Kilby v. CVS: Cal. Supreme Court Clarifies Seating Requirements

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On April 4, 2016, the California Supreme Court answered three questions certified by the United States Court of Appeals for the Ninth Circuit regarding interpretation of the California wage order requirements for the provision of seating to employees (previously covered on the ILJ here). This opinion arose from two federal court class actions on the issue, one against CVS Pharmacy and the other against Chase Bank. See Kilby v. CVS Pharmacy, Inc., No. S215614 (Cal. April 4, 2016) (slip op. available here). The much-anticipated clarification is welcomed by plaintiffs’ attorneys following a dearth of authority as to how to evaluate claims based on an employer’s failure to provide adequate seating.

The three questions certified to the California Supreme Court were:

  1. Does the phrase “nature of the work” [under Wage Order Nos. 4-2001 and 7-2001, § 14(A)] refer to individual tasks performed throughout the workday, or to the entire range of an employee’s duties performed during a given day or shift?
  2. When determining whether the nature of the work “reasonably permits” use of a seat [as used in Wage Order Nos. 4-2001 and 7-2001, § 14(A)], what factors should courts consider? Specifically, are an employer’s business judgment, the physical layout of the workplace, and the characteristics of a specific employee relevant factors?
  3. If an employer has not provided any seat, must a plaintiff prove a suitable seat is available in order to show the employer has violated the seating provision?

Slip op. at 1. First, the court rejected the employers’ argument that the work in question should be evaluated based on a “holistic” consideration of all of an employee’s job duties during an entire shift, which would require a weighing of all of an employee’s “standing” tasks against all of the “sitting” tasks, and then classifying a job as either a “sitting” or “standing” job. It also rejected the employees’ argument that the work in question should be evaluated separately for each individual task that the employee might perform. Rather, the court referenced legislative history and the California Division of Labor Standards Enforcement—which had submitted an amicus brief—to hold that the “nature of the work” under the wage order should be examined as to each of the subsets of tasks that an employee would perform or would be expected to perform in a particular location within their workplace (out of the total tasks and duties performed during a shift), “such as those performed at a cash register or a teller window, and consider whether it is feasible for an employee to perform each set of location-specific tasks while seated.” Id. at 16. In other words, seating might be required while attending to certain work tasks (grouped by their location) but not others, even for the same employee.

Second, the court held that whether work “reasonably permits” use of a seat should depend on the totality of circumstances, including both whether tasks can be performed while seated, as well as whether seating would be feasible, with no single factor being determinative. In doing so, the court preserved a role for the employer’s “business judgment” (such as to the efficacy of providing customer service when seated versus standing) and the physical layout of the workplace among the factors to be considered. Slip op. at 20-23. However, the court rejected consideration of the physical differences among employees as a relevant factor, because “the provision requires a seat when the nature of the work reasonably permits it, not when the nature of the worker does.” Id. at 24.

Lastly, because the wage order “unambiguously states employees ‘shall be provided with suitable seats,’” the court held that any claim that “compliance is infeasible because no suitable seating exists” would be the employer’s burden to prove. Slip op. at 25.

Kilby appears to be a boon for plaintiffs seeking to certify seating claims, because the evaluation now focuses more on objective inquiries common to groups of employees. Further, plaintiffs no longer need to prove that seating could have feasibly been provided, often an awkward and time-consuming exercise. With this much-needed clarification of the law regarding seating claims, California employees can be expected to bring and seek to certify an increasing number of seating actions. 

Authored by: 
Jonathan Lee, Associate

Long v. Provide Commerce: Arbitration Clause in Browsewrap Agreement Held Unenforceable

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A California Court of Appeal affirmed an order issued by Judge Jane Johnson denying a motion to compel arbitration where the arbitration agreement was contained in an online “browsewrap” agreement. Long v. Provide Commerce, Inc., No. B257910, 2016 WL 1056555 (March 17, 2016) (slip op. available here). The plaintiff had purchased flowers through, a website operated by the defendant. In his putative consumer class action lawsuit, the plaintiff alleged that, despite being advertised as a completed, assembled product, the flowers were delivered in a “do-it yourself kit requiring assembly.” Slip op. at 3. The defendant moved to compel arbitration based on an arbitration clause in the website’s Terms of Use.

In Long, the Terms of Use were available via a hyperlink at the bottom of each page on the website—what is known in e-commerce as a browsewrap agreement. A browsewrap agreement does not require any express manifestation of agreement to the Terms of Use; rather, the user agrees to the Terms simply by using the website. Slip op. at 7. This is in contrast to a “clickwrap” agreement, where the consumer must click on a checkbox indicating his assent to be bound by the Terms of Use in order to continue using the website. Id. As there was no dispute that the plaintiff had no “actual knowledge” of the Terms of Use when he made his online purchase, the court analyzed the design and placement of both the hyperlink and the website to determine whether they were “sufficient to put a reasonably prudent Internet consumer on inquiry notice of the browsewrap agreement’s existence and contents.” Id. at 8.

The question of “what sort of website design elements would be necessary or sufficient to deem a browsewrap agreement valid in the absence of actual notice” was an issue of first impression in California. Slip op. at 9. While the hyperlink to the Terms of Use appeared on every page of the website and was visible without scrolling down, the hyperlink was nonetheless deemed too inconspicuous to provide the plaintiff with inquiry notice. Id. at 12-13. First, the hyperlink was light green-colored on a lime green background, and thus could blend in. Id. at 13. Additionally, there was nothing on the website to notify the consumer that, in using the website to buy flowers, “he should also be on the lookout for a reference to ‘Terms of Use’ [elsewhere] on the website[].” Id. at 12. Also, when a consumer selected his purchase and proceeded to checkout, the hyperlinks were not, contrary to the defendant’s characterization, “located next to” the form fields that a consumer would fill out to complete his order. Rather, there were several layers of other text and images that a consumer would need to look past to find the Terms. Furthermore, the inclusion of the Terms of Use hyperlink in a confirmation email did not remedy the problem; in the email, the Terms of Use hyperlink appears in inconspicuous grey font on a white background and was “located on a submerged page,” forcing the recipient to scroll down past layers of information, advertisements, logos, and other hyperlinks. Id. at 13.

The opinion expressly focused on the “practical reality” of how a consumer would interact with the website and the confirmation email. Slip op. at 13. Although it did not need to decide this issue, the court opined that, even if the hyperlink had been displayed conspicuously on the website, “without notifying consumers that the linked page contains binding contractual terms, the phrase ‘terms of use’ may have no meaning or a different meaning to a large segment of the Internet-using public.” Id. The court thus “advised” online retailers to include a conspicuous textual notice rather than just a hyperlink. Id. at 12-13 (agreeing with Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171 (9th Cir. 2014)). Finally, the Court of Appeal also held that, as the plaintiff was not bound by the Terms of Use browsewrap agreement, the plaintiff also was not bound by the forum selection clause included therein. Id. at 14-15.

Authored By:
Katherine Kehr, Senior Counsel

NLRB Orders Cedars-Sinai to Rescind and Revise Its Mandatory Arbitration Pacts

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Last month, a National Labor Relations Board (NLRB) judge in San Francisco ordered Los Angeles’s famed hospital, Cedars-Sinai Medical Center, to stop using its mandatory arbitration agreements to prohibit employees from bringing class action lawsuits. Administrative Law Judge Artiel Sotolongo also ruled that the hospital must fix the provisions of its agreements that could mislead employees to believe they cannot file unfair labor charges before the NLRB. Cedars-Sinai Med. Ctr. & Chandra Lips, 31-CA-143038, 2016 WL 1042504 (March 15, 2016) (slip op. available here).

In 2014, Chandra Lips, a medical staff assistant who worked for the hospital from July 2011 to May 2013, filed a complaint with the American Arbitration Association seeking class action status and an unfair labor practices charge with the NLRB. Thereafter, Cedars-Sinai moved to compel individual arbitration against her in February 2015 by filing a complaint for declaratory relief in a state action in Los Angeles Superior Court (BC571046).

Judge Sotolongo’s decision relied on the NLRB’s decisions in D. R. Horton, 357 NLRB 2277 (2012), enf. denied in relevant part 737 F.3d 344 (5th Cir. 3013), and Murphy Oil USA, Inc., 361 NLRB No. 72 (2014), enf. denied in part 808 F.3d 1013 (5th Cir. 2015), both of which held that enforcement of individual arbitration on employees seeking class labor law claims was illegal. See slip op. at 6-7. Unlike D.R. Horton and Murphy Oil, however, the mandatory arbitration agreement in Cedars-Sinai does not explicitly preclude employees from initiating or seeking class or collective action status in arbitration or in other forums; it is silent on the issue. Because of this, Judge Sotolongo held that the applicable standard here was an objective one—that is, whether employees could reasonably interpret the language of the agreement to act as a barrier to filing charges with the Board, among other criteria, such as whether the rule was issued in response to union activity (it was not). The court concluded that employees could reasonably interpret Cedars-Sinai’s agreement to bar class or collective actions. Slip op. at 6-8. Because of the sweeping language stating workers were required to submit to arbitration “all statutory, contractual and/or common law claims,” the judge gave little weight to the exceptions listed in the arbitration agreement, such as the exclusion of claims “preempted by federal labor laws,” finding it “too vague” for a worker with no legal training to understand its consequences. Id. at 6-7. However, D.R. Horton and Murphy Oil did apply where the hospital tried to enforce the arbitration agreement by filing the declaratory state court action to compel Lips into individually arbitrating her employment-related claims. This restricts employee rights under section 7 of the National Labor Relations Act to pursue concerted or collective action, and thus Cedars-Sinai was in violation.

Although the Fifth Circuit has rejected the NLRB’s views on both D. R. Horton and Murphy Oil, Judge Sotolongo wrote that he was “compelled to follow the Board’s decisions unless the Supreme Court overrules the Board.” Slip op. at 9. Thus, he ordered Cedars-Sinai to “rescind [or revise] the mandatory and binding arbitration agreements in all of its forms,” provide employees with notice of such changes, notify the state court of the revision and rescission of the arbitration agreement (upon which Cedars-Sinai had based its claim to compel individual arbitration), and to inform the state court that it no longer opposes the lawsuit on the basis of that arbitration agreement. Id. at 11. Any revision, the judge stated, should clarify that such an agreement does not restrict employees from pursuing wage-and-hour actions or other employment-related actions on a class or collective basis in any forum, and specifically does not prevent employees from filing charges with the NLRB. Id. at 10. Cedars-Sinai was also required to reimburse Lips for reasonable attorneys’ fees and expenses, with interest. Id. at 12. 

Authored by: 
Natalie Torbati, Associate

When a Stay Is Not a Stay: Cal. Supreme Court’s Decision in Gaines v. Fidelity Insurance

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In Gaines v. Fidelity National Title Insurance Co., a majority of the California Supreme Court found that an agreement entered into by the parties to stay a case pending mediation did not toll the five-year time period within which an action must be brought to trial under California Code of Civil Procedure section 583.310. No. S215990 (Feb. 25, 2016) (slip op. available here). Section 583.340(b) provides that courts must automatically exclude from the five-year period any time there is a “complete stay,” when the “[p]rosecution or trial of the action was stayed or enjoined.” Section 583.340(c) also mandates exclusion of any time there is a “partial stay,” where it was “impossible, impracticable, or futile” to bring the case to trial. California Code of Civil Procedure section 583.330 further permits tolling by a written stipulation or express oral agreement in court between the plaintiff and the defendant. Notwithstanding these provisions, the trial court held that the case was due to be dismissed for violation of the five-year time period. The Court of Appeal affirmed, as did the California Supreme Court, each over vigorous dissenting opinions.

Plaintiff Gaines filed a lawsuit in 2006, alleging that the defendant mortgage company defrauded her and her (deceased) husband into selling their home to an unscrupulous property manager—who turned out to be the fiancé of the lender’s employee—to “help” them avoid foreclosure. See slip op. at 2-3. The case encountered numerous procedural hurdles; Mrs. Gaines had to amend the complaint four times during the first 14 months to add various defendants. Gaines v. Fidelity Nat’l Title ins. Co., 165 Cal. Rptr. 3d 544, at 570 (Cal. App. 2013). In 2008, the plaintiff and defendant Aurora stipulated to a 120-day stay to attempt mediation. Slip op. at 4. The court vacated the trial date, ordered mediation, and stayed the litigation, except that parties were to respond to previously-served discovery; however, the mediation ultimately failed. Id. Additionally, Aurora initially admitted to owning the loan in January 2009, but then claimed 11 months later that Lehman Brothers was the owner; the parties then struggled to bring Lehman, which was by then in bankruptcy, into the lawsuit, further compounding delays. Slip op. at 3. That same month (November 2009), the plaintiff passed away, and her son, Milton Howard Gaines, became the plaintiff as her successor in interest. Id.

Remarkably, the California Supreme Court found that the trial court’s stay order—to which the plaintiff agreed at the defendants’ request—did not toll the five-year time limit. A complete stay under section 583.340(b) will operate to automatically toll the five-year period, while a partial stay under section 583.340(c) will not do so unless it results in a circumstance of impossibility, impracticability, or futility. See slip op. at 2. The court first found that the stay was not a “complete” stay under Section 583.340(b) because limited discovery and mediation were allowed to proceed, and because the “stay” was not due to an “extrinsic” event such as contractual arbitration. Slip op. at 10-13. Yet, as Justice Kruger, joined by Justice Liu, asserted in her dissent, the majority’s opinion wrongly relied upon Bruns v. E-Commerce Exchange, Inc., 51 Cal. 4th 717 (2011), which found that a stay of discovery did not toll the five-year time limit. Slip op., Kruger dissenting op. at 5-6. Gaines involved the opposite of a stay of discovery—it was stayed for all purposes except certain limited discovery. Id., Kruger dissenting op. at 7.

Second, the California Supreme Court found no tolling under section 583.340(c), because that section required a “period of impossibility, impracticability or futility, over which plaintiff had no control.” Slip op. at 23. And, because the parties chose to attempt mediation, the plaintiff had control over the progress of the case. Id. Notably, as Justice Kruger pointed out in her dissent, the “beyond the plaintiff’s control” language does not appear in section 583.340(c). Slip op., Kruger dissenting op. at 12. Further, the dissent observed, the majority made no allowance for Aurora’s mistake in claiming ownership, which stalled the case for 11 months. 165 Cal. Rptr. 3d at 572. Consequently, the decision “reward[s] plaintiff for working cooperatively with an opposing party by depriving her of her day in court.” Slip op., Kruger dissenting op. at 1.

After Gaines, plaintiffs’ counsel should take note: the majority gave weight to the plaintiff’s failure to secure an express stipulation pursuant to section 583.330 to toll the five-year limit. Slip op. at 10. Justice Kruger countered that, before the majority’s opinion, a plaintiff “would have had no reason to believe such a stipulated extension would be necessary.” Slip op., Kruger dissenting op. at 14. However, in the future, plaintiffs embroiled in protracted litigation in California courts should heed Gaines, and stipulate or move for the tolling of section 583.310.

Authored By:
Jennifer Bagosy, Senior Counsel