SCOTUS Decision Digital Realty-Somers Whistleblower Protections

Supreme Court Action and Whistleblower Protections  

Concerning Whistleblower Protections – 0n February 21, 2018, the Supreme Court held in Digital Realty Trust, Inc. v. Somers that to sue under the anti-retaliation provisions of the Dodd-Frank Act, a person must first report a violation of the securities laws to the Securities and Exchange Commission (SEC). In reversing a prior Ninth Circuit decision, the Supreme Court ruled that employees who report alleged violations only internally are not protected whistleblowers under Dodd-Frank but are protected only if they have reported to the SEC.

The Dodd-Frank Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) strengthened SEC enforcement by providing monetary awards and anti-retaliation protections to “whistleblowers” who report on securities law violations. The statute unambiguously provides monetary awards to people who report to the SEC. However, the issue in Digital Realty was the extent of anti-retaliation protections that restrict employers from firing, demoting, harassing or otherwise discriminating against a “whistleblower.”

The Dodd-Frank Act defines a “whistleblower” as someone who provides “information relating to a violation of the securities laws to the Commission.” While that definition seemingly only protects those who report to the SEC, the Dodd-Frank Act separately provides protection for whistleblowers who make disclosures consistent with other federal laws that do not require disclosure to the SEC, including the Sarbanes-Oxley Act.

Digital Realty Trust, Inc. v. Somers
Paul Somers worked as a vice president for Digital Realty from 2010 until he was terminated in April 2014. While employed with Digital Realty, Somers claims to have reported possible securities law violations to senior management, and alleges he was fired shortly after making these internal reports. In November 2014, Somers filed suit against his Digital Realty, claiming that his former employer retaliated against him in violation of the Dodd-Frank Act by firing him for making an internal report protected by the Sarbanes-Oxley Act.

Digital Realty immediately asked the court to dismiss the case, arguing that Somers was not entitled to whistleblower protection because he did not meet the statutory definition under the Dodd-Frank Act. By his own account, Somers admitted that he did not make any reports to the SEC.

Lower Court Decisions

whistleblower protections

A California federal court and the 9th Circuit Court of Appeals both refused to dismiss the Somers’ case. The lower courts could not find a clear way to reconcile the Act’s narrow definition of whistleblower with the broad protections of its anti-retaliation provision. Therefore, the lower courts deferred to the SEC’s interpretation of the Act which extends protection to individuals who make internal reports. Recognizing that certain provisions of the Sarbanes-Oxley Act require internal reporting, the 9th Circuit reasoned that a strict application of the Dodd-Frank Act’s whistleblower definition would narrow the anti-retaliation provisions of the Act “to the point of absurdity,” leaving entire categories of employees, such as in-house counsel and auditors, with little protection under the Act.

In short, the 9th Circuit elevated Congressional intent and regulatory interpretation over the plain language of the Act. This created a split in the circuits, as the 5th Circuit Court of Appeals had strictly applied the Act’s definition of whistleblower in an earlier case. The Supreme Court accepted the case to resolve the dispute and determine who Congress intended to protect when it defined “whistleblower” in the Dodd-Frank Act.

SCOTUS
The Supreme Court ruled 9-0 in favor of Digital Realty. In the majority opinion authored by Justice Ginsburg, the Supreme Court held that an individual must report securities law violations to the SEC to be protected as a whistleblower under the Dodd-Frank Act. The Court found that the Dodd-Frank Act unambiguously defines a “whistleblower” as someone who provides information regarding securities law violations to the SEC. Because the statute’s definition limits those who are entitled to protection to those who report to the SEC, a person who reports only internally is not protected as a whistleblower regardless of the conduct they engage in, such as reporting misconduct.
The Court found that, by enacting the whistleblower provisions of Dodd-Frank, “Congress undertook to improve SEC enforcement and facilitate the Commission’s ‘recovery of money for victims of financial fraud.’” The Court held that by requiring the provision of information to the SEC, the narrower whistleblower definition serves the goal of assisting SEC enforcement.

Conclusion
The Supreme Court’s decision in Digital Realty Trust, Inc. v. Somers should remind all employers to evaluate anti-retaliation policies and to take all employee reports seriously. While a zero-tolerance policy is the most effective practice, employers should ensure all employees, supervisors and managers are aware of such policies. If you feel you have been a victim of retaliation, or have questions about any of California’s employment related laws, feel free to contact leading California employment lawyers at Kingsley & Kingsley. Call toll-free at (888) 500-8469 or contact us via email.

Kingsley & Kingsley

16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)

Pre-Employment Background Checks Fair Credit Reporting Act

FCRA – Fair Credit Reporting Act

There are numerous bodies of law employers should understand when it comes to screening employee candidates. These related laws cover topics such as background checks, the federal Fair Credit Reporting Act (FCRA), “ban the box” on applications, and the ability to run credit checks. 

California’s Ban the Box Law

On October 14, 2017, Governor Jerry Brown signed AB 1008 into law, enacting a broad “Ban the Box” law that took effect on January 1, 2018. The new law prohibits most California public and private employers from asking an applicant about criminal conviction history until after a conditional offer of employment has been made. Specifically, AB 1008 amended the California Fair Employment and Housing Act (FEHA), which covers all California employers with five or more employees (with some positions exempted). As a result of the Ban the Box law, the following conduct is now prohibited before an employer makes a conditional offer of employment:

  • Including in any application (whether written or oral) any question that seeks the disclosure of an applicant’s conviction history;
  • Considering an applicant’s conviction history;
  • Considering, distributing, or disseminating information about any of the following while conducting a conviction history background check in connection with any application for employment:
    • arrest not followed by conviction (except as provided in Labor Code § 432.7(a)(1) and (f))
    • referral to or participation in a pretrial or post-trial diversion program; and
    • convictions that have been sealed, dismissed, expunged, or statutorily eradicated pursuant to law.

Fair Credit Reporting Act (FCRA)

The federal Fair Credit Reporting Act (FCRA) sets the national standard for employment background checks. (15 U.S.C. §§1681 et seq.) Even in states like California that have laws governing background checks, employers have to follow the FCRA. State laws may give more rights to workers, but they cannot take away from the basic rights of the FCRA.

The federal FCRA applies only when an employment background check is prepared by an outsides creening company. When a third party compiles a report, the FCRA requires (1) that you are notified that an investigation may be performed, (2) that you are given the opportunity to consent, and (3) that you are notified if information in the report is used to make an “adverse” decision about you.

But under the FCRA, if the employer does not hire a third party to conduct the investigation, but compiles the report itself, the provisions of the FCRA do not apply. However, California law does require some notice and access if the employer conducts its own report.

When an outside company prepares the report, the FCRA requires the employer to:

  • Give you notice on a separate document that a report may be required.
  • Obtain your permission.
  • Get your specific permission if medical information is requested.
  • Give a specific notice if your neighbors, friends, or associates will be interviewed about your “character, general reputation, personal characteristics, or mode of living.” This is called an “investigative consumer report” under the FCRA.

FCRA and California Law

California law is broader in scope than the federal FCRA. It covers third-party employment screeners, as does the FCRA. but it also covers employers who conduct background checks themselves, something that the FCRA omits. Two of the most obvious differences between the federal FCRA and California’s related law are the meaning of some terms and the notice that starts the employment checking process.

FCRA Fair Credit Reporting Act

In California, an employment background check is called an “investigative consumer report”, or ICR. Candidate rights and an employer’s obligations are included in the Investigative Consumer Reporting Agencies Act (ICRAA). (CA Civil Code §1786)

Under the federal FCRA, an “investigative consumer report” is limited to personal interviews with your friends, neighbors or business associates. In California, an ICR covers your “character, general reputation, personal characteristics, or mode of living” obtained through “any means.” Under California law, a company that collects information for employers and compiles reports is called an Investigative Consumer Reporting Agency (ICRA).

The term ICR does not include credit reports. If an employer in California wants to see your credit report as part of an employment background check, that report is also governed by the Consumer Credit Reporting Agencies Act (CCRAA). (CA Civil Code §1785)

An employer in California can only request your credit report for certain positions. If the position falls into one of the categories that allow a credit check, the employer must give notice that a credit check will be obtained, along with an explanation of why the check is allowed.

Credit Checks

In addition to ban the box laws and FCRA, bans on credit checks are increasing across the country. Credit check laws typically provide that employers are prohibited from conducting credit checks, looking at a person’s credit account debts, bankruptcy history, etc. for employment purposes, unless some sort of specific exception applies. Exceptions are usually found for prospective employees in the financial industry or for employees who will have signatory authority over large large sums of money for their employer or clients. In California, for example, most managerial positions can be subject to a credit check as part of the employee screening process.

Summary

All California employers should review recruitment policies, procedures and forms to ensure they adhere to both federal and state laws highlighted above. Should you have questions about Ban the Box laws, FCRA, credit checks, or any of California’s labor laws, don’t hesitate to to contact leading employment lawyers at Kingsley & Kingsley. Feel free to call us toll-free at (888) 500-8469 or click here to contact us via email.

Kingsley & Kingsley

16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)

 

Grubhub Independent Contractors

Judge Rules Grubhub Drivers Independent Contractors Not Employees

In a significant court decision on the status of gig-economy workers, U.S. Magistrate Judge Jacqueline Scott Corley concluded on February 8, 2018, that drivers for Grubhub Inc. are independent contractors and not employees under California law. The ruling may have implications for other sharing economy companies, including Uber and Lyft, whose business models are built on pairing customers with products and services through apps while avoiding the personnel costs of traditional employment.

Lawson v. Grubhub Inc.
The case against Grubhub was brought by Raef Lawson, who worked as a food-delivery driver for less than six months while pursuing a career as an actor and writer. In 2015, Lawson sued Grubhub claiming the company violated California labor laws by not reimbursing his expenses, paying him less than minimum wage and failing to pay overtime. Lawson claimed he should have been classified as an employee, not a contractor.

The case was originally filed as a proposed class-action lawsuit, but the judge never granted that status, so it was only limited to him and his claimed $600 in damages–consisting of back wages, overtime, and expense reimbursement. Both sides had agreed that Judge Corley, rather than a jury, would decide the case in her San Francisco federal courtroom. Closing arguments were heard in late October 2017.

Borello Test
A key element of the case centered around the Borello test, which is used to determine whether a worker is a 1099 contractor or a W-2 employee. The Borello test considers workplace circumstances like whether the work performed is part of the company’s regular business, the skills required to do the job, payment methods, and whether the work is done under the supervision of a manager.

Elements of the case in Lawson’s FavorGrubhub Independent Contractors “Grubhub did control some aspects of Mr. Lawson’s work,” Judge Corley commented. “Grubhub determined the rates Mr. Lawson would be paid and the fee customers would pay for delivery services. While the Agreement states that a driver may negotiate his own rate, this right is hypothetical rather than real. The Court finds that Mr. Lawson could not negotiate his pay in any meaningful way and therefore this fact weighs in favor of an employment relationship.”

Elements of the case in Grubhub’s Favor
In Judge Corley’s estimation, in addition to working for other gig economy companies while simultaneously working for Grubhub, Lawson was fundamentally “not credible.” By his own admission, Lawson “gamed the app” by scheduling himself for a work shift (a “block” in company parlance) but received few, if any, actual delivery orders by putting his phone in airplane mode, among other tactics.

“Mr. Lawson’s claimed ignorance of his dishonest conduct is not credible,” Judge Corley wrote. “Mr. Lawson would remember if after he filed this lawsuit against Grubhub he cheated Grubhub. If he had not moved his smart phone to airplane mode, intentionally toggled available late, or deliberately engaged in other conduct to get paid for doing nothing he would have denied doing so at trial. But he did not.”

Other aspects that were not in Lawson’s favor of being treated as an employee included 1) he could set his own schedule, 2) largely wear whatever clothes he wanted, and 3) he could choose his own route.

The Decision
Under California law, whether an individual performing services for another is an employee or an independent contractor is an all-or-nothing proposition,” Judge Corley concluded.

“If Mr. Lawson is an employee, he has rights to minimum wage, overtime, expense reimbursement, and workers compensation benefits. If he is not, he gets none. With the advent of the gig economy and the creation of a low-wage workforce performing low skill but highly flexible episodic jobs, the legislature may want to address this stark dichotomy. In the meantime the Court must answer the question one way or the other. Based on what the Court observed at trial and the facts found, and after applying the Borello test, the Court finds that during the four months Mr. Lawson performed delivery services for Grubhub he was an independent contractor.”

Reaction
Shannon Liss-Riordan, Lawson’s lawyer, said she plans to appeal the ruling. “Among other issues, the California Supreme Court is considering adopting a more protective test for employee status, so I was surprised the decision was issued before the Supreme Court has issued that decision…we should have prevailed even under the Borello standard,” Liss-Riordan said. 

Matt Maloney, chief executive officer of Grubhub, said the company is pleased with the ruling, “which validates the freedom our delivery partners enjoy from deciding when, where and how frequently to perform deliveries…We will continue to ensure that delivery partners can take advantage of the flexibility that they value from working with Grubhub,” Maloney said.

Conclusion
People who work as 1099 contractors can set their own schedules, and decide when, where and how much they want to work. Employers utilizing 1099 contractors avoid paying taxes, overtime pay, benefits and workers’ compensation. However, some companies have recognized that some people don’t want to be independent contractors, and prefer the benefits that come with employee status. 

Additional Resources: Daily Journal article by Eric B. Kingsley: Let’s talk about a ‘hybrid’ worker. 

Employers are advised to review independent contractor relationships and evaluate agreements with third parties, and contact an employment lawyer with questions. To discuss these laws, or a potential claim on your behalf, feel free to call us toll-free at (888) 500-8469 or click here to contact us via email.

Kingsley & Kingsley

16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)

 

Kingsley & Kingsley Elevates Attorney Liane Katzenstein Ly to Partner

February 13, 2018

News Release Contact:
Kingsley & Kingsley
16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)


Kingsley & Kingsley Attorney Names Liane Katzenstein Ly as Partner
• Ms. Ly has been practicing employment law since 2008
• Ms. Ly focuses her practice on wage and hour law and complex class action litigation cases


california employment lawyer LyThe law firm of Kingsley & Kingsley is pleased to announce that Liane Katzenstein Ly has been named partner in the firm. A graduate of the University of California Davis School of Law, Ms.Ly has been representing plaintiffs in a wide range of employment cases since 2008.

Ms. Ly represents plaintiffs in employment litigation including class actions and individual employment cases. She concentrates her practice on wage and hour law, class action litigation, and employment law. Ms. Ly’s experience includes consumer class action cases including claims for failure to pay wages, the denial of meal and rest periods, misclassification of employees, and unfair competition cases, among others. Ms. Ly also litigates representative action cases pursuant to the Private Attorneys General Act (PAGA).

We are thrilled to announce the election of Ms. Ly as a partner in our firm,” said firm co-founder and managing partner Eric B. Kingsley. “We have an experienced and incredibly accomplished group of employment litigators, and Liane’s results speak for themselves. She has dedicated her career to protecting employees’ rights and she will continue to benefit all of our clients in their fight against corporate wrongdoing.

Ms. Ly is an honors graduate of Florida State University, and while at University of California Davis School of Law, she was an editor of the Environmental Law Journal and a board member of the King Hall Negotiations Team.

Ms. Ly is admitted to practice in all California state courts as well as the United States District Court for the Central District of California.

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Since 2001, the lawyers at Kingsley & Kingsley have been dedicated to helping workers harmed by the wrongdoing of employers throughout California. The firm is well-respected statewide for its work in successfully representing plaintiffs with wage and hour disputes and protecting their rights. Kingsley & Kingsley exclusively represents employees and focuses its practice on wage & hour and consumer class action cases including claims for failure to pay wages, the denial of meal and rest periods, misclassification of employees, and unfair competition cases. Kingsley & Kingsley also regularly litigates representative action cases pursuant to the Private Attorneys General Act (PAGA). Kingsley & Kingsley also handle cases involving sexual harassment, discrimination, pay inequity, and wrongful termination cases. The firm also serves individuals dealing with disability claims and an insurance company’s denial of benefits. Based in Los Angeles, California, Kingsley & Kingsley handles cases in state and federal courts across California and nationwide.

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Los Angeles, California

Kingsley & Kingsley Elevates Attorney Kelsey M. Szamet to Partner

February 12, 2018

News Release Contact:
Kingsley & Kingsley
16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)


Kingsley & Kingsley Attorney Names Kelsey M. Szamet as Partner
• Ms. Szamet has been practicing employment law since 2008
• Ms. Szamet focuses her practice on complex class action litigation and individual employment cases


Kelsey M. Szamet - California employment lawyer

The law firm of Kingsley & Kingsley is pleased to announce that Kelsey M. Szamet has been named partner in the firm. A graduate of the UCLA School of Law, Ms. Szamet has been representing plaintiffs in a wide range of employment cases since 2008 and has been recognized as a “Rising Star” by Super Lawyers magazine each year since 2014.

Ms. Szamet represents plaintiffs in employment litigation including complex class actions and individual employment cases. She concentrates her practice on wage & hour and consumer class action cases including claims for failure to pay wages, the denial of meal and rest periods, misclassification of employees, and unfair competition cases, among others. Ms. Szamet also frequently litigates representative action cases pursuant to the Private Attorneys General Act (PAGA). In addition to her robust class and representative action experience, Ms. Szamet successfully represents plaintiffs in wrongful termination, sexual harassment, and discrimination cases. She is also well-versed at the appellate level and has authored several appellate briefs in both state and federal court.

“We are thrilled to announce the election of Ms. Szamet as a partner in our firm,” said firm co-founder and managing partner Eric B. Kingsley. “We have a very accomplished group of employment litigators, and Kelsey’s experience speaks for itself. She has dedicated her career to protecting employees’ rights and she will continue to benefit all of our clients in their fight against corporate wrongdoing.”

Ms. Szamet received her Bachelor of Arts degree, cum laude, from the University of California San Diego, where she majored in Human Development and minored in Communications. While attending UCLA School of Law, Ms. Szamet was active in the Women’s Law Journal and various community-based legal clinics.

In addition to her work with the firm, Ms. Szamet dedicates her time to several non-profit organizations, and recently concluded her tenure as Vice President of the Board of Directors for the YWCA – Greater Pasadena Foothill Valley. She currently sits on the Board of Directors for the Child Educational Center.

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Since 2001, the lawyers at Kingsley & Kingsley have been dedicated to helping workers harmed by the wrongdoing of employers throughout California. The firm is well-respected statewide for its work in successfully representing plaintiffs with wage and hour disputes and protecting their rights. Kingsley & Kingsley exclusively represents employees and focuses its practice on wage & hour and consumer class action cases including claims for failure to pay wages, the denial of meal and rest periods, misclassification of employees, and unfair competition cases. Kingsley & Kingsley also regularly litigates representative action cases pursuant to the Private Attorneys General Act (PAGA). Kingsley & Kingsley also handle cases involving sexual harassment, discrimination, pay inequity, and wrongful termination cases. The firm also serves individuals dealing with disability claims and an insurance company’s denial of benefits. Based in Los Angeles, California, Kingsley & Kingsley handles cases in state and federal courts across California and nationwide.

Facebook: Kingsley & Kingsley
LinkedIn: Kingsley & Kingsley

age discrimination California

Age Discrimination in the Workplace

Age Discrimination  age discrimination California

Several national reports show that there are actually more Baby Boomers in the workforce than ever before. These reports suggest that it is no longer the norm for workers to retire at age 65–unlike previous generations. With this trend, it is important to review the salient points of age discrimination for both employees and employers alike.

Definition

According to the EEOC, age discrimination involves treating an applicant or employee less favorably because of his or her age. The Age Discrimination in Employment Act (ADEA) forbids age discrimination against people who are age 40 or older. It does not protect workers under the age of 40, although some states have laws that protect younger workers from age discrimination. It is not illegal for an employer or other covered entity to favor an older worker over a younger one, even if both workers are age 40 or older. In general, the ADEA applies to private employers with 20 or more employees, state and local governments, employment agencies, labor organizations and the federal government. Lastly, age discrimination can occur when the victim and the person who inflicted the discrimination are both over 40.

Notable Cases

Several EEOC cases highlight the prevalence of age discrimination and the cost employers can pay for violations.  In October of last year, restaurant chain Ruby Tuesday agreed to pay $45,000 to settle an age bias lawsuit after it allegedly failed to hire a qualified applicant with over 20 years of relevant experience. Also, late last year, Montrose Memorial Hospital in Colorado paid $400,000 and furnished other relief to settle an age discrimination lawsuit brought by the EEOC. Montrose violated federal law when 29 employees, aged 40 and older, were fired or forced to resign, the EEOC said. The longtime employees, many with 10 to 20 or more years of work history at the hospital, were fired for supposed performance deficiencies for which younger employees were treated more leniently. In November, the EEOC sued the McCready Foundation, a nursing home operator out of Baltimore, MD.,  for failing to promote a 53-year-old woman.

Prohibited Actions

Under the ADEA, it is unlawful to discriminate against a person because of his or her age with respect to any term, condition, or privilege of employment, including hiring, firing, promotion, layoff, compensation, benefits, job assignments, and training. Harassing an older worker because of age is also prohibited.

It is also unlawful to retaliate against an individual for opposing employment practices that discriminate based on age or for filing an age discrimination charge, testifying, or participating in any way in an investigation, proceeding, or litigation under the ADEA. ADEA protections also include advertisements and job notices, apprenticeship programs, pre-employment inquiries, and the provision of benefits.

Kingsley & Kingsley – Experienced California Employment Lawyers

It is important to remember that not all illegal age bias is blatant. Even something meant to be harmless, such as a question about future retirement plans or a comment about professional longevity, could be used against you. If you are a victim of age discrimination, the California employment lawyers at Kingsley & Kingsley can help. Should you have questions about discrimination or retaliation in the workplace, call and speak to an experienced California lawyer toll-free at (888) 500-8469 or click here to contact us via email.

Kingsley & Kingsley

16133 Ventura Boulevard, Suite 1200
Encino, California 91436
Phone: 888-500-8469
Local: 818-990-8300 (Los Angeles Co.)