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Employment Lawyers Discuss Future Trends Affecting Business

The San Diego Business Journal asked six local lawyers specializing in employment law to comment on trends and recent court decisions that will impact California businesses.

Among these are social media and its use in the workplace, worker misclassification, wage-and-hour disputes and class action lawsuits related to such disputes.

Mitch Danzig and Brandon Wellington of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC

The most significant issue businesses will likely face in the next few years will be the clash between employees’ personal rights and employers’ rights with respect to the control over social media in the workplace and protecting goodwill and trade secrets when workers leave for competitors or start competing businesses. Recent decisions by the National Labor Relations Board have significantly limited employers’ abilities to restrict employee social media use when discussing employer business, even when the employer is trying to protect confidential business information. Additionally, as employers face the challenges associated with losing talent to competitors or employees starting their own competing businesses, how can employers effectively protect their business goodwill and trade secrets in states that prohibit or significantly limit restrictions on post-employment competition?


Dave Carothers, San Diego managing partner at Carothers DiSante & Freudenberger LLP

Implementation of the Affordable Care Act may bring employers exposure regarding alleged discriminatory management of wellness programs. Some employees may argue that a wellness program discriminates in its implementation or fails to focus on health issues of certain categories of employees.

Litigation concerning background checks and their impact on minority job applicants may increase. Incarceration rates disproportionately impact men of color. The U.S. Equal Employment Opportunity Commission has announced it has a particular interest in investigating claims in this area.

Definition of “disability” may expand to include ailments such as chronic fatigue syndrome, shift work and Internet-use disorder.

Spencer Skeen of Ogletree, Deakins, Nash, Smoak & Stewart PC

Employers should be extremely concerned about the risk of wage-and-hour lawsuits and, in particular, class and private attorney general, or PAGA, representative actions. These claims are brought by one employee on behalf of all employees subject to the pay practice in question, so the potential for exposure can be staggering. Businesses have tried to limit potential exposure for these claims through use of arbitration agreements, which often contain a class action or PAGA waiver. These provisions prevent the individual from bringing class or representative claims against the business, but they are being met with mixed results. Brown v. Superior Court [(2013) 216 Cal. App. 4th 1302] held an arbitration clause waiving the right to bring a representative PAGA claim was unenforceable. Iskanian v. CLS Transportation of Los Angeles [(2012) 206 Cal. App. 4th 949] reached the opposite result. The California Supreme Court granted review in both Brown and Iskanian, which means neither case is good law and employers have no clear guidance regarding the court’s view on such waivers. In addition to using class action and PAGA waivers, which are being evaluated by the Supreme Court, employers will need to manage against the risk of class and collective action lawsuits through pay practices audits and other methods.

Paul Duvall of King & Ballow Law Offices

In employment litigation, wage-and-hour class action cases pose the greatest risk to employers of any size. Incremental errors in overtime pay, lunch breaks or other basic employment activities made over a period of time can result in large judgments that threaten the life of any business. Accordingly, the recent decision by the U.S. Supreme Court permitting employers to obtain waivers of class action claims by employees is significant.

The key case is American Express Co. v. Italian Colors Restaurant [133 S. Ct. 2304 (U.S. 2013)]. In a 5-3 decision, which enforced individual arbitration and class action waiver provisions in a commercial agreement, the Supreme Court has sent shockwaves throughout the class-action world, particularly in the labor-and-employment context. While American Express arises in the antitrust context, its broad holding, especially in light of previous decisions, presents new obstacles to class litigation in the employment context.

The Supreme Court found that the Federal Arbitration Act required courts to “rigorously enforce” arbitration agreements as well as class-actions waivers, according to the terms of the parties’ contract. In its broadly worded decision, the Supreme Court held courts may not invalidate a contractual waiver of class arbitration simply because the cost of such individual arbitration would allegedly exceed the amount of potential recovery to plaintiffs. Effectively, American Express’ holding, together with other recent Supreme Court rulings, allows employers to insulate themselves from class exposure so long as they have express — and well-drafted — provisions in their employment agreements mandating individual arbitration of claims and prohibiting class-based litigation.

Marlene Moffitt, senior counsel at Allen Matkins Leck Gamble Mallory & Natsis LLP

I believe that the most important issue over the next few years will be worker misclassification. This issue was highlighted recently with the heightened penalties under Labor Code section 226.8 for willful misclassification. The issue is now in the spotlight again with Ayala v. Antelope Valley Newspapers Inc. [(2012) 210 Cal.App.4th 77], which is pending before the Supreme Court. With Ayala, the court will hopefully clarify the role that Martinez v. Combs [(2010) 49 Cal.4th 35] plays in determining whether an independent contractor has been misclassified. Martinez has traditionally been considered the seminal case on the joint employer doctrine, whereas S.G. Borello & Sons Inc. v. Dept. of Industrial Relations [(1989) 48 Cal.3d 341] has been the seminal case on classification. However, the Supreme Court in Ayala requested briefing specifically on the applicability of Martinez — showing that the court may consider the broad definition of “control” used in Martinez — for independent contractor classification claims as well. Whatever the outcome, this decision will impact how employers classify workers for purposes of complying with the Patient Protection and Affordable Care Act laws on leaves of absence, and laws on other wage-and-hour issues.

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