ACBA Labor and Employment Section 
2015 Newsletter

Contents and quick links:
1) ARTICLE: How to Return Information Belonging to Your Client's Former Employer
2) MCLE: Labor & Employment Nuts and Bolts Series
3) ARTICLE: Outside Iskanian's Reach: Keeping PAGA Claims Alive in Federal Court
4) ARTICLE: Sick Leave for All California Employees

How to Return Information Belonging to Your Client’s Former Employer

Half of employees who left or lost their jobs keep confidential corporate data after they've left, according to a 2013 study. [i] This is not surprising since many employees, in performing their work duties, routinely have access to, and work with, their employer’s confidential or proprietary information. Smart phones, laptops, email and file hosting services like Dropbox or Box allow employees greater flexibly to work remotely or outside of normal office hours, which benefits employers, but also means that employees are likely to have this information in their possession when the employment ends. Most employers have policies requiring employees to return this information upon separation. Even so, when the employment relationship ends, there are several reasons why employees may take the data with them, such as inadvertence, neglect, or a misperception about industry custom.

What then should an attorney do when her client, who has been wrongfully discharged, has not returned the information belonging to her former employer? If the employment was recently terminated, then the employee is probably best advised to immediately return the information directly to her former employer. But otherwise, there is little legal guidance for how the client’s attorney should handle returning such information, and the employee’s retention of information belonging to her former employer can have devastating consequences for the client and her attorney. Although attorneys may differ about how to approach this issue, our firm has successfully used the following approach to avoid the numerous pitfalls that this issue may present:

First, the attorney should ask the client what information she has retained from her former employment, including any electronically stored information. 

Attorneys routinely ask clients to provide documents that would support the employment claims or otherwise typically be exchanged in discovery. As part of the intake process, the attorney should also ask what other information the client retains from her former employment. Ask about the different places where the information is stored and how the client first came to be in possession of the information. Ask whether the client erased or destroyed work files after the discharge and, if so, why. Encourage the client to be forthcoming. Remind her that an employer can easily ascertain if the client attempted to delete electrically stored information, or email files to her own personal email account. Explain the potential risks to the client’s case if this issue is not thoroughly addressed at the outset.

Second, the attorney should take custody of the information and preserve it.
If the attorney determines that the client still retains information belonging to the former employer, then the attorney should take custody of the information. Depending on where the information is stored, the attorney can take physical custody of the client’s laptop or other equipment, secure access to the client’s file hosting account, or scan the client’s electronically stored information. This eliminates the possibility of the information being used, disclosed, or lost by the client. Removing the threat of use or disclosure reduces the likelihood that the employer will file a motion for injunctive relief seeking the immediate return of the information on grounds that its disclosure would cause irreparable harm to the employer.

Third, once the attorney has taken custody of the information from her client, she should separate the client’s information from that belonging to the former employer.
Information that legitimately belongs to the client includes the client’s employment agreement, personnel and payroll records, feedback about the client’s performance, communications to or from the employer about the underlying dispute, and so forth. Separate this information from that which the employer’s attorney would likely argue is privileged, confidential or trade secret. A “trade secret” is defined by statute. [ii] It includes information that derives independent economic value from not being generally known to the public, and is the subject of reasonable efforts to maintain its secrecy, such as customer information, marketing strategies and marketing plans, pricing and cost information, plans and designs for the employer’s product, detailed software design concepts, and source code for a computer program used to manufacture the employer’s product. This information, which in most cases proves to be irrelevant to the client’s employment claims anyway, should be returned.  

Before returning the information to the employer, the attorney should mark it for identification.
Marking the information for identification allows everyone to refer to it by number rather than description—much like an exhibit at trial or in a deposition—and defines the scope of information that the attorney obtained from the client and will turn over to the employer’s counsel. The attorney should make two copies of the information, one for herself and the other to return to the employer’s counsel.

Finally, the attorney should notify opposing counsel and return the information.
The client’s attorney, with the client’s authorization, should draft and send the employer’s counsel a letter stating the following:
  1. the attorney has information belonging to the employer that she would like to return,
  2. the information has been preserved in the attorney’s custody and marked for identification,
  3. the information is being returned to the employer’s counsel,
  4. in addition to being returned to the employer, the attorney proposes to retain a copy of the information for her own records, since it is likely relevant and discoverable, and
  5. the attorney, upon notice, will immediately turn over her copy of any confidential or proprietary information to the employer’s attorney, without prejudice to appropriately seek the same information in discovery.
This last point is important because the client’s attorney may not retain confidential information taken from the employer by her client, and the fact that the information is not privileged does not justify self-help. [iii]

This approach can allow the attorney to focus on pursuing the client’s employment claims, rather than defending the client against the employer’s claims for misappropriation, conversion or breach of contract. It mitigates your client’s exposure for damages and fees resulting from the alleged misappropriation, and reduces the likelihood that the employer will able to obtain an injunction. Preserving and maintaining the information protects against claims of spoliation, which in the most egregious cases can result in terminating sanctions. It allows the attorney to uphold the law[iv], avoid disqualification, and fulfill her legal obligation to produce evidence. [v] Plus, it preserves the attorney’s credibility with opposing counsel. This approach also is better than the alternatives, considering an injunction from the court ordering the return of information is the “least sanction” appropriate in such cases. [vi]

Being proactive about returning proprietary information to your client’s former employer may not only save your case, but also keep your client out of trouble.

About the Author:
Aaron Minnis is a partner at Minnis & Smallets LLP, a San Francisco law firm, where he advises and represents individuals in employment law matters.
[i] “What’s Yours is Mine: How Employees are Putting your Intellectual Property at Risk”, (Symantec Corp. and Ponemon Institute, 2013)
[ii] California Civil Code section 3426.1(d) defines trade secrets: “Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure and use; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
[iii] Pillsbury, Madison & Sutro v. Schectman (1997) 55 Cal.App.4th 1279, 1288.
[iv] California Business & Professions Code section 6068(a).
[v] California Rules of Professional Conduct, Rule 5-220.
[vi] Pillsbury, Madison & Sutro v. Schectman (1997) 55 Cal.App.4th 1279, 1288.

Labor & Employment On-Going Nuts and Bolts Series:

Part IV: Wage and Hour Litigation (Register Here)
(Connexion Conference Facility)
Wednesday, July 8, 2015
12:00 p.m. - 1:30 p.m.
FREE Roundtable: July 15th from 6:00 p.m. - 7:00 p.m. (R.S.V.P. Here)

Part V: Discrimination and Harassment (Register Here)
Wednesday, August 12, 2015
12:00 p.m. - 1:30 p.m.
FREE Roundtable: August 19th from 6:00 p.m. - 7:00 p.m (R.S.V.P.)

Part VI: PAGA (Register Here)
Wednesday, September 22, 2015 
12:00 p.m. - 1:30 p.m.
FREE Roundtable: September 29th from 6:00 p.m. - 7:00 p.m (R.S.V.P.)

The Series
The Labor & Employment Law Section, in conjunction with the Barristers Section, is presenting a “Nuts and Bolts” series of seminars. The presentations will cover fundamental areas of employment law and procedures that will be useful to anyone practicing employment law. 

The Roundtables
Would you like to sit down with seasoned labor and employment law attorneys for an informal discussion on the ins and outs of practicing L&E law in Alameda County? Do you have questions about employment law or practice that you would like to ask an experienced colleague? Would you like to share your experience with newer attorneys over light refreshments and a glass of wine? Join us for a FREE follow-up discussion the week after each Nuts & Bolts program.
keeping PAGA claims alive

Outside Iskanian’s Reach: Keeping PAGA Claims Alive in Federal Court

Here’s the scenario: You file a wage and hour class action in California state court, including a Private Attorney General Act of 2004 (“PAGA”) claim. The defendant removes the case to Federal Court under the Class Action Fairness Act of 2005 (“CAFA”) and then waves an arbitration agreement at the judge in its motion to dismiss. The judge reviews the agreement, notes a class waiver, and sends you off to arbitrate your client’s claims on an individual basis.
  • First, how can this happen under the Iskanian case?[1]
  • Second, what is a plaintiffs’ lawyer to do about it?
Although the California Supreme Court recently made it clear that PAGA claims cannot be forced into arbitration[2] (a decision the U.S. Supreme Court has refused to review[3]), the Ninth Circuit has yet to do the same. So even though there are a handful of Federal District Court Judges[4] who have followed Iskanian’s lead in finding PAGA waivers unenforceable, many have not, instead opting to send both class and PAGA claims to arbitration on an individual basis.[5], [6] How can this be? Well, although federal courts in California are bound by Iskanian’s holding that an employee’s right to bring a PAGA claim cannot be waived through an arbitration agreement, they are not bound by Iskanian’s additional determination that such waivers do not frustrate the purposes of the Federal Arbitration Act (“FAA”) – an inherent question of federal law.[7] Since federal jurisprudence on FAA preemption is sparse,[8] and precedent involving PAGA waivers non-existent, federal district court judges must undertake their own analysis to determine whether PAGA waivers are FAA-preempted. Although the issue has been raised on appeal,[9] we are months – if not years – away from any definitive rule requiring California federal courts to retain jurisdiction over PAGA claims when employer arbitration agreements waive the right to litigate them. So… how can plaintiffs’ lawyers keep their PAGA claims alive once they’ve been removed to federal court?

Amend your complaint to dismiss every claim but PAGA, then move to remand.
Once you’re in federal court and the class action portion of your case has been gutted, do you still meet the $5 million amount in controversy requirement? PAGA claims are penalty-based, cannot be aggregated and have a much shorter statute of limitations period,[10] so it’s worth doing the math. If CAFA was the only basis for removal (and since PAGA claims aren’t subject to CAFA jurisdiction), take a second look at defendant’s removal papers which are required to provide detailed information on the amount in controversy.[11] If you don’t have the information you need, ask for it. If the defendant won’t provide it without a formal discovery request or order from the judge, move to compel it and seek sanctions. Just like plaintiffs cannot withhold information regarding the amount in controversy to avoid removal, defendants cannot withhold it to avoid remand.[12]

Dismiss your federal court case and re-file your PAGA claim in state court without class action claims.
Although you lose some of the statute of limitations period (probably a few months for the removal and motion to compel arbitration proceedings), you don’t need a new plaintiff. (Be sure to also include non-PAGA wage claims for just your client.) Defendant may cry foul (the old line about forum shopping),[13] but so far no federal district court judge has refused to dismiss a plaintiff’s case just because that plaintiff wants to take advantage of the more favorable state court forum. Indeed, in one case, after ordering both class and PAGA claims to arbitration on an individual basis, Judge James Selna of the Central District granted the plaintiffs’ motion to dismiss after they re-filed a PAGA-only case in state court.[14] As Judge Selna aptly put it, although “[the] dismissal may certainly inconvenience Hobby Lobby because it may have to litigate, rather than arbitrate, Plaintiffs’ PAGA cause of action,…this is not the type of prejudice that precludes Rule 41(a)(2) dismissal of claims.”[15]

Got a case you haven’t filed yet? Engage in a preemptive strike.
Consider filing a PAGA-only claim in state court. As noted above, while class action claims can be removed to federal court under CAFA, PAGA claims cannot.[16] And since state courts are bound by Iskanian, your PAGA claim cannot be forced to arbitration even if a clear agreement exists. Not sure you want to give up the meaty class action four-year statute of limitations period? File two separate cases – a PAGA-only case in state court and a class action case in state or federal court. Although you’ll need more than one plaintiff to avoid dismissal under the doctrine of concurrent jurisdiction,[17] your PAGA case will not be delayed by a motion to compel arbitration (as the outcome is a done deal under Iskanian) and, as an added bonus, you’ll be able to immediately obtain merits discovery.

Given that class action complaints are now regularly sent to arbitration and, even when they aren’t, often fail to obtain certification in either state or federal court, PAGA claims are the "new black." Class action lawyers who include PAGA claims in their complaints (and some have suggested it would be malpractice not to do so) need to be prepared to defend them. Until the Ninth Circuit weighs in on FAA preemption, plaintiffs’ attorneys are well-served to take advantage of California state courts’ get-out-of-arbitration-free card.
About the Author:
Molly A. DeSario serves as an Senior Associate for Scott Cole & Associates, APC. Ms. DeSario has experience representing workers in class action litigation and has collaborated with the Equal Employment Opportunity Commission on federal employment discrimination matters
[1]               Iskanian v. CLS Transp. L.A., LLC, 59 Cal.4th 348 (2014).
[2]               On June 23, 2014, the California Supreme Court ruled that it is contrary to public policy to force employees to waive their right to bring an action for civil penalties under PAGA. Iskanian, 59 Cal. 4th at 383.
[4]               See Davis v. Nordstrom, Inc., 2014 U.S. Dist. LEXIS 107845 (N.D. Cal. Aug. 5, 2014) (Claudia Wilken); Hernandez v. DMSI Staffing, LLC, 2015 U.S. Dist. LEXIS 12824 (N.D. Cal. Feb. 3, 2015) (Edward Chen).
[5]               See Martinez v. Leslie’s Poolmart, Inc., 2014 U.S. Dist. LEXIS 156218 (C.D. Cal. Nov. 3, 2014) (Christina A. Snyder); Fardig v. Hobby Lobby Stores, Inc., 2014 U.S. Dist. LEXIS 87284 (C.D. Cal. June 13, 2014) (James V. Selna); Ortiz v. Hobby Lobby Stores, Inc., 2014 U.S. Dist. LEXIS 140552 (E.D. Cal. Sept. 30, 2014) (Troy L. Nunley); Chico v. Hilton Worldwide, Inc., 2014 U.S. Dist. LEXIS 147752 (C.D. Cal. Oct. 7, 2014) (John F. Walter); Langston v. 20/20 Cos., 2014 U.S. Dist. LEXIS 151477 (C.D. Cal. Oct. 17, 2014) (Jesus G. Bernal); Mill v. Kmart Corp., 2014 U.S. Dist. LEXIS 165666 (N.D. Cal. Nov. 26, 2014) (Kandis Westmore).
[6]               See, e.g., Parvataneni v. E*Trade Financial Corp., 967 F. Supp. 2d 1298, 1304–05 (N.D. Cal. 2013); Miguel v. JPMorgan Chase Bank, N.A., 2013 WL 452418, at *9 (C.D. Cal. Feb. 5, 2013); Morvant v. P.F. Chang’s China Bistro, Inc., 870 F. Supp. 2d 831, 845–46 (N.D. Cal. 2012); Quevedo v. Macy’s, Inc., 798 F. Supp. 2d 1122, 1140–42 (C.D. Cal. 2011); Grabowski v. Robinson, 817 F. Supp. 2d 1159, 1181 (S.D .Cal. 2011).
[7]               See Fardig v. Hobby Lobby Stores Inc., 2014 U.S. Dist. LEXIS 139359 (C.D. Cal., Aug. 11, 2014).
[8]               See EEOC v. Waffle House, Inc., 534 U.S. 279, 288–91 (2002) (holding that EEOC was not barred by an arbitration agreement because it was not party to it, could prosecute the claim without the employee’s consent, and the employee had no right to control the litigation).
[9]               Urbino v. Orkin Servs. of Cal., 726 F.3d 1118 (9th Cir. 2013) (resolving appeal on jurisdictional grounds without determining whether PAGA waivers are FAA-preempted).
[10]             See, e.g., Cal. Labor Code Section 2699(f)(2) (“If, at the time of the alleged violation, the person employs one or more employees, the civil penalty is one hundred dollars ($100) for each aggrieved employee per pay period for the initial violation and two hundred dollars ($200) for each aggrieved employee per pay period for each subsequent violation”); Baumann v. Chase Investment Services. Corp. et al., 747 F.3d 1117 (9th Cir. Mar. 13, 2014).
[11]             28 U.S.C § 1446.
[12]             28 U.S.C. § 1332(a).
[13]             Although long-touted by defense firms as an act of bad faith, plaintiffs’ attorneys have an absolute duty to shop for the best forum to adjudicate their client’s claims. See Hamilton v. Firestone Tire & Rubber Co., 679 F.2d 143, 145 (9th Cir. 1982) (no prejudice to defendant from a second lawsuit where defendant inconvenienced and plaintiff gains some tactical advantage); Smith v. Lenches, 263 F.3d 972, 976 (9th Cir. 2001) (same).
[14]             Fardig v. Hobby Lobby Stores Inc., Case No. 8:14-cv-00561-JVS, ECF Doc. No. 38 (C.D. Cal. Nov. 10, 2014).
[15]             Id. at p. 5.
[16]             See Baumann v. Chase Investment Services Corp. et al., 747 F.3d 1117 (9th Cir. Mar. 13, 2014) (holding that PAGA actions are not sufficiently similar to Rule 23 class actions to establish original jurisdiction of a federal court under CAFA). 
[17]             Black’s Law Dictionary 928 (9th ed. 2009) (jurisdiction that might be exercised simultaneously by more than one court over the same subject matter).

Sick Leave for All California Employees

California's employment law landscape is constantly shifting. On or after July 1, 2015, all California employers regardless of size must provide their California employees with at least 3 days (24 hours) of paid sick leave per year for:
  • the diagnosis, care, or treatment of an existing health condition of
    • an employee or
    • an employee’s family member 
  • victims of domestic violence, sexual assault, or stalking to obtain
    • court orders,
    • medical attention,
    • access to a domestic violence shelter,
    • counseling, or
    • temporary or permanent housing.   
  • If a collective bargaining agreement provides for sick leave the law may not apply.
  • Home care attendants and flight deck and cabin crew may be exempted if they receive equivalent benefits.
  • If your PTO policies or sick leave policies provide equivalent benefits the law need not apply.
These policies should be reviewed now for compliance purposes. 

Who is a “Family Member?”
  1. A biological child, adopted, or foster child, stepchild, legal ward, or a child to whom the employee stands in loco parentis (place of a parent, i.e. school teachers) regardless of age or dependency status.
  2. A biological, adoptive, or foster parent, stepparent, or legal guardian of an employee or the employee’s spouse or registered domestic partner, or a person who stood in loco parentis when the employee was a minor child.
  3. A spouse, registered domestic partner, grandparent, grandchild or sibling.
The employee must work more than 30 days within a year of the commencement of employment or within a year of July 1, 2015, whichever is later. The employee can earn up to 24 hours of paid sick leave in a calendar year at the rate of one hour per every 30 hours worked. If the employee is an exempt employee he or she accrues sick days based on the their normal weekly work schedule or 40 hours per week, whichever is less. An employer can limit the use of paid sick days to 24 hours or three days in each year of employment.

When can the employee take paid sick leave?
An employee can use accrued paid sick days after 90 days of employment. Accrued paid sick days carry over to the following year of employment. However, the employer can impose a maximum cap of 48 hours or 6 days until sick leave is used.

Does the employer have to pay accrued out sick leave when the employee leaves?
An employer is not required to pay an employee for accrued, unused paid sick days upon separation from employment. However, if the employee is rehired within one year of the date of separation, the employer must reinstate his or her previously accrued and unused paid sick days.

How it works
The employer can require the employee to use paid sick leave in minimum increments of no more than two hours. The rate of pay is the employee’s hourly wage at the time of the leave. If in the 90 days before taking accrued sick leave the employee had different hourly pay rates, was paid by commission or piece rate, or was a nonexempt salaried employee, then the rate of pay will be calculated by dividing total wages, not including overtime premium pay, by the total hours worked in the full pay periods of the prior 90 days of employment.
The employee must receive payment for sick leave no later than the payday for the next regular payroll period after the sick leave was taken. An employer cannot require the employee to find a replacement to cover the days during which the employee uses paid sick days.
Pay stubs must show accrued sick leave
The employee must receive written notice of accrued sick leave, or paid time off leave an employer provides in lieu of sick leave, on an itemized wage statement or in a separate written notice provided to the employee with his or her wage statement.
Notice required
The employee must provide reasonable advance notice if the need for paid sick leave is foreseeable. If the need for paid sick leave is unforeseeable, the employee must provide notice of the need for the leave as soon as practicable.
Potential liability
The state can sue an employer for violations of the new law, seeking reinstatement, back pay, costs, attorneys’ fees, and penalties of up to $4,000 per employee per day. Aggrieved employees can also sue the employer under the statute and on behalf of other â€œaggrieved employees” pursuant to the Labor Code Private Attorney General Act (“PAGA”)
Penalties include:
  1. the dollar amount of paid sick days withheld multiplied by three, or two hundred fifty dollars ($250), whichever amount is greater, not to exceed four thousand dollars ($4,000 and
  2. fifty dollars ($50) for each day the violation occurred or continued, not to exceed thousand dollars ($4,000).
The Labor Commissioner may file of a civil action to enforce its order and the employer may be ordered to pay to the state fifty dollars ($50) for each day or portion of a day a violation occurs or continues for each aggrieved employee. In an administrative or civil action brought under this article, the Labor Commissioner or court, as the case may be, will award interest on all amounts due and unpaid.
Now is the time to prepare for this new law and to learn these new rights, so that employees and employers alike will be informed.
About the author:
PHILLIP J. GRIEGO is the owner of PHILLIP J. GRIEGO & ASSOCIATES, a boutique labor and employment law firm in San Jose, CA.  Mr. Griego's practice expanded to include labor relations, general business and commercial litigation involving trade secrets, unfair competition, and privacy issues. 
Copyright © 2015 Alameda County Bar Association, All rights reserved.

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