in early 2015, three employees had filed a wage-and-hour class action lawsuit under California law against PLS Check Cashers. The complaint in that case did not assert federal claims or mention the FLSA. The parties reached a final settlement of that action in April 2015—the so-called Dieguez settlement—that covered all class members who did not timely opt out of the settlement. The settlement included a broad release that encompassed "all claims that were or could have been pled based on the factual allegations in the Complaint."

In August 2016, Rangel, a PLS worker who was covered by the Dieguez settlement, filed a putative collective action asserting FLSA-based wage-and-hour claims against PLS. The district court dismissed the case on res judicata grounds, finding that the Dieguez settlement had resulted in a final judgment on the merits of Rangel's wage claims. The Ninth Circuit affirmed, holding that "Rangel's FLSA claims, which were direct federal law counterparts to the state law claims settled in Dieguez, easily qualify" as having been settled by the release in the Dieguez settlement. The court rejected Rangel's assertion that her FLSA claims could not have been pled in the original state action because the action was opt-out only and therefore inconsistent with the FLSA's opt-in mechanism, explaining that the broad language in the release did "not limit itself to those claims that class members were functionally capable of bringing in Dieguez itself."

Impact: The Ninth Circuit's decision rests in large part on the broad language in the Dieguez settlement release—which encompassed all claims that "could have been pled based on the factual allegations in the Complaint." The holding thus reinforces the importance of carefully crafting release language in all settlements, including class action settlements, and provides guidance on what language to include in such releases to preclude future claims.

Sixth Circuit: Full-Time Presence at Work Is Not an "Essential Job Function" Under the ADA

Decision: The Sixth Circuit recently held that an employee's full-time presence at work, in and of itself, is not an "essential function" of a job under the Americans with Disabilities Act (ADA). The plaintiff, in Hostettler v. College of Wooster, was a full-time employee who took maternity leave and then asked to return to work on a part-time basis due to severe postpartum depression and separation anxiety. The employer acquiesced but then fired the plaintiff two months later after she asked to extend her part-time schedule, claiming that the position required a full-time employee. The plaintiff sued, alleging violations of the ADA (among other claims). The district court granted summary judgment in the employer's favor, ruling that the plaintiff could not demonstrate she was able to perform the "essential functions" of her job, as required for an ADA discrimination claim, because full-time work was an essential function of her position.

The Sixth Circuit reversed, holding that "[o]n its own, . . . full-time presence at work is not an essential job function." It can only qualify as an essential job function if full-time presence is tied "to some other job requirement," such as the necessity to be consistently present at the job site for the employee to perform his or her duties. The Sixth Circuit reasoned that if full-time presence at work were "an essential function of a job simply because an employer says that it is," then the purpose of the ADA would be defeated, as employers could refuse to allow employees to attend doctor's appointments or make other accommodations that resulted in employees being present at work fewer than 40 hours per week. The plaintiff had provided evidence that she was able to perform her job duties even though she was in the office on a part-time basis, so there was a question of fact whether she could perform her duties on a modified schedule, making summary judgment inappropriate.

Impact: Hostettler affirms that employers must be reasonable about "at work" hours when considering employees' requests for disability or medical condition accommodations. If employers refuse to allow reduced work hours or alternative work schedules to accommodate disabilities, they should be able to explain why reduced or alternative schedules would significantly impair their workplaces. This decision likely will have its biggest impact at workplaces where jobs can arguably be performed off-site or outside of regular work hours—such as jobs that do not require in-person interaction with other employees—but less of an impact where jobs require presence at the workplace at specific times, such as construction, service industry and many managerial positions.

California Enacts Two New Laws Regarding Salary Inquiries and Sexual Harassment

Amendment to the California Fair Pay Act: Assembly Bill (AB) 2282, which was recently enacted, amends the California Fair Pay Act to provide clarity regarding the scope of the law. California's Fair Pay Act, which took effect on January 1, 2018, prohibits employers from asking job applicants for "salary history information" and relying on such information as a factor in making employment offers and requires employers to provide applicants with the "pay scale" for the position applied for upon "reasonable request."

The amendment clarifies that employers are not prohibited from asking applicants their salary expectations for the position being applied for. It also defines three terms used in the Fair Pay Act that had initially been undefined—"applicant," "reasonable request" and "pay scale"—thereby clarifying the scope of employers' obligations. "Applicant" is defined as "an individual who is seeking employment with the employer and is not currently employed with that employer in any capacity or position." A "reasonable request" for pay scale information by an applicant is defined as "a request made after an applicant has completed an initial interview with the employer." And "pay scale" is defined as a "salary or hourly wage range," which means that employers are not required to provide bonus or equity information.

Amendment to California Defamation Law for Sexual Harassment Communications: Another California bill, AB2770, increases protections for statements made in connection with sexual harassment allegations effective January 1, 2019. It amends California Civil Code section 47(c) to immunize three categories of employment-related communications related to sexual harassment if they are made "without malice": (1) complaints of sexual harassment by an employee to an employer based on "credible evidence," (2) communications between an employer and "interested persons" regarding sexual harassment complaints and (3) communications by a current or former employer in response to an inquiry indicating whether the current or former employer would rehire the employee and whether a decision not to rehire is based on a determination that the employee engaged in sexual harassment.

AB 2770 is the latest in a growing trend of recent state legislation aimed at eliminating sexual harassment in the workplace and increasing accountability and transparency with respect to those claims. While the law gives employers additional leeway in communications relating to sexual harassment, employers must still be cautious about what they say and to whom they say it since immunity is only granted to statements made "without malice." Employees, of course, can still claim that the communication was "malicious" because it was motivated by hatred or ill will or not reasonably believable.

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