KH&K scores double victories!

Read about our recent victories on Summary Judgment and on defeating a motion for class certification HERE!


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The EEOC’s New Rule On An ADEA Defense Creates Confusion and Greater Restraints On Employers Defending Against Such Claims

By Rachel Hulst

Since its inception, the Age Discrimination in Employment Act (ADEA) has protected workers over the age of 40 from discrimination.  In an attempt to make this Act consistent with Supreme Court case law, the Equal Employment Opportunity Commission (“EEOC”) has now issued its final new rule that purportedly better describes defenses an employer may assert against certain ADEA claims[1].  The result appears to be a more confusingly rigid standard for employers to meet when defending against these types of claims.

The ADEA has always permitted employees to bring two basic claims against an employer with 20 or more employees, disparate treatment and disparate impact claims.

Disparate treatment claims require an individual to prove that an employer intentionally discriminated against he/she on the basis of his/her age.  Employers primarily defend against such claims by producing evidence that the alleged discriminatory decision at issue was not arbitrary or irrational (the “legitimate nondiscriminatory reason”).

Conversely, disparate impact claims allege neutral Company policies or practices that have an effect of harming a group of older workers more than younger workers.  Fairly recently, two US Supreme Court decisions have held that an employer may assert an affirmative defense to such disparate impact claims under the ADEA – the Reasonable Facts Other than Age (RFOA) defense[2].  This new rule professes to better clarify how employers can assert this defense.   In doing so, the EEOC lays out a number of “considerations” for determining if an employer has established the RFOA defense.  While not all are required, the more an employer can cite, the better off it is in defeating this type of claim.  They are as follows:

  • the extent to which the factor is related to the employer’s stated business purpose;
  • the extent to which the employer defined the factor accurately and applied it fairly and accurately (including how managers were given guidance or training);
  • the extent to which the employer limited supervisor’s discretion to assess employees subjectively (ie: did not permit unconstrained discretion);
  • the extent to which the employer assessed the adverse impact of its practices on older workers (not always warranted or necessary); and
  • the degree of the harm to individuals within the protected age group and the steps the company took to reduce the harm.

Unfortunately, these fact-intensive considerations leave room for greater debate that will surely result in additional suits brought against employers under this Act.  Moreover, they are arguably inconsistent with the Supreme Court case holdings they purport to clarify.  Smith and Meacham both held that employers defending their policies against ADEA disparate impact claims need not show a “business necessity”, which requires evidence that the Company looked at other ways to achieve the same goals that did not result in a disparate impact.  Rather, employers need only establish that the decision to implement the policy was reasonable.[3]  Yet, the above considerations appear to describe the “business necessity” defense more than an “RFOA”, only leading to further confusion on what an RFOA actually is.

In the end, the EEOC’s new rule considerations focus on parsing out those practices and policies that are truly neutral against others which may have some (hidden) discriminatory intent.  Accordingly, the EEOC is sending the message that employers (1) must consider age prior to implementing any new “neutral” policies or practices; (2) must put safeguards in place to ensure that these policies don’t adversely affect those over 40 and (3) must monitor such policies after they are implemented to continually ensure such policies or practices don’t later have an adverse effect on those over the age of 40.  That puts a lot more on the employer to make certain that all of its management employees meticulously examine each and every policy and practice before (and after) implementation. Ironically, the message is: always consider age when executing future age-neutral policies.

To protect against such claims, employers are encouraged to continue to do some more of the same.  Prior to policy implementation, (1) document the reasons behind it up front; (2) specifically set out neutral criteria; and  (3) conduct an age specific statistical analysis where appropriate (such as for a reduction in force).

Additionally, it is prudent for all employers to now consider (1) providing additional guidance to management on how to implement new policies that have the potential of resulting in a disparate impact; (2) putting systems in place to continue to monitor the effects of the policies after they are in place; and (3) ensuring there are not other ways of employing such policies that would have less of an effect on older workers.   It is unclear right now how important meeting all (or any) of these considerations will be for employers defending against disparate impact claims brought under the ADEA.  We encourage all to proceed cautiously through these muddy waters.

[1] See 29 C.F.R. Part 1625; the final regulations go into effect on April 30, 2012.

[2] Smith v. City of Jackson (2005) 544 US 228 [court held that in addition to Title VII, the ADEA also exposes employers to liability for employment decisions that disparately impact older employees, unless those decisions are based on an RFOA]; Meacham v. Knolls Atomic Power Lab.  (2008) 554 US 84, 97 [the court confirmed that an RFOA is an employer’s affirmative defense, that the burden of proof for this defense was on the employer and that the business necessity defense (a defense used in Title VII cases) “should have no place in ADEA disparate-impact cases".]

[3] See Smith at p. 243, Meacham  at p. 97.

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KHK wins Summary Judgment in Disability Case

On Tuesday, the US District Court (C.D. Cal.) granted KHK’s motion for summary judgment in a disability discrimination case (Dam v. Rite Aid) involving Rite Aid’s termination of a pharmacist who “hired” his cousin, a pharmacist technician, as a volunteer to help out at his store on a weekly basis.  The Court agreed with Jonathan Allan Klein and Laura Clark, who argued that no evidence of pretext could exist, since the suspension and termination decision (although not communication of the decision) were made before plaintiff’s “disability” arose.  Interestingly, the “disability” was alleged, in part, to have been brought on by the very investigation and suspension that eventually led to plaintiff’s termination.

The Court rejected Plaintiff’s claims of “pretext”, and granted the motion a few days before the scheduled oral argument and about 6 weeks before the scheduled trial date.  Read the Order Granting MSJ.

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KHK wins binding labor arbitration against UFCW 770

On February 20, Arbitrator Michael Prihar found for KHK’s client in a binding labor arbitration with United Food and Commercial Workers Union Local 770 regarding grievant Juan Calderon.

In the case, Mr. Prihar found that Mr. Calderon was terminated for good cause, in light of allegations of insubordination against the Rite Aid employee.  Read the arbitrator’s decision.

Jonathan Allan Klein and Katie Weeks argued the case for Rite Aid.  Contact them with questions.

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KH&K successful in obtaining order denying class certification in 40,000+ proposed meal and rest break class

On February 17, Judge Nancy Wieben Stock of the Orange County Superior Court denied Plaintiffs’ motion for class certification in the 40,000+ member proposed class in McSwain v. Rite Aid.

Our office has been counsel for Rite Aid in this case since 2008, and for the company since 1998.   The case involved allegations that plaintiffs were denied meal and rest breaks as hourly employees at Rite Aid from 2004.  Contact or with questions.

Judge Stock’s Order is below:

Plaintiff’s Motion to Certify Class

The Motion is Denied.

Typical Claim(s). Plaintiff’s Motion wholly fails for lack of sufficient supporting evidence to establish the critical elements of why a Class Action is a Superior vehicle.  While purporting to represent over 40,000 non-exempt employees, Plaintiff’s motion is essentially based upon  a single incomplete declaration, combined with an unhelpful Supplemental declaration in Reply.  The Declarations, taken together, even if not impeached, do not establish Labor Code violations.  Indeed, they do not establish that lack of compensation for any missed or shortened meal or rest breaks, not the circumstances of same, over a 13 year period.  The Declarations are rife with conclusions and opinions about what the Employer was thinking, or not doing, all without evidentiary support.  It gets worse, when one considers the impeaching evidence of Plaintiffs prior sworn statements, offered by Defendant.

Adequacy of Class Representative. A plaintiff who seeks to represent a class must have a credible claim so that the typicality and commonality elements can be adjudged against that claim.   Here, Plaintiff is not a credible witness or representative, making her inadequate as a representative.  She has no claim based on the mere fact that there is allegedly no written policy for meal and rest breaks.   Further, if the existence of a Written Policy is the linchpin of Plaintiff’s case, she has not established any claim after the 2010 policy was put in place.

The Declaration of Plaintiff filed in support of the Motion is directly contradicted by her deposition testimony and she has made no showing that the lack of a written policy caused her to miss meal or rest breaks.  In fact,   there is very little evidence of why she missed meal and rest breaks;  a very important consideration.    Plaintiff’s own testimony shows that there was a policy in place, she was informed of the policy, and she was responsible for and did enforce it.    She received meal and rest breaks,  and meal and rest break premiums, so whether there was a written policy or not as to her is irrelevant.

Plaintiff claims there is no written policy.   What about the notices on the Boards?  Aren’t the collective bargaining agreements written policies?  And why is it that Plaintiff and, for that matter, Plaintiff’s counsel,  neglected to inform this Court that collective bargaining agreements existed which concerned meal and rest periods.  The  Motion and Reply completely ignore the issue.

Counsel relied on a legal proposition, that meal and rest break policies must be in writing,  which is not sound,  and on a factual proposition,  that there was no written policy,  which is belied by written collective bargaining agreements.  They failed to show typicality by failing to provide even one declaration out of the 42,000 employees who have a claim based on the same circumstances as Plaintiff.

Typicality. Even if Plaintiff acted ignorantly for years, not knowing she had a right to compensation for missed meal and rest breaks, and this has not been shown to be plausible, there is no evidence that her  situation was typical among the other 42,000 employees.  Plaintiffs failed to submit a  Declaration from even one other person who was in her situation;  who thought they knew the policy and didn’t, who acted on the policy but wasn’t sure of it,  who received premiums and didn’t know it, and  who had a collective bargaining agreement and didn’t know what was in it. In contrast, we have several  Declarations on the other side, showing that a policy was in place and was carried out.

Commonality. Common issues do not predominate.  The issue of whether there was a written policy is not necessarily the only issue, or even the most important.  What is relevant is why,  how, when and under what circumstances meal and rest breaks were missed;  all individual inquiries as to each putative class member.   The evidence presented by Defendant,  and by Plaintiff for that matter, indicates there is a policy to pay premiums for meal and rest breaks and that the policy is carried out in numerous ways,   under all sorts of different scenarios and circumstances that arise because of the nature of the business,  all of which make any notion of the predominance of common facts and law without merit.  The consideration of numerous collective bargaining agreements which govern meal and rest breaks,  under different terms,  precludes a finding of commonality also.   Even if it were possible to establish sub-classes or nuances in the policies and practices at the various job sites, these moving papers do not  support such an approach either.  The evidence presented by Defendant, none of which is refuted,  is that the meal and rest break policy is enforced is all sorts of different ways, in all sorts of circumstances,  none of which can be proven commonly.  And, almost all of the 42,000 employees are governed by collective bargaining agreements adding a totally different dimension to the issue which has been ignored by Plaintiff.

Trial Plan.  Plaintiff has not established any trial plan that would demonstrate that trial of these 42,000 claims could be had on common proof.  The Statistical evidence presented is incomplete and unpersuasive.

Defendant to give Notice.


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San Francisco’s Health Care Security Ordinance: 2012 Updates

Within San Francisco city limits, employers of 20 or more employees are subject to the Health Care Security Ordinance.  The following is a plain-English summary of these provisions, which can be somewhat perplexing for employers and employees alike, and the changes to the law effective in 2012.

San Francisco’s Health Care Security Ordinance (HCSO) requires mid to large-size employers in the City (for-profits with 20 or more employees and non-profits with 50 or more employees) to spend a minimum amount on their employees’ health care.  Employers can choose how to make these health care expenditures, including purchasing health insurance, setting up health spending accounts, or enrolling employees in the City’s Healthy San Francisco Program.  Employers with 1-19 employees are exempt from the HCSO provisions.

Employees covered by the HCSO, “covered employees,” are those employed for at least 90 calendar days and perform at least eight hours of work per week in San Francisco.

The new HCSO regulations, effective January 1, 2012, change the minimum health care expenditure rates and the annual salary figure exempting certain employees from the HCSO.

2012 Health Care Expenditure Rates

Large Employers (100+ employees) – minimum health care expenditure rate increased to $2.20/hour (previously $2.06/hour).

Medium-Sized Employers (20-99 employees) – the minimum health care expenditure rate increased to $1.46/hour (previously $1.37/hour).

The minimum expenditure rates require employers to pay a certain amount for each employee’s health care services, or reimbursing the costs of those services, in addition to wages and compensation.

The expenditure rate is to be paid for each hour worked by a covered employee for that quarter.  Required health care expenditures are calculated by multiplying the total number of “hours paid” to each covered employee by the applicable expenditure rate.  “Hours paid” include both work hours and any paid time off, including vacation and sick leave.

2012 Annual Salary Exemption Figure

Managers, supervisors, or confidential employees who earn an annual salary at or above $84.051 (or $40.41/hour) in 2012 are exempt from coverage under the HCSO (previously $81,450, or $39.16/hour).  In other words, these employees are not “covered employees” and the employer need not pay health care expenditure rates.

San Francisco employers are must comply with several city-wide ordinances regulating labor and employment, such as the HCSO, in addition to state and federal labor laws.



- Katie Weeks

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KHK Obtains Dismissal due to Forum Non Conveniens Argument

Jonathan Allan Klein and Jennifer Kaplan prevailed on a motion for forum non-conveniens on behalf of Penske Truck Leasing in a case arising out of the rental and reported theft of a Penske vehicle.  The Superior Court of California, County of Los Angeles ruled in favor of Penske, holding that the facts of the case (which arose out of a vehicle rental in Nevada) did not have sufficient connection to California to justify litigating the case in California.

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Union Arbitration Denied — Arbitrator Upholds Employer’s Termination based on Presence on OIG Exclusion List

Jonathan Allan Klein and Laura Clark successfully defended Rite Aid’s termination decision regarding employee Claudia Sandoval in a binding arbitration before arbitrator Frank Silver.

In this case, UFCW 770, on behalf of the terminated employee, challenged Rite Aid’s termination decision, which was itself based on the presence of employee on Federal Office of Inspector General Exclusion List. The OIG exclusion list prohibits precludes excluded persons from participating in Medicare and Medi-Cal programs, and the employee was convicted of Social Security-related fraud, thus placing her on exclusion list. Arbitrator overruled Union grievance, holding the employer properly terminated employee once it discovered she was on the exclusion list. Read the decision.

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California adds new “Wage Theft Protection Act” — Is your business ready?

By Jessica Madrigal

New Requirements for New Hires

California has passed new legislation (the Wage Theft Protection Act), effective January 1, 2012, that imposes new requirements on employers with respect to new hires.  Specifically, California Labor Code Section 2810.5 will require that employers disclose certain information to employees “at the time of hiring” in the form of a written notification.  The specific requirements are outlined below:

What Information Must be Disclosed to New Hires?

Labor Code Section 2810.5 requires employers to provide written notice to employees “at the time of hiring” of the following information:

1. the employee’s pay rate and basis for pay rate (e.g. salary, commission, hourly, etc.);

2. allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances;

3. the regular payday designated by the employer;

4. the name of the employer, including any “doing business as” names used by the employer;

5. the physical address of the employer’s main office or principal place of business, and a mailing address, if different;

6. the telephone number of the employer;

7. the name, address, and telephone number of the employer’s workers’ compensation insurance carrier;

8. and other information the Labor Commissioner “deems material and necessary” (nothing further has been designated by the Labor Commissioner to be included in the new hire notices at this time)

What if There Are Changes or Modifications to the Information Contained in the Notice?

  • If any changes are made to the above information, employers must provide notification to the employee within seven days either by including the updated information on the employee’s next pay statements or in a separate written form.  Thus, for information that typically appears on an employee’s wage statement (i.e. pay rate), an amended notification form does not need to be issued as long as those changes appear on the employee’s next wage statement.  For changes in other information, such as the name and address of the employer’s workers’ compensation carrier, which is generally not included on wage statements, an amended notification form would have to be provided to the employees.
  • The Labor Commissioner has indicated that it will be creating a sample notification form as well as a FAQ sheet to assist employers in complying with the law, which will be available on the Division of Labor Standards and Enforcement website in mid-December.

Which Employees do the Notification Requirements Apply To?

  • The new law applies to all non-exempt employees hired on or after January 1, 2012 so these notifications do not need to be provided to current employees.
  • Section 2810.5 does not apply to employees who are exempt from overtime laws or employees covered by a valid collective bargaining agreement if their regular rate of pay exceeds California’s minimum wage by at least 30%, and if their overtime compensation is paid at the proper premium wage rate.  Despite this exception, it is good practice to provide this notice to all new hires for two reasons:  1) To avoid disputes over whether the notice was due in the event employees classified as exempt later claim they were misclassified; and 2) as for union employees, not all employees are eligible to become union members immediately upon hire and would thus not fall under this exception.  The fact that they may eventually become union members is immaterial, because Labor Code 2810.5 requires that the notice be provided “at the time of hiring.”
  • Although not required by the law, a copy of this new hire notice should be kept in each employee’s personnel file in case there is ever a dispute regarding compliance with this requirement.
  • Finally, although some information addressed in the written notice is already contained in the workplace posters mandated by other laws, Section 2810.5 does not change any of those posting requirements.

What Are the Disclosure Requirements Each Pay Period?

California Labor Code Section 226 requires that employers provide accurate itemized wage statements to each employee semimonthly or at the time of each payment of wages.  This is not a new requirement, but ensuring that accurate wage statements are provided to employees will also help employers meet the notification requirements set forth under the new legislation described above.  Section 226 requires that the following information be included on employee wage statements:

1. gross wages earned;

2. total hours worked by the employee (this requirement does not apply to employees who are salaried and exempt from payment of overtime);

3. the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis;

4. all deductions (i.e. taxes, medical insurance, etc.), provided that all deductions may be aggregated and shown as one item;

5. net wages earned;

6. the inclusive dates of the period for which the employee is paid;

7. the name of the employee and the last four-digits of his or her social security number or an employee identification number other than a social security number;

8. the name and address of the legal entity that is the employer; and

9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee

  • A copy of the wage statement and record of the deductions must be kept by the employer for three years at the place of employment or at a central location within the State of California

What Should Employers do to Ensure Compliance with the New Notification Requirements?

Employers should be working diligently to prepare notification forms so that they are ready to be distributed to any new hires as of January 1, 2012.  It is also a good idea to take this opportunity to review itemized wage statements to ensure they are in compliance with California law.

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Dismissal Obtained For Pharmacy In Wrongful Death Case Prior to Service of Complaint

Dismissal Obtained For Pharmacy In Wrongful Death Case Prior to Service of Complaint

Jonathan Allan Klein and Anne F. Marchant successfully obtained dismissal of a pharmacy in a wrongful death action filed in Sacramento County Superior Court.  The father of the decedent sued the decedent’s pharmacy and medical providers alleging that the Methadone prescribed and dispensed by the defendants had led to the death of his 29-year old daughter.  On behalf our pharmacy client, we filed a demurrer to the complaint prior to it even being served, based on the lack of any alleged breach of duty.

Plaintiff’s counsel agreed to dismissal, prior to a hearing on the demurrer, after discovery completed on behalf of the pharmacy revealed that the decedent had a prior history of using Methadone and the cause of death was not related to toxic levels of Methadone (as alleged in the Complaint.)

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