Employment Law Trends

These are just a few of the recent legal opinions, trends and other updates relevant to our practice area:

Lamps Plus v. Vasquez (2019)

The United States Supreme Court issued a ruling further limiting Plaintiffs’ ability to pursue class action claims where an arbitration agreement applies to the parties to the litigation. The court held, in a 5-4 decision, that where an arbitration agreement is ambiguous on the question of class arbitration, it cannot support class arbitration under the Federal Arbitration Act (“FAA”). The Lamps Plus decision limits Plaintiffs’ ability to arbitrate class action claims that an arbitration agreement prevents them from litigating in court. This ruling is an extension of the previous ruling in the Stolt-Nielson case, where the court held that where an arbitration agreement is silent as to class action arbitration, it cannot be read to authorize it. The Lamps Plus court, relying on Stolt-Nielson, found an arbitration agreement must expressly authorize class arbitration in clear terms in order to permit it.

Vazquez v. Jan-Pro Franchising International, Inc. (2019)

The Ninth Circuit Court of Appeals held that the California Supreme Court’s ruling in Dynamex Operations West, Inc. v. Superior Court applies retroactively (i.e., before the date of the 2018 Dynamex ruling). The ruling also has important effects on franchised businesses like McDonald’s and international commercial cleaning company Jan-Pro—the defendant in the Ninth Circuit case.

Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018)

In Dynamex, the California Supreme Court clarified the test for determining whether workers should be classified as “employees” or “independent contractors.” Embracing a presumption all workers are, in fact, employees (and placing the burden on the entity classifying them otherwise), the Court adopted what is now termed the “ABC test.” Under this standard, a worker will be deemed to have been “suffered or permitted to work,” and thus, an employee for wage order purposes, unless the putative employer proves the worker:

  • (A) is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  • (B) performs work that is outside the usual course of the hiring entity’s business; and
  • (C) is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Note that each of these requirements needs to be met for a court to recognize that a worker has properly been classified as an independent contractor. Note also that, as of the time of this update (June 2019), certain “carve outs” (exceptions to the ABC test) are being created for particular job positions.

Epic Systems Corp. v. Lewis (2018)

Rejecting arguments that they violated employees’ rights to collective bargaining, and that modestly-valued consumer claims would be more efficiently litigated within the parameters of one lawsuit, the U. S. Supreme Court, in Epic Systems Corp. v. Lewis, 584 U.S. ___ (2018), sanctioned the use of so-called “class action waivers.” Citing its deference to freedom to contract principles, the Epic Systems opinion opened the door dramatically to the use of these waivers as a condition of employment, consumer purchases and the like. Some commentators in opposition to the ruling see it as a “death knell” to many employment and consumer class actions, and have increasingly pushed for legislation to circumvent it in hopes of reviving otherwise-underrepresented parties’ ability to litigate on a group basis. Supporters (mostly pro-business) of the high court’s ruling argue its holding is consistent with private contract principles. Many of those supporters had long-since argued that class action procedures were generally inconsistent with due process mandates and unnecessarily promoted litigation of otherwise small claims—thus heralding the ruling’s anti-litigation effect.