IN THIS ISSUE:
- Is your business prepared for the surf-by plaintiff? The growing trend of website accessibility cases under the ADA
- California court makes it easier for plaintiffs to recover on wage statement claims
- Class waivers in arbitration agreements: What will the Supreme Court do?
Among the most prevalent cases filed under Title III of the Americans with Disabilities Act during the last year have been those challenging the accessibility of the websites of certain businesses that are open to the public, known as “public accommodations.” Since 1992, Title III of the ADA has dictated that public accommodations, such as retailers and restaurants, must follow certain requirements during the design, construction, and alteration of buildings and facilities covered by the law. These requirements are aimed at ensuring that all places of public accommodation are accessible by all individuals, including those with physical disabilities.
Title III ADA claims are nothing new. For more than two decades, these claims have been brought by individual plaintiffs and often focused on accessible parking features and interior issues, such as paths of travel, door pressure and clearances, and bathroom configurations. The frequency of these claims has increased dramatically over the years, in large part due to a few serial plaintiffs filing dozens or even hundreds of lawsuits, each based on cursory, or “drive-by,” surveys of a defendant’s property. Resolution of the claims has been generally straightforward, thanks to the very detailed nature of the standards applicable to physical, brick-and-mortar facilities. The typical approach included surveying the property against the regulatory standards, negotiating with the plaintiff on a plan and timeline for fixing any issues, and negotiating a reasonable attorney’s fee for plaintiff’s counsel. (Thankfully for defendants, the ADA does not provide for monetary relief to the plaintiff for Title III violations, although comparable state laws sometimes do.)
Advent of the “surf-by” plaintiff
This relatively manageable landscape has changed. Although “drive-by” plaintiffs continue to file claims, our clients are now facing an avalanche of lawsuits by “surf-by” plaintiffs, who surf the internet, test websites, and bring lawsuits alleging that the website is a “public accommodation” under the ADA and is inaccessible to individuals with visual and auditory disabilities.
Website accessibility cases differ from brick-and-mortar cases in three significant ways. First, there are often disputes about which commercial websites are even subject to the ADA, an issue that arises much less frequently in brick-and-mortar cases, in which coverage is typically clear. Whether a website is covered by Title III depends on which court has the case, and even which judge within the same court. Some courts have held that websites that are tied to a purely web-based business with no connection to a brick-and-mortar facility are not covered by Title III. Other courts have held that there must be some nexus, or connection, between the website and a physical facility for there to be coverage. This could be a store locator feature, or an online ordering feature where a product must be picked up at a physical location. Still other courts have ruled that the websites of businesses that are purely web-based are subject to Title III of the ADA.
Second, there are currently no legally binding, regulatory standards applicable to websites. In other words, no one is sure what it means for a website to be legally compliant. The courts addressing these issues have come to different conclusions. Many courts have used or been persuaded by the Web Content Accessibility Guidelines, which are published by the Web Accessibility Initiative of the World Wide Web Consortium, the main international standards organization for the Internet. The Accessibility Guidelines specify how to make web-based content accessible for persons with disabilities. The current version, WCAG 2.0, was published in December 2008 and became an International Organization for Standardization standard in October 2012. Although these standards have not been formally adopted by the U.S. Department of Justice for purposes of Title III compliance, websites and electronic content of federal agencies and some federal contractors are required to conform to WCAG 2.0 by January 18, 2018. Thus, these are the standards that are likely to be at issue in website cases.
Third, seemingly as a strategy to apply more settlement leverage, the plaintiffs in website accessibility cases are now filing more lawsuits as class actions. Unfortunately, the plaintiffs in website accessibility cases may have a better argument than the “brick-and-mortar plaintiffs” that class treatment is appropriate. The good news, though, is that businesses often have strong defenses to class certification in website accessibility cases, including lack of commonality and typicality due to website design features that may affect plaintiffs differently depending on the nature of their specific disabilities and experience on the website. Perhaps more importantly, the overwhelming majority of these cases are still being resolved as single-plaintiff cases, even when styled as putative class actions.
Companies that host websites can reduce the likelihood of a surf-by lawsuit by taking the time to have their websites analyzed by consultants familiar with the WCAG 2.0, and making changes as necessary to comply with the standards. If the company is sued, it can apply the approach used in brick-and-mortar lawsuits to try to get the case resolved quickly and inexpensively.
If the website is not compliant, companies (with the help of their consultants) should analyze the website to determine what issues exist and devise a plan and timeline for updating the website. Often, the websites do not require complex or expensive updates: many websites already meet many of the guidelines, and many of the other guidelines will take a web developer only a few minutes to implement. Once the website issues have been identified, the company can follow the normal course of negotiating with the plaintiff on a plan and timeline for fixing any issues and negotiating a reasonable attorney’s fee for plaintiff’s counsel.
The California Court of Appeal has issued a decision that will make it easier for employees to recover civil penalties when an employer fails to provide accurate or complete wage statements as required by state law.
In Lopez v. Friant & Associates, LLC, the court ruled that employees suing over wage statements under the state Private Attorneys General Act can recover civil penalties without having to show that the employer’s violation was “knowing and intentional” or that the employees were injured by the violation.
Overview of PAGA
The PAGA was enacted in 2003 to improve enforcement of the California Labor Code. Under the law, an “aggrieved employee” may file a representative action “on behalf of himself or herself and other current and former employees” to recover civil penalties for violations of the Labor Code that otherwise would be assessed and collected by California’s Labor and Workforce Development Agency. Civil penalties available under the PAGA are in addition to any other remedies available under state or federal law. For employers with more than one employee at the time of the violation, PAGA Section 2699(f) provides that the penalty is $100 per aggrieved employee per pay period for an initial violation and $200 per aggrieved employee per pay period “for each subsequent violation.” The LWDA receives 75 percent of the civil penalty recovered in a PAGA action, and the aggrieved employees receive 25 percent.
Wage Statement requirements
California Labor Code Section 226(a) specifies nine items of information that must be included in wage statements:
(1) gross wages earned,
(2) total hours worked by the employee [with specified exceptions],
(3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis,
(4) all deductions, provided that all deductions made on written orders of the employee may be aggregated and shown as one item,
(5) net wages earned,
(6) the inclusive dates of the period for which the employee is paid,
(7) the name of the employee and only the last four digits of his or her social security number or an employee identification number other than a social security number,
(8) the name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, ... the name and address of the legal entity that secured the services of the employer, and
(9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee....
Section 226(e)(1) provides that an employee “suffering injury” as a result of an employer’s “knowing and intentional failure” to comply with Section 226(a) is entitled to recover statutory penalties and damages. Notably, Section 226(e) imposes no penalty for “an isolated and unintentional payroll error due to a clerical or inadvertent mistake.”
The Lopez case
Eduardo Lopez filed suit against his employer, seeking only civil penalties under PAGA Section 2699(f). Mr. Lopez alleged that the employer violated Section 226(a)(7) by failing to include the last four digits of employees' Social Security numbers or employee identification numbers on itemized wage statements. The employer admitted to the error, and the parties stipulated that 5,766 paychecks were issued without the required information. However, the employer’s evidence indicated that the omission was inadvertent, and that it promptly corrected the error once it became aware of it. The trial court granted summary judgment to the employer, saying that Mr. Lopez had failed to demonstrate a “knowing and intentional” violation by the employer. According to the trial court, the availability of civil penalties under the PAGA was governed by Labor Code Section 226(e)(1).
The Court of Appeal reversed, finding that a claim for civil penalties under PAGA Section 2699 – as opposed to a claim for statutory damages under Section 226(e)(1) – did not require a showing of a “knowing and intentional” violation, nor was a plaintiff required to prove injury. The fact that the employer made an apparently honest mistake, which it corrected promptly, might mitigate the penalties owed but did not affect the liability determination, according to the Court.
Implications for employers
Under the interpretation of the PAGA set forth in Lopez, “aggrieved employees” without injury can now seek hefty penalties against employers even where wage statement violations are neither knowing nor intentional. California employers are likely to see an increase in wage statement claims as a result of this decision.
Given the nuance and complexity of Section 226(a), mistakes by employers are easy to make. This is particularly true for employers with nationwide operations, who may be less conversant with California law than employers who are based entirely in California. Employers should not try to delegate compliance with California wage statement laws to payroll providers – who may not be willing or able to ensure compliance – but, rather, should insist that wage statements be pre-approved by Human Resources or the company’s employment counsel.
It is helpful to note that violations of two of the nine itemized requirements -- Sections 226(a)(6) (the inclusive dates of the period for which the employee is paid) and 226(a)(8) (the name and address of the legal entity that is the employer) -- are subject to cure during a brief window under the PAGA. Further, as the Lopez court itself noted, where employers proactively correct wage statement violations, a court may use its discretion to decline to award PAGA penalties or to reduce a PAGA award that is unjust, or arbitrary and oppressive.
On October 2, the U.S. Supreme Court heard oral argument in a trio of cases questioning the validity of the National Labor Relations Board’s decision in D.R. Horton, Inc., which an appeals court refused to enforce in relevant part. The cases are Epic Systems Corp. v. Lewis, Ernst & Young LLP v. Morris, and NLRB v. Murphy Oil USA, Inc. We have covered these cases in prior publications.
At issue is the viability of class waivers in employer-sponsored arbitration programs. The Federal Arbitration Act generally provides that arbitration agreements must be enforced by the courts, “save upon such grounds as exist at law or in equity for the revocation of any contract.” In pertinent part, Section 7 of the National Labor Relations Act, which applies to non-union as well as union employees, specifically guarantees "the right to ... engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection." (Emphasis added.)
Requiring employees to arbitrate disputes while precluding them from arbitrating on a “class” or collective basis violates Section 7 of the NLRA, according to the Board. Although an employer can require employees to agree to arbitrate, the NLRB contends, it cannot limit their ability to pursue claims as a class.
At oral argument before the Supreme Court, the usual 4-4 split of the Justices – with Justice Anthony Kennedy as a potential “swing” vote – was evident. Justices Stephen Breyer, Elena Kagan, and Sonia Sotomayor – and, to a lesser degree, Justice Ruth Bader Ginsburg – grilled the employers’ attorneys about the restrictions on employees’ rights to act in concert. Justice Ginsburg characterized an arbitration agreement with a class waivers as a “yellow dog contract,” a contract in which the employee agrees not to join a union as a condition of employment.
Chief Justice John Roberts and Justice Samuel Alito asked questions that seemed to be generally supportive of the employer side. Justices Neil Gorsuch and Clarence Thomas were silent, but they would be expected to agree with the employers, as well.
The attorneys for the employers argued that, although Section 7 prohibits retaliation against employees for engaging in protected concerted activity, it does not guarantee employees the right to proceed in any particular forum. They also argued that restrictions on pursuit of class claims exist in any forum, including the court system (for example, the requirements of Rule 23(a) of the Federal Rules of Civil Procedure). They also noted that employees always had the right to go as a group to the various agencies that govern the employment relationship, including the U.S. Department of Labor.
Richard Griffin, who at the time of oral argument was still NLRB General Counsel as a holdover from the Obama Administration (he has since been succeeded by President Trump’s appointee, Peter Robb), argued that arbitration agreements with class waivers precluded even two employees from acting together. However, he said that, in the view of the Board, it would be lawful for an employer to restrict an employee to a particular forum without directly imposing any other limitations on employees’ rights to act in concert. Then, if the forum itself has restrictions on class or collective claims, the employee would be bound by them. The reason for the distinction, Mr. Griffin contended, is that Section 7 restricts employers but not forums.
The attorney for the employees disagreed with the NLRB on this point, arguing essentially that an employer cannot do indirectly what it is prohibited from doing directly. In other words, he argued, if an employer restricts an employee to a forum that limits the employee’s ability to bring a class or collective claim, then the employer violates Section 7 of the NLRA. However, he contended that there would not be an issue if the employees could join in some other way – for example, as multiple (but not “class”) plaintiffs in a single lawsuit or arbitration.
Our prediction is that the Court will stand by its longstanding approval of arbitration as an alternative to litigation, in general, and prior approval of class waivers in arbitration agreements, specifically.
Another argument in favor of class waivers
Although the parties—and most commentators—are treating the argument as a showdown between Section 7 of the NLRA and the FAA, we believe that the Court could uphold class waivers of arbitration agreements on another ground: That the Board’s decision in D.R. Horton is based on a misinterpretation of the NLRA.
Until 1975, the Board applied a two-step analysis to Section 7. First, it “consider[ed] whether some kind of group action occurred.” Second, if “group action” took place, then it “consider[ed] whether that action was for the purpose of mutual aid or protection.”
In 1975, in Alleluia Cushion Co., Inc., the Board abandoned its traditional two-step analysis and held that it “will find an implied consent” if a single employee acts with the purpose of “mutual aid or protection” and no other employee objects. Over the ensuing years, Alleluia Cushion’s departure from Board precedent was repeatedly criticized by the Courts of Appeal. Alleluia Cushion was overruled in the 1980s by Meyers Industries.
In D.R. Horton the Board held that because a single employee’s request for certification of a class of employees was “concerted activity,” any mandatory arbitration agreement that did not permit class relief violated Section 7. In doing so, it necessarily departed from the traditional construction of Section 7, and resurrected Alleluia, but it did not acknowledge that it was doing so. Instead, it cited Meyers for the new rule it was announcing. The Board engaged in a kind of administrative legerdemain. It left employers scratching their heads over the standard for concerted activity in the post-D.R. Horton world. Is it Meyers? Alleluia Cushion? Some mixture of the two? If the latter, how does the mixture work? Is it Alleluia Cushion for class relief waivers and Meyers for everything else? Is there a longer list of factual settings in which Alleluia Cushion should be applied? If so, how is that list defined? Does the Board get to choose one or the other depending on its views of the broader purposes of the Act? Or its views of sound labor policy? Or whim?
If the Court doesn’t reject D.R. Horton outright, it may return the question to the Board for reconsideration—and a Board with a majority appointed by President Trump is unlikely to follow D.R. Horton’s reasoning.
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