Employees Maintain PAGA Standing Even After Individual Claims are Submitted to Arbitration
In the latest development in what seems like a never-ending battle between employers’ efforts to limit their employees’ potential legal claims to individual claims only and employees’ efforts to ensure that they can bring representative or class claims against their employers, the California Supreme Court has determined that employees continue to maintain standing to have representative (or group wide) Private Attorneys General Act (“PAGA”) claims heard in court even where the employee’s individual claims are subject to valid arbitration provisions. Larger employers (or those more likely to be subject to class actions by employees) have long sought to curb employees’ ability to bring class action lawsuits (e.g., claims for failure to pay overtime, failure to provide meal and rest breaks) through the use of arbitration provisions with their employees which limit or eliminate the employee’s ability to raise such claims as class action lawsuits, thus requiring employees to bring these claims on an individual basis in arbitration rather than in court. While unpleasant to deal with on an individual basis, such claims are far less likely to cause financial ruin for an employer and can be dealt with one-by-one. Plaintiffs’ lawyers have sidestepped this strategy by asserting claims under PAGA in addition to individual claims in their lawsuits, as California courts have ruled fairly consistently that PAGA claims are not subject to arbitration even if an employee’s individual claims are required to go to arbitration on an individual basis. The United States Supreme Court made a 2022 ruling which seemed to indicate that a properly-worded arbitration agreement could eliminate this plaintiff-side strategy, stating in its Viking River Cruises v. Moriana decision that an employee’s individual PAGA claims could indeed be sent to arbitration along with other employment-based claims, and that once such individual PAGA claims were sent to arbitration the employee would have no standing to pursue representative PAGA claims in court. However, the California Supreme Court determined in Adolph v. Uber Technologies, Inc. that the US Supreme Court’s second point- that an individual employee loses standing to assert representative PAGA claims in court where their individual PAGA claims are subject to valid arbitration provisions- was not binding in California and was not the law of the land for California employers. Rather, the Court ruled that employees do maintain standing to have their representative PAGA claims heard even if their individual claims are sent to arbitration. This puts California employers on precarious footing with respect to arbitration agreements with employees in general, and with respect to legal strategies available to avoid and settle employment claims asserted by their employers. In the cat-and-mouse game being played between employers and employees, the California Supreme Court seems to have closed a door on what was otherwise a promising strategy for employers backed by a US Supreme Court ruling. Please contact NavBat to address issues with employment contracts with employees, and to talk over strategies for avoiding or limiting exposure to representative actions by employees or...
read moreEmployers Have a Duty to Protect Their Employees From Cybertheft
Everything these days is online, it seems. So it is not too surprising that a court recently ruled that an employer has a duty to protect its employees from cybertheft. That is precisely what the U.S. Court of Appeals for the Eleventh Circuit ruled in Ramirez v. The Paradies Shops, LLC. In that case, a Carlos Ramirez, on behalf of himself and a class of similarly-situated current and former employees, sued his former employer (a large company operating hundreds of retail shops in airports, hotels, and other locations), claiming that the employer was negligent in failing to protect employees’ personally identifiable information (“PII”) from a ransomware attack. In particular, the former employee argued that the company did not sufficiently protect the PII from cyber-attack and breached its duty to the employees by maintaining employee PII, including Social Security numbers, on an unencrypted, internet-accessible drive. While the court applied Georgia law, the legal principles applied are similar to other states, including California. The Eleventh Circuit found that the company required its employees to provide PII as a condition of employment and “employers are typically expected to protect their employees from foreseeable dangers related to their employment.” Given the company’s size and sophistication as well as the amount of data at risk (“extensive database of prior employees’ PII”), it was foreseeable that it would be the target of a cyber-attack and that it had a duty to take reasonable steps to protect its employees’ PII. For employers in California (where employment laws are even more stringent), the message is clear: take appropriate measures to protect employees’ PII. The level of protection and the amount of concomitant investment depends on a number of factors including the size of the company and the nature of the operations. Still, being proactive is key. If you are a California employer and have questions, contact the attorneys at Navigato & Battin, LLP for...
read moreSupreme Court Ruling Is All Bite, No Bark for Prospective Infringers
In a highly publicized case, the Supreme Court of the United States ruled in favor of Jack Daniels and against a company that marketed and sold a spoof dog chew toy. The toy was shaped like a Jack Daniels’ whiskey bottle. It used similar coloring and stylized labeling as the Jack Daniels’ bottle. Finally, it contained other similarities to the well-known Jack Daniels’ whiskey bottle, including the following labeling: “Bad Spaniels,” “The Old No. 2,” and “on your Tennessee Carpet.” Anyone who has enjoyed a few Jack and Cokes, knows these are plays on words, mimicking the phrases found on a Jack Daniels’ bottle. Jack Daniels asked the company – VIP Products LLC (“VIP”) – to stop selling the dog toys, claiming that the toys unfairly infringed on their famous trademarked whiskey bottle. VIP refused and filed a preemptive lawsuit attempting to establish that its dog toy did not infringe Jack Daniel’s trademark. The Ninth Circuit Court of Appeal agreed with VIP and ruled in its favor. The Supreme Court of the United States, however, reversed the decision. In reaching this conclusion, the Supreme Court rejected VIP’s argument that the dog toy was protected by the First Amendment because the toy represented an expressive work or parody. Because the dog toy did not qualify for First Amendment protection, the issue of whether the dog toy infringed on Jack Daniel’s trademark must be analyzed under the standard likelihood-of-confusion analysis that applies to typical trademark infringement claims. The Supreme Court’s ruling is welcome news for trademark owners. It will make it easier for brand owners to successfully “sic” or “unleash” their lawyers on infringers. If you need to register, maintain or protect your brand, contact the attorneys at Navigato &...
read more“I’m Afraid I Can’t Do That, Dave” and Other Lessons from Mata v. Avianca Airlines
The chatbots are coming! The chatbots are coming! And, apparently, they want to practice law. A New York attorney recently discovered the significant risk of relying on ChatGPT to do one’s legal research. In the case, the plaintiff, Robert Mata, claimed his knee was injured when it was struck by a serving cart during a flight, and he sued the airline, Avianca Airlines. Avianca’s attorneys filed a motion to throw out the case, arguing the statute of limitations had expired. In response, Mata’s attorney, Steven Schwartz, submitted a 10-page brief, chock full of legal citations as to why the airlines’ motion should be denied. Unfortunately, at least six of the cases were bogus – completely fabricated. When Avianca’s lawyers pointed out that they could not find any of those cases, Schwartz admitted that he had used ChatGPT to perform his legal research. Introduced in November 2022, ChatGPT is an artificial intelligence chatbot that uses natural language processing to create humanlike conversational dialogue. In response to a user’s queries, the program can answer questions and compose various written content, including articles, essays, and – at least Schwartz thought – legal briefs. In a recent hearing on possible sanctions against Schwartz and another lawyer, Schwartz apologized to the court, conceding he had “failed miserably” at vetting the authorities which the bot provided. He told an angry U.S. District Judge P. Kevin Castel that he was “operating under a misconception … that this website was obtaining these cases from some source I did not have access to.” At the very least, can you trust ChatGPT to tell you if it is making stuff up? Apparently not. In a copy of the exchange submitted to the judge, Schwartz asked ChatGPT: ‘Is varghese a real case’ and ‘Are the other cases you provided fake.’ The bot replied: ‘No, the other cases I provided are real and can be found in reputable legal databases.’ The takeaway for lawyers is clear: do not rely on ChatGPT for your legal research. More broadly, the case underscores the fact that the ChatGPT platform is still limited and unreliable. Thus, anyone doing online research which they intend to use in business or academics should not blindly quote from or rely on the results of a chatbot query – or a Google search for that matter. Verify your sources! The judge has not yet ruled on whether Schwartz will be sanctioned. “I’m Afraid I Can’t Do That...
read moreEmployers: Where’s Your Email Monitoring Policy?!?
A recent California appellate court case reinforces the need for employers to have a clear and enforceable policy regarding the ability to review employees’ work emails. In Militello v. VFARM 1509 [1], the plaintiff, Shauneen Militello, sued several fellow co-owners of a cannabis manufacturing and distribution company. One of the defendants, Ann Lawrence, asked the court to “disqualify” (remove from the case) Militello’s attorney, arguing that Militello had improperly obtained private emails between Lawrence and her husband that were sent on the company’s email network, which Militello then provided to her attorney. Her attorney, in turn, attempted to use the “private” emails in the litigation in violation of the spousal communications privilege (the privilege against disclosure of private communications between spouses). The trial court disqualified Militello’s attorney and the Court of Appeal agreed. The Court of Appeal ruled that private emails sent on a company computer network could not be used against the user where the user had a “reasonable expectation of privacy” with respect to personal emails sent over the company network. Importantly, the court noted that there was “no evidence [the company] had a policy of monitoring individual email accounts—there was no [] company handbook with a policy prohibiting [employee] from using her [company] email account for personal communications or indicating her account would be monitored to ensure compliance with that restriction—let alone that [employee] had agreed to such a policy.” This latest case underscores the need for employers to have a clear, written policy, countersigned or otherwise acknowledged by the employees, concerning electronic asset usage. At a minimum, the policy should state that the employer can monitor employees’ email communications and all activity on work computers or devices. The policy should also indicate that the employees have no reasonable expectation of privacy in their email communications or other digital/online activities while using company email, computers or other devices. This is yet another cautionary tale for California employers but one which is fairly easy to address. Employers who have questions about this recent decision or employment laws in general should contact Navigato & Battin. [1] Militello v. VFARM 1509 (2023) 89 Cal.App.5th 602 [306 Cal.Rptr.3d...
read moreCommercial Lease Force Majeure Decisions Continue to Disappoint Tenants
Force majeure provisions in commercial leases generally allow one or both parties to the lease to delay or wholly excuse their performance of certain lease obligations in the event of unforeseen circumstances (often defined to include “acts of God,” fires, natural disasters, war, and governmental action, among other things). Prior to March 2020, these provisions were often overlooked in lease reviews and negotiations as more-or-less boilerplate and unimportant. Since COVID-19 and the slew of government shutdowns, occupancy restrictions, lockdowns, and masking requirements that came along with it, force majeure provisions have been a major point of contention between tenants seeking to avoid paying rent during shutdown periods and landlords seeking to collect it. For the most part, courts have been relatively unsympathetic to tenants who have attempted to utilize their commercial leases’ force majeure provisions to avoid paying rent otherwise due to their landlords. A recent case, West Pueblo Partners, LLC v. Stone Brewing Co., LLC, is no exception. In West Pueblo, Stone Brewing entered into a long-term lease for a space which was to be operated as a restaurant and brewery, taking possession of the space in January 2018. From March 2020 through March 2021, Stone Brewing was required to comply with government shutdown orders and other rules, which virtually eliminated its ability to serve dine-in patrons. This was devastating to the location’s revenue, and Stone withheld rent from its landlord from December 2020 through March 2021. As you probably guessed from the title of the article, Stone Brewing relied on its lease’s force majeure provision to excuse its failure to pay. The force majeure clause in question read: “If either party is delayed, interrupted or prevented from performing any of its obligations under this Lease, and such delay, interruption or prevention is due to fire, act of God, governmental act or failure to act…or any cause outside the reasonable control of that Party, then the time for performance of the affected obligations of the Party shall be extended for a period equivalent to the period of such delay, interruption or prevention.” COVID-19 and the associated governmental shutdown orders seem to fit perfectly into this definition of a force majeure event excusing Stone Brewing’s payment of rent, but the Court read the provision narrowly in ruling against Stone Brewing’s arguments. Per the Court, Stone Brewing was not actually delayed, interrupted, or prevented from paying rent to its landlord. True, it may have been prevented from serving customers or generating revenue during some or all of the government shutdown period, but this did not literally prevent Stone Brewing from paying rent. Rather, it simply made the payment of rent and continuing operations more expensive. The Court also noted that Stone Brewing did in fact have the money to pay rent on the location even though revenue took a major hit due to COVID restrictions. Courts have relied on these narrow interpretations in ruling against similar arguments made by tenants suffering from COVID-19-related hardships, driving home the point that the express language chosen for these lease terms matters a great deal. Commercial leases are most often presented as extraordinarily landlord-friendly documents, but reasonable concessions are not impossible to attain. Your commercial space may be one of the most significant investments made in your business, and it is not uncommon for...
read moreGood Faith Defense for Wage Claims
As many employers are aware, California has some of the most employee-friendly laws in the country. Two such employee-friendly laws are Labor Code sections 203 and 226. Section 203 imposes a waiting time penalty on an employer who willfully fails to pay wages owed to a terminated employee on the date of termination. The penalty for violating Section 203 is the payment of daily wages to the employee for up to thirty days following the date of termination, unless the wages owed to the now ex-employee are paid sooner. Section 226 imposes a penalty on an employer who knowingly and intentionally fails to provide accurate wage statements to an employee. The penalty for violating Section 226 is the greater of all actual damages or $50 for the initial pay period in which a violation occurs and $100 per employee for each violation in a subsequent pay period. The penalty is not to exceed an aggregate penalty of $4,000. A recent California Court of Appeal decision[1] considered whether an employer’s good faith belief that no wages were owed would preclude a finding that the employer “willfully” or “knowingly and intentionally” failed to comply with the statutory requirements of Labor Code Sections 203 and 226. The Court of Appeal ruled that an employer’s good faith belief that no wages were owed to an employee prevented the employer from being penalized under Sections 203 and 226. The plaintiff in Naranjo argued that the good faith defense applied only in labor commissioner hearings and not in lawsuits. The Court disagreed with the plaintiff’s argument and explained that even though the defendant’s defenses to the wage claims ultimately failed, such defenses were reasonable and were not made in bad faith. The Court of Appeal explained that the “knowing and intentional” requirement cannot be satisfied by merely showing the employer’s inadequate wage statement was not an inadvertent error or a clerical mistake. Rather, the Court held that the “knowing and intentional” standard is similar to the “willful” standard under Section 203 and requires that the plaintiff show something more than an inadvertent error or mistake. The Naranjo decision is a win for employers and provides an avenue for employers to avoid additional penalties under Labor Code Sections 203 and 226 if they are found to have violated other wage laws. While this decision is helpful, employers should still be careful to ensure that they are not violating other wage laws by failing to pay minimum wage or overtime wages, among other things. Employers who have questions about this recent decision or employment laws in general should contact Navigato & Battin. [1] Naranjo v. Spectrum Security Services, Inc. (Feb. 27, 2023 Second District, Div. Four No....
read moreGenerative AI: Employer Considerations for Permitting Employees to Use ChatGPT
Unless you have been living under a rock, you and your employees have used or at least heard of ChatGPT. ChatGPT is an AI-based language model developed by OpenAI. GPT stands for “Generative Pre-trained Transformer,” which refers to the model’s architecture and how it was trained. ChatGPT is designed to generate human-like responses to natural language input. It has been trained on a massive dataset of text from the internet and can generate coherent, contextually relevant text in response to a wide variety of prompts. ChatGPT has achieved impressive results in a range of natural language processing tasks, including text generation, question answering, and language translation. Your employees may use ChatGPT to find answers to simple questions, to write computer codes, or even to help write a newsletter article. In fact, all of the italicized content of this newsletter article was “authored” by ChatGPT. Thus, if you are an employer considering the use of ChatGPT in your organization, there are a few restrictions you may want to consider: Legal compliance: When using ChatGPT in your organization, you must ensure that you are complying with all applicable laws and regulations. For example, if you collect user data using ChatGPT, you may be subject to data privacy regulations such as the General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA). Ethical considerations: As with any technology, the use of ChatGPT may raise ethical considerations that you need to address. For example, you should ensure that ChatGPT is not being used to manipulate or deceive users, or to promote harmful or discriminatory content. Technical limitations: While ChatGPT is a powerful language model, it is not perfect and may have technical limitations. For example, it may struggle with understanding certain types of language or may have biases based on its training data. You should be aware of these limitations and ensure that they do not impact the quality of service you are providing. Employee training: If you are implementing ChatGPT in your organization, you should ensure that your employees are trained on how to use it effectively and responsibly. This may include training on how to monitor ChatGPT’s performance, how to address inaccuracies or errors, and how to handle sensitive or confidential information. Use case limitations: ChatGPT is best suited for certain types of use cases, such as answering frequently asked questions or providing customer support. It may not be suitable for more complex tasks, such as making important business decisions. You should be aware of its limitations and ensure that it is being used appropriately. In addition to the suggestions by ChatGPT, employers may want to implement additional policies. Employers should consider a policy in which job applicants affirm that they have not used ChatGPT to complete their job application, draft a cover letter, draft a writing sample, or otherwise assist the applicant in applying for the job at hand. In addition, employers should consider a policy in which employees agree that they have not used and will not use ChatGPT for certain tasks. While ChatGPT may be able to answer common questions and provide useful background information, it should not be used for more complex tasks. For example, a medical professional should not ask ChatGPT about dosage or side effects of a medication. However, ChatGPT may be useful...
read moreSpoof Trademark Office Calls
Obtaining a trademark requires filing a trademark application and paying a fee to the United States Patent and Trademark Office (the “USPTO”). Obtaining a trademark does not, however, require providing information or making payments to USPTO over the phone. Recently, USPTO issued an alert regarding fraudulent “spoof” calls in which the caller purports to be from USPTO itself. A spoof call is one in which the caller uses technology to change the name and number which appear when receiving the call. A spoof call might appear to be from USPTO based on Caller ID, but is actually from an unknown bad actor. The spoof calls purporting to be from USPTO are spam calls in which the caller informs the recipient that their trademark has expired and payment is required to keep the trademark active. The spoof calls also seek sensitive personal information, such as social security numbers. USPTO’s alert stated that USPTO will never ask for personal information or payment over the phone. If you receive a call which appears to be from USPTO, do not provide any personal information or payment over the phone. Instead, you should determine if the call was legitimate by contacting the Trademark Assistance Center (“TAC”) of the USPTO at 1-800-786-9199. In addition to contacting the TAC, you may also search the Trademark Status and Document Retrieval system on the USPTO website to find official communications regarding a trademark or trademark application. Official communications will never involve USPTO seeking personal information or payments via a phone call. It is important to err on the side of caution and verify any communications which seek personal information or payment, as well as any communications which seem unusual or suspicious. With respect to trademark filings, individuals frequently troll the information contained in trademark filing documents for email addresses, mailing addresses, and telephone numbers, among other things, and use such publicly-available information to try to trick unknowing trademark applicants and registrants into paying unnecessary costs and fees. Do not fall victim to these schemes. If you have any questions regarding your trademarks or any communications which purport to be from USPTO, please contact Navigato & Battin right...
read moreCalifornia’s Ban on Mandatory Arbitration Agreements is Struck Down
It is common practice for employment agreements to require employees to participate in mandatory arbitration with their employers to resolve any disputes. Among other things, arbitration provisions are favored by employers because arbitration clauses can prevent disputes with employees from being filed as class action lawsuits or in publicly-available court filings. In 2019, California enacted Labor Code §432.6, which made it an unlawful employment practice for employers to require applicants and employees to sign arbitration agreements as a condition of employment. Thus, Labor Code §432.6 banned mandatory arbitration provisions or agreements between an employer and employee. In 2020, as the ban was set to take effect, the U.S. Chamber of Commerce filed suit and sought an injunction which would prevent the enforcement of the new statute. The United States District Court for the Eastern District of California ruled in the Chamber of Commerce’s favor and granted a preliminary injunction which prevented enforcement of the ban. In reaching its decision, the Eastern District explained that the Federal Arbitration Act (“FAA”) preempted California’s ban. In other words, the FAA, which allows mandatory arbitration agreements, supersedes California’s law because it is a federal law specifically governing the same issue. Following the Eastern District’s ruling, California appealed the ruling the United States Court of Appeals for the Ninth Circuit. The Ninth Circuit ruled that the FAA does not entirely preempt Labor Code §432.6 and thus, the ban could be enforced. The Chamber of Commerce then petitioned the Ninth Circuit for a rehearing on its ruling. On February 15, 2023, the Ninth Circuit released its decision on the rehearing. This time, the Ninth Circuit held that “[b]ecause the FAA’s purpose is to further Congress’s policy of encouraging arbitration, and [California’s ban] stands as an obstacle to that purpose, [the ban] is therefore preempted.” As a result of the Ninth Circuit’s new ruling, Labor Code §432.6 no longer bars California employers from requiring mandatory employment arbitration agreements as a condition to employment. California employers can now continue, or begin, to require employees to sign mandatory arbitration provisions or agreements as a condition to employment. Arbitration can be more favorable to employers, and arbitrated disputes are often resolved much faster than a lawsuit would be. Therefore, employers should consider making arbitration agreements part of their standard hiring practices. Any employer who has questions about the impact of the Ninth Circuit’s ruling or how arbitration agreements work should contact Navigato &...
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