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Posts Tagged ‘California’

Under Attack Again: California Attorney General Announces Misclassification Lawsuit Against Uber and Lyft

Posted on: May 7th, 2020

By: Ryan Greenspan

On May 5, 2020, California Attorney General Xavier Becerra announced that the State of California will be suing Uber and Lyft for misclassifying their drivers as independent contractors.  The precise details of the suit are not presently known, but it is being reported that Uber and Lyft are being accused of violating Assembly Bill 5, went into effect on January 1, 2020 and dramatically changed the legal requirements in California to qualify as an independent contractor.

In Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court established a 3-factor test employers must satisfy to prove that a worker is properly classified as an independent contractor.  Employers must prove the following:

1) that the worker has freedom from control over how to perform the services they provide;

2) that the services provided are outside the business’s normal variety; and

3) that the worker is engaged in an independently established role. 

Assembly Bill 5 codified the Dynamex decision while carving out limited exceptions.  Assembly Bill 5 was expected to significantly impact several of the app-based companies based in California, particularly those commonly known as being part of the “gig economy.”  Companies such as Uber and Lyft have always classified their drivers as independent contractors, which afforded workers the opportunity to set their own hours and work for multiple companies, but also meant those workers did not receive various benefits afforded to employees, such as healthcare, workers’ compensation, expense reimbursements, and a guarantee that they would be paid at least the minimum wage. 

Enforcement litigation does not come as a surprise.  Shortly after Assembly Bill 5 went into effect, Uber and Lyft announced that they would refuse to reclassify their drivers as employees.  In February 2020, a federal judge denied a request from Uber and food delivery company Postmates for a preliminary injunction that would have exempted them from the new law.

Prior to Assembly Bill 5 going into effect, Uber and Lyft assisted in the funding of a statewide ballot measure known as the Protect App-Based Drivers & Services Act.  The Act is expected to be voted upon in the November 2020 election.  If passed, companies such as Uber and Lyft would continue to be permitted to classify their drivers as independent contractors while providing several benefits to their workers, such as a guarantee of at least 120% of the minimum wage, 30 cents per mile for expenses, and a healthcare stipend. 

Uber and Lyft have largely been able to defend or settle a series of class action lawsuits over the issue of worker classification.  However, an enforcement lawsuit from the state presents a unique challenge to the app-based companies because there is less opportunity to reach a settlement than there is with a private plaintiffs’ attorney.

While this case is in its infancy, the outcome will have a tremendous impact on the approximately 500,000 drivers working for Uber and Lyft in California, as well as thousands more who work for companies such as Doordash. If you have any questions or would like more information on this lawsuit or Assembly Bill 5, please contact Ryan Greenspan at [email protected].                        

California Department of Insurance Issues COVID-19 Bulletins Addressing (i) 60-Day Grace Period for Premiums; Expiration of Drivers Licenses; (ii) Alternative Payment Methods; and (iii) Accounting for Extraordinary Circumstances in Evaluating Claims Handling

Posted on: March 20th, 2020

By: Zach Moura

California Insurance Commissioner Ricardo Lara issued three notices to insurers on March 18, 2020 related to the novel coronavirus disease (COVID-19), all aimed at ameliorating the pandemic’s impact on the both insurers and insureds.

The first notice is addressed to all insurance companies and other licensees. The Commissioner recognizes that the COVID-19 outbreak is creating extraordinary circumstances that impact the ability of insurers to conduct insurance-related business. The Department of Insurance (DOI) intends to take those extraordinary circumstances, and resulting business disruptions, into account when evaluating insurer compliance with legal and commercial obligations during the COVID-19 outbreak. The Commissioner also encourages all companies to take steps to maintain their ability to process and pay insurance claims, and to provide other requisite consumer services, in “a reasonable and timely manner.”

The Commissioner’s second notice addresses a request that “all admitted and nonadmitted insurance companies that provide any insurance coverage in California including, life, health, auto, property, casualty, and other types of insurance” provide their insureds with at least a 60-day grace period to pay insurance premiums. The Commissioner wants to avoid cancellation of policies for “nonpayment of premium during this challenging time due to circumstances beyond the control of the insured.”

The Commissioner also requests that agents, brokers, and any other licensees who accept premium payments on behalf of insurers take steps to ensure that customers have the ability to make prompt insurance payments, including through arranging for online payment to eliminate in-person payment methods, to protect the safety of both workers and customers.

Commissioner Lara’s third COVID-19 notice follows on the California Department of Motor Vehicles’ request to California law enforcement that it exercise discretion in the enforcement of driver’s license and vehicle registration expirations for 60 days beginning March 16, 2020. The Commissioner encourages insurers to refrain from using the expiration of policyholders’ driver’s licenses or vehicle registrations during those same 60 days for any of the following reasons:

  • To affect a driver’s ability to secure and maintain auto insurance coverage;
  • To affect a driver’s eligibility for a Good Driver discount;
  • To determine eligibility for a California Low Cost Automobile policy;
  • To impact the rates charged to any driver.

The notice will be reevaluated at the end of the 60-day period, or May 15, 2020.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce educational content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Just Don’t Go There: The Ninth Circuit Rules that Prior Pay History Can’t Be Used To Justify Compensation Decisions

Posted on: March 10th, 2020

By: Anastasia Osbrink

For years, employers across the U.S. have taken into account what an individual was making at his or her current job in assessing how much they would need to pay them if they left and joined the employer.   And, for years, when one employee claimed discrimination based upon sex under the federal Equal Pay Act because he or she was not paid as much as another employee of another sex performing similar duties, the employer would rely upon prior pay as a basis for the pay differential between the two employees.

Well, no more in states in the Ninth Circuit (Alaska, Arizona, California and Hawaii).  The Ninth Circuit recently made clear that employers cannot justify pay disparity between employees based on pay history from prior jobs under the Equal Pay Act. (Rizo v. Yovino, No. 16-15372 [9th Cir. Feb. 27, 2020] [en banc].)  The defendant in Rizo, the Fresno County Office of Education, argued that the plaintiff’s disparity in pay fell did not violate the Equal Pay Act because the County sets new employees’ salaries based on a 5% raise over their previous salaries. The Ninth Circuit disagreed with the defendant, holding that pay history from a prior job is not job-related and not an acceptable basis for a pay disparity.

Additionally, the Ninth Circuit pointed out that it would defeat the purpose of the Equal Pay Act to allow pay disparity based on gender to self-perpetuate because of prior discriminatory pay. It is also worth noting that in 2018, AB 168 made it illegal in California to seek salary histories from job applicants. Therefore, not only is it illegal for employers in California to ask about salary history, it is now also clear based on the ruling in Rizo that they should not base a system of pay on prior job salaries even if that information is voluntarily provided by job applicants.

Please contact Anastasia F. Osbrink at [email protected] if you have any follow-up questions about the Rizo ruling.

Securing the Bag: California Supreme Court Rules Exit Searches Compensable

Posted on: March 2nd, 2020

By: Gregory Blueford

Shunning the position of the United State Supreme Court’s decision in Busk v. Integrity Staffing Solutions, Inc., the California Supreme Court has ruled that time spent on the employer’s premises waiting for and undergoing company-mandated exit searches of bags and personal technology devices brought to work purely for personal convenience by employees is compensable as “hours worked” in California.

In Frlekin v. Apple, Inc., the employer, Apple, had a bag search policy that required search of employees’ bags, packages, purses, backpacks, briefcases, and personal Apple technology devices whenever the employee left the store. Apple said the time spent waiting for and undergoing these searches was not compensable as “hours worked” in California, in part because employees could opt not to take a bag and therefore would not be required to undergo the search; in other words, the decision to bring a bag to work was “voluntary.”

The California Supreme Court said that the California Wage Orders had to be reviewed “liberally” and with an eye towards “protecting and benefiting employees.” The Court ruled that Apple’s search policy “controlled” employees by (1) requiring employees to comply with the policy under the threat of discipline, including termination, (2) confined employees to the premises as they waited for and underwent a search, and (3) required employees to complete tasks while awaiting and during the search like finding a manager and waiting for that person to conduct the search, thus, making the time is compensable. The California Supreme Court reasoned that the wage and hour standards of the Fair Labor Standards Act and subsequent decision in Busk, which generally exempts non-required work activities, “differs substantially” from California law, and that a State may enact law that provides employees greater protection than the FLSA, which California has done.

Employers with bag or any similar exit searches must be weary of this decision and ensure that this time is considered compensable and employees stay on the clock until the conclusion of the search.

If you have questions or would like more information, please contact Greg Blueford at [email protected].

Pre-Judgment Settlements with the Insured after Claimed Blown Policy Limit Demand

Posted on: February 20th, 2020

By: Tim Kenna

Every once in a while, an insurer contemplates settlement of the insured’s potential bad faith claim following allegations that a policy limit demand lapsed, and that the insurer is liable for any resulting excess judgment and bad faith damages. In Potter v. Alliance United Insurance Company, 37 Cal. App 5th 894 (2019), the trial court had sustained a demurrer to the personal injury judgment creditor’s complaint seeking to avoid a pre-suit settlement of the bad faith claim on fraudulent conveyance theories without leave to amend.  The Court of Appeal reversed finding that the complaint alleged a colorable claim under California’s Uniform Voidable Transactions Act (UVTA, Civ. Code. Section 3439 et sec.  Although there was also a common law claim it was not considered on appeal.).

The Court held that the complaint adequately alleged the elements of a UVTA claim because the bad faith claim was an asset of the insured he could have used to pay down his civil liability, that the complaint adequately alleged he did not receive a reasonably equivalent value for the claim released and that the transfer of the bad faith claim was made for the insurer’s benefit.  The court took the position that reasonably equivalent value is a question addressed in evaluating the merits of the claim against the payment. That can be definitively determined on a decision on the merits. Thus, it is a hurdle to the claim but it is very closely associated with proving the bad faith refusal to settle.

The case is an interesting twist on the judgment creditor’s voluntary and involuntary bankruptcy options in obtaining an assignment of rights from the judgment debtor’s trustee in bankruptcy.

If you have questions or would like more information, please contact Tim Kenna at [email protected]