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Careful what you ask for, warns Colorado Supreme Court

The Colorado Supreme Court warned in a recent case that a party who seeks to enforce a settlement agreement — even by merely seeking a declaratory judgment and without actually asserting a breach of the settlement agreement — may make itself liable, if it fails in its action, for attorney fees under the settlement agreement’s fee-shifting clause, especially where that party itself had stated its intent to seek such fees had it been successful.

Having themselves sought attorney fees under that provision, plaintiffs tacitly acknowledged that their claims sought to enforce the Settlement Agreement’s terms. Having done so, plaintiffs cannot now take the opposite position, merely because their lack of success at trial rendered them liable for defendant’s attorney fees under the Settlement Agreement

Source: Klun v. Klun, 442 P.3d 88 (Colo. 6/3/2019).

Three issues in Colorado regarding vacation pay

Colorado law, CRS 8-4-101 defines vacation to be a part of “wages” when “earned in accordance with the terms of any agreement. If an employer provides paid vacation for an employee, the employer shall pay upon separation from employment all vacation pay earned and determinable in accordance with the terms of any agreement between the employer and the employee.” As such, an employee cannot agree to waive vacation, or any other “wages,” once “earned, pursuant to CRS 8-4-121, and CRS 8-4-109 requires that such vacation, along with all other “wages,” to be paid out in final paychecks.

Despite what seems relatively clear statutory language on first blush, three issues persist. Colorado employers have received some fleshout on at least two.

1. Can an employer impose conditions on the payout of vacation in a final paycheck? The Colorado Court of Appeals says, yes.

A recent Colorado Court of Appeals case suggests the law may not be that simple. In  Nieto v. Clark’s Mkt., Inc. the employer added a twist in its handbook. There, a policy said that an employee “forfeits all earned vacation and pay benefits” if they fail to provide 2-week notice before quitting. The employee cited the foregoing statutes, arguing the vacation could not be waived and had to be paid out in the final paycheck.

The Court of Appeals held for the company. The Court of Appeals looked to the “terms of any agreement,” as required by the statute, in other words, to the language of the vacation policy and held that 2-week notice was a condition of earning the vacation.

Ms. Nieto’s right to compensation for accrued but unused vacation pay depends on the parties’ employment agreement. And that agreement unequivocally says that the vacation pay she seeks wasn’t vested given the circumstances under which she left the Market’s employ.

Is Nieto good law in Colorado, can employers rely comfortably on it? Many would argue that the Colorado Court of Appeals simply got it wrong. However, the deadline for appeal has now passed, so it is certainly the law as between Ms. Nieto and her former employer Clark’s Market, Inc. It is noted too that the decision was selected for official publication, so, unless the Court of Appeals or the Colorado Supreme Court revisit the issue in a future case, it is binding on trial courts. Therefore employers could arguably rely on it for now, so long as they are willing to risk protracted litigation and future appeals.

2. Can an employer apply a use-it-or-lose-it rule to vacation at the end of every year? The Colorado Division of Labor and Employment says, no, but the issue is pending in the Colorado Court of Appeals.

Pending before the Colorado Court of Appeals is Blount, Inc. v. CDLE, in which the Colorado Division of Labor and Employment is asking the Court of Appeals to rule against an employer’s purported use-it-or-lose-it policy. In an apparent effort to end-run the Court’s decision, the CDLE issued on the same day as it filed a brief in the appeal, a new rule (7 CCR 1103-7 rule 2.15) — which it then proceed to rely upon in its brief — stating that employers may not have use-it-or-lose-it policies. How will the Court of Appeals rule? How will the Court of Appeals view the CDLE’s apparent claim-jumping regulation? Will the Court of Appeals take Blount as an opportunity to re-consider or limit Nieto? Stay tuned.

3. Do these same rules apply to PTO or just vacation? The Division of Labor and Employment says, no, these restrictions do not apply to PTO.

As of this summer, callers to the Colorado Division of Labor and Employment will be told it takes the position that these “vacation” rules do not apply to PTO. CRS 8-4-101 speaks only to the inclusion of “vacation” in “wages,” not PTO; therefore, the Division will not currently pursue an administrative wage claim for PTO.

Notwithstanding, employers should realize that some plaintiff attorneys will take such claims to court, but they do so under a contract law theory, not under Colorado’s wage statutes, and as a contract claim, such claims do not carry attorney fees or penalties.

Supreme Court rules arbitrator should, depending on language, decide arbitrability, but Colorado law might say otherwise?

Earlier this year, the Supreme Court held, in Henry Schein, Inc. v. Archer and White Sales, Inc., held that, depending on the language of the parties’ arbitration agreement, it is for an arbitrator, not a judge in court, to decide questions of arbitrability. The decision involved relatively common language saying, “Any dispute arising under o related to this Agreement (except for actions seeking injunctive relief and disputes related to trademarks, trade secrets, or other intellectual property…) shall be resolved by binding arbitration….” That language is sufficient, the Court held, to invest in the arbitrator, not the judge, the arbitrability of a complaint that sought in part injunctive relief (arguably falling into that language’s exception). The Supreme Court’s decision significantly shifted into arbitration an even larger chunk, as it were, of the kinds of issues that are frequently litigated in these cases. The Supreme Court relied on the Federal Arbitration Act’s broad policy of favoring arbitration.

A recent article in the Colorado Lawyer notes that CRS 13-22-206 of Colorado’s state arbitration act might suggest otherwise, at least as to cases seeking arbitration under state law versus the FAA, which the article notes might be a question. Section 13-22-206 of Colorado’s state law provides, in part, as follows:

(2) The court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate.

(3) An arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled and whether a contract containing a valid agreement to arbitrate is enforceable.

(4) If a party to a judicial proceeding challenges the existence of, or claims that a controversy is not subject to, an agreement to arbitrate, the arbitration proceeding may continue pending final resolution of the issue by the court, unless the court otherwise orders.

 

Gene Commander, Esq., author of the article, concludes with the helpful suggestion that drafters consider FAA preemption and further draft the agreement to clearly memorialize the parties’ intent as to whether and which arbitrability issues will be decided by a judge versus a court.

Third Circuit expounds on class actions in wage claims

A class action is a way for one or more persons to sue on behalf of a voluminous group of similarly situated persons. The idea is that the claim may not be financially worthwhile for one or a few people to prosecute, but where many people have suffered the same wrong, it makes sense for them to litigate the claims all at once, just as it is more efficient for the courts and defendant.

Wage claims are often for relatively small amounts, when one considers only one plaintiff, but can be for huge amounts when prosecuted on behalf of a claim. Wage claims though aren’t technically called a class action. Wage claims are prosecuted under the Fair Labor Standards Act (FLSA), which provides for “collective” actions; whereas, class actions are prosecuted under Rule 23 of the Rules of Civil Procedure.

What’s the difference between a class action and a collective action? Well, there aren’t many, but the few differences there are, are indeed significant. The biggest difference is conceptual and practical. In a class action, the judge declares a “class,” and members can opt out if they don’t wish to be part of the lawsuit. In a collective action (a FLSA wage claim), the judge declares the potential class, but members have to opt in to become part of the lawsuit.

There are other significant differences in terms of the procedures and standards court follow at the start of the case. Those differences can drive significant outcomes in terms of settlement strategies and litigation approaches.

Still, the differences can be as subtle as they are sometimes significant, triggering relatively frequent litigation in the courts. The Tenth Circuit has, for example, said, in a 2001 decision (Thiessen) that there is “little difference in the various approaches”  under Rule 23 for class actions versus FLSA for collective actions. However the Third Circuit, in a recent decision, Reinig v. RBS Citizens, N.A., held the differences, though often slight, are significant enough that an appeal involving the one did not give it jurisdiction to consider issues related to the other. The Third Circuit, therefore, declined to decide whether certification of a collective action under FLSA was appropriate, even though it did decide that certification of a class under Rule 23 was inappropriate. The court left the collective action certification for the lower court and later litigation.

In so ruling, the court did, though, hold that the class action Rule 23 certification — the issue on appeal before it — had been improper. The Court clarified that, in order to prove that the plaintiffs’ lawsuit alleging “off the clock” work was appropriate for class certification, Rule 23 required them to prove that they, and the requested class members, could all show that their rights were violated using the same evidence of liability. It was not sufficient to prove that they had all been wronged by the same employer, that they had all been shorted wages to which they should have been entitled, or even that they had all been shorted in the same way. Rule 23, the Third Circuit held, requires that they prove they, and the requested class, could establish their cases using common evidence.

As for the merits of their claim, the Third Circuit opined that, to prove an off-the-clock work claim, the plaintiffs would need to show they had worked off the clock, which constituted overtime, and that the employer had at least “constructive knowledge” of the same. The court did not explain what would constitute “constructive knowledge.”

To satisfy their wage-and-hour claims, Plaintiffs must show that: (1) pursuant to Citizens’ unwritten “policy-to-violate-the-policy,” the class MLOs performed overtime work for which they were not properly compensated; and (2) Citizens had actual or constructive knowledge of that policy and of the resulting uncompensated work.  See Kellar v. Summit Seating Inc., 664 F.3d 169, 177 (7th Cir. 2011) (citing Reich v. Dep’t of Conservation & Natural Res., 28 F.3d 1076, 1082 (11th Cir. 1994)); see generally Davis v. Abington Memorial Hosp., 765 F.3d 236, 240–41 (3d Cir. 2014).  Thus, to satisfy the predominance inquiry, Plaintiffs must demonstrate (1) that Citizens’ conduct was common as to all of the class members, i.e., that Plaintiffs’ managers were carrying out a “common mode” of conduct vis-à-vis the company’s internal “policy-to-violate-the-policy,” and (2) that Citizens had actual or constructive knowledge of this conduct.  See Sullivan, 667 F.3d at 299; Dukes, 564 U.S. at 358; see also Tyson Foods, Inc., 136 S. Ct. at 1046 (explaining that, although a plaintiff’s suit may raise “important questions common to all class members,” class certification is proper only if proof of the essential elements of the class members’ claims does not involve “person-specific inquiries into individual work time [that] predominate over the common questions”).  

The Third Circuit’s holding that class and collective actions are sufficient different that it lacked jurisdiction over issues re the one even though it had jurisdiction over issues re the other firmly establishes a split among the Circuits on the issue. Interested readers may wish to check if either party seeks Supreme Court review.

Source: Reinig v. RBS Citizens, N.A.case no. 17-3464 (3rd Cir. 12/31/19).

Would-be class action plaintiffs jujitsu Uber’s arbitration agreement

In a move Bruce Lee would have admired, a group of 12,501 drivers seeking to assert wage-hour and related claims against Uber — faced with having each executed arbitration agreements — have filed a Petition in the federal courts for the Northern District of California demanding just that, 12,501 individual arbitrations.

The Petition illustrates what is likely to become a powerful tactic for would-be class/collective action plaintiffs who find themselves otherwise stymied by arbitration agreements that do not permit class/collective actions. As reported here, the U.S. Supreme Court recently endorsed arbitration agreements as effective tools against class/collective action litigation. This move turns that tool back onto the employer itself.

The drivers allege that, as early as August 18, 2018, they began submitting claims to arbitration under the arbitration agreements. The drivers allege that, as of the time of the Petition, 12,501 demands for arbitration had been submitted.

Of those 12,501 demands, in only 296 has Uber paid the initiating filing
fees necessary for an arbitration to commence. Out of those matters, only 47 have
appointed arbitrators, and out of those 47, in only six instances has Uber paid the
retainer fee of the arbitrator to allow the arbitration to move forward..

Why hasn’t Uber (allegedly) paid the arbitrator’s retainer fees in the other cases? Well, if true, it might be related to the (alleged) fact that (according to the Petition, the fee in each such case is a “NON-REFUNDABLE filing fee of $1,500 for each.” As in, according to the Petition, a total of $18,681,000 (12,501-47x$1,500), just to start each of the 12,501 cases.

Are the Uber drivers asking the court to, therefore, let them out of their arbitration agreements? Are they asking the court to allow them to pursue a class/collective action in court? No, because that would be contrary to recent Supreme Court decision. Instead, they’re asking the Court to order Uber to comply with the (alleged) arbitration agreements, starting by paying the initial arbitration fees. The Petition seeks other relief to include an order requiring Uber to continue to participate in each of the 12,501 arbitrations and to pay the drivers’ attorney fees and costs in prosecuting their Petition.

 

Denver federal court, one of the most pro-employee?

In what is likely to be a bombshell article amongst Colorado labor and employment attorneys, Bloomberg BNA reported today that its analysis of judicial statistics shows Denver’s federal court to be the most employee-plaintiff friendly of 11 federal courts it has analyzed. “The other courts Bloomberg Law has reviewed are: the Eastern District of New York, the Northern District of Alabama, the Northern District of Illinois, the Western District of Washington, the Middle District of Florida, the Western District of Wisconsin, the Northern District of Texas, the Central District of California, the Western District of Oklahoma, and the Northern District of Ohio.”

The District of Colorado grants employers’ motions for early dismissal—made right after a lawsuit is filed—just 36.7 percent of the time in job bias and similar cases. It dismisses such cases on the eve of trial—following a motion for summary judgment—at a 45.8 percent clip. That gives Denver workers something extra to be cheery about, in addition to the more than 200 beers crafted in the city each day and the playoff-contending Colorado Rockies.

Interested in how particular judges rank? Bloomberg BNA analyzed them individually and provides what it views as the relevant statistics for each, concluding,In all, eight of the 11 judges granted early motions to dismiss in employment cases less than 40 percent of the time.

Source: Workers Suing in Denver Federal Court Feeling Rocky Mountain High, P. Dorrian (9/21/18).

First and Seventh Circuit decisions illustrate the “adverse employment action” requirement in EEO cases

As a general rule, the EEO laws, such as Title VII (race, gender, religion, etc.) and the ADEA (age), do not allow a plaintiff to sue for the everyday “slings and arrows” they might suffer in the workplace (quoting Shakespeare’s Hamlet). Rather, the law requires an “adverse employment action.” The adverse employment action test requires the plaintiff to show material harm to the terms and conditions of their employment. That doesn’t always have to mean being fired or demoted. In retaliation cases, it can be anything a reasonable worker would find sufficient to chill them from reporting misconduct.

Two recent decisions by the First and Seventh Circuit illustrate the kinds of conduct that do not rise to the level of an adverse employment action.

In the First Circuit case, the plaintiff argued that each of the following, separately and together, was sufficient, but the court disagreed:

  • The plaintiff’s supervisor allegedly demonstrated anger and overreacted when the plaintiff went over his head.
  • The supervisor allegedly made a temporary change to the plaintiff’s schedule.
  • The supervisor allegedly told the plaintiff to pull down his pants when the plaintiff said he had a skin condition.
  • The supervisor and two coworkers allegedly called the plaintiff a “cry baby.”
  • When the plaintiff took a medical leave but did not provide the required medical documentation, his leave was converted to paid vacation.

In the Seventh Circuit case, that court held the following was insufficient to prove an adverse employment action:

  • The plaintiff’s request for medical leave was, allegedly, originally misclassified as paid sick leave not FMLA leave.
  • A psychological examination had, allegedly, been requested of him in circumstances where the evidence such a request was “not unusual” (the plaintiff was a police officer and the psychological exam was requested as part of his clearance to return to duty).
  • Approval of his request to work a secondary job had allegedly been delayed for three months.

As the First Circuit noted, the adverse employment action requirement may seem harsh, but it remains the well established threshold that a plaintiff must cross to warrant court litigation.

Today’s opinion is a lesson straight out of the school of hard knocks. No matter how sympathetic the plaintiff or how harrowing his plights, the law is the law and sometimes it’s just not on his side. See Medina-Rivera v. MVM, Inc., 713 F.3d 132, 138 (1st Cir. 2013) (quoting Turner v. Atl. Coast Line R.R. Co., 292 F.2d 586, 589 (5th Cir. 1961) (Wisdom, J.) (“[H]ard as our sympathies may pull us, our duty to maintain the integrity of the substantive law pulls harder.”)

Source: Freelain v. Village of Oak Park, case no. 16-4074 (7th Cir. 4/30/18); Sepulveda-Vargas v. Caribbean Restaurants, LLC, case no. 16-2451 (1st Cir. 4/30/18).

Supreme Court upholds mandatory pre-dispute arbitration agreements, even when they bar class/collective actions

In a 5-4 decision the Supreme Court may have given employers — at least in some states — to block class and collective actions. The Court ruled that mandatory pre-dispute arbitration agreements are enforceable under the Federal Arbitration Act (FAA), even in employment cases, and even as a block against class/collective actions. The Court had previously so ruled in the context of consumer contracts. In this case, the Supreme Court extended that ruling to employment agreements.

This ruling means companies can now lawfully require — at least under federal law — both consumers (as a condition of buying their product or service) and now employees (as a condition of working for the company) to agree,

  • Before any dispute ever arises,
  • To submit any future possible disputes to arbitration,
  • Instead of litigating them in court, and
  • Unless otherwise spelled out in the arbitration agreement, to waive any future rights to participate in class or collective actions.

In extending its ruling to employment cases, the Court rejected the argument that the National Labor Relations Act protects an employee’s right to join class/collective actions.

Perhaps of greatest importance the Court signaled a sharp curtailing of precedent holding that courts must defer to administrative agencies. That principle is called Chevron deference (after the Supreme Court’s 1984 decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.). Chevron deference has become highly controversial and is seen by conservative legal theorists as the chief vehicle for creation of the so-called administrative state. Here the issue of Chevron deference was raised because the National Labor Relations Board had held that the statute it oversees, the National Labor Relations Act, does include protection for class/collective actions and therefore should have rendered illegal the agreement at-issue. Over a heated dissent, the Supreme Court rejected the argument that the Board’s interpretation of the NLRA was entitled to deference. Whether this portends an end to Chevron deference or will prove an isolated ruling remains to be seen.

A “collective” action is like a class action. Some laws, notably, some wage-hour laws (such as minimum wage and overtime laws) permit “collective” actions instead of class actions. Simply put, the difference is that in a class action, the judge declares the existence of a class, and class members opt out of the class if they do not wish to participate; whereas, in a collective action, members must opt in to join the class.

Employers that have previously been concerned about stepping into the waters of mandatory pre-dispute arbitration agreements may now wish to consult with counsel about doing so. Employers should remember that, although this is a strong case for employers, it does not necessarily apply to claims brought under state laws, and some states, notably both New York and California, have taken strong positions against this type of agreement.

Source: Epic Systems Corp. v. Lewis, case no. 16-285 (5/21/18)

“Tolling” versus “Suspending”: Which is it? SCOTUS says “tolling” means tolling.

Imagine a plaintiff who has both federal and state law claims. This is commonly the case in employment lawsuits where a plaintiff may, for example, have federal discrimination claims (often under Title VII) and state law claims (such as assault). Imagine that plaintiff faces a 2-year statute of limitations on their state law claims. Assume he files his EEOC charge, receives a right to sue and, exactly 1 year after the incidents at-issue, files his federal lawsuit. In that lawsuit he also asserts his state law claims. 14 months later, the federal court dismisses the federal claims, then, without ruling on the merits of the state law claims, dismisses them because there is no longer a federal claim to establish federal jurisdiction. At that point, it’s been 26 months (12+14) since the incidents at-issue occur, in other words, the 2-year (24 month) statute of limitations is 2-months expired.

So does the state law 24-month statute of limitations bar the plaintiff from re-filing his state law claims, this time in state court? No, there is a federal statute, 28 USC 1367(c), that says state law claims are “tolled” while the case is pending in federal court and, thereafter, for another 30 days. In other words, our hypothetical plaintiff can still file his state lawsuit, but he has to do so quickly, at least within that 30-day period.

But what if our hapless plaintiff misses that 30-day period? In other words, the judge ruled 26 months after the incidents at-issue. He clearly had the right to file during that 27 month, but what if he misses that window and doesn’t file until, say, the 30th month? Did his deadline expire at the end of that 30-day period or, because sec. 1367(c) says the state statute of limitation is “tolled,” does he get that 30 days plus another 14 months for the period his case was pending in federal court?

Faced with a choice between reading sec. 1367(c) as giving that plaintiff either just 1 month (30 days) or 15 months (30 days plus 14 months), the Supreme court held, in a divided opinion, that he has15 months in that scenario. In other words, the majority held that, because the federal tolling statute says the state statute of limitations is “tolled,” the plaintiff stopped the clock when he filed his federal lawsuit. He gets all the rest of the state statute of limitations after that, in other words, all the time that the case was pending before the federal court, plus the federal tolling statute’s 30 extra days.

That is, the limitations clock stops the day the claim is filed in federal court and, 30 days postdismissal, restarts from the point at which it had stopped.

The majority’s 5-4 decision reverses the lower Circuit Court and overrules a dissent, both of which would have held that the plaintiff only had 30 days. In a frankly odd dissent, the normally articulate J. Gorsuch explained the dissent’s view of sec. 1367 by analogizing to an obscure 1929 book:

Chesterton reminds us not to clear away a fence just because we cannot see its point. Even if a fence doesn’t seem to have a reason, sometimes all that means is we need to look more carefully for the reason it was built in the first place. The same might be said about the law before us.

The decision is a victory for plaintiffs. Although a relatively unusual scenario, the majority’s reading of sec. 1367 provides plaintiffs with time to carefully consider their next move (whether and what to file in state court) following an adverse ruling in federal court.

Source: Artis v. District of Columbia, 138 S.Ct. 594 (2018).