Employees Lose Labor Claim for Not Performing Labor Within Usual Course of Business

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Employees Lose Labor Code § 2810.3 Claim Where They Were Not Performing Labor Within The “Usual Course Of Business” Of The “Client Employer”

Morales-Garcia v. Better Produce, Inc., 2023 WL 3749314 (9th Cir. 2023)

In 2014, California enacted Labor Code § 2810.3 to protect workers whose labor has been outsourced to a labor provider. Under the statute, the outsourcing entity, known as a “client employer,” is liable for the laborers’ wages if the laborers’ work is within the outsourcers’ “usual course of business.”

In the present case, the plaintiffs are agricultural workers hired by strawberry growers (“the Growers”) to pick the fruit that was then turned over to the defendants – Red Blossom Sales, Inc. and Better Produce, Inc. (“the Marketers”) for distribution. The Marketers cooled and sold the berries principally to large retail grocery chains. The Marketers conducted their cooling and distribution operations on premises that were close to but separate from the farms.

As happens quite frequently with agricultural workers (and, hence, the need for Labor Code § 2810.3) the Growers stopped paying the plaintiffs and later filed for bankruptcy. The plaintiffs sued the Growers and the Marketers as joint employers under California and federal law. The plaintiffs also sued the Marketers as client employers under California Labor Code § 2810.3. The district court ruled for the Marketers on all theories. The plaintiffs appealed only with respect to the Marketers’ liability under § 2810.3.

On appeal, the Ninth Circuit affirmed, explaining that because the plaintiffs were not performing labor within the Marketers’ “usual course of business” – which is defined as “the regular and customary work of a business, performed within or upon the premises or worksite of the client employer Labor Code § 2810.3(a)(6) – the Marketers were not liable as client employers under California Labor Code § 2810.3.

Over Lawyering Renders Arbitration Agreement Unenforceable

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Arbitration Agreement’s Impermissible Waiver Of Employee’s PAGA Claims Invalidated The Entire Agreement Under Its Unambiguous “Savings Clause And Conformity Clause” – Over Lawyering Renders Arbitration Agreement Unenforceable

Westmoreland v. Kindercare Education LLC, 90 Cal.App.5th 967 (2023)

Rochelle Westmoreland was employed by Kindercare Education LLC. As a condition of employment, when Westmoreland was hired, Westmoreland electronically signed a “Mutual Arbitration Agreement Regarding Wages and Hours.” Although the agreement expressly excludes any claims that cannot be required to be arbitrated as a matter of law, it also contains a provision described as a “Waiver of Class and Collective Claims” providing that covered claims will be arbitrated only on an individual basis and that the arbitrator may not adjudicate form of a class, collective, or representative claims. Complicating matters further, the arbitration agreement also contains a so-called “Savings Clause & Conformity Clause” requiring that if any provision of the agreement is determined to be unenforceable or in conflict with a mandatory provision of applicable law, it shall be construed to incorporate the mandatory provision of law, and/or the unenforceable or conflicting provision shall be automatically severed and the remainder of the agreement shall not be affected unless the Waiver of Class and Collective Claims is found to be unenforceable in which case the entire agreement is rendered invalid and any claim brought on a class, collective, or representative action basis must be filed in court of competent jurisdiction. This “Savings Clause & Conformity Clause” is referred to as the “Poison Pill.”

When Westmoreland was fired, she filed a representation action under PAGA. Kindercare moved to compel arbitration of Westmoreland’s individual non-PAGA claims and to stay her PAGA claim. The trial court granted the motion. Westmoreland sought a writ of mandate. The Court of Appeal held that the unenforceable PAGA waiver was not severable from the rest of the agreement and, therefore, it rendered the entire agreement unenforceable. The California Supreme Court and then the United States Supreme Court rejected Kindercare’s subsequent petitions for review and for certiorari.

Kindercare filed a renewed motion to compel arbitration and then, following Viking River, argued that Viking River compelled a finding that Westmoreland’s PAGA claims must be divided: the “individual” PAGA claim sent to arbitration and the “representative” PAGA claim pursued in court. The Court of Appeal would have agreed but for Kindercare’s Poison Pill:

Had Kindercare simply included a waiver of representative claims in its arbitration agreement and not included the poison pill at the end of the agreement, the result here could have been substantially similar to that in Viking River – the PAGA claims could be divided: the “individual” PAGA claim sent to arbitration and the “representative” PAGA claim pursued in court.
Ironically, the language and structure of Kindercare’s arbitration agreement necessitates a result similar to the “claim joinder” rule in PAGA that Viking River deemed problematic when imposed by state law. The poison pill effectively prevents us from sending Westmoreland’s “individual” claims under PAGA (representing the State of California but pursuing “individual” remedies based on the plaintiff’s status as a former employee) to arbitration while allowing litigation in court of her “representative” claims under PAGA, which involve the rights of other “aggrieved employees.”
The arbitration agreement, in this case, sought to address the uncertainty in the law in 2016 concerning the waiver of representative claims under PAGA by using the poison pill provision to prevent litigation on parallel tracks if it ever became clear that even one of Westmoreland’s potential class or representative claims could not be waived and would have to be pursued in court. The provision is unambiguous and “presents an all-or-nothing proposition.” The provision leaves no room for Kindercare to choose to bifurcate Westmoreland’s claims between arbitration and court; it instead invalidates the agreement.
In sum, having exercised our discretion to hear Kindercare’s appeal as a writ of mandate, we conclude that the arbitration agreement is invalid by operation of the unambiguous “Savings Clause and Conformity Clause.” As a consequence of Kindercare’s drafting decisions, and absent further stipulation between the parties, the arbitration agreement is “invalid” and so Kindercare must litigate all of Westmoreland’s claims in court.

Individual But Not Representative Claims Compelled To Arbitration

In-N-Out Burgers

Piplack v. In-N-Out Burgers, 88 Cal.App.5th 1281 (2023)

Former employees of In-N-Out Burgers, on their own behalf and on behalf of similarly aggrieved employees, brought an action against In-N-Out Burgers seeking civil penalties under the Labor Code Private Attorneys General Act for In-N-Out Burgers’s alleged practices of requiring employees, without reimbursement, to purchase and wear certain articles of clothing and to purchase and use special cleaning products to maintain the clothes. In reliance on Viking River Cruises, Inc. v. Moriana, ––– U.S. ––––, 142 S.Ct. 1906 (2022), In-N-Out Burgers filed a motion to compel arbitration, arguing that Viking River requires plaintiffs’ individual PAGA claims to be arbitrated and all remaining representative claims dismissed for lack of standing. The trial court summarily denied In-N-Out Burgers’ motion to compel arbitration. In-N-Out Burgers appealed.

The Court of Appeal concluded that the arbitration agreements required individual PAGA claims to be arbitrated and that In-N-Out Burgers did not waive its right to compel arbitration through its litigation conduct. The Court of Appeal also held that Viking River’s requirement that the plaintiff’s individual claims under PAGA be compelled to arbitration did not necessarily deprive the plaintiff of standing to pursue representative claims as an aggrieved employee.

Jury Could Find Termination Substantially Motivated by Disability

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Although Employer Had Tentatively Placed Employee RIF List Before Becoming Aware of Her Disability, It Did Not Terminate Her Employment Until After It Was Aware Of Her Disability – A Reasonable Jury Could Find That Employee’s Ultimate Termination Was Substantially Motivated By Her Disability

Lin v. Kaiser Found. Hosps., 88 Cal.App.5th 712 (2023)

Suchin I. Lin was employed by Kaiser as an IT Engineer. Lin became disabled as a result of a fall in the workplace which caused her to suffer an injury to her left shoulder. A doctor issued a work status report placing Lin on modified duty with restrictions requiring Lin to use a sling and to limit the use of her left arm. The doctor also indicated that surgery might be necessary. As part of a round of employee layoffs Kaiser planned, at least tentatively, to terminate Lin before Lin became disabled. Following her disability, Kaiser went forward with her layoff. Lin sued for disability discrimination. Kaiser filed a motion for summary judgment, arguing that it was entitled to summary adjudication of Lin’s disability discrimination and retaliation claims because the decision-maker had made the decision to eliminate Lin’s position in a RIF before Lin sustained her disability. Lin opposed the motion arguing that, while her name was selected for the initial RIF list prior to her disability, this “proposed” list was “subject to further review,” as reflected in the list’s gradual reduction from 31 employees to the 17 who were ultimately laid off. She further argued that her ultimate termination was a result of the decision-maker’s reliance on her supervisor’s post-disability assessment of her, particularly a post-disability email to the decision-maker rating her performance much lower than that of her teammates. The trial court granted Kaiser’s motion.

On appeal, the Court of Appeal reversed. The Court of Appeal held that Kaiser’s plan to terminate Lin before she became disabled, by itself, was (of course) not discrimination against Lin because of her disability. But Kaiser did not complete its layoff plans—or, a reasonable jury could find, make its final determination to terminate Lin—until after Lin had become disabled. The Court of Appeal found that there was evidence from which a reasonable jury could conclude that Kaiser’s ultimate decision to terminate Lin was motivated, at least in substantial part, by concerns Kaiser had about Lin’s disability. The Court of Appeal found the following facts important in its decision:

  • Before Lin sustained her disability, neither her then-current supervisor nor any prior supervisor had given her a negative performance evaluation.
  • After Lin sustained her disability, her then-current supervisor began giving her negative feedback and a poor performance evaluation.
  • Lin’s then-current supervisor’s criticisms, in large part, revolved around his concerns about her “slow delivery” and her “pace of execution” – concerns that a jury could find stemmed directly from her disability.

Lin’s then-current supervisor agreed to Lin’s request for light-duty work as a form of accommodation for her disability (but he never actually provided her with light-duty work). His agreement to assign Lin lighter tasks supported a reasonable inference that he believed her disability prevented her from handling her usual workload.

Employee Loses Pregnancy Discrimination Claim Failed to Prove Related Condition

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Employee Loses Pregnancy Discrimination Claim Because She Failed To Carry Her Burden Of Proving That She Had A Condition Related To Pregnancy; Could Perform The Essential Functions Of The Job; And Was Denied A Reasonable Accommodation – The Moral Of This Case Is To Never, Ever Use Kaiser As Your Physician

Lopez v. La Casa de Las Madres, 89 Cal.App.5th 365 (2023)

Gabriela Lopez was employed by La Casa De Las Madres, a non-profit organization that provides services to women and children who are victims of domestic violence. In April, Lopez notified La Casa that she was pregnant and that her expected due date was in September. She was placed on modified work duty a few months before her due date, and several weeks before her due date, she was placed off work due to conditions or symptoms relating to her pregnancy.

After giving birth, Lopez experienced complications and her doctor (Kaiser) informed La Casa that Lopez had a “moderate-severe” disability that affected her ability to perform her job by limiting her from engaging in activities that are “stress producing or require sustained attention,” and those that “require the making of important or significant decisions.” Kaiser stated that this disability necessitated two modifications to Lopez’s work duties: (1) time off to allow Lopez to continue mental health treatment, both groups and individual therapy; and (2) flexible/shortened workdays if the patient finds the nature of the work or stress of the work overwhelming and triggering of severe anxiety/depressive symptoms. On a section of the form inquiring how long these limitations would be necessary, Kaiser stated, “It is unknown,” and when asked to provide a phone number for follow-up questions, Kaiser stated, “NA, patient had to sign Kaiser release of information and completing this form was the only authorized action.”

La Casa made a determination that it could not accommodate the limitations that Campion proposed. It could provide time off for therapy but could not function indefinitely without a shelter manager. Nor could that job be performed without making significant decisions and facing stressful situations at unpredictable times.

La Casa notified Lopez that it was unable to accommodate the limitations proposed by Kaiser. Instead, La Casa offered to extend Lopez’s leave for a short time longer and, upon her return to work, to assign her to a “Data Entry Specialist position,” which had flexible hours and did not involve stressful tasks. The position paid an hourly wage, which was less pay than Lopez received as a shelter manager, but Lopez was offered higher pay than others who had filled the position. This data-entry position was offered as a “temporary accommodation,” with the expectation that Lopez would return to her shelter management role.

Lopez advised La Casa she was not interested in the data-entry position and that she was able to return to her role as a shelter manager. Lopez submitted another health care provider form, signed by Kaiser. This partially completed form contained the following statement: “Advised by patient to just complete modification section for employer.” In answer to a question about proposed modifications, Kaiser stated, “Modifications recommended include time off to continue individual therapy sessions and group therapy.” Kaiser reported that it was “unknown” how long modifications would be necessary.

La Casa advised Lopez that the form was incomplete and asked Lopez to submit a complete, updated form. Lopez submitted another form from Kaiser, which stated that it had not seen Lopez in a month because Lopez’s insurance had lapsed. Therefore, Kaiser was unable to assess the severity of Lopez’s disability, whether Lopez was able to perform job duties or the duration of any job limitations. After Lopez submitted this form, she did not respond to further repeated inquiries from La Casa.

A week or so later, La Casa sent a letter to Lopez stating that La Casa considered Lopez to have “elected to discontinue her employment.” That same day, Lopez went to La Casa’s administrative office to talk to the Executive Director without an appointment, but the ED was not there. La Casa introduced evidence that Lopez was angry, threw her keys on an employee’s desk, and stormed away, at which point La Casa considered her to be a former employee. Lopez testified that she left her keys with the employee because she thought she had been terminated, but she acknowledged that La Casa never asked her to turn in her keys. Regardless, the evidence showed that Lopez never stated that she resigned or submitted a written resignation, and no one at La Casa told Lopez she was terminated.

Lopez sued for a pregnancy discrimination claim under section 12945, subdivision (a)(3)(A). Following the bench trial, the trial court found that Lopez failed to establish three elements essential to this claim: that she (1) “had a condition related to pregnancy”; (2) “could perform the essential functions of her job”; and (3) “was denied a reasonable accommodation,” as requested on the advice of a health-care provider.

There was evidence that after Lopez had her baby and exhausted her pregnancy-disability leave, she sought an extension of her leave, but the basis for that extension was not established at trial. No medical professional testified, no medical records were offered into evidence, and Lopez “repeatedly objected” to evidence regarding the “medical condition” that formed the basis of her claim.

Regarding the first finding, there was evidence that after Lopez had her baby and exhausted her pregnancy-disability leave, she sought an extension of her leave, but the basis for that extension was not established at trial. No medical professional testified, no medical records were offered into evidence, and Lopez “repeatedly objected” to evidence regarding the “medical condition” that formed the basis of her claim. The forms Kaiser signed did not contain a diagnosis and, although they assert a mental-health-related disability, do not so much mention pregnancy. La Case put on evidence that it was unaware of the reason Lopez sought to extend her leave. Lopez testified that after her daughter was born, she felt sad and depressed, attended therapy, and was given medication, which, the court found, suggested that Lopez may have had post-partum depression, but Lopez was impeached with evidence that she was depressed and experiencing stress before her pregnancy leave began. For all of these reasons, the court concluded that Lopez failed to establish that the condition for which she sought accommodation was pregnancy related.

Even assuming that La Casa “inferred” Lopez was suffering from pregnancy-related depression, Lopez failed to establish that “she could perform the essential functions of her job with a reasonable accommodation,” the court found. The court based this finding on evidence that Kaiser had “advised against activities that produced stress and that required making important decisions” and that the shelter-manager job “was inherently stressful and required quick decisions that sometimes meant the difference between life and death.” In reaching this conclusion, the court found that Lopez’s testimony that she did not find the duties of the shelter manager to be stressful was not credible.

Finally, the court found that Lopez failed to prove that she was denied a reasonable accommodation. The court found that La Casa would have allowed Lopez time off to attend therapy and that a “flexible or shortened workday” if Lopez found her work stressful was not a reasonable accommodation. The court based this ruling on evidence that La Casa had discussed options that would have enabled them to accommodate this second suggestion of Kaiser’s, including hiring a “shadow’ shelter manager” to step in if Lopez had to leave work due to stress or anxiety. La Casa had concluded this solution was “unworkable” for multiple reasons, including the cost of paying two people to do the same job and the confusion for staff of having two managers. La Casa was also concerned that effective communication would be critical for a shadow manager to succeed, and Lopez had a documented history of poor communication with her immediate supervisor, Ms. Bergson. During the period Lopez was on leave, Bergson had assumed many of Lopez’s duties with assistance from others, but that accommodation could not be sustained indefinitely, the court found.

The court also based its ruling on evidence that La Casa offered Lopez the temporary assignment of a data-entry position, which the court found was a reasonable accommodation, and that Lopez told La Casa she would rather quit than take that position. The court also found no evidence of a discriminatory motive by La Casa, but rather that “La Casa expected Ms. Lopez to return to her job as a shelter manager and made numerous efforts to effect that result.”

Lopez appealed, arguing that the trial court committed an error of law by placing the burden on Lopez to prove that (1) she had a condition related to pregnancy and (2) she could otherwise perform the essential functions of the shelter-manager position. According to Lopez, these two elements do not apply to a claim for pregnancy discrimination that is premised on a violation of section 12945(a)(3)(A). The Court of Appeal rejected these arguments holding: “we find no support for Lopez’s construction of section 12945(a)(3)(A) in the statutory language, FEHC regulations or pertinent case law, and accordingly we reject her contention that the test the trial court used to evaluate her pregnancy discrimination claim requires us to reverse the judgment.”