• Arbitration Clause in Independent Contractor Agreement Invalid

    Employers doing business in California know, or should know, that arbitration agreements are oftentimes thrown out as being “unconscionable.”  See Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, and its progeny.  If the employment arbitration agreement is procedurally and substantively unconscionable the courts will not enforce the agreement.  In the typical employer-employee context, the courts oftentimes have no trouble deciding the agreement is procedurally unconscionable because the employer drafts the agreement and gives it to the employee on a take-it-or-leave-it basis.  The courts believe an employee’s option to find a job elsewhere does not mitigate the inequality of bargaining power between the employer and employee.

    But what about an arbitration clause between a company and an independent contractor?  Does the same analysis apply and will the court be more or less likely to find the agreement procedurally unconscionable?  In Wherry v. Award, Inc.  (11 C.D.O.S. 2413), a California Appellate Court decided that the fact that “plaintiffs are independent contractors and not employees makes no difference in this context.”

    Whether the company uses employees or independent contractors, arbitration agreements should be reviewed by knowledgeable counsel before using or executing the agreement.  I have my own view on whether arbitration clauses are a good idea in the first place, but if you do business in California you need to be aware of the issues that you will face should you enter into an arbitration agreement.

    The Law Office of Phillip J. Griego
    95 South Market Street, Suite 520
    San Jose, CA 95113
    Tel. 408-293-6341
     
    Original article by Robert E. Nuddleman, former associate of The Law Office of Phillip J. Griego.
     

    Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

    Your use of this blog does not create an attorney-client relationship between you and the Law Office of Phillip J. Griego. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and the Law Office of Phillip J. Griego cannot guarantee the confidentiality of anything posted to this blog.

    Phillip J. Griego represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

  • 3 Interesting Overtime Results

    $4,385,000 settlement in class action case against DIRECTV, Inc:

    Michael Cicero, on behalf of himself and other installers, filed a class action lawsuit against DIRECTV alleging he and other installers were not paid overtime and were not paid for time spent driving to and from installation sites.  Cicero alleged installers were paid based on the number of installations performed and did not receive meal breaks.  The parties settled prior to trial and DIRECTV agreed to establish a $4,385,000 settlement fund for the class.

    $2,910,000 settlement in class action against Kaiser Foundation:

    Yvette Smith, Tim Dodson, and Molla Enger, on behalf of themselves and other business application coordinators and senior business application coordinators, sued Kaiser Foundation Hospitals alleging the employees were misclassified as exempt employees.  Kaiser contended the employees were exempt under the California and Federal administrative exemptions.  The plaintiffs asked for $6.46 million, but settled for $2.91 million prior to trial.

    County of Los Angeles defeats paramedic overtime claim:

    Richard Dupless and Tom Fahrny, on behalf of themselves and 82 similarly situated department employees, sued the County of Los Angeles alleging a violation of the Fair Labor Standards Act.  The plaintiffs argued that the county incorrectly calculated their regular pay rate because the county did not consider hazard bonuses paid to the employees.  The plaintiffs also alleged that they were not paid overtime when doing hazardous materials handling.  The county argued that it correctly calculated the regular rate of pay because the plaintiffs were not entitled to the bonuses unless they worked shifts in paramedic or hazardous materials position, therefore the bonuses were not part of the regular pay for the non-paramedic and non-hazardous materials positions.  The county also argued that the paramedics were not entitled to overtime unless they worked more than 182 hours in a week.  The judge granted the county’s motion for summary judgment.  No word yet on whether there will be an appeal.

    The Law Office of Phillip J. Griego
    95 South Market Street, Suite 520
    San Jose, CA 95113
    Tel. 408-293-6341
     
    Original article by Robert E. Nuddleman, former associate of The Law Office of Phillip J. Griego.
     

    Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

    Your use of this blog does not create an attorney-client relationship between you and the Law Office of Phillip J. Griego. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and the Law Office of Phillip J. Griego cannot guarantee the confidentiality of anything posted to this blog.

    Phillip J. Griego represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.

  • Explicit Mutual Wage Agreement Can Set Hourly Rate

    The general rule in California is that a non-exempt employee’s salary only compensates the employee for the regular hours worked.  This means if you pay an employee a set salary each week the employee is still entitled to overtime if s/he works more than 8 hours in a day or 40 hours in a week.  Several cases previously held that the only exception to this general rule is if you and the employee enter into an explicit mutual wage agreement prior to performing the work.  See, e.g., Espinoza v. Classic Pizza, Inc., supra, 114 Cal.App.4th at p. 974; Ghory v. Al-Lahham, supra, 209 Cal.App.3d at p. 1491; accord Hernandez v. Mendoza (1988) 199 Cal.App.3d 721, 725–726 [“Absent an explicit, mutual wage agreement, a fixed salary does not serve to compensate an employee for the number of hours worked under statutory overtime requirements.”]; Alcala v. Western Ag Enterprises (1986) 182 Cal.App.3d 546, 550–551 [“explicit agreement” for a fixed salary can comply with overtime laws]; Brennan v. Elmer’s Disposal Service, Inc. (9th Cir. 1975) 510 F.2d 84, 86 fn. 1.

    Many employers used this exception to fit the realities of the job.  If an employee was regularly scheduled to work 50 hours per week, the employer and employee would agree the employee would receive $8.00 per hour for the first 8 hours per day & 40 hours per week, and $12.00 per hour for any hours in excess of 8 per day or 40 per week.  Employers could then pay a set salary without violating the overtime requirements, so long as the employee did not work more than the amount set forth in the explicit mutual wage agreement.

    This also had the added benefit of lowering the employee’s regular rate of pay.  If a non-exempt employee is paid a salary without an explicit mutual wage agreement then the employee’s regular rate of pay is calculated by dividing the weekly salary by 40 (the maximum regular hours the employee could work) instead of the total hours worked.  This sometimes resulted in a higher regular hourly rate than the parties contemplated.

    The legislature later modified Labor Code Section 515(d) to state: For the purpose of computing the overtime rate of compensation required to be paid to a nonexempt full-time salaried employee, the employee’s regular hourly rate shall be 1/40th of the employee’s weekly salary.

    The Labor Commissioner opined that this modification eliminated the “explicit mutual wage agreement” exception to the general rule.  According to the Labor Commissioner, a non-exempt employee who is paid a fixed salary is paid nothing for the overtime hours even if the employer and employee had an explicit mutual agreement that the salary would cover the regular hours and overtime hours.

    A California Court of Appeal disagrees with the Labor Commissioner.  In Arechiga v. Dolores Press, Inc. (11 C.D.O.S. 1733), the employer and employee agreed to pay the employee $11.14 per hour for the regular hours worked and $16.71 for the overtime hours, and that the employee would regularly work 66 hours per week for a weekly salary of $880.00.  Relying on the Labor Commissioner’s position, the employee brought suit claiming the $880.00 only compensated the employee for the first 8 hours in a day and the first 40 hours in a week.  The Court of Appeal reaffirmed that the Labor Commissioner’s manual is entitled to no deference, and upheld the parties’ right to negotiate a weekly salary based on a specified agreed hourly rate.

    There is no word yet whether this decision will be appealed, or if appealed what the Supreme Court might do.

    I expect many employers may take the opportunity to modify their payment arrangements with their employees because Arechiga may help significantly limit exposure.  Employers should be sure to enter into an explicit mutual wage agreement before the work is performed.  As in most cases, the employer should also put the agreement in writing.  We highly recommend consulting with attorneys familiar with California wage and hour law before modifying your policies.

    The Law Office of Phillip J. Griego
    95 South Market Street, Suite 520
    San Jose, CA 95113
    Tel. 408-293-6341
     
    Original article by Robert E. Nuddleman, former associate of The Law Office of Phillip J. Griego.
     

    Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law, but we cannot answer questions about specific situations or provide legal advice. If you desire legal advice, you should contact an attorney.

    Your use of this blog does not create an attorney-client relationship between you and the Law Office of Phillip J. Griego. The use of the Internet or this blog for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be posted in this blog and the Law Office of Phillip J. Griego cannot guarantee the confidentiality of anything posted to this blog.

    Phillip J. Griego represents employees and businesses throughout Silicon Valley and the greater San Francisco Bay Area including Palo Alto, Menlo Park, Mountain View, Los Altos, San Jose, the South Bay Area, Campbell, Los Gatos, Cupertino, Morgan Hill, Gilroy, Sunnyvale, Santa Cruz, Saratoga, and Alameda, San Mateo, Santa Clara, San Benito, Mendocino, and Calaveras counties.