An Employee’s Exempt Status May Be Determined by Reference to Other Workweeks

In Batze v. Safeway, Inc. (May 3, 2017) 10 Cal. App. 5th 440, the Court of Appeal held that although the determination of exempt or nonexempt status should be made on weekly basis, a jury may extrapolate evidence from weeks in which evidence is available to make inferences regarding weeks in which evidence is not available.

Plaintiffs were grocery store assistant managers. They brought individual claims for unpaid overtime against Safeway after the court denied class certification. Plaintiffs claimed that they were misclassified as exempt employees because a majority of their time was not spent on managerial duties. The trial court found in favor of defendants, finding that plaintiffs spent over fifty percent of their time performing managerial tasks, and met all other qualifications for exempt status. Plaintiffs appealed on the grounds that because (1) defendants bore the burden of proof, and (2) because the ratio of nonexempt to exempt activities must be determined on weekly basis, no inferences could be made regarding weeks in which defendants produced no evidence, the trial court’s decision was incorrect.

The California Court of Appeal affirmed. It found that substantial evidence supported the trial court’s decision. Although an employee’s exempt or nonexempt status may vary each week, the trier of fact can make reasonable inferences about an employee’s activities in earlier or later periods, particularly when an employee’s duties have not changed significantly over time. Defendants produced sufficient evidence to enable the trial court to make reasonable inferences about those periods during which evidence was not available.

The practical implication is that an employer’s best practices are to have weekly evidence of an employee’s activities. When impracticable, a factfinder could make reasonable inferences to fill in the evidentiary gaps.

Court of Appeal Reaffirms PAGA Claims Are Not Subject to Binding Arbitration

Roberto Betancourt sued Prudential, alleging a single cause of action under the Private Attorney Generals Act (Labor Code 2698 et seq.), in which he sought civil penalties on behalf of himself and other aggrieved Prudential employees for failure to pay overtime, failure to provide meal and rest periods, failure to pay minimum wage, failure to reimburse business expenses, and other claims. Prudential moved to compel arbitration under a 2006 agreement, whereby Betancourt agreed Betancourt agreed “to forego any right to bring claims on a representative or class member basis.” The Court of Appeal found that the trial court correctly denied the motion because, under settled law (Iskanian v. CLS Transp. Los Angeles, LLC (2014) 59 Cal.4th 349), a defendant cannot compel arbitration in a PAGA case, which is brought on behalf of the state.

Prudential made several arguments attempting to limit Iskanian, the most creative being that although “Iskanian held predispute waivers of the right to bring a representative action are unenforceable,” it did not hold that where an employer has agreed to litigate the PAGA claim in arbitration, which Prudential agreed to do here (despite contrary language in the agreement), “the agreement on the forum for the PAGA claim is enforceable.” The Court disagreed, holding again that becaue PAGA claims are brought on behalf of the state, “the fact that Betancourt may have entered into a predispute agreement to arbitrate does not bind the state to arbitration.”

Perhaps the most legally significant argument should a PAGA case ever get before the U.S. Supreme Court is that “if Iskanian is interpreted as prohibiting arbitration of all PAGA claims, then that state law prohibiting arbitration is preempted by the Federal Arbitration Act (FAA).” The Court of Appeal sidestepped that question — basically saying that if Betancourt had AGREED to arbitrate, then it could have done so, or at least that question isn’t before the Court. However, since employees rarely agree to arbitrate (where recovery is often lower), it remains true that for all intents and purposes a PAGA case will never be arbitrated, which a conservative SCOTUS could find to be an FAA violation. But that remains to be seen.

The takeaway for employees is that, once again, a published opinion harshly dismantled the arguments of an employer attempting to enforce an arbitration of PAGA claims. For employers, it will more often be the case that, where an employee has signed an arbitration agreement, they will find themselves on the receiving end of a one-count lawsuit seeking only PAGA penalties as was done here.

Betancourt v. Prudential Overall Supply, 2017 S.O.S. 1202
(Cal. Ct. App., 4th Dist. Mar. 7, 2017)

Pervasive Hugging Can Create Hostile Work Environment

Where correctional officer alleged sheriff created sexually hostile work environment, summary judgment for defendants was error because a reasonable juror could conclude that differences in the sheriff’s hugging of men and women were not, as the defendants argued, just “genuine but innocuous differences in the ways men and women routinely interact with members of the same sex and the opposite sex.”

The Ninth Circuit Court of Appeals ruled that hugging can create a hostile or abusive workplace when it is unwelcome and pervasive, and summary judgment on a hostile work environment claim is appropriate only if the defendant’s conduct was neither severe nor pervasive enough to alter the conditions of the plaintiff’s employment.

Zetwick v. County of Yolo, 2017 S.O.S. 14 (9th Cir. Feb. 23, 2017),