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Fourth Quarter 2009Newsletters California UPDATE Employment Law

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Employers Not Liable for Acts of Foreign Suppliers

The Ninth Circuit Court of Appeals has held that a U.S. company is not liable for the labor practices of foreign companies with which it does business. In Doe v.Wal-Mart, Case No. 08- 55706, the plaintiffs alleged that: (1) they were “third-party beneficiaries” of Wal-Mart's supply contracts requiring certain labor standards, and (2)Wal-Mart was a joint employer of the workers of suppliers in China, Bangladesh and Indonesia. The federal appeals court rejected the plaintiffs' claims, saying that the company did not exercise an “immediate level of day-today” control and direction of the foreign employees.

Unions Cannot Bring Suit Over Meal Periods

The California Supreme Court has ruled that a union does not have standing to sue over meal periods and rest breaks on behalf of its members. The Amalgamated Transit Union and the Teamsters sued three transportation companies under the California Labor Code and the Unfair Competition Law. The court held the unions did not suffer any requisite damage under either statute, and that the employees' rights under those statutes were not assignable.The case is ATU v. Superior Court, Cal. Supreme Court No. 151615.

Employers Can Avoid Class Action by Settling With Potential Plaintiffs

After a wage and hour class action has been filed but before certification of the class, the employer is free to enter into settlement agreements with potential class members, a California Court of Appeal has ruled. Chindarah v. Pick Up Stix (2009) 171 Cal.App.4th 796, pet. for rev. denied, ___ Cal. ___ (2009). Notwithstanding Labor Code Section 206.5, which purports to prohibit the release of wage claims, the court found that a settlement and release is valid if there is a “bona fide dispute” over whether any wages are owed.The timing and execution of such a maneuver must be carefully planned, but this is a potential method for nipping a class action in the bud.

Ninth Circuit Denies Class Status for Home Loan Consultants

In two separate opinions, federal appeals panels have denied wage and hour class status to mortgage consultants. In Vinole v. Countrywide (Case No. 08-55223) and In ReWells Fargo Home Mortgage Overtime Pay Litigation (Case No. 08-15355-06-1770), the Ninth Circuit ruled that the district judges erred in finding that just because the companies uniformly classified these groups of employees as exempt, common issues would predominate over individual issues. The appeals court correctly exposed this logic as circular and fallacious. In the Countrywide case, the court wrote: “a district court abuses its discretion in relying on an internal uniform exemption policy to the near exclusion of other factors relevant to the predominance inquiry.”

Summary Judgment for Employer on Claims of No “Interactive Process” and “Constructive Discharge”

Failure to engage in an “interactive process” with a disabled employee to find some reasonable accommodation is a separate cause of action in California. Exactly what constitutes a sufficient “interactive process” is not entirely clear. One Court of Appeal has held that the employer was properly granted summary judgment on an employee's claim of failure to engage in an interactive process even though a reasonable jury could have found that the employer failed to continue the interactive process after an initial accommodation offer, where the employee suffered no injury inasmuch as no available accommodation was identified in discovery. The court also ruled that a change in employment status from full time did not amount to a constructive discharge. Scotch v. Art Institute of California (2009) 173 Cal.App.4th 986.