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INTERRESTING TIMES II: Parallel Processes? PAGA and Calexit

  1. Feds vs. California re PAGA

The latest round in federal-state PAGA matches features the 9th Circuit’s unpublished February 16, 2017 decision in Valdez v.Terminix International Co. (9th Cir. 2017) 2017 U.S. App. LEXIS 3881 and the California Court of Appeal, 4th Appellate District, March 7, 2017 decision in Betancourt v. Prudential Overall Supply, 2017 Cal. App. LEXIS 191. The brevity of the 9th Circuit’s unpublished “reversal” decision contrasts starkly with the academic decision of District Judge Pregerson denying Terminix’s motion to compel arbitration.

In Valdez, the District Court had deemed the California Supreme Court decision in Iskanian v. CLS Transp. (2014) 59 Cal. 4th 348, cert. den. 135 S. Ct. 1155 (2015) dispositive of the first question, is a blanket waiver of PAGA claims in an employment contract permissible as a matter of California law, noting the State Supreme Court had distinguished the decision of the SCOTUS in AT&T Mobility  v. Concepcion, 563 U.S. 333 (2011), holding preempted by the Federal Arbitration Act (FAA) California’s common law rule prohibiting as unconscionable certain class action waivers, as inapplicable to a PAGA claim waiver since a PAGA claim is not a private dispute but, rather, a claim belonging to the State of California.  (The District Court further noted California precedent that a plaintiff may not bring an “individual” PAGA claim at arbitration insofar as the claim is always representative on behalf of the State).

Then noting the “contentious” nature of the issue whether a PAGA claim is subject to an arbitration agreement, and the existence of a “split” in decisions, the District Court concluded that a PAGA claim should not be submitted to arbitration.  Judge Pregerson explained in considerable detail:

“As a matter of logic, if the claim belongs primarily to the state, it should be the state and not the individual defendant that agrees to waive the judicial forum. In the PAGA statute, the Legislature has explicitly selected a judicial forum as the default forum…. [B]oth federalism and separation-of-powers concerns are at their apex here.  Moreover, civil enforcement of state labor laws is a matter of traditional, if not preeminent, state regulation.  Accordingly, it should not be understood to be preempted or superseded by a federal statute absent very clear evidence of congressional intent [citation omitted] ……. the Court will not presume to deprive a state of the mechanism chosen by its legislature to enforce its civil laws.” [Emphasis added]

Disagreeing with the District Court’s analysis, the reviewing court held that Iskanian did not require that a PAGA claim be pursued in the judicial forum.

Contrastingly, in Betancourt v. Prudential Overall Supply, supra, where the plaintiff brought a single cause of action under PAGA, the court of appeal agreed with the trial court that, under Iskanian, “defendant cannot rely on a predispute waiver by a private employee” to compel arbitration in a PAGA case, which is brought on behalf of the state, holding, “The state is not bound by Betancourt’s predispute agreement to arbitrate”.  Further, quoting Iskanian, “a PAGA claim lies outside the FAA’s coverage because it is not a dispute between an employer and an employee arising out of their contractual relationship. It is a dispute between an employer and the state…” [emphasis in original].

  1. “Anti-California” Predispositions of Gorsuch

In previous blog posts, we have noted that in January 2017 SCOTUS granted certiorari to review three (9th, 7th and 5th) Circuit Court decisions raising the question, are class-action waivers in predispute mandatory employment arbitration agreements prohibited by National Labor Relations Act (NLRA) statute and jurisprudence protecting workers’ rights to act together, as the National Labor Relations Board (NLRB or “the Board”) says they are.  One can probably “bet the farm” that if SCOTUS nominee Neil Gorsuch is confirmed to take the seat vacated by former Justice Scalia[1] he will continue “the Scalia court’s hostility to class actions” [2].  The opposing camps of plaintiff and defense employment attorneys already have disseminated their respective blog posts, the employer camp vaunting “Gorsuch Sides with Businesses on Labor and OSHA Issues,” and the employee camp, with comedy to mask despair, “Supreme Court Gorsuch? Oops, There Goes Another One of Your Employment Rights.”

Among Gorsuch’s “trademarks” is his disdain for the so-called Chevron doctrine (Chevron USA, Inc. v. NRDC, Inc. (1984) 467 U.S. 837) pursuant to which an administrative agency’s interpretation of a statute is owed deference by courts when ‘the statute is silent or ambiguous’ on the issue in question and the agency’s reading represents a ‘permissible construction of the statute.’  With Scalia-like sarcasm, Circuit Judge Gorsuch, in his dissent in TransAm Trucking, Inc. v. Administrative Review Board, U.S. Department of Labor (2016) 833 F3d 1206, mocked Chevron deference (in allusions to “Chevronland”) and denigrated OSHA’s and DOL’s expertise in matters which Judge Gorsuch spoke of as so “ephemeral and generic” as “health and safety.”[3]

In Gorsuch’s dissent from the majority decision denying the employer’s petition for review from the DOL Administrative Review Board’s (ARB) decision that the employer terminated the employee in violation of the whistleblower provisions of the Surface Transportation Assistance Act, Gorsuch curiously commented that “it might be fair to ask whether TransAm’s decision was a wise or kind one.  But it’s not our job to answer questions like that…”  In the TransAm case the employee truck driver was terminated after he reported to TransAm that the brakes on his trailer had locked up due to frigid temperatures and was instructed to wait at the location for TransAm’s road assist service; hours later, with numb torso and feet, he reported to the TransAm dispatcher that his bunk heater was not working and he was freezing.  He was told to “hang in there.”  Instead, after reporting to his supervisor that, due to the cold, he had numb feet and difficulty breathing, the employee unhitched the trailer and left for help in the truck.  The DOL Administrative Law Judge (ALJ) concluded the driver engaged in statutorily protected activity when he reported the frozen brake issue and when he refused to obey supervisory instructions; further, that such protected activity contributed to TransAm’s termination decision.  The ALJ and the ARB rejected TransAm’s position that the employee was terminated “for violating company policy by abandoning his load while under dispatch.”[4]

In Walton v. Powell (10th Cir. 2016) 821 F.3d 1204  Judge Gorsuch, writing for the majority in a former public employee’s Section 1983 First Amendment retaliation suit, again, in “Scalia-fashion”, jocosely disdained the “bedrock,” three-part McDonnell Douglas burden-shifting framework established by SCOTUS in 1973 in McDonnell Douglas Corp. v. Green, 411 U.S. 792 for courts to use in evaluating summary judgment bids on employment discrimination claims for which employer a plaintiff lacks direct evidence.[5]  Since 1973 application of the McDonnell Douglas standard has been extended to Age Discrimination in Employment (DFEH), FMLA and False Claims Act, contexts.  The employment defense bar criticizes McDonnell Douglas as unduly complicating and impeding of the summary judgment process.  In Walton, Gorsuch repeatedly ridicules the standard, ladening it with what some might call “snooty” and atypical adjectives such as “eponymous,” “heuristic”, and “argot,” “proven of limited value even in its native waters,”  noting that “more than a few keen legal minds have questioned whether [it] is worth the candle even in the Title VII context, let alone well adapted for new adventures in far-flung environments like this one [public employee First Amendment retaliation context],” and even remarking that judges have not “expressed a yearning for [it].”

Gorsuch is also a fan of the “corporate personhood” doctrine annunciating that corporations enjoy constitutional protections under the Bill of Rights.  See, Citizens United v. FEC (2010), 558 U.S. 310, (held that corporations First Amendment right entitles corporations to unlimited election funding).  Gorsuch, of course, joined in the 10th Circuit’s extension of religious constitutional rights to private sector for-profit corporations in its Hobby Lobby decision (723 F3d 1114), upheld by SCOTUS in 2014 (134 S. Ct. 2751), Scalia joining in Alito’s decision for the majority.

Gorsuch’s, Scalia’s and Alito’s “activist” stance on such expansion of “constitutional liberties” to secular for-profit corporations is demonstrated by the well-considered dissenting opinion of Judge Matheson in the 10th Circuit decision, in which Matheson opined that the District Court had not abused its discretion in denying the corporate plaintiffs’ Religious Freedom Restoration Act (RFRA) claim, given that (i) the RFRA gives no express indication that it covers secular

for-profit corporations; (ii) corporate law recognition that legal distinctions exist between corporations and their shareholders which preclude rote disregard of corporate form and imputation of shareholder religious beliefs to corporations, and; (iii) the issue, joined at a very “preliminary stage” and “expedited process” of application for preliminary injunctive relief,

“is complex and involves critical areas of statutory and constitutional law. The answer will profoundly affect the relationship between the government and potentially millions of business entities in our society in ways we can only begin to anticipate.  These circumstances are far from optimal to decide a heretofore unexplored question, yet the majority does so broadly and without hesitation.”

III. “Calexit” and Upcoming “Tests” of Professional Ethics

The divide between the federal and state courts in California and between the Trump agenda[6] and the agenda of the State of California[7]  not only fuels mass marches and protests, but also likely referenda on Calexit.  As historian Timothy Snyder has written in his timely, tiny book, On Tyranny: Twenty Lessons from the Twentieth Century, in “interesting times,” such as these, it is imperative to “Remember professional ethics.”  Snyder, who also authored the ambitious and admonitory tomes, Bloodlands: Europe Between Hitler and Stalin and Black Earth: The Holocaust as History and Warning, notes that “lawyers were vastly overrepresented among the commanders of the Einsatzgruppen, the special task forces who carried out the mass murder of Jews, Gypsies, Polish elites, communists, the handicapped and others” [emphasis in original] [On Tyranny, pp. 39-40] and also that “It is hard to subvert a rule-of-law state without lawyers…” Ibid., 38.

The American Bar Association (ABA) has publicized the recent letters signed by representatives of more than 150 law firms, to President Trump, expressing concern regarding a reported Administration proposal to eliminate funding for the Legal Services Corporation.  The ABA itself, of course, in 2007 established the ABA Rule of Law Initiative (ABA ROLI) to consolidate its five-overseasrule of law” programs, perhaps not then anticipating potential jeopardy to its domestic program[8].  Notably, ABA ROLI programs are concentrated, in pursuit of, among other ends; (i) access to justice and human rights; (ii) anti-corruption and public integrity, and; (iii) judicial reform.  The United Nations Declaration of the High-Level Meeting on the Rule of Law also emphasizes the right of equal access to justice for all, including members of vulnerable groups.

[1] In whose mold, President Trump vowed his nominee would be forged.

 

[2] Scalia is the author of both the Concepcion and also the Italian Colors decision. Scalia reportedly sought to justify his own sarcasm by describing himself as a “snoot.”

 

[3] “After all, what under the sun, at least at some level of generality, doesn’t relate to ‘health and safety’” [emphasis in original rhetorically asked Judge Gorsuch in his dissenting opinion.

 

[4] TransAm did not dispute that the employee had a reasonable apprehension of serious injury if he remained with the trailer, that the trailer’s frozen brakes were unsafe, and that the employee, “who had been waiting more than three hours in freezing temperatures in an unheated truck, was unable to obtain correction of the unsafe condition.”

 

[5] Pursuant to this customary methodology, the employee must first establish a prima facie case of discrimination; the burden of proof then shifts to the employer who must provide a legitimate reason for its conduct, which shifts the burden back to the plaintiff who must demonstrate that this reason is pretextual.

[6] (Senate Bill 49, strengthening and expansion of the Equal Pay Act, Fair Chance Act in the City of Los Angeles)

 

[7] (i.e., oxymoronic Cabinet appointments and decimation of environmental, labor, education, art, State Department, United Nations, legal services, and “Meals on Wheels” budgets)

 

[8] “We might be tempted to think that our democratic heritage automatically protects us from such threats [fascism and communism].  This is a misguided reflex.” [emphasis added].  Snyder, On Tyranny, supra, p. 13.