AI is A-mazing (Except That I Wrote This Title Myself)

By Michael Mandel  |  October 17, 2024

This is a departure from my usual posts about employment law cases or developments. But this has fascinated me so much, I have to share. A friend recently pointed me to a new experimental tool from Google, NotebookLM. They tout it as "help[ing] you understand things faster." Essentially, you provide the source material and then Notebook LM generates a podcast episode. So I provided NotebookLM my website, and it generated a five-minute podcast episode. Take a listen! 

Word(s) Matter: California Supreme Court Holds That A Single Use of the "N-Word" By a Non-Supervisory Coworker Can Support a Claim for Workplace Harassment

By Michael Mandel  |  July 30, 2024 (updated August 1, 2024 with link to article)

On July 29, 2024, the California Supreme Court issued a new decision regarding workplace harassment and retaliation. In Bailey v. San Francisco District Attorney's Office, Case No. S265223 (July 29, 2024), the court held that a single use of the N-word, an "unambiguous racial epithet" - can be sufficiently severe to support a claim for workplace harassment. 

The court also held that a course of conduct that effectively seeks to withdraw an employee’s means of reporting and addressing racial harassment in the workplace can support a claim of retaliation, even in the absence of a termination, demotion, transfer, suspension, or other more tangible employment action. A copy of the opinion can be found here. 

Please click here to read an article I wrote summarizing the decision and its impact on California lawsuits.

Pride and Prejudice: California Supreme Court Holds That Waiver of the Right to Arbitration Does Not Require Any Showing of Prejudice 

By Michael Mandel  |  July 25, 2024

The California Supreme Court handed employees and their advocates a win today. Following a 2022 U.S. Supreme Court decision addressing the issue under the Federal Arbitration Act (Morgan v. Sundance, Inc. 596 U.S. 411 (2022)), the state’s high court held that employers who go too far down the road of civil litigation before seeking to compel arbitration can be found to have waived their right to arbitration, even in the absence of any prejudice to the employee. This “no prejudice required” rule applies regardless of whether the arbitration agreement is governed by the Federal Arbitration Act (FAA) or the California Arbitration Act (CAA).

THE TRIAL COURT DENIES COMMERCE CLUB'S MOTION TO COMPEL ARBITRATION

In Quach v. California Commerce Club, Inc., Case No. S275121 (July 25, 2024), the plaintiff Peter Quach filed a civil lawsuit in 2018 against his former employer, California Commerce Club, Inc., for age discrimination, wrongful termination, retaliation, and harassment. In its answer to Quach’s complaint, Commerce Club asserted as an affirmative defense that Quach was required to arbitrate his claims, but it did not move to compel arbitration at that time.

In advance of the initial case management conference, Commerce Club submitted a case management conference statement form to the court in which it requested a jury trial, did not check the box indicating it was willing to participate in “binding private arbitration,” and did not list a motion to compel arbitration in the space provided for listing motions it expected to file before trial. At the case management conference, the court set a trial date. Both sides subsequently posted jury fees and engaged in discovery. Commerce Club propounded written discovery on Quach, and responded to Quach’s initial written discovery, including producing a copy of the signature page of Quach’s arbitration agreement, which he had signed in 2015 (and which Commerce Club apparently had provided to Quach before he filed the lawsuit). While the trial court proceedings were delayed due to the COVID-19 pandemic, Commerce Club continued to actively participate in discovery, engaging in meet and confer over discovery disputes and taking a full day of Quach’s deposition.

Approximately 13 months after Quach originally filed his lawsuit, Commerce Club filed a motion to compel arbitration. Attempting to explain its delay, Commerce Club asserted that it had just located a complete copy of Quach’s arbitration agreement. It also argued that Quach was not prejudiced by the delay because there had been only “minimal discovery” due to the pandemic’s impact on Commerce Club’s access to information and witnesses.

The trial court denied Commerce Club’s motion. It found that Commerce Club “knew of its right to compel arbitration” and instead of moving to compel arbitration, propounded a “large amount” of written discovery, spent “significant” time meeting and conferring “over many months,” and took Quach’s deposition, demonstrating “a position inconsistent [with the intent] to arbitrate” and causing “prejudice.” Commerce Club appealed.

THE COURT OF APPEAL REVERSES THE TRIAL COURT'S ORDER DENYING A MOTION TO COMPEL ARBITRATION

The Court of Appeal, in a 2-1 decision, reversed the trial court. It held that Commerce Club did not waive its right to compel arbitration, concluding that the trial court’s finding that Quach had shown prejudice was not supported by substantial evidence. Quach petitioned the California Supreme Court for review, which it granted in order to address the impact of the U.S. Supreme Court’s 2022 decision in Morgan, in which it held that, under the FAA, a party opposing arbitration based on a claim of waiver by the party seeking arbitration need not prove that they suffered any prejudice as a result of the other party’s conduct.

THE CALIFORNIA SUPREME COURT REVERSES THE COURT OF APPEAL AND HOLDS THAT COMMERCE CLUB WAIVED ITS RIGHT TO ARBITRATION

The California Supreme Court ruled in favor of Quach and held that Commerce Club had waived its right to arbitration. The court began by explaining that the procedural rules of the CAA, like those of the FAA, are grounded in a policy of “treating arbitration [agreements] like all others,” not one preferring arbitration to litigation. Thus, “in determining whether a party to an arbitration agreement has lost the right to arbitrate by litigating the dispute, a court should treat the arbitration agreement as it would any other contract, without applying any special rules based on a policy favoring arbitration. That is, courts should apply the same procedural rules that they would apply to any other contract.”

The court then explained that to establish waiver under generally-applicable contract law, the party opposing enforcement of a contractual agreement must prove by “clear and convincing evidence that the waiving party knew of the contractual right and intentionally relinquished or abandoned it.” The “clear and convincing evidence standard” means that the party arguing for a waiver must show that it is “highly probable” the fact is true. The party opposing enforcement of the contract may prove the other party’s “intentional relinquishment or abandonment of the right … by evidence of words expressing an intent to relinquish the right or of conduct that is so inconsistent with an intent to enforce the contractual right as to lead a reasonable factfinder to conclude that the party had abandoned it.” The court also noted that the “waiver inquiry is exclusively focused on the waiving party’s words or conduct; neither the effect of that conduct on the party seeking to avoid enforcement of the contractual right nor that party’s subjective evaluation of the waiving party’s intent is relevant.”

Applying this standard to the facts before it, the court had no trouble concluding that it was “highly probable” that Commerce Club knew of its right to compel arbitration and had, through its words and conduct, evidenced an intent to relinquish its right to compel arbitration. The court added that, “Commerce Club’s position, if accepted, would surely create undue delay and gamesmanship going forward.”

CONCLUSION

The takeaways from this decision are pretty clear. For parties who might wish to enforce an arbitration agreement, do not delay and do not take any actions that could be construed as inconsistent with an intent to compel arbitration. Rather, the party should shout from the rooftop that they wish to have the dispute resolved through arbitration, not in court. 

For parties opposing arbitration, carefully evaluate what the other party has done with respect to the claims prior to them actually moving the court to compel arbitration. If the other party has done anything that is inconsistent with an intent to submit claims to arbitration, then you may be able to thwart any effort to compel arbitration, even if you have not suffered any prejudice. 

Extreme Makeover: PAGA Edition

By Michael Mandel  |  June 30, 2024

On June 27, 2024, the California Legislature passed sweeping changes to the California Labor Code Private Attorney General Act (PAGA) [Note: California Governor Gavin Newsom officially signed the bills amending PAGA into law on July 1, 2024]. This is the result of a negotiated agreement to stave off an expensive and contentious fight over an initiative that business groups had qualified for the November ballot that, if passed, would have gutted PAGA. The amendments to PAGA are intended to continue to provide protections for workers, provide incentives for businesses to comply with wage and hour laws, and curb some of what the business community perceived as abuses of PAGA. The amendments apply to lawsuits filed on or after June 19, 2024, except that they will not apply if the plaintiff provided notice to the Labor and Workforce Development Agency before June 19, 2024.

The most relevant revisions to PAGA fall into five general categories:

(1) Limiting standing for PAGA plaintiffs;

(2) Expanding the ability of employers to cure violations and avoid (or at least limit) PAGA penalties;

(3) Expanding trial courts’ authority to manage PAGA cases and enhancing their discretion in determining the amount of any penalties;

(4) New penalty structure; and

(5) New requirements for imposing penalties for certain types of violations.

Please click here to read an article I wrote about this important development in California employment law.

California Supreme Court To Decide Whether the Federal Arbitration Act Preempts California Law Requiring Prompt Payment of Arbitration Fees

By Michael Mandel  |  June 13, 2024

In 2019, the California Legislature amended the California Arbitration Act (CAA) to add Code of Civil Procedure Sections 1281.97 and 1281.98. Section 1281.97 requires companies/employers to pay any necessary fees or costs to initiate an arbitration proceeding within 30 days after the due date or else the company is in material breach of the arbitration agreement and waives its right to arbitration. Section 1281.98 similarly requires companies/employers to pay any necessary fees or costs to continue an arbitration proceeding within 30 days after the due date.

Back in March, I wrote (here) about a 2-1 decision by the California Court of Appeal in which the Court upheld the enforceability of Section 1281.97. See Hohenshelt v. Superior Court, 99 Cal. App. 5th 1319 (2024) (“Hohenshelt”). This was the sixth published opinion by a California Court of Appeal upholding this statute. But in a fiery dissent, Justice John Wiley proffered his view that the Federal Arbitration Act (FAA) preempts Sections 1281.97 and 1281.98, breaking ranks with the numerous other California trial and appellate courts who previously considered and rejected this argument.

Then, last month, in a 2-1 decision, the majority of another panel of California’s Second District Court of Appeal agreed with Justice Wiley that the FAA preempts Section 1281.97. See Hernandez v. Sohnen Enterprises, Inc. (May 22, 2024, Case No. B323303).

Yesterday, the California Supreme Court granted review of the Court of Appeal’s decision in Hohenshelt. California’s highest court will now decide whether it believes that the FAA preempts Section 1281.97 and 1281.98. While we likely won’t get a decision from the California Supreme Court until the summer of 2025 at the earliest, I’m going to predict now that the California Supreme Court will rule that the FAA does not preempt Section 1281.97.

To anyone who follows the California Supreme Court, my prediction is not particularly bold. But to up the ante, I am going to go out on a limb and also predict that the California Supreme Court will not have the final word on this issue. Instead, I predict that the U.S. Supreme Court will eventually agree to weigh in on this dispute and it will find that the FAA does preempt Section 1281.97.

Be sure to check back with me in 2026 to see if my predictions come true!

Man Bites Dog: California Supreme Court Rules in Favor of Employer in Wage and Hour Lawsuit

By Michael Mandel  |  May 6, 2024

On May 6, 2024, the California Supreme Court issued its second opinion in the long-running wage and hour litigation in Naranjo v. Spectrum Security Services. In this iteration, the Court analyzed whether a good faith – but ultimately mistaken – belief by an employer that it is complying with the law insulates it from liability for penalties for failing to provide accurate itemized wage statements to employees. The Court held that “when an employer shows that it reasonably and in good faith, albeit mistakenly, believed that it complied … that employer’s failure to comply with wage statement requirements is not ‘knowing and intentional,’ and the employer is therefore not subject to penalties….”

Please click here to read an article I wrote about this case.

California Court of Appeal Slices Up How Much Dough is Reasonable When a Plaintiff Prevails on Wage and Hour Claims.

By Michael Mandel  |  April 1, 2024

The promise (or threat) of a prevailing plaintiff’s attorneys’ fees looms large in almost all wage and hour cases. On March 25, 2024, a California appellate court held that a former pizza delivery driver who prevailed at trial on a claim for unpaid minimum and overtime wages is entitled to an award of attorneys’ fees and costs as a matter of right, even though the employee’s recovery was rather small and the trial court thought that the case was litigated in a manner that was disproportionate to the ultimate amount of recovery. However, in sending the case back to the trial court for further consideration, the Court of Appeal emphasized that the plaintiff is only entitled to “reasonable” fees and costs, foreshadowing that the plaintiff will likely not recover anywhere near the amount of fees and costs that he is seeking.

Please click here to read an article I wrote about this case.

California Supreme Court Addresses Compensability of Time Spent Waiting in Security Line and Parking Lot Pilgrimages

By Michael Mandel  |  March 26, 2024

On March 25, 2024, the California Supreme Court handed down a new opinion interpreting California wage and hour laws. Specifically, the Court addressed issues regarding how much control an employer may exercise over an employee before the employer must pay for the time as “hours worked.” In this particular case, the time at issue was time employees spent waiting in their personal vehicles for security inspection as they left the premises for the day and time that the employees spent driving to and from remote parking lots. The decision is not a clear winner for employees or employers. The tests the Court announced are fact-intensive and will result in additional litigation, both in this particular case and other cases raising similar claims and issues.

Please click here to read an article I wrote about this case and its implications for California employers and employees.

California vs. Everybody

By Michael Mandel  |  March 1, 2024

Last month, I wrote (here) about a California appellate decision that held that, under a 2019 California law, an employer who paid arbitration fees one day late was in material breach of the arbitration agreement and waived its right to arbitration. This past week, another court of appeal agreed with that ruling in a 2-1 decision in Hohenshelt v. Sup. Ct. (Golden State Foods Corp.) (2nd DCA, Case No. B327524). But one of the judges issued a scathing dissent on the grounds that, in his view, California singles out arbitration agreements for disfavored treatment and the Federal Arbitration Act therefore preempts the law. The stage may thus be set for yet another showdown in the U.S. Supreme Court between California and arbitration agreements.

Please click here for a link to an article I wrote about this case and its implications for California wage and hour litigation.

Standing up for PAGA

By Michael Mandel  |  February 6, 2024

On February 1, 2024, in Lawson v. Grubhub, Inc. (N.D. Cal. Case No. 15-cv-05128-JSC), a federal judge in San Francisco issued one of the first rulings since the California Supreme Court’s recent decision last month in Estrada v. Royalty Carpet Mills, Inc. (Jan. 18, 2024, Case No. S274340), which held that that trial courts cannot strike PAGA claims for being unmanageable, but can use other case and trial management strategies and procedures, including limiting evidence. 

The gravamen of the lawsuit is that Grubhub has misclassified its food delivery drivers as independent contractors and thereby failed to pay them at least minimum wage for all of their hours worked (including time they spent waiting for orders), failed to pay them overtime wages, and failed to reimburse them for necessarily-incurred business expenses. Relying largely on principles of federal constitutional standing, the Lawson court has ruled that the plaintiff may only pursue PAGA penalties on behalf of other employees for Labor Code violations he personally suffered. The court also imposed certain parameters on the time period for which the plaintiff may seek PAGA penalties, but it rejected other limits that Grubhub sought. 

This decision provides some examples of how defendants might try to attack PAGA claims after Estrada, and how courts might try to wrap their arms around potentially-unwieldy PAGA claims. 

Please click here for a link to an article I wrote about this case and its implications for California wage and hour litigation.

Failure to Pay Arbitration Fees Within 30 Days Waives the Right to Arbitration

 By Michael Mandel  |  January 25, 2024

On January 24, 2024, a California appellate court reminded us that California courts must strictly enforce California's 30-day time limit for companies to pay arbitration fees.

In a published decision, a California court of appeal recently held that an employer who paid the initial filing fee for an arbitration one day late was in material breach of the arbitration agreement and waived its right to arbitration. See Suarez v. Sup. Ct. (Rudolph & Sletten, Inc.) (Jan. 24, 2024, 4th DCA Case No. D082429). And, adding insult to injury, the Court ordered the employer to pay the attorneys’ fees and costs incurred by the employee as a result of the breach. This is the latest California court decision to reinforce that courts will strictly enforce the timing requirements for companies/employers to pay arbitration fees or else waive their right to arbitration. See also Espinoza v. Sup. Ct. (Centinela Skilled Nursing & Wellness Centre West, LLC), 83 Cal. App. 5th 761 (2022) (holding that a defendant employer waived its right to arbitration when it failed meet the 30-day deadline for paying arbitration fees even though the delay in payment was inadvertent, brief, and did not prejudice the plaintiff). 

Please click here to read a short article I wrote about this case and its implications for California employers, employees, companies, and consumers.