Seven Key '07 Decisions

As you say goodbye to 2007, we invite you to look back at the most precedent-setting employment law cases of the past year.

(1) Murphy v. Kenneth Cole Productions

The California Supreme Court ruled that a three-year statute of limitations, not one year, applies to the "one additional hour of pay" employers are required to pay employees when meal and/or rest breaks are not provided.

After extensive review of the history behind the missed meal and rest breaks pay requirement, the court clarified that wages are benefits that an employee is entitled to as part of compensation, including money, vacation pay, room and board, and sick pay. California law entitles non-exempt employees to an unpaid 30-minute, duty-free meal period upon their fifth hour of work, if their shift is longer than six hours, and a paid 10-minute rest break per four hours of work. Employees who must forego the meal and rest breaks are giving the employer "free" work and suffer a loss of a benefit to which they are entitled. In other words: they suffer a loss of wages. The hour of additional pay is not only an incentive for employers to comply with the law but foremost a premium wage that compensates employees.

The court also found that when a trial court hears a Labor Commissioner case, the court hears the case without regard to the case as heard by the Labor Commissioner. By the same token, the employer may abandon, change or add defenses not brought before the Labor Commissioner.

(2) Welcher v. Workers' Compensation Appeals Board and Brodie v. WCAB

Supreme Court ruling confirmed the proper calculation of a workers' compensation permanent disability award for employees who suffer multiple injuries. In the opinion the court explained that SB 899 (Poochigian; R-Fresno) of 2004 and the "history behind them reflect a clear intent to charge employers only with that percentage of permanent disability directly caused by the current industrial injury."

This leaves a formula known as "Formula A," in effect. It begins with the overall percentage of permanent disability, and then subtracts the non-compensable percentage of permanent disability or that percentage attributable to a previous industrial injury. Formula A makes sure employers are only liable for the percentage of permanent disability directly caused by the current work-related injury. Employees with pre-existing conditions or prior industrial injuries should only receive workers' compensation in an amount commensurate with the injury that has just occurred.

(3) Green v. State of California

Dwight Green, a state employee, was told he could not return to work following a leave of absence because, according to his doctor, Green couldn't perform the required job duties. Green filed an action claiming that he was discriminated against based on his disability because the employer could not prove Green was no longer qualified to perform his job.

Initially, Green won a multimillion dollar jury verdict. A court of appeal agreed with the jury and the case made its way to the California Supreme Court.

The Supreme Court clarified that FEHA places the burden on employees to prove that they are qualified individuals and not on the employer to establish that the employee was not qualified in order to prevail.

(4) Gentry v. Superior Court of Los Angeles County

Robert Gentry filed a class action lawsuit against Circuit City Stores, Inc. on behalf of himself and other misclassified customer service managers who were owed wages for overtime hours. Despite the employer's dispute resolution procedures, the California Supreme Court found that class action waivers in arbitration agreements may or may not be enforced, depending on whether the class arbitration would be a significantly more effective way of vindicating the rights of employees than individual arbitration.

If a dispute involves a small amount of damages and a group of employees with the same dispute, then class arbitration may be the most efficient and least expensive way of enforcing employee rights. If one provision of an arbitration agreement is deemed unenforceable, the entire agreement may still be effective.Visit www.hrcalifornia.com/topseven to view the remaining three key '07 decisions.

(5) Prachasaisoradej v. Ralphs Grocery Co., Inc

Eddy Prachasaisoradej worked as a produce manager for Ralphs Grocery. He filed a claim against Ralphs alleging that the formula used to determine the supplementary monies under the company's incentive compensation plan (ICP) violated California law because Ralphs was shifting the cost of running its business to the employees by withholding, deducting or recouping from them wages belonging to the employees. Ralphs said the formula was determined by subtracting each store's operating expenses from store revenues.

An employee ICP based on the employer's profits, which was calculated by subtracting operating expenses from revenues, is not an unlawful wage deduction according to the California Supreme Court. An employer that offers supplementary compensation (in addition to regular wages) designed to reward employees if and when their collective efforts result in higher profits for the company is not a violation of California wage protection laws.

(6) Repa v. Roadway Express, Inc.

Injured employee Alice Repa sued Roadway claiming that it violated the Family Medical Leave Act (FMLA) by requiring her to use accrued sick and vacation pay while she was receiving disability benefits from the Health Fund. Roadway countered, saying the regulation applied only to disability leave related to the birth of a child and only to temporary disability benefit plans administered by employers, not to plans administered by a third party.

The 7th U.S. Circuit Court of Appeals (covering Illinois, Indiana and Wisconsin) held that employees on FMLA leave who are also receiving employer-provided disability benefits may not be required to use accrued sick or vacation leave during their absence. Although not specifically applicable to California employers, California courts will likely look to this decision if a California employee challenges an employer policy requiring use of sick, vacation or paid time off during an FMLA leave or a leave of absence under the California Family Rights Act (CFRA).

(7) Incalza v. Fendi North America

Giancarlo Incalza, a citizen of Italy, took a sales position in Fendi's New York City store, after assurances that his employment was secure. Years later Incalza sued, claiming he was wrongfully terminated in violation of an implied contract that he would only be fired for good cause. Incalza showed that Fendi had a policy of termination only for good cause and he was given oral assurances of continued employment. When Fendi was sold to a French company, it was advised that the E-1 visas issued to Incalza and one other employee were no longer valid, but H1-B visas were probably available for these employees. Fendi applied for an H1-B visa for the other employee but terminated Incalza's employment.

A California appeals court clarified that an employer may not continue the employment of unauthorized workers, but the Immigration Reform and Control Act (IRCA) does not restrict an employer from suspending or placing an employee on an unpaid leave for a reasonable period of time to remedy his immigration status. According to IRCA an individual is "employed" only if he is performing work and getting paid. IRCA's intent is to ensure unauthorized immigrants are not getting paid wages but also to protect legal immigrants from immediate termination without further inquiry or opportunity to remedy their status.

This article reprinted from California Employer Update. If you would like to receive this full-color printed newsletter right in your mailbox, visit CalBizCentral to subscribe.