Laborsphere

California Lawyers Author Article for The Recorder

San Francisco partner Cheryl Orr and counsel Fey Epling wrote an article for The Recorder on recent trends that indicate a shift in the landscape of employer class actions, especially in the wake of Brinker Restaurant v. Superior Court.

Cheryl and Fey note that “employers across America are breathing a collective sigh of relief at the California Supreme Court’s ruling,” in Brinker, particularly its holding that “an employer satisfies its duties by providing and permitting breaks, as opposed to ensuring that their employees take them.” This is, however, “just the latest blow to putative class actions” they have observed as management-side class action defense practitioners.

The article outlines other factors, such as, a shift in the nature of filings, the choice of venue, the matter of class certification and a “greater sense of urgency for resolution” of litigation, that have all resulted in “a fairly dramatic shift in the class action landscape.”

To read the entire article, click here.

DOJ Extends Compliance Deadline for Means of Entry and Exit to Swimming Pools at Hotels and Other Public Accommodations

On the disability access front, on May 21, 2012, the DOJ issued the following regulations applicable to swimming pools at public accommodations (including hotels). Cutting through the regulatory jargon, the DOJ’S action extended to January 31, 2013, a compliance deadline that had been March 15, 2012 and was then extended to May 21, 2012. To read the final rule in its entirety click the below link.

http://www.ada.gov//regs2010/ADAregs2012/finalrule_existingpools_FR_may21.htm

The compliance deadline applies to rules passed in the Fall of 2010 that require hotels and other public accommodations to install pool lifts for entry and exit in new construction and alterations. Hotels with existing pools must consider whether it is “readily achievable” to install lifts.

For more information on the substance of the rules, the DOJ recently issued guidance, which can be viewed by clicking the below link.

http://www.ada.gov//pools_2010.htm

New Jersey’s Highest Court Rejects “Absolute Liability” Standard for Employee Assault of Patient

The New Jersey Supreme Court in Davis v. Devereux Foundation, 209 N.J. 269 (2012), recently rejected an attempt to impose absolute liability against a residential health care facility for a criminal assault committed by an employee against a resident patient. The Court determined that the facility should be held to the traditional reasonable duty of care towards its patients. Further, the traditional “scope of employment” analysis should be applied to determine whether the employer could be held liable for the tortious conduct of its employee.

In Davis, a resident counselor employed by Devereux, a residential institution for the developmentally disabled, engaged in a pre-meditated act of aggression when she assaulted a residential patient by pouring boiling water on him. The counselor was arrested and imprisoned for criminal assault, and the patient’s guardians obtained a default judgment against her for assault in the ensuing civil action.

The family also brought a civil action against the health care facility. Reversing the trial court’s grant of summary judgment in favor of the facility, the Appellate Division remanded for trial and imposed an absolute liability standard on the employer under the common law “non-delegable duty” analysis, which imposes a duty on the master to protect those entrusted to its care in an in loco parentis relationship, such as a school or health care facility, and subjects the master to liability for the acts of its employees whenever they fail to meet their duty of care. Under that common law approach, the non-delegable duty imposed on the employer cannot be satisfied by any level of care taken by the employer in hiring or supervision of its staff, but is based solely on the level of care taken by the employee.

The Supreme Court reversed and reinstated summary judgment in favor of the health care facility. The Court observed that the “non-delegable duty” would unfairly impose absolute liability on the employer regardless of the level of care engaged in by the employer. “Once an employee has committed a tortious act, the duty would effectively impose absolute liability upon residential institutions” even if the employer had acted reasonably in screening applicants and supervising its employees.

The Court instead determined that traditional principles of the duty of reasonable care should be followed with respect to the actions of employees of facilities responsible for in loco parentis care. The Court observed that such facilities are expected to take reasonable measures to assure that their staff members are not endangering the safety of the patients entrusted to their care, and that liability for the tortious acts of their employees would be determined under traditional “scope of employment” principles. Finding in this case that Devereux acted reasonably in screening individuals prior to hiring, and in supervising the relationship of its employees with the residential patients, the Court determined that the facility had met its duty of care to its patients. The Court further determined that the counselor had acted far outside the scope of her employment in pouring boiling water on the patient where she acted out of personal anger and frustration, and not in any way to further the interests of her employer.

New Jersey’s Appellate Court Denies Employer’s Attempt to Dismiss Claims on Eve of Trial Based on Employee Agreement to Arbitrate

Can an employer litigate employment claims in court and then enforce an arbitration agreement against the plaintiff-employee on the eve of trial to avoid presenting the case to a jury? The New Jersey Appellate Division just said, “No.”

Plaintiff Karen Cole was a nurse anesthetist employed by Liberty Anesthesia Associates, LLC to work at Jersey City Medical Center. When her privileges were revoked by the Hospital, Liberty terminated her employment and she filed suit against both Liberty and the Hospital for retaliatory discharge under the New Jersey Conscientious Employee Protection Act (“CEPA”), and for discriminatory discharge based on her disability under the New Jersey Law Against Discrimination (“LAD”).

Cole settled her claims against the Hospital at the hearing on the Hospital’s motion for summary judgment. Liberty did not settle with plaintiff at that time. Instead, after defending the action for almost two years in litigation, Liberty moved to dismiss the claims against it one month later in a motion in limine filed three days before trial based on the arbitration agreement Cole had entered into in her employment agreement with Liberty. The trial court enforced the arbitration agreement and dismissed the case on the eve of trial, and Cole appealed.

In a March 29, 2012 opinion, the New Jersey Appellate Division reversed and remanded the action for trial. The court found that Liberty’s counsel had pursued the litigation – instead of seeking to enforce the arbitration agreement – as a deliberate trial strategy, and determined that Liberty was equitably estopped from enforcing the arbitration provision at the last minute before trial where it had failed to mention arbitration among the thirty-five affirmative defenses asserted in its Answer; failed to identify the arbitration agreement in discovery; and failed to raise the agreement in its motion for summary judgment on the merits. The court observed that Liberty’s deliberate course of conduct was prejudicial to Cole where it had caused her not only to participate in extensive discovery, but also to prepare to try her case before a jury, which the court noted required a great deal more preparation than presenting a case in arbitration.

To read the published opinion in Cole click here. Cole is reported at 425 N.J. Super 48 (App. Div. 2012).

7th Circuit Finds Pharmaceutical Sales Reps Exempt Under FLSA Administrative Exemption

In consolidated cases decided on May 9, 2012, the U.S. Court of Appeals for the Seventh Circuit (which covers employers in Illinois, Indiana and Wisconsin) held that pharmaceutical sales representatives employed by Abbott Laboratories, Inc. and Eli Lilly & Co. are exempt from overtime pay requirements under the Fair Labor Standards Act’s “administrative” exemption. In so holding, the Seventh Circuit joins the Third Circuit, which similarly held in February 2010 that Johnson & Johnson sales representatives were covered by the administrative exemption. On the other hand, the Second Circuit ruled in July 2010 that the administrative exemption did not apply to sales reps of Novartis Pharmaceutical Corp.

The Seventh Circuit’s ruling on the administrative exemption comes at a time when the U.S. Supreme Court has heard arguments, and expects to rule next month, in a case addressing whether the FLSA’s separate “outside sales” exemption applies to pharmaceutical sales reps employed by GlaxoSmithKline PLC. Depending on the Supreme Court’s ruling and the particular circumstances of the employees involved, employers in the Seventh Circuit may soon have a double-barreled argument that their outside sales employees are exempt from FLSA overtime pay requirements under both the administrative and outside sales exemptions. The consolidated Seventh Circuit cases are Schaefer-LaRose v. Eli Lilly & Co., No. 10-3855, and Jirak, et al. v. Abbott Laboratories, Inc., Nos. 11-1980 and 11-2131.

New York High Court: No At-Will Exception For Complaining Hedge Fund Executive

The New York State Court of Appeals declined this week to recognize an exception to the at-will employment doctrine for a hedge fund’s Chief Compliance Officer who alleged that he was fired for objecting to his employer’s unlawful trading practices. In Sullivan v. Harnisch, Plaintiff Joseph Sullivan was an employee and minority owner of Defendants Peconic Partners LLC and Peconic Asset Managers LLC (collectively, “Peconic”), holding various titles including Chief Compliance Officer. Defendant William Harnisch was the majority owner, President and Chief Executive Officer. Sullivan filed a lawsuit for wrongful discharge, alleging that Peconic fired him for objecting, in his capacity as Chief Compliance Officer, to Harnisch’s “manipulative and deceptive trading practices.” The trial court denied Defendants’ motion for summary judgment seeking to dismiss the claim. The Appellate Division, First Department, reversed and Sullivan appealed.

According to the Court of Appeals, the “gist of Sullivan’s claim is that the legal and ethical duties of a securities firm and its compliance officer justify recognizing a cause of action for damages when the compliance officer is fired for objecting to misconduct.” The Court reiterated the at-will employment doctrine, explaining that, “absent violation of a constitutional requirement, statute or contract,” an employer has the right to terminate employment at will. The Court indicated that it has “recognized an exception” to this doctrine “only once.”

That exception arose in Wieder v. Skala, in which a law firm had allegedly fired a lawyer for insisting that it comply with the profession’s ethical obligations. According to the Court, that decision “stressed both the ethical obligations of members of the bar and the importance of those obligations to the employment relationship between a lawyer and a law firm.” Moreover, the decision focused on the legal profession’s “unique function of self-regulation.”

In Sullivan, the Court emphasized the narrow scope of the Wieder decision. Although the Court left open the possibility that “there are some employment relationships, other than those between a lawyer and a law firm, that might fit within the Wieder exception,” the Court concluded that “the relationship in this case is not one of them.” Distinguishing Wieder, the Court explained that Sullivan’s regulatory and ethical obligations were not inextricably tied to his duties as an employee. Indeed, the Court observed, Sullivan “was not even a full-time compliance officer.” The Court also stated that regulatory compliance was not at the “very core” and the “only purpose” of Sullivan’s employment.

The Court affirmed the Appellate Division’s decision. In a strongly-worded dissent, Chief Judge Lippman charged that the “majority’s conclusion that an investment adviser like defendant Peconic has every right to fire its compliance officer, simply for doing his job, flies in the face of what we have learned from the Madoff debacle, runs counter to the letter and spirit of this Court’s precedent, and facilitates the perpetration of frauds on the public.”

Notwithstanding the dissent’s alarm that New York employers are now free to fire employees who allege wrongdoing, prudent employers – particularly in highly regulated fields like the securities industry – take such allegations seriously and investigate them, and are careful to avoid allegations of retaliation.