What Tom Brady Just Taught Us About Arbitration Clauses

Yesterday, U.S. District Court Judge Richard Berman vacated Tom Brady’s four-game suspension in what has been infamously titled “Deflategate“.  The 40-page opinion was striking not in its commentary over whether Tom Brady did or did not conspire to or deflate footballs in an NFL game, but rather, like any citizen, Tom Brady was entitled to a fair arbitration.

Judge Berman more or less accepted the arbitrator’s “…facts as the arbitrator found them.” citing to Westrbook Corp. v. Daihatsu Motor Co., Ltd. 304 P.3d 200, 213 (2d Cir. 2002), but ruled Brady was given “inadequate notice of his potential discipline and alleged misconduct”, denied the opportunity to examine lead investigators and NFL Executive Vice President and General Counsel Jeff Pash, and “denied equal access to investigative files, including witness interview notes.[1]

Arbitration clauses, such as the one Brady was subject to under the NFL Players Collective Bargaining Agreement limited Brady in access to evidence and the ability to cross-examine witnesses. These rights are paramount to the civil justice system but are often waived through arbitration clauses appearing in employment contracts, consumer transactions, and nursing home care. Yesterday’s ruling will have implications beyond just a few deflated footballs, but refocus attention to the necessity of a fair shot at justice.

[1] Judge Berman’s ruling cited to via the New York Times, available here.

How Tough is Tough Mudder’s Death Waiver?

Extreme obstacle courses such as Tough Mudder, Spartan, and Warrior Dash have garnered increased attention following several high-profile participant injuries. In 2013, a New Jersey Man almost lost his leg when falling on a sharp piece of metal requiring emergency surgery and in France, hundreds of runners reported diarrhea like symptoms following a mud run event.  Yet, many of these obstacle runs require participants to sign a liability waiver barring an injured person from ever holding the obstacle course organizer responsible. But can this really be true?  Can a person waive liability from injuries from “smoke and open flames, barbed wire, and electric shocks” resulting in “broken bones”, “loss of consciousness”, or “neurological disorders?”

In Washington, contracts releasing liability for negligence are valid unless a public interest is involved.[1] The Courts use six factors in evaluating whether these agreements violate public policy:

  1. The agreement concerns an endeavor of a type generally thought suitable for public regulation;
  2. The party seeking exculpation is engaged in performing a service of great importance to the public, which is often a matter of practical necessity for some members of the public;
  3. Such party holds itself out as willing to perform this service for any member of the public who seeks it, or at least for any member coming within certain established standards;
  4. Because of the essential nature of the service, in the economic setting of the transaction, the party invoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks the services;
  5. In exercising a superior bargaining power, the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence; and
  6. The person or property of members of the public seeking such services must be placed under the control of the furnisher of the services, subject to the risk of carelessness on the part of the furnisher, its employees or agents.[2]

So what does this all mean to Tough Mudder or similar obstacle course participants here in Washington? While the so called “Death Waiver” is untested among Washington appellate courts, the case of legal Johnson v. Spokane to Sandpoint, LLC may provide insight. In Johnson, the plaintiff registered for a 185-mile running relay race between Spokane, Washington and Sandpoint, Idaho.

When registering for the event, Ms. Johnson signed and agreed to waive and release Spokane to Sandpoint … from any and all claims or liability of any kind arising out of my participation in this event, even though that liability may arise out negligence or carelessness on the part of persons on this waiver. While running the race a witness reported that Ms. Johnson crossed the northbound lanes of highway 2 before colliding with an oncoming driver incurring severe injuries. In applying these facts to the six factor test, the court ultimately ruled in part that the “preinjury release precluded Ms. Johnson from claiming an ordinary negligence duty by Spokane to Sandpoint, LLC and that facts did support a higher gross negligence standard.[3]

While Johnson may be cited as supporting waivers such as required by Tough Mudder and other extreme events, it will be for the courts in the future to decide whether the 6-factor test should be modified in the age of extreme races.

[1] Hewitt v. Miller, 11 Wash.App. 72, 521 P.2d 244 (1974).

[2] Wagenblast v. Odessa Sch. Dist. 105–157–166J, 110 Wash.2d 845, 851–55, 758 P.2d 968 (1988)(citing Tunkl v. Regents of Univ. of Cal., 60 Cal.2d 92, 32 Cal.Rptr. 33, 383 P.2d 441, 446 (1963)).

[3] Gross negligence has been defined as “the failure to exercise slight care.”. Boyce v. West, 71 Wash.App. 657, 665, 862 P.2d 592 (1993)

Are Non-competes Hurting Seattle’s Tech Industry?

This was the question posed more broadly in Fortune’s recent article “Are noncompete agreements hurting tech innovation?”

Washington joins Massachusetts and Rhode Island in considering new legislation that would severely limit or void many non-compete agreements. Known in Washington as House Bill 1926, the law would principally require that “every contract by which a person is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” If enacted, Washington would join other leading states like California that severely limit non-compete agreements in employee contracts.

Supporters of the bill point to the enormous success of the tech industry in Silicon Valley where similar bans exist. However, critics say non-competes are necessary to protect the employer’s investment in training, education, and exposure to confidential company information.

For the casual reader, non-competes agreements in Washington are often thought of in three parts: (1) agreements to not work for a competitor/customer; (2) agreements to not solicit customers; and (3) agreements to not solicit employees. The three are colloquially thought of as one agreement. However, Washington courts view each of these provisions differently with the burden on the employer to show that the agreement is reasonable.[1]

The debate surrounding non-compete agreements have increased due to recent reports of non-compete clauses showing up in low-wage manual labor contracts. The New York Times reported in 2014 of non-compete agreements showing up in Jimmy John’s employee contracts. The company’s actions have prompted congressional attention to ban non-competes for certain worker categories or workers earning below a monetary threshold. This is a notable contrast to non-competes widespread use for high-wage earners such as executives, engineers, scientists and high-commission sales employees.

[1] Sheppard v. Blackstock Lumber Co. 85 Wn.2d 929, 933, 540 P.2d 1373 (1975).

California Says Uber Driver is an Employee, Not an “Independent Contractor”

Yesterday, Uber appealed a California Labor Commission ruling that held an Uber driver was not an independent contractor, but an employee of Uber.  $4,152.20 in backwages is insignificant when compared to the broad implications of reclassifying Uber drivers as employees.

The ruling is in striking contrast to Uber’s long-held proclamation as a “logistics” or a “lead generating” service that simply connects independent contractors to consumers desiring those services.

A similar ruling here in Washington State could have a major impact on Uber operations here. The Washington State Supreme Court tackled the independent contractor v. employee issue recently in Anfinson v. FEDEX Ground Package System, Inc., 281 P.3d 289 (2012) in adopting the FLSA (“Fair Labor Standards Act”) “economic reality” test[1] for deciding whether an individual is an employee or an independent contractor.[2] The test largely focuses on the degree to which an employer asserts control over the worker. Should a similar ruling to California’s be adopted here, Uber would need to dramatically revise its business model.

[1] The Court referring it to also as the “economic dependence” test.

[2] See also: Bonnette, 704 F.2d at 1469-70 (Home health care workers jointly employed by social service agencies); Real v. Driscoll Strawberry Associates, Inc., 603 F.2d 748, 755-56 (9th Cir. 1979) (licensor of patented strawberries may have jointly employed strawberry growers, where it could control important growing and marketing decisions).

Should You Be Paid Overtime for Answering Late Night Work Email?

This was the question posed by Lauren Weber of The Wall Street Journal in her article, "Can You Sue the Boss for Making You Answer Late-Night Email?"

The author cites Pew Research Center studies that report 44% of internet users regularly did some job tasks outside the workplace. While smartphone technology has greatly increased the availability of workers, it hasn’t necessarily increased their overtime. While the vast majority of white-collar workers are exempt from the Fair Labor Standards Act and Minimum Wage Act, new Department of Labor rules are expected to change this.

In Washington, what constitutes “work” is the often a major dispute in minimum wage and overtime cases. “Work” is not defined in the MWA or the FLSA, but the courts have defined work as activity or inactivity that is requested or allowed by the employer and that is pursued predominantly for the employer’s benefit, even though it confers a benefit on the employee.

See: Tennessee Coal, Iron & Railroad Co. v. Muscoda Local 123, 321 U.S. 590, 598, 64 S. Ct. 698 (1944) (defining work as “physical or mental exertion (whether burdensome or not) controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer and his business”).

The Washington Administrative Code defines “work” under WAC 296-126-002(8), as “hours worked” as “all hours during which the employee is authorized or required by the employer to be on duty on the employer’s premises or at a prescribed workplace.”[1]

Several notable companies have been sued for failing to pay overtime for smartphone use after hours, namely Verizon, T-Mobile and Black and Decker. Set for trial in August 2015, a Chicago police sergeant has filed suit against the City of Chicago alleging that he was required to respond to emails and text messages while off duty, but without receiving overtime.

While there have been relatively few of these types of smartphone/after-hours cases, this may change following revision of the Department of Labor rules expected for release and public comment any day now.

[1] Applied in Stevens v. Brink’s Home Security, Inc., 162 Wn.2d 42, 48-50, 169 P.3d 473(2007), Mechanics were engaged in “work” when they drove company vans from their home to the first customer at shift’s start and drove from the last customer to home at shift’s end.

The “Real” Price of Nails and Blueberries for Workers

Last Sunday, The New York Times uncovered how consumers can unknowingly play a part in wage theft of exploited workers. Reporter Sarah Maslin Nir was having her nails done one day and asked the salon worker what her schedule is like. The manicurists stated that she works 24 hours a day, with naps, 6 days a week and not paid minimum wage. Maslin’s research uncovered that the price of nails in New York City was far less than the national average and began to connect the dots between exploited immigrants and the real price of a manicure.

Federal Law requires that employees be paid minimum wage[1] for all hours worked.[2] However, sometimes employers pay employees using more elaborate forms such as a “piece rate” or a “salary”. This can lead to issues for employees where the “piece rate” falls below the state or federal minimum wage. For example, overtime is calculated at time-and-a-half the “regular rate”. The regular rate must include all compensation, other than overtime compensation. See: Hisle v. Todd Pac. Shipyards, 151 Wn.2d 853, 862-63, 93 P.3d 108 (2004). This is then divided by the total hours worked during the workweek, so that the pay can be expressed as an hourly rate on which the 50% overtime premium can be calculated. Alternatively, employees can be paid a “salary”, but when divided by the number of hours the employee works and the per hour rate falls below the minimum wage, an illegal practice occurs.

The New York Times' article highlights how the price of many consumer goods or services do not reflect the real price of the good or service. For example, the Washington Supreme Court is likely to issue their ruling on if or how fruit pickers in Eastern Washington should be paid for rest breaks. Washington’s law requires a 10 minute rest break for each four hours worked under WAC 296-126-092(4), however Sakuma Farms employees paid per basket or bushel complain of never receiving pay for their rest. A new ruling that mandates this pay may have a financial impact to farmers and consumers alike, where the price of blueberries rises to the real price.

[1] The 2015 Federal Minimum Wage is $7.25.

[2] “Work” is not defined by the Washington Minimum Wage Act or the Fair Labor Standards Act, and is defined through case law as that which is pursued predominantly for the employer’s benefit, even though it confers a benefit on the employee. See, e.g.: Tennessee Coal, Iron & Railroad Co. v. Muscoda Local 123, 321 U.S. 590, 598, 64 S. Ct. 698 (1944) (defining work as “physical or mental exertion (whether burdensome or not) controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer and his business”).

MIND THE GAP: Washington is One of Many States to Not Require “On-Call” Pay

This week, NPR reported on Attorney General Eric Schneiderman’s request for detailed staffing and scheduling information from 13 big retail chains, including Target, Ann Taylor, Gap, J.C. Penney and Abercrombie & Fitch.

The inquiry focuses on dated “reporting-time” laws intended to ensure workers are paid a minimum number of hours when they physically show up at a job for a scheduled shift. Nowadays, employees report being notified via text message or email whether they are required to work that day. This practice can circumvent the requirement to pay employees minimum hours.

New York is one of just 8 jurisdictions with reporting-time pay laws that include: California, Connecticut, The District of Columbia, New Hampshire, New Jersey, Massachusetts, Oregon (minors only), and Rhode Island. Surprisingly, Washington does not require “show-up” pay. The Washington Department of Labor states “Generally on-call pay does not have to be paid unless the worker is actually called back or receives a phone call at home that will fix the problem, which would be considered hours worked.”

Washington has very strong laws that protect workers from performing work without pay, however “on-call” or “show-up” pay is noticeably missing from these laws. As retailers use new technologies to meet efficient staffing needs, the employee ultimately loses where he or she is constantly “on-call” but without pay.

Recent Gender Discrimination Verdict Highlights Risks To Employment Attorneys

The recent verdict in the Ellen Pao trial (against her employer for gender discrimination) highlights the risks employment lawyers face in trial. Pao sought nearly $16 million in lost wages and millions more in punitive damages. Had a verdict been returned in her favor, her attorney, Alan Exelrod, could have also petitioned the court for attorneys’ fees, estimated to be in the millions.

While attorneys’ fees are widely available in successful employment claims, they are often criticized by employers for encouraging litigation, in spite of the strong public policy that support attorneys’ fees.

While Pao’s case was in the millions, many times the recovery of wages for low-wage workers can be small. Without attorneys’ fees, employment attorneys working on a contingency fee basis alone would otherwise be dissuaded from pursuing a low-damages trial.

However, sometimes the smallest recovery can be the most important to employees. In my own practice, a recovery of $500 against an employer who wrongfully withheld $500 can make all the difference to an employee’s ability to pay rent, a cell phone, gas, food, etc. A small recovery may also represent the end of an illegal wage practice.  Imagine an employer who requires employees to work “off the clock.” or denies rest-breaks or meal periods.  In total, these damages may not amount to millions, but pursuing recovery of these small claims ensures workers are paid correctly under the law.

These attorney fee statutes for wage cases are designed to permit employees to recover full wages where legal fees would greatly exceed the underlying claim.[1] The purpose of the fee award is to “ensure effective access to the judicial process by providing attorneys’ fees for prevailing plaintiffs with wage and hour grievances”.[2]

[1] See, e.g.: Brandt v. Impero, 1 Wn. App. 678, 682, 463 P.2d 197 (Div. I, 1969).

[2] Fegley v. Higgins, 19 F.3d 1126, 1134-35 (6th Cir. 1994).

How Come You Don’t Get Paid Overtime?

Do you remember when you were an hourly employee and you received “time and a half” for hours worked over forty? Your boss needed you to work and you needed the money. Life was good. A great exchange of extra money for your valuable time.

But now, you are older, wiser, more educated, more experienced and now paid on a “salary”. So what happens when your boss asks you to work over 40 hours? You work… but you don’t get paid.

So whatever happened to overtime pay?

Odds are high, you don’t receive overtime and aren’t required to. In fact, a study done by the Economic Policy Institute (“EPI”) reported that only 11% of American workers are required to receive overtime. This is generally because:

  1. Your position is likely “exempt” under the current definitions of executive, administrative, and professional employees[1] and
  2. Your annual income does not fall below $23,660 ($455 per week) to qualify for mandatory overtime under the Federal Labor Standards Act (“FLSA”).

The FLSA, passed in 1938, gives the Federal Department of Labor (“DOL”) authority to promulgate regulations and enforce federal labor laws. However, the last update to the overtime dollar amount threshold occurred in 1975. As a result, most businesses are able to require “overtime” be performed by the employee without extra pay.

If this strikes you as unfair, then regardless of your political affiliation, you have a friend in the White House. On March 13, 2014, President Barack Obama issued a presidential memorandum calling for revisions of the DOL’s regulations that could have a major impact on salaried workers in America. These revisions are expected this Spring.

The President has called for revisions of the exemptions for “executive, administrative, and professional employees” (often referred to as “white collar” exemptions). These exemptions, in addition to the $455 per week regulations, have been criticized widely and allowed for low-wage positions to be exempt from overtime (i.e. “Assistant Managers” or “Shift Supervisors” at popular fast food restaurants, despite performing the same or similar duties as hourly employees).

So what does this all mean to you? Well, the Economic Policy Institute equates the current $455 per week, $23,660 per annum rate to $984 a week or $51,168 in today’s dollars. Meaning, employers paying less than $984 per week, may be required to pay non-exempt employees overtime if the new regulations adjust to these amounts and definitions are updated. This could have a substantial economic impact on white collar workers either directly in the form of additional compensation for additional hours worked (or reduced hours) or indirectly through increased hiring to fulfill a previous unpaid need.

[1] These are just a few of the positions excluded from the FLSA and state Minimum Wage Acts. The Minimum Wage Act and FLSA have different minimum wage and overtime exemptions. In addition, the Minimum Wage Act does not include many of FLSA amendments, namely, amendments passed in late 1940s.

Overtime laws vary widely from state to state.  If you have questions or concerns whether you are paid appropriately, you should seek legal advice from an employment lawyer.

3 Common Myths of Wagetheft in Washington

Last November, I had the privilege of speaking alongside Federal and State Department of Labor and union leaders on the issue of wagetheft in Tacoma. I was asked to speak about my own experiences as a private attorney who represents low-wage workers recover unpaid wages and/or payment for denial of rest breaks.

What became clear during the discussion and the public’s Q&A afterward, is at least three common myths surrounding wagetheft still exist.

Myth: “I am afraid to complain to my boss because I will be fired.”
Answer: An employer is prohibited from discharging or discriminating against an employee for complaining to the employer or the government that his or her RCW 49.46 rights have been violated, for filing or about to file proceedings “under or related to RCW 49.46, or for giving testimony or being asked to testify in proceedings “under or related to” RCW 49.46.[1] The Federal Labor Standards Act also prohibits retaliation for exercising wages rights.[2]

Myth: “I can’t afford a private attorney to pursue my unpaid wages claim.”
Answer: A worker owed wages has several options. He or she may make a complaint at the Department of Labor and Industries (State/Federal), complain to their union (if applicable) or hire a private attorney. Most private attorneys, like myself are paid by the employer only in the event they recover wages for the worker. The strong Washington worker laws allow for an employee to hire a private attorney on a contingency basis.

Myth: “I am not a US Citizen, am I still entitled to wage law protection?"
Answer: The law surrounding undocumented workers is constantly changing. Washington State has made a leading effort to protect the rights of undocumented workers by preventing worker status from entering the courtroom.[3] Second, the Rules of Professional Conduct prohibit an attorney from making assertion or inquiry “about a third person’s immigration status when the lawyer’s purpose is to intimidate, coerce, or obstruct that person from participating in a civil matter.” Even the Washington State AG’s Office will not inquire as to immigration status of anyone complaining of wage theft.

[1] RCW 49.46.100(2)

[2] See: Lambert v. Ackerly, 180 F.3d 997, 1002-05 (9th Cir. 1999) (en banc decision holding that FLSA prohibits retaliation based on informal complaints to employer); Valerio v. Putnam Assoc., 173 F.3d. 35, 45 (1st Cir. 1999).

[3] In Salas v. Hi-Tech Erectors, 168 Wn.2d 664, 230 P.3d 583, the Washington State Supreme Court held it was an abuse of discretion under ER 403 to allow a jury to learn of the Plaintiff’s immigration status in awarding lost future income. The Court wrote: