Employers frequently utilize tests and other assessments to determine which job applicants are best suited for a position. However, employers must ensure such assessments are race and gender neutral and do not unknowingly screen out protected classes or else risk liability. A test can be biased, even if it appears neutral on its face, by the statistical effect it has on the applicants considered for the job and ultimately hired.

The problem recently came to light by the Equal Employment Opportunity Commission (EEOC) which began taking steps to eliminate systemic bias from occurring in the recruitment, screening, and hiring of employees. According to the EEOC, despite progress, employment discrimination is widespread in the United States and can arise knowingly, and unknowingly, in screening assessments of potential employees.

One of the most recent cases involves the superstore chain Target, which last month settled a complaint filed against it by the EEOC alleging gender and race bias in hiring for $2.8 million. The settlement amount is considered high for a suit of its kind and will be divided among approximately 3,000 employees in accordance with the damages incurred by each.

According to the EEOC, for the past decade, Target had been utilizing hiring assessments for upper-level positions that were not sufficiently related to the job for which the test applied, in violation of Title VII of the Civil Rights Act of 1964. The EEOC agreed that, on their face, the tests were neutral. However, it contended that in practice the tests prevented certain races and genders from receiving jobs, and, in particular, that it screened out blacks, Asians, and women. In addition to the assessments, Target required a pre-employment psychological exam in violation of the Americans with Disabilities Act (ADA). Under the ADA, employers are not permitted to submit applicants to medical exams prior to receiving job offers.

In response to the charges, Target has agreed to monitor the hiring of its employees in a more careful manner as well as utilize expert consultants to train its employees on the proper administration of assessments and maintain better records.

Despite the large settlement, Target is not admitting any wrongdoing. “The EEOC has concluded that only a small fraction of the assessments administered during the relevant time period could have been problematic,” Target spokeswoman Molly Synder stated. “We continue to firmly believe that no improper behavior occurred regarding these assessments.”

This case should raise a red flag to employers who utilize tests and other assessments to screen job applicants. It is important that such tests do not disproportionately affect protected classes. Whether a test does have a biased effect on applicants can only be determined by employment statistics. However, careful review of screening tests prior to their use should be conducted to eliminate any potential for bias. Furthermore, Target’s improper utilization of pre-job offer psychological exams demonstrates a clear lack of legal leadership in the hiring process. Experienced legal counsel, were it utilized, could have prevented such an ADA claim by ensuring Target’s practices conformed to federal and state laws.


This blog was posted to Jampol Zimet LLP blog on September 29. Click here to read the original entry. 

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The Insurance Broker and Dual Agency

Posted on January 12, 2015 08:58 by Marc Zimet

 Insurance brokers and agents know that their respective roles entail unique responsibilities and duties to their clients. Correctly defining an individual as a broker or agent is essential to determining the proper scope of representation and duties owed to the client. This can be difficult where lines are blurred and legally, the determination will depend upon the facts, not how the parties label themselves. Furthermore, it is possible under certain circumstances for an individual to act as both agent and broker. In these cases care must be taken to ensure the broker is meeting its standard of care and ethical considerations are adhered to.

Generally speaking, agency relationships, such as those found in the agent and broker context, arise via contract. While an agency relationship may be oral, in the case of an insurance broker and agent, it should always be in writing to ensure a clear understanding between the parties is documented, as well as to comply with Business and Professions Code.

Typically, brokers are agents of the insurer when it comes to issuing policies, certificates of insurance, collecting premiums, etc. The role of the broker as an agent is generally provided for in the contract between the insurer and broker, as well as the specific circumstances under which the broker has the authority to act as agent.

However, problems may arise where the role of the intermediary is not so clear. For example, where the broker is an agent of the insured, if the insured directs the broker to obtain insurance from a specific insurance company, the broker is also considered to be an agent of the insurer. In situations such as these, the broker may become an agent of the insured for purposes of obtaining coverage, as well as an agent of the insurer for other purposes. Generally speaking, agents are fiduciaries of their principals, owing to their principal the duty of undivided loyalty. One would therefore assume that the dual agency would put the broker in a precarious situation, which is generally not permissible in the realm of agency law. However, in the insurance arena, this dual agency is not always a conflict for the broker.

In California, it has been held that the broker’s duties to the insured do not rise to the level of a fiduciary. A broker need only act with reasonable care. (Workmen’s Auto Insurance Company v. Guy Carpenter & Company, Inc.(2011) 194 Cal.App.4th 1468.) Therefore, in California at least, the broker acting as dual agent will not run afoul of principal-agency law. While the courts have declined to impose the fiduciary duty on brokers, the fact of the matter is that under normal circumstances a dual agency in the context of insurance will rarely see a conflict of interest such as that that the prohibition is intended to prevent. This is because the broker’s responsibilities to the insurer and insured are independent of each other. For example, the broker can easily procure insurance for the insured and collect the premium for the insurer without conflict. Once the broker has obtained coverage as requested by the insurer, the agency relationship between the broker and insured terminates, thereby permitting the broker to continue to collect premiums and issue certificates on behalf of the insurer without any potential for conflict.

While brokers may act in a dual agency capacity, care must still be taken to act with reasonable care and prudence, and a broker may still be liable to insureds for failing to meet this standard. 

This blog was originally posted on January 6. Click here to read the original entry. 


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Frequently, nursing homes and long term care facilities find themselves the subject of claims for injuries or harm to patients stemming from insufficient staffing. Proving that the facility had enough employees on hand to properly care for its patients is essential to defending such claims.

Under California law, facilities must provide, at a minimum, 3.2 nursing hours per patient per day. (Health & Safety Code §1276.5.) However, according to the California Code of Regulations, facilities are required to have sufficient staff on hand and provide those nursing hours needed meet the individualized needs of its patients. (22 Cal.Code.Regs. §72501(e).)

An issue arises when a facility relies upon the Health and Safety Code requiring only 3.2 nursing hours per day per patient, and mistakenly believes that so long as this number is achieved, they have fulfilled their duties. However, in some cases 3.2 hours per patient may not be sufficient to care for the patient, resulting in a failure of the facility to meet the requirement of the California Code of Regulations to meet the individualized needs of its patients.

Facilities must be careful to ensure it is meeting the individual needs of its patients, rather than relying upon §1276.5 and its 3.2 hour requirement. A facility that relies only upon the 3.2 hour requirement and fails to provide care as needed may in fact demonstrate that it has disregarded the individual needs of its patients. Plaintiffs alleging wrongdoing by a nursing facility who are trying to prove the facility has failed to provide care as needed, and that as a result of insufficient staffing harm has occurred, may look to budget and cost records. A facility’s budget records can be utilized against a nursing facility to demonstrate that it budgeted only for staffing to provide 3.2 hours of nursing per day per patient. This evidence can show that the facility failed to meet the individualized needs of its patients by providing only the minimum standard of care.

Nursing facilities can help eliminate the risk of lawsuits and liability for insufficient care by ensuring the individualized needs of its patients are met. This means a careful review of the facilities’ patients and their needs is required on a consistent and frequent basis to assess the overall needs of the facility in terms of staffing.

If you are a nursing facility and have questions about the standard of care required for your patients, or have liability concerns, please contact Marc Zimet at Jampol Zimet, LLP at (213) 689-8500 or at mzimet@jzlaw.com, for a consultation to ensure your interests are protected before it is too late.

*This blog was originally posted to Jampol Zimet on December 23. Click here to read the original entry. 

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The U.S. Supreme Court has granted review of Integrity Staffing Solutions v. Busk to determine whether time spent by employees in a security check line constitutes work and is therefore compensable. The case was brought by employees of Integrity Staffing Solutions, a temporary employee provider, who provided employees to Amazon.

In Integrity, temporary workers were assigned to work for Amazon at two of its Nevada warehouses. According to the class action plaintiffs, they regularly spent approximately 20-25 minutes at the end of each day in security checks when leaving work, waiting to be searched, empty their pockets, and pass through metal detectors. They claimed they were not compensated for this time and were due overtime pay. The workers argue that Amazon required them to clear security checks each day, as necessary to reduce employee theft from the warehouses. The plaintiffs went on to note that the Title 29 of the Code of Federal Regulations Part 785 provides, “[t]he workweek ordinarily includes all time during which an employee is necessarily required to be on the employer’s premises, on duty, or at a prescribed workplace.” A workday is further defined as, “[t]he period between the time on any particular day when such employee commences his/her principal activity and the time on that day at which he/she ceases such principal activity or activities. The workday may therefore be longer than the employees scheduled shift hours, tour of duty, or production line time.”

On appeal, the Ninth Circuit noted that the FLSA, as amended by the Portal-to-Portal Act of 1947, “generally precludes compensation for activities that are ‘preliminary’ or ‘postliminary’ to the ‘principal activity or activities’ that the employee ‘is employed to perform.’” However, it also noted that “preliminary and postliminary activities are still compensable” if they are “integral and indispensable” to an employee’s principal activities. For example, in Steiner v. Mitchell, (1956)350 U.S. 247, 332, changing clothes and showering were “integral and indispensable” to the production of batteries. It has been held that to be “integral and indispensable,” an activity must be (1) “necessary to the principal work performed” and (2) “done for the benefit of the employer.” (Alvarez v. IBP, Inc. (2003) 339 Fed.3d 894, 902–03.)

In finding the employees entitled to compensation, the Ninth Circuit held that the security clearances were necessary to the “employee’s primary work as warehouse employees and done for Integrity’s benefit.

The Supreme Court, in issuing a decision on this issue, will clear up much confusion, as the Ninth Circuit’s decision is in direct conflict with other circuit rulings. In Gorman v. Consolidated Edison Corp. (2007) 488 Fed.3d 586, the Second Circuit ruled that time spent in a security screening by employees was not compensable. Furthermore, the Eleventh Circuit issued a similar ruling in Bonilla v. Baker Concrete Construction (2007) 487 Fed.3d 1340.

The outcome of this case has the potential to reach thousands of workers who have worked for Amazon and have been subject to the security checks. Amazon employs approximately 38,000 temporary employees at its warehouses. It is estimated that if the Supreme Court affirms the Ninth Circuit ruling, damages will be in the millions.

Employers should be aware of the standards applied by the courts to determine whether their employees are entitled to compensation for activities required by the employer. Employers requiring their employees to spend time in security checks, change clothes, or otherwise take time to prepare for work should seek advice of counsel to determine whether such time is compensable. If you are an employer unsure about whether your employees must be compensed for time spent in security checks or preparing for work, please contact our attorneys at Jampol Zimet, LLP located at 800 Wilshire Boulevard, Los Angeles, CA 90017, or at (213) 689-8500, for a consultation to ensure your interests are protected before it is too late.

This blog was first posted to Jampol Zimet’s Insurance Defense Blog. Click here to read the original entry. 

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Preventing Elder Abuse in the Nursing Home

Posted on May 30, 2014 02:47 by Marc Zimet

Despite the fact that nursing homes and long-term care facilities strive to provide the best care to their patients and residents, such facilities are exposed to a great risk of liability by employees who commit elder abuse. Elder patients are vulnerable and can easily fall victim to various kinds of abuse from employees, including physical and emotional abuse, neglect, and fraud. However, there are steps that nursing homes can take to reduce its risk of abuse.

Staff Screening: The first thing nursing homes can do to minimize its risk of abuse is properly and thoroughly screen its employees. Prior to hiring any employees, criminal background checks must always be performed and references should be inquired. Staff should also be screened for their suitability for the position. Individuals who have had substance abuse or domestic violence issues are not suitable. Furthermore, individuals who demonstrate a tendency to be controlling, lack empathy, or are not genuinely interested in the welfare of their patients may not be appropriate.

Patient/Staff Ratio: Research has demonstrated that homes with a low staff-to-patient ratio have the most occurrences of abuse. A high staff-to-patient ratio permits staff members to develop relationships with their patients thereby reducing the risk of abuse. Nursing homes can combat this risk by ensuring it has sufficient staff on hand to care for all its residents to prevent overwhelming staff from caring for too many patients. Facilities should also monitor and regularly screen its employees for burn-out and stress to ensure any problems employees may be having with their duties are addressed. Facilities should also regularly take patient satisfaction surveys of its employees. To help in preventing employee stress, facilities can increase pay and benefits, increase aides and/or assistant support staff, and provide strong leadership.

Policies and Training: All facilities should ensure clear policies against abuse are set forth in its employee handbook. Additionally, facilities should actively provide training to employees regarding abuse, its prevention, how to spot it,and how to report it. Employees reporting abuse should not be punished. Nursing homes should strive to create an abuse-free environment through creating a company culture that is anti-abuse. Employees should be trained in communication skills, anger management, and handling difficult patients. Employees lacking proper training and skills to handle difficult patients are more likely to become stressed and frustrated.

Address Complaints: Many homes who find themselves in litigation due to ongoing abuse of its patients could have prevented such abuse had it properly address complaints. Typically, there are warning signs of abuse that facility employees and/or supervisors fail to recognize and address. Complaints, even those of the smallest nature, should be taken seriously and thoroughly investigated. Supervisors should receive additional training regarding the intake of complaints, how to investigate such complaints, and how to manage a finding of abuse. Any complaint or grievance with an employee should be memorialized in writing and maintained in an employee's individual file to create a clear record that can be reviewed. The accumulation of small complaints may suggest a larger problem with an employee. 

At-Risk Patients: Research has shown that some patients are at greater risk for abuse than others. Those patients suffering from diseases that result in isolation, such as dementia, are at greatest risk. Patients who do not have family regularly visiting them, as well as those who have a higher degree of dependency on staff are also at greatest risk. Patients meeting these criteria should be monitored closely to ensure staff are properly caring for them. 

While a nursing home may not be able to completely eliminate all risk of the occurrence of abuse, it can take many steps that will aid in its prevention. From thorough screening, training, and monitoring of employees to creating strong company policies and addressing complaints, a nursing home can take a proactive approach to managing its staff and reducing its exposure. 

Blurb: Despite the fact that nursing homes and long-term care facilities strive to provide the best care to their patients and residents, such facilities are exposed to a great risk of liability by employees who commit elder abuse. Elder patients are vulnerable and can easily fall victim to various kinds of abuse from employees, including physical and emotional abuse, neglect, and fraud. However, there are steps that nursing homes can take to reduce its risk of abuse.

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The California Court of Appeals recently held that the penalties that may be awarded to a patient for violations under the Patient's Bill of Rights are statutorily limited to $500 per lawsuit. In Nevarrez v. San Marino Skilled Nursing and Wellness Centre, Nevarrez was admitted to the San Marino nursing home for rehabilitation. Though alert, he had difficulty standing and walking and during the month he was there, fell a total of nine times. His last fall resulted in a head injury and required brain surgery, and he later suffered a stroke from his injury. After his hospital stay, we was readmitted to the home and fell an additional two times.  

Nevarrez thereafter filed a complaint alleging elder abuse under Welfare and Institutions Code section 15600 et seq., negligence, violation of the Patient's Bill of Rights under Health and Safety Code section 1430, subdivision (b), willful misconduct, and violation of Penal Code section 368.

At trial, the judge permitted a citation issued by the Department of Public Health after Nevarrez's ninth fall to be admitted into evidence. The citation included information concerning the nursing home's plan for corrections and the investigator's specific findings. After it became clear the investigator would not testify at trial, San Marino attempted to keep the citation out of evidence on the basis that it would not be permitted to cross examine the investigator. It was nonetheless allowed into  evidence by the judge. 

After trial, the jury found the Patient's Bill of Rights had been violated due to the home's under staffing. It also found negligence on the home's part, with the home 40% comparatively negligent. On the elder abuse claim, it found the home had been negligent as well, but did find any malice. Nevarrez was awarded approximately $1.2 million for past medical expenses, $200,000 for future medical expenses, and $3 million for general damages. The court additionally awarded Nevarrez $500 per violation of the Patient's Bill of Rights as permitted under Section 1430(b) (of which there were 14) for a total of $7,000, and $950,000 in attorneys fees. The court denied San Marino's motion to reduce non-economic damages to the $250,000 cap per the Medical Compensation Reform Act (Civ. Code §3333.2) and to reduce economic damages to those amounts actually paid. San Marino timely appealed.

On review, the Court of Appeals affirmed the Patient's Bill of Rights violations. However, it found the jury had been improperly instructed that it could find negligence based upon violations of federal and California law, and the issuance of the citation by the DPH which evidenced such violations. On the elder abuse claim, the Court found again that the trial court had improperly provided the DPH citation to the jury before weighing its probative value against its prejudicial effect. The Court therefore reversed the negligence and elder abuse verdicts. 

The Court then reviewed the attorney fees and penalties awarded under Health and Safety Code section 1430, subdivision (b) which permits a patient to sue a nursing home that “violates any rights” set forth in the Patient's Bill of Rights. Though the court properly awarded the fees as permitted for violations of the Elder Abuse Act and Section 1430(b), it failed to apportion the award, as San Marino was the only defendant named in the cause of action under Section 1430(b). It therefore reversed the award of attorneys fees to be reviewed upon remand.

Of greatest significance of this case is the Court's review of the lower court's award under Section 1430(b) of $7,000 for the 14 violations of the Patient's Bill of Rights. After reviewing arguments set forth by all parties, the Court concluded that the statute only permits a single award of $500 per lawsuit and that the $7,000 award was excessive. The Court reviewed the statute, looking to the Legislature's intent when enacting the statute, statutory scheme, legislative history, and public policy considerations. The section provides: “The licensee shall be liable for up to five hundred dollars ($500) ... and may be enjoined from permitting the violation to continue.” While Nevarrez argued the language pointed towards an award per single violation, the Court did not agree. Looking to the plain meaning of the language, the court held that the penalty could only be awarded once per lawsuit. 

This holding is important specifically for skilled nursing homes. The Court's curtailing of penalties permitted for violations of the Patient's Bill of Rights may effectively reduce lawsuits related to violations as plaintiff's potential monetary recovery is now limited.

Blurb: The California Court of Appeals recently held that the penalties that may be awarded to a patient for violations under the Patient's Bill of Rights are statutorily limited to $500 per lawsuit. This significantly reduces the potential monetary recovery by plaintiffs for violations. 


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Drafting the Employee Handbook

Posted on March 24, 2014 07:14 by Marc Zimet

Are you an employer? Then you should have an employee handbook. If you don't have one, now is the time to procure one. If you do have one, then now is the time to review your handbook to ensure it is up to date with the ever changing employment laws. While the state of California does not require an employer to maintain an employee handbook, a well drafted handbook helps to avoid lawsuits, offers an affirmative defense to litigation, and ensures compliance with complex state and federal regulations. 

A good employee handbook sets forth the company's stance on important legal issues, such as harassment and discrimination, as well as informs the employee of the company's operating policies and procedures. A handbook can set forth the rules for employees, including management guidelines, and may also be used to educate employees about benefit plans. Regardless of the depth of a handbook, there are a few policies an employer should be sure to develop and include. 

- An explanation of “at-will” employment and disclaimer. To ensure an employee handbook is not interpreted by an employee as constituting an employment contract , the handbook must include an “at-will” disclaimer. This will explain to the employee that he or she can be terminated with or without cause at any time.

-An explanation of the different classifications of employment. This should include full-time, part-time, temporary, exempt, and non-exempt classifications. It should be clear which category an employee fits into, and the employer should ensure the employee is properly classified. 

- An explanation of hours, meals, and breaks. To aid in avoiding litigation, employers should ensure their policy regarding employee hours, meals, and breaks is clearly set forth and in compliance with legal requirements. This should also include the employer's policies regarding over-time and double-time pay rates. 

-A statement of equal employment opportunity. Employers should ensure they have a well drafted policy addressing their dedication to equal employment and intolerance of all forms of discrimination against classes protected by law. It should further set forth that the employer shall not discriminate at any time during the employment process, such as during hiring and termination. 

-Policy against harassment. All employers should clearly set forth their policy against harassment in the workplace. This should include all forms of harassment employees are protected against (not just sexual). A harassment policy should also provide employees who believe they have been harassed with guidelines for reporting such harassment and protocols for handling incidents reported by employees. 

- Employee conduct and performance. The handbook should set forth what conduct is impermissible in the workplace, especially that conduct which may result in termination. It should also set forth expectations regarding an employee's performance and whether there will be periodic reviews of performance levels. 

-Explanation of the company's electronic privacy policies. The employee handbook is the best place for employers to set forth their policy on electronic privacy of employees. This includes an employee's privacy of their computers, emails, telephone conversations, and voicemails.  

- Family and Medical Leave Act (FMLA) policy. If you are an employer with more than fifty employees, you are required by law to provide your employees with your FMLA policy in writing. The handbook is an excellent place to do this.

- Acknowledgment. Employers should always ensure they receive a written acknowledgment from the employee stating his or her receipt of the handbook and that he or she understands the terms and agrees to abide by company policies. It cannot be emphasized how important this step is. 

Due to the complexity of employment laws, employers should hire experienced legal counsel to draft and/or review their employee handbook. A well drafted handbook will be written in simple, laymen language to ensure all employees understand its provisions and there is no confusion about the meaning of its terms.

Last of all, employers must ensure its employees actually follow the employee handbook. It is important that not just low-level employees comply, but managers as well. This is especially true in cases of claims of discrimination or harassment where a manager's handling of a claim can either mitigate a company's damages, or increase them. 

While the above list is not exclusive, it provides a solid foundation for employers to base their employee handbooks. An employer who clearly sets forth its policies on these issues protects itself against litigation, and will find that in the event litigation is ever commenced, the handbook provide defense as well as evidence of company policies and culture. 

Blurb: If you are an employer in California, an employee handbook is a must. While the state of California does not require an employer to maintain an employee handbook, a well drafted handbook helps to avoid lawsuits, offers an affirmative defense to litigation, and ensures compliance with complex state and federal regulations. Included are some of most important policies an employer should be sure to develop and include in their handbook.

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How to Avoid Retaliation Claims When Firing

Posted on January 22, 2014 02:34 by Marc Zimet

Retaliation claims were the most frequent claims filed with the Equal Employment Opportunity Commission (EEOC) for 2012. There has been a sharp rise in retaliation claims since the 2006 Supreme Court opinion in Burlington Northern & Santa Fe Railway Company v. White, which lowered the standard for what is considered retaliatory conduct. Employers accused of wrongdoing by an employee risk such a claim when the employee is later fired for a legitimate reason. However, employers should not fear retaliation claims so that employees are kept on to the detriment of their business. While fear of a retaliation claim is a legitimate concern, there are steps an employer can take to help reduce the likelihood of such a claim, and protect themselves if a claim is made. 

1) Maintain an effective no-retaliation policy. All employers should maintain an effective no-retaliation policy to solidify its stance against retaliation. This should be affirmed in the company’s policies against harassment and discrimination, but can also be provided for in its own provision.

2) Train Employees. Employers must train supervisors and managers on how to properly respond to employee complaints, and specifically those complaints that involve them as managers. Those managers to whom a complaint is made against, or who personally supervise the complaining employee, should not be in charge of investigating the complaint. A neutral, third party should always be used to ensure an objective viewpoint.

3) Investigate Claims. All complaints should be thoroughly investigated and documented.

4) Document Performance Issues. Good documentation of performance issues leading to termination can defend an employer against a retaliation claim. Ensure employees with similar performance problems are treated equally.

5) Before termination, review discipline and the decision to terminate. Ensure the employee’s poor performance is well documented. If an employee has made a recent complaint regarding harassment or discrimination, has complained of workplace misconduct, or has engaged in any protected activities such as union picketing, it may not be a good time to terminate if there may appear to be a connection between the activity and the termination.

No employer wants to face a retaliation complaint. Proactive employers following the above steps can reduce their exposure and likelihood of suits. In the case that a complaint is filed, employers aren’t stuck with a poorly performing employee. However, understanding the proper steps to documenting the performance issues and ensuring the cause for termination is clear from the record and timing is essential before taking termination action.

This blog was originally posted on Jampol Zimet’s blog on January 14. Click here to read the original entry.  

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The U.S. Court of Appeals for the Second Circuit has granted two petitions to appeal trial court decisions in employment cases concerning whether interns qualify as employees and therefore are entitled to minimum wage and overtime protections. The two cases in question involve similar facts, however, the trial courts arrived at exact opposite conclusions.

In Eric Glatt and Alexander Footman, et al., v. Fox Searchlight Pictures, Inc., former interns Glatt and Footman brought suit against Fox in 2011, seeking class certification for more than one hundred interns and back pay for work done for the company on the film Black Swan. While the U.S. Supreme Court has upheld unpaid internships, such internships must be for training purposes. Glatt and Footman claim their internships, which consisted of getting coffee and taking out the trash, were anything but that. Citing the Labor Department’s six-prong test that must be met in order for an internship to be legally unpaid, District Judge William Pauley permitted the class certification and granted summary judgment for the plaintiffs, ruling the interns were in fact employees because the picture company had formal and “significant” control over the interns.

In the second case, Wang v. Hearst Corporation, unpaid interns sued the magazine company on behalf of 3,000 students who worked in the name of gaining experience. However, District Judge Harold Bauer declined to certify the class stating the class lacked the element of commonality. His finding was based on the fact that the company did not have an internship policy and that each Hearst magazine utilized interns in different manners and for different purposes.

The U.S. Court of Appeal’s decision in these cases is being watched closely by many, especially those in industries that rely heavily on unpaid interns. For those industries, such as the entertainment, finance, and sports industries, a decision changing the way interns are classified could change the way these industries operate. Hearst Corporation has already stopped its practice of taking interns. To students seeking real-world experience, this could mean they graduate without any training or contacts to help them land a job. To critics of the industries, unpaid internships are nothing more than an abuse of the labor system. For employers, the outcome will determine how future internships are handled; including for what purposes unpaid interns can be utilized. Interestingly, according to the Hearst decision, so long as an employer does not have an internship policy in place, it should be protected from class actions. This, however, will not protect an employer from individual suits.

This blog was originally posted on December 17 on the Jampol Zimet blog. Click here to read the original entry. 

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The ruling comes from California’s Court of Appeals for the Sixth District in Bain v. Tax Reducers, Inc. after extensive litigation following the plaintiff’s month-long employment with the defendant. Plaintiff Harold Bain worked as an accountant for a firm where he was classified as an independent contractor, earning a salary for a fixed 32 hours per week.

A few years later, while attending a seminar, Bain and his employer realized he was improperly categorized as an independent contractor when in fact he was an employee. They agreed to finish the year, and then re-categorize Bain as an employee. However, shortly before the year’s end, in December 2004, the company was sold to defendant TRI. TRI’s President James Griffin met with Bain to discuss his employment, but did not discuss whether Bain would be an independent contractor or employee. After the takeover, Bain was never given any employment documents from TRI. Bain put together a packet consisting of a W-4, I-9, and other documents and placed them on Griffin’s desk; Griffin denied ever receiving them.

While working for TRI, Bain was instructed to continue to use his weekly time sheets to report his hours, and worked under the direction and supervision of TRI. He was directly supervised by Griffin and met with clients as they were assigned to him. At the end of the first month, Bain had not yet been paid and so he asked Griffin when he would receive his first pay check. Griffin responded by leaving an independent contractor agreement on Bain’s desk, proposing to pay Bain a reduced rate and terminating employment after six months. Believing Griffin was trying to reclassify him from his employee status, Bain responded to Griffin requesting employee status and no reduction in pay. Griffin said he would talk to the former employer. A few weeks later, Bain resigned citing TRI’s failure to pay him for seven weeks and failure to reimburse him for expenses submitted.

In March 2005 Bain filed a claim for unpaid wages and expenses with the California Labor Commissioner and sent a demand letter to TRI. TRI responded that its offer to pay Bain a reduced rate “still stands” but did not send a check. Bain claimed $7,700 in unpaid wages, $157.26 for unpaid expenses, and $6,600 in waiting time penalties. In its response, TRI claimed Bain was not entitled to wages or penalties because he was never an employee. The hearing before the Labor Commissioner occurred a year later in March 2006, at which time it was found that Bain was an employee and he was awarded the amounts requested plus interest. TRI appealed the decision to the superior court. Although labeled an “appeal” such trials are de novo in which the decision of the Labor Commissioner is not entitled to any weight.

In Superior Court, trial was set for December 2006. The parties reached a judicially supervised settlement the day of trial. However, the court failed to retain jurisdiction over the settlement. The parties attempted over the next few months to finalize a written settlement agreement, however they could not agree on the terms. A year and a half later, in May 2008, Bain filed a new action to enforce the settlement. Litigation followed at which time both parties conducted discovery and sought summary adjudication. TRI argued that Bain’s cause of action for Labor Code violations and wages due were time barred by the statute of limitations. The trial court denied the motion.

After a four day trial, the trial court held that Bain was in fact an employee of TRI and that his claims were governed by a three year statute of limitations period. However, because TRI had agreed to pay Bain wages in January 2007 as part of their December 2006 settlement, the limitations period began to run in 2007 and therefore the claims were not time barred. Alternatively, the court held that Bain was entitled to rely on the doctrine of equitable tolling because he had consistently pursued his claims. The court found in Bain’s favor on the claims and gave him a choice of two judgments both totaling approximately $25,400. TRI and Bain appealed; Bain claimed additional attorney’s fees owing and an enhancement factor against TRI due to alleged vexatious litigation. TRI claimed the court erred in finding the action was not barred by the statute of limitations and when it imposed statutory penalties.

On appeal, the Court stated that a cause of action for wage liability must be commenced within three years after the cause of action accrues. A cause of action accrues when the wages first become regularly due (i.e. on payday). Therefore, the Court held the trial court erred in finding the cause of action accrued after TRI agreed to pay a settlement, in 2007, when in fact it accrued no later than February 18, 2005, the last day Bain worked for TRI. As suit was not filed until May 7, 2008, more than three years later, his causes of action were time barred before the superior court.

However, on the issue of equitable tolling, the Court found the limitations period to be tolled. The doctrine of equitable tolling applies when a party has multiple remedies available and pursues one, such as where a plaintiff first pursues administrative remedies, even if not legally required to exhaust those first. Whether the doctrine applies is heavily reliant upon the individual facts and the proponent must demonstrate three elements: 1) timely notice, 2) lack of prejudice to the defendant, and 3) reasonable and good faith conduct of the plaintiff. Based upon Bain’s diligent prosecution of his claims, substantial evidence existed to support the trial court’s ruling that the statute of limitations was equitably tolled.

This case serves to remind employers that proper classification of employees is essential to avoiding litigation. It is clear in this case that both Bain’s former employer and defendant TRI lacked guidance or knowledge on the issue of employee classification. Furthermore, TRI failed to adhere to laws requiring payment to its employees thereby subjecting it to waiting time penalties. This case is a prime example of how such mistakes can lead to time-consuming and costly litigation, all which could have been avoided.

This blog was originally posted on December 3, 2013 by Jampol Zimet LLC. Click here to read the original entry. 
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