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Chinese Class Action: Take the Boss Hostage

With U.S. business owners celebrating the Supreme Court’s embrace of “the liberal federal policy favoring arbitration” and hastening to add arbitration clauses with class action waivers to the stack of first-day paperwork for new hires to sign, news from China suggests an approach far more aggressive than anything Rule 23 contemplates. Charles Starnes, co-owner of Florida-based Specialty Medical Supplies, arrived at his Beijing factory last week intending to lay off 30 employees. However, Starnes was preempted by the employees, who rather than being escorted out of the building by an officious HR employee, took Starnes hostage. The employees/captors have since benefitted from the Chinese government’s apparent indifference, if not its affirmative support, as Starnes remains in captivity.

Accounts vary as to exactly what happened, though it seems that Starnes’ meeting with employees went awry like an unsuccessful mediation writ large, with employees having expected a more generous severance package. Instead of responding with the usual counter-offer, they put Starnes in something that looks a lot like a conventional jail, albeit with more elegant bar beveling than is usually seen in prisons. Apparently, according to the Washington Post, “a lot of CEOs get taken hostage in China.”

The paper documents a similar incident that took place in Shanghai, in January of this year, but no others, noting only that workers taking their boss hostage “doesn’t make for international headlines.” This time, however, it did make headlines. Even so, Starnes remains in captivity, as no international groundswell has demanded his release. No word on whether Starnes will be required to resolve the dispute with his captors under the efficient, streamlined auspices of arbitration.

New California Workplace Legislation for 2013

Now that we’ve said goodbye to 2012 and 2013 has begun, employers and employees alike should take note of the various changes to California’s labor and employment laws. Among the legislation which took effect on January 1, 2013, are the following, each of which is likely to rely principally on private litigation for its enforcement.

  • Pay Stub Statute Clarified: Labor Code section 226 is clarified, by SB 1255, to specify that “suffering injury” is generally coextensive with an employer’s violation of one of the nine enumerated requirements of wage statements issued in California. This is expected to foreclose the argument that the “suffering injury” requirement gives rise to individual inquiries, thereby precluding class treatment of pay stub claims.
  • Social Media Privacy: AB 1844 prohibits employers from requiring that either job applicants or employees disclose user names and/or passwords to provide the employer with access to private social media information.
  • Enhanced “Whistleblower” Protection: AB 2492 expands the cover age of California’s False Claims Act (aka “Baby Qui Tam”) beyond employees, to cover all contractors and agents.
  • Right to Inspect Personnel Files: AB 2674 clarifies that employers must retain employee personnel files for at least three years after an employee’s tenure ends.
  • Breastfeeding Discrimination: AB 2386 expands the California Fair Employment and Housing Act (FEHA) definition of “sex” to include breastfeeding, thereby making discrimination based on breastfeeding actionable.
  • Religious Clothing: FEHA’s coverage of employers’ reasonable accommodation of employees’ religious beliefs is expanded by AB 1964 to include dress and grooming under the rubric of “beliefs and observances.”

Myles v. Prosperity Mortgage: Dukes Inapplicable to FLSA Certification

Federal courts continue to interpret last year’s Wal-Mart v. Dukes Supreme Court decision more narrowly than many had expected, surprising those who viewed Dukes (in concert with AT&T v. Concepcion) as a virtual death knell for class actions.  In Myles v. Prosperity Mortgage Co., Judge Catherine C. Blake granted conditional class certification in an action alleging that the defendant misclassified its loan officers as exempt from overtime pay.  See Myles, No. 11-01234 (D. Md. May 31, 2012) (memorandum opinion re: class certification) (available here).  And of greater general significance, the court held that Dukes is inapplicable at the certification stage of an FLSA action.  Id. at 10-11.  Although Dukes did not address FLSA claims, the Myles defendant, Prosperity Mortgage Company (PMC), argued for the application of the more rigorous certification criteria articulated in Dukes, which would result in a radical remaking of the long-established, two-stage FLSA certification process.  Id. at 9-10.  PMC maintained that Dukes applies to “all aggregate claims,” including both class actions and collective FLSA actions. Id. at 9.

After considerable reasoning, however, the Myles court concluded that Dukes not only does not apply to FLSA certification determinations, but is also factually distinguishable from Myles, stating, “Dukes does not mention the FLSA or the two-step certification process, and such a conclusion does not necessarily follow from any particular language in the opinion.”  Id. at 9.  Judge Blake also pointed out that the first stage of FLSA certification requires only “relatively modest” evidence of commonality, in contrast to the far more demanding Dukes criteria.  Id. at 8-9.  Finally, she noted that in Dukes, there was no corporate discriminatory policy common to the class, and the class claims were based on individual, discretionary decisions made by many different managers, whereas in Myles, “PMC has acknowledged that it had an express policy of considering its loan officers to be exempt under the FLSA; thus, no local management discretion is at issue and no individualized inquiry is necessary to determine why individual loan officers were disfavored.”  Id. at 11.

Buttressing its analysis, the court noted that “‘numerous courts . . . have refused to apply Dukes on motions for conditional certification under the FLSA, concluding that the Rule 23 analysis had no place at this stage of the litigation.’”  Id. at 10, citing Winfield v. Citibank, N.A., ¬¬___ F. Supp. 2d ___, 2012 WL 423346 at *10 (S.D.N.Y. Feb. 9, 2012).

BREAKING NEWS: U.S. Supreme Court Denies Review in Brown v. Ralphs

In a major victory for employees, the United States Supreme Court has denied Ralphs’ Petition for Certiorari in Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489 (2011), which held that AT&T Mobility v. Concepcion, 131 S.Ct. 1740 (2011), does not apply to representative actions brought pursuant to PAGA, the Labor Code Private Attorneys General Act of 2004. Coupled with the California Supreme Court’s refusal to review Brown, the decision now stands on strong footing that unequivocally exempts PAGA from the ambit of Concepcion and the Federal Arbitration Act.