Wednesday, February 24, 2016
We've looked at arbitration provisions and unconscionability before. In this recent case out of California, Yeotis v. Warner Pacific Insurance Services Inc., No. B245770, the agreement in question was found to be unconscionable in places, but that didn't doom the arbitration provision contained within it.
There was an element of procedural unconscionability to the contract. The court concluded that the contract was an adhesion contract, because the plaintiff was required to sign it in order to keep her job. There was, therefore, some procedural unconscionability attached to the formation of the contract. Additionally, there was some substantive unconscionability in the contract's provisions that gave the court pause. The wording of the contract required the plaintiff to pay fees in arbitration that she wouldn't have had to pay in a court of law. The defendant tried to argue that that was only the impression given and that the plaintiff would never have had to pay those fees in reality, but the court was concerned that the plaintiff would assume, under the contract's language, that she would be responsible for the fees and therefore might hesitate to pursue her remedy against the employer.
So the court directed the costs provision to be severed from the contract, but it found that the rest of the contract was enforceable. The procedural unconscionability was slight, it thought, and did not permeate the whole contract. The plaintiff's allegation that she had never been provided with the relevant arbitration rules prior to signing the contract was unpersuasive to the court as a more serious procedural unconscionability problem because the court thought she could have found the rules herself very easily and there was no contention otherwise. As for the rest of the arbitration procedures as explained in the contract, the court found that they were not substantively unconscionable and so could be enforced.
Wednesday, February 17, 2016
It's not a secret that some colleges and universities out there are really struggling. At Lake Superior State University in Michigan, where enrollment has been declining, two professors were recently denied tenure, as Josh Logue reported for InsideHigherEd. As required by the faculty association's agreement with the university, the denials set forth the reason tenure had been denied, and the reason given was the need for the university to reduce staffing in the face of the declining enrollment. The professors took issue with this reason for denial, however, because the agreement contained the following clause:
Recommendations for tenure shall be based on:
a) Careful review of the Tenure Application File [letters of support, CV, and evaluations].
b) Consideration of the faculty member’s collegiality in their relation to faculty, students, staff, and administration.
The professors are saying that that doesn't allow for denial of tenure based on another consideration, such as financial.
It's unclear whether there was a communication with the candidates beforehand that institutional need might impact the tenure decision. The contract doesn't seem to ever mention financial considerations impacting the faculty, or institutional need, or indeed any kind of catch-all, at first glance. It does, however, provide for an appeal of a tenure decision, so I'm curious if the denied candidates will take advantage of this, and what the eventual outcome will be.
Friday, January 29, 2016
The class action lawsuit against Uber for allegedly misclassifying its drivers as “independent contractors” instead of regular “employees” is growing in scope and importance. (O’Connor v. Uber Technologies Inc., 13-cv-03826, Northern District of California). It now covers more than 100,000 drivers. If Uber loses, the case could mean the end of the so far highly lucrative business ride share model that is currently valued at a whopping $60 b worldwide. http://www.bloomberg.com/news/articles/2015-12-18/uber-faulted-by-judge-for-confusing-drivers-with-new-contract
A recent contractual twist developed as follows: Judge Chen had previously found certain contractual language between Uber and its drivers to be unconscionable and unenforceable. Uber claims it tried to fix those issues in a new set of contracts prohibiting its drivers from “participating in or recovering relief under any current or future class action lawsuits against the company.” (Link behind a sign-in request). The drivers were, instead, required to resolve potential conflicts via arbitration. The new contract did, however, purport to give drivers 30 days to opt out of the arbitration provision.
Judge Edward Chen stated about this contractual language that “it is likely, frankly, to engender confusion.” The potential for confusion stems from the fact that numerous drivers have, obviously, already joined the class action lawsuit just as many still may want to do so. Hundreds of drivers are said to have called the plaintiffs’ lawyer, Shannon Liss-Riordan, to find out whether they have to opt out of the new contract to join the lawsuit. Ms. Liss-Riordan called the updated contract an attempt to “trick her clients into relinquishing their rights to participate in the class action.”
Uber, however, claimed that it was just trying to fix previous problematic contractual language and that it would “not apply the new arbitration provisions to any drivers covered by the class action.” The contractual language, though, does not say so.
Whether this is an example of deliberate strong-arming or intimidating the drivers into not joining the lawsuit or simply unusually poor contract drafting may never be known. Judge Chen did, however, order Uber to stop communicating with drivers covered by the class action suit and barred the company from imposing the new contract on those drivers.
The saga continues with trial set for June 30.
Meanwhile, Lyft settled a very similar lawsuit by its drivers in the amount of $12 million. Under that settlement, Lyft will still be able to classify its drivers “independent contractors.”
Saturday, January 23, 2016
This relatively new and unknown funding idea is being tested by Purdue University in cooperation with financial services company Verno Education. The loans are called “Income-share Agreements” or “ISAs.” Investors lend money to students in return for a certain percentage of the student’s future income for a set number of years. A few companies and NGOs in the United States are offering contracts on a limited, pilot basis, although the idea itself is not new: Economist Milton Friedman introduced the idea in the 1950s.
Purdue President Mitch Daniels has touted the idea, claiming that the loans “shift the risk of career shortcomings from student to investor: if the graduate earns less than expected, it is the investors who are disappointed; if the student decides to go off … to Nepal instead of working, the loss is entirely on the funding providers….” Voila, truly “debt-free-college” according to Daniels.
Not so fast. First, most college students of course end up finding a job. They will thus have to repay something. That something could easily be very expensive. For example, if a student borrowed $10,000 via a contract to repay 5% of her income for five years after graduation and ends up getting a $60,000 job, she or he will have to pay back $15,000 without compounded interest.
Student protections are currently poor. For example, there is no clarity as to whether the Fair Credit Reporting Act would apply. Further regulations of this area are necessary. Meanwhile, students will have to individually bargain these types of contracts very carefully.
Thursday, January 21, 2016
On Thursday, the U.S. Circuit Court of Appeals for the D.C. Circuit heard arguments about whether a clothing company illegally fired three retail store employees for their Facebook posts criticizing the employer. The case involves the as-of-yet little developed area of how labor law applies to social media usage as well as other complex issues of contracts and employment law. The case is Design Technology Group v. NLRB, Case Number 20-CA-035511. The case also demonstrates the issue of poor workplace conditions and how little employees can do under contracts law or other bodies of law against this, which I have blogged about before (most recently here). I am not an employment law expert. I simply find this case very interesting from the point of view of how social media law is developing in relation to what is, after all, also an employment contract.
In the case, three employees repeatedly brought various safety concerns to the attention of the store manager. Among other things, the employees felt that the area of San Francisco where the store was located was relatively unsafe at certain times of the evening and that, perhaps, store hours could thus be changed to alleviate this problem. Homeless people would also gather in numbers outside the store to watch a burlesque video that the store played on a big TV screen right inside a window, thus potentially also attracting various (other) unsavory characters.
Allegedly, the store manager did not respond to these safety concerns and treated the employees in an immature and unprofessional way. The three employees discussed the events not at the water cooler, which is so yesteryear, but on Facebook. These posts included messages such as
- “It’s pretty obvious that my manager is as immature as a person can be and she proved that this evening even more so. I’m am unbelieveably [sic] stressed out and I can’t believe NO ONE is doing anything about it! The way she treats us in NOT okay but no one cares because everytime [sic] we try to solve conflicts NOTHING GETS DONE!!... “
- “800 miles away yet she’s still continues to make our lives miserable. phenomenal!”
- “hey dudes it’s totally cool, tomorrow I’m bringing a California Worker’s Rights book to work. My mom works for a law firm that specializes in labor laws and BOY will you be surprised by all the crap that’s going on that’s in violation 8) see you tomorrow!”
One of the employees did bring the California worker’s rights book—which covered issues such as benefits, discrimination, the right to organize, safety, health, and sanitation—to work and put it in the break room where other employees looked through it, noticing that they were entitled to water and sufficient heat.
This same employee also (naïvely) sent resumes from the company computer in spite of company rules allowing only sporadic computer access (the store manager had allegedly set a bad example by using the store computer for personal purposes herself). The company discovered this as well as the Facebook posts, and fired the three employees.
The company argues that the workers commented on Facebook only in order to create a pretext for filing a claim with the NLRB. The smoking gun, according to the company, is the following exchange of (select, but most salient) Facebook postings:
- “OMG the most AMAZING thing just happened!!!! J”
- “What … did they fire that one mean bitch for you?”
- “Nooooo they fired me and my assistant manager because “it just wasn’t working out” we both laughed and said see yaaah and hugged each other while giggling ….Muhahahahaha!!! “So they’ve fallen into my crutches [sic].”
The use of the expression “Muhahaha” is, according to the company, the smoking gun indicating the employee’s desire to get fired. It does indeed seem to indicate _some_ reveling in the turn of events, but arguably not a desire to be fired. The “top definition” of the phrase on the user-created online “Urban Dictionary” is, today, “supost [sic] to be an evil laugh when being typed in a game.” Case briefs list it as “An evil laugh. A laugh one does when they are about to do something evil. Such as when a villain has a plot to take over the world, he does this laugh right before it goes into effect. Also a noise made by people who have just gotten away with an evil deed or crime….” The “evil laughter” entry on Wikipedia describes the phrase Muhahaha as being “commonly used on internet Blogs, Bulletin board systems, and games. There, [it is] generally used when some form of victory is attained, or to indicate superiority over someone else.”
The company appeals a ruling from the National Labor Relations Board (“NRLB”) finding the terminations unlawful because the employees’ discussions of working conditions were protected concerted activities under the National Labor Relations Act. The company claims that the comments were not legally protected because they were part of a scheme to manufacture an unfair labor practice claim.
It will be interesting to see how the Court of Appeals will address the social media aspect of this case. One the one hand, it does seem exceptionally naïve to expect to be able post anything in writing on the internet – Facebook, no less – without it potentially being seen by one’s current or future employer. I’m sorry, but in 2016, that should not come as a surprise to anyone (note that the company also used email monitoring software to discover whether its employees applied for jobs with competitors, which at least one of the employees here did). Note to employees who may not have a home computer or internet access: use a library computer.
On the other hand: does it really matter what employees post to their “friends” about their jobs, absent torts or other clear violations of the law (not alleged here)? Isn’t that to be expected today just as employees previously and still also talk in person about their jobs? Isn’t the only difference in this case that the posts are in writing and thus traceable whereas “old-fashioned” gossip was not? If employees merely state the truths, as seem to have been the case in this instance perhaps apart from the last “Muhahaha” comment, isn’t it overreaching by the employer to actually _fire_ the employees if they, of course, otherwise provided good services? Even if the employees are exaggerating, boasting, or outright lying, should employers be able to fire employees merely because of private comments on Facebook posted to one’s online “friends”?
An alternative idea might be to consider whether the employees were actually on to something that (gasp!) could help improve a poor work situation for the better.
The National Federation of Independent Business’ Small Business Legal enter has filed an amicus brief in support of the company, alleging that the NLRB decision “allow[s] employees regardless of their motive or actual misconduct to become termination-proof simply by making comments relating to their employment online.”
That’s hardly what the employees are arguing here. They do, however, argue a right to discuss their employment situation online without a snooping employer terminating them just for doing so. In this case, the employees had, noticeably, tried to improve highly important workplace issues in a fruitful way. The situation did, however, escalate. In and of itself, however, the “fallen into my clutches” comment, although of admittedly debatable intent, does not seem to indicate that the employees were attempting to manufacture an unfair labor practice claim. The employees seemed to have been primarily concerned with safety issues and working conditions, but were fired in retaliation for their critical online arguments. That, to me, seems like a fair argument.
Stay tuned for the outcome of this case!
Wednesday, December 30, 2015
Here's one for all the professors out there: Smith v. Board of Supervisors for the University of Louisiana System, Civil Action Case No. 13-5505 Section: "G" (3), out of the Eastern District of Louisiana.
Steven Smith was a tenured professor at the University of New Orleans ("UNO"). Smith alleged a series of disagreements / misunderstandings that eventually led to Smith being committed to teaching the spring 2012 semester at both UNO and a Brazilian university, the Federal University of Bahia ("UFBA"). Smith attempted to resolve the conflict by pushing his start date at UFBA to the last two weeks of his semester at UNO. He had his students at UNO use the final two weeks to work on final projects, which would be submitted to him electronically while he was in Brazil at UFBA. Smith alleged that there was further miscommunication between him and UNO administration about Smith's schedule and whether or not it was acceptable. As a result, Smith stated that he was threatened numerous times with termination. Eventually, he was encouraged to resign and did so.
Smith sued asserting several causes of action, including breach of contract. The Board responded by arguing that Smith and the Board never entered into a contract at all.
Smith first pointed to the faculty handbook and UNO bylaws as the contract between himself and the Board. However, the faculty handbook explicitly stated that it "should not be construed as a formal contractual agreement between the University and its faculty." The court therefore found that the handbook did not constitute a contract.
That was not the end of Smith's contract claims, however, and that's where the tenure issue comes in. Smith argued that his tenure provided him with "a contractual right to continued employment." To support his argument, Smith pointed to the definition of "tenure" in Black's Law Dictionary as well as a number of statements made to Smith when he was granted tenure. The Board made no argument in opposition, leading the court to conclude that, "[a]lthough there was no specific written tenure contract, the parties appear to agree that Smith's achieving tenure meant that he was no longer an at-will employee." Accordingly, the court found that tenure was a contract between Smith and the Board. Whether or not this contract had been breached was a genuine issue of material fact precluding summary judgment.
Thursday, December 10, 2015
Will the legal hiring and general business situation never change for the better? Maybe, but commentators still think that future change on the legal market will come from structural and innovative, rather than cyclical, change. For example, in addition to relatively simple steps such as hiring outside staffing agencies and sharing office centers, some firms are launching their own subsidiaries providing legally related services such as contract, data and cyber security management along with ediscovery.
Until recently, law firms offered these and other services. As outside service providers have proved to be able to provide certain key services more efficiently and cost effectively than traditional law firms, the latter have lost business that they are now desperately trying to recoup.
Imitation is still the most sincere form of flattery. It is not only on the market for legal services that copycats abound; this has also proved to be the case with, for example, many shared economy service websites such as Uber, Lyft, Airbnb, VRBO and others. As soon as one company idea and website turns out to be successful, others just like it seem to shoot up within weeks or months. However, instead of simply trying to do what others are already doing and doing well, it would be nice if companies – law firms among them – would try to think about how they could do things better instead of just trying to, as often seems the case, (re)gain business by taking market shares from others. Exactly how law firms should do so is, of course, the million-dollar question, but it seems clear that innovation is prized both within and beyond the legal field. That will benefit our students if jobs are created by actual law firms rather than by service providers not hiring people with JDs.
Tuesday, December 8, 2015
A few days ago, I blogged here on an attempt by some university professors in California to unionize and to obtain better pay and working conditions in general.
In China, university reform is also underway, but, at least in part, with a much more troublesome intent and potentially dire effects for the nation and the world.
The Guardian reports that China’s education minister has vowed to “drive smart alecks, dissenters and thieves” from the country’s university classrooms. This is part of a wider anti-corruption campaign launched by President Xi three years ago.
The alleged misconduct ranges from action that seems reasonable (firing university leaders for filing fake expense reports and taking bribes from students) across the pitiful and almost laughable (punishing senior university officials for engaging in illicit acts of “hedonism” by, for example, driving luxury cars) to the outright shocking and extremely troublesome, seen with Western eyes. For example, several university chiefs have been toppled for “flouting Communist party rules.” Attempts are made to ban books that attempt to spread “Western values.” The education minister has also called for “greater political screening of academics before they are hired” and is worried that “enemy forces” are attempting to “infiltrate university campuses” in order to “turn young minds against the party.”
Liberal academics claim that the discussion and study of sensitive topics has generally become increasingly difficult under the leadership of President Xi.
All this is indeed very troublesome indeed. However, before we roll our eyes too much at these serious Chinese events, let us just remember that the United States academic world is far from perfect either. Recall, for example, the recent defunding of various law school and other university clinics on East Coast campuses for, at bottom, being too liberal and assisting the lower class in obtaining better pay and working conditions. A former senior faculty colleague personally told me once that one of my papers on (are you ready?) climate change was almost “too political” in Orange County, California. The article discussed mainstream factual aspects, including business and investment issues, of climate change that are now, just a few years later, being discussed in Paris by all media, including conservative outlets. Recently, numerous attempts at diversifying college campuses across the nation have shed light on potential elitism and racism in American universities. Nope, we are far from perfect ourselves. But when an entire nation deliberately and officially seeks to censor learning processes, there is indeed cause for alarm.
Last year, I had the great honor, joy and privilege of teaching international environmental law at a prime Chinese university. I brought up such “sensitive” topics as public participation in government law- and decision-making, climate change, and trade in endangered species. I was videotaped doing so (this is normal practice in China). I was also not invited back this past summer. Maybe my teaching is simply no good. Maybe more senior and “famous” lecturers were chosen. I cannot blame the university for doing so at all. I know that I have a lot with which I can contribute to any educational institution, but I also bow to and honor the many experienced, learned and very well published colleagues on the “market” these days. However, hate to think that I was, perhaps, censored away. I don’t think that is the case. If it was, then I am nonetheless happy to have at least contributed with a few provocative, Western thoughts. Perhaps I was just too much of a smart aleck...
Saturday, December 5, 2015
Five thousand part-time and non-tenure track professors working for the University of Southern California, a private university employing a total of 6,600 faculty, are petitioning the National Labor Relations Board to become unionized. If the petition is granted, the faculty will get a chance to vote on the issue with contract negotiations to follow soon thereafter.
Those of the faculty who support the move say that it could lead to better working conditions, more job stability and higher pay. Currently, part-time faculty teaching courses for USC earn an average of about $5,000 per course. Such faculty often have to piece together jobs teaching classes for several universities earning them the name “freeway flyers.” Parents are often getting upset that students are being taught by part-time adjuncts. Of course, the stress and uncertainty of not having a stable teaching job in one location may indeed affect the quality of the instruction provided by adjuncts and other non-tenured professors.
Nonetheless, USC Provost Michael Quick and other university representatives have warned the potentially unionizing faculty that their move may lead to “less collegiality on campus” because unions, in their opinion, rest on “an adversarial model.”
Come again? So, some university folks may resent the fact that their low-paid, low-security, but hardworking colleagues for seeking out better working conditions for themselves and thus eventually the university students? That in itself sounds highly uncollegial and should be rethought. Perhaps some university faculty and leaders ought to consider assisting their colleagues in moving towards better working conditions and pay, as the trend is around the nation in both academia and beyond, not trying to retaining status quo. Unions have a sound role to play in this respect. Even without unions, many of us enjoy good working conditions and pay. However, many faculty may not individually be able to obtain such conditions. Unions have demonstrated their ability to assist workers in this respect. “Adversarial” is not the right word for that. It’s called bargaining power and leverage. It is what you make it.
As if this wasn’t insulting enough to the faculty, the university provost also encouraged the faculty to “read anything an organizer asks to you sign as you would read a legal document.” Duh! As one faculty said: “I almost feel like they’re insulting my intelligence.” Apparently, the intelligence of the faculty is recognized in some contexts (teaching), but not in others (reaching out for help to improve one’s working conditions).
By way of comparison: part-time and untenured faculty at both the University of California and California State University have long been represented by unions. That has not led to any reports of “less collegiality” or any other of the parade of horribles-scenarios so often invoked when it comes to employee versus employer bargains assisted by unions.
Tuesday, December 1, 2015
In cases where workers have quit their jobs because of intolerable workplace bullying and thus wish to assert illegal discrimination, the United States Supreme Court seems inclined to start the statute of limitations “clock” when the employee resigns rather than when the last discriminatory action takes place. Private sector workers typically have 180 days to report job discrimination to the Equal Employment Opportunity Commission (“EEOC”) whereas public sector employees must do so within 45 days.
The case is Green v. Brennan, No. 14-613. In it, a postal worker claims that he was passed over for a promotion because he is black. When he complained to his employer, the United States Postal Service, he was allegedly forced to choose between retirement or a lower-paying job 300 miles away. He resigned and filed suit for constructive discharge, but missed the EEOC deadline. The trial and appellate courts disagreed as to when the statute of limitations should start to run, which would have made a difference in the case.
As the law currently stands, employees only enjoy legal protection against discrimination based on a relatively narrow range of underlying issues such as age, gender, national origin, race, religion or disability under, most relevantly, Title VII of the Civil Rights Act of 1964. But luckily, times are changing. Although employees in this country enjoy notoriously few of the rights and work norms that are taken for granted in so many other parts of the industrialized world, some states are doing something to change this situation, at long last. In California, for example, AB 2053 now requires California employers with 50 or more employees to include training in the prevention of “abusive conduct” to already existing requirements regarding sexual harassment.
“Abusive conduct” is that which a “reasonable person would find hostile, offensive, and unrelated to an employer’s legitimate business interests.” “It may include repeated infliction of verbal abuse … that a reasonable person would find threatening, intimidating, or humiliating, or the gratuitous sabotage or undermining of a person’s work performance.” The conduct must be undertaken with malice. In other words, AB 2053 targets a wide range of workplace bullying that is not linked to “traditional” discrimination. Such conduct is surprisingly common and accepted by management to a surprisingly great extent in more places than you might think and in places that may or may not surprise you, including our very own field, legal academia.
Unfortunately, AB 2053 does not yet have sufficient legal “teeth” as defining “malice” and the bullying targeted by the law is difficult. Thus, in spite of the extent of the problem and its many recognized and severe consequences on both employers’ productivity and success levels as well as, of course, the employees’ varied interests, if an employee thinks she or he has an issue with his or her employer, the “resolution is likely [to come from] human resources, and not the courts.”
What happens if a human resources department is disinterested in or for other reasons - corporate acceptance of workplace bullying, perhaps - unwilling to assist the employee? Perhaps not much, as the situation stands. But just as the Civil Rights movement started some place and built up at least some protections against some types of discrimination, modern notions of what constitutes workplace discrimination and its negative effects are, luckily, spreading. In spite of the usual initial criticism, AB2053 is a very good start. Undoubtedly, the common law will be able to shed further light on what modernly constitutes acceptable workplace behavior and what does not. That way, the law can get the required legal “teeth.” In the meantime, it is a sad observation about the modern American workplace that so many managers effectively tolerate or even undertake workplace harassment and that so few counterbalancing institutions in place in other cultures exist here, for instance trade unions. In contracts law, it’s all about the bargaining power. Most American workers have too little in today’s workplace.
Thursday, November 19, 2015
Serious coin collectors still exist. Very serious ones.
In a recent case before the Ninth Circuit Court of Appeals, an individual expert coin collector had offered to sell his knowledge regarding a “Brasher Doubloon” to a rare coin wholesale company for $500,000. A Brasher Doubloon is a $15 dollar coin minted by goldsmith Ephraim Brasher in late eighteenth-century New York. These rare coins are extremely valuable today. (The case is Swoger v. Rare Coin Wholesalers, 803 F.3d 1045 (Ninth Cir. 2015).
The parties met at a trade show to further discuss the coin collector’s theory that the coin in question was “the first United States coin issued for circulation … under authority of an Act of Congress.” The Act in question was “An Act Regulating Foreign Coins, and For Other Purposes,” chapter 5, 1 Stat. 300 (1793). The Act provided that certain “foreign gold and silver coins shall pass current as money within the United States, and be a legal tender for the payment of all debts and demands.” The Act also specified which countries’ coins qualified, how much the coins were required to weigh, etc.
The coin collector believed the coin to qualify under this provision because Spanish and Spanish colonial coins qualified at 27.4
grains per dollar. By analogy, the expert thought, that would require a Brasher Doubloon to weigh 411 grains. The coin collector reasoned that because the coin in question weighed 410.5 grains (oh, so close), it must have been minted pursuant to the Act. The wholesale coin company, however, refused to pay the collector for his information, not believing it proved that the coin really was minted “pursuant to the Act.” The expert brought suit, alleging fraud, breach of contract, and asserting damages under a theory of quantum meruit, among other things.
The appellate court found that the collector could not recover because he did not provide the information required under the contract. The Act, said the court, pertains to foreign coins only, not American ones.
Appellant also asserted a new theory on appeal: that because the coin was struck to “conform” to the weight in the Act for Spanish coins, it was used in commerce; in other words, “passed current as money” under the Act. That argument got swift treatment as well: the collector had promised information showing that the coin was, under a Congressional Act, legal tender, not that it was merely used as such by members of society.
As always, exact statutory reading is key, even in today’s contractual disputes.
Wednesday, November 11, 2015
Must a rape be arbitrated if an employment contract calls for “any and all disputes” to be resolved by arbitration?
Thankfully not, at least in Ohio, according to a recent Court of Appeals decision (Arnold v. Burger King, No. 101465, 2015 WL 6549138).
When Ms. Arnold obtained employment with a Burger King franchisee, she signed a contract that, among other things, provided as follows:
Under this arbitration program, which is mandatory, Carrols [the franchisee] and you agree that any and all disputes, claims or controversies for monetary or equitable relief arising out of or relating to your employment, even disputes, claims, or controversies relating to events occurring outside the scope of your employment (“Claims”), shall be arbitrated before JAMS, a nation arbitration association.
Ms. Arnold alleged that she was harassed and sexually abused over an extended period of time by her supervisor who, among other things, forced Ms. Arnold to perform oral sex on him in the men’s restroom at the restaurant during working hours. Ms. Arnold brought suit, claiming sexual harassment; respondeat superior/negligent retention; emotional distress; assault; intentional tort, and employment discrimination. The franchisee sought to compel arbitration, arguing that Arnold's claims were subject to arbitration under the mandatory arbitration agreement because they “arose out of Arnold's employment.” (That’s right: the company wanted JAMS to resolve a serious rape case…) Ms. Arnold answered that her claims fell outside the scope of the arbitration agreement and that the agreement was, furthermore, unenforceable because it was unconscionable.
The court agreed with Ms. Arnold. “When claims may be independently maintained without reference to the contract or relationship at issue,” they do not have to be arbitrated. CITE. Clearly, a civil complaint can be brought for sexual assaults and harassment even without the existence of a contract. “Arnold's claims relating to and arising from the sexual assault exist independent of the employment relationship as they may be maintained without reference to the contract or relationship at issue.” Ms. Arnold thus did not have to arbitrate the claims for that reason alone.
As for unconscionability, the court found the agreement to be procedurally unconscionable because Arnold, a previously unemployed entry-level employee, signed the agreement, drafted by the employer, when it was presented to her as a condition for hiring her. “As for Arnold's bargaining power, the choice was either sign it or remain unemployed. There is no evidence that Arnold could alter any of its terms.” The court found the agreement substantively unconscionable as it sought to include “every possible situation that might arise in an employee's life” and because it failed to set forth the potentially high costs of arbitration.
What makes this case even more stunning is the fact that the franchisee was aware of the very troubled employment environment at its restaurants. This led to several other sexual harassment charges, including sexual assault allegations, filed by the EEOC and which were ongoing for more than a decade. One might have hoped that an employer such as this would want stricter measures, and not arguably more lenient ones, against those of its employees that have violated norms and rules of appropriate workplace behavior to signal that such behavior is unacceptable in 2015. Apparently, in at least some geographical and socio-economic locations, that is too much to hope for.
Monday, November 9, 2015
California takes its laws against minors contracting seriously. Very seriously. Dancing with the Stars favorite Bindi Irwin, daughter of “Crocodile Hunter” Steve Irwin, must prove that her father was really killed in 2006 in order for her to get the earnings from the popular dancing show. So far, Bindi Irwin has allegedly presented “insufficient proof” that her father has waived those earnings. This despite worldwide shock that the beloved wildlife TV show stars was killed in a freak accident by a stingray in 2006.
California law requires underage entertainers to get court approval of their contracts to avoid the rampant abuses of minors in the industry of yesteryear. Parents of minors must now sign a quitclaim waiving any rights to the child's earnings. Bindi's mother, Teri, has already signed, but Steve has not, for obvious reasons.
The show’s owners, BBC Worldwide, is working with the court to work out the situation.
Under her contract with BBC, Bindi earns a guaranteed salary of $125,000 as well as weekly sweeteners for each week she stays on the show. So far, Bindi has done very well, even earning top scores one week. The shows airs on Monday nights on ABC.
Wednesday, October 21, 2015
Amazon is suing approximately 1,000 individuals who are allegedly in breach of contract with the Seattle online retailer for violating its terms of service. Amazon is also alleging breach of Washington consumer protection laws.
In April, Amazon sued middlemen websites offering to produce positive reviews, but this time, Amazon is targeting the actual freelance writers of the reviews, who often merely offer to post various product sellers’ own “reviews” for as little as $5. (You now ask yourself “$5? Really? That’s nothing!” That’s right… to most people, but remember that some people don’t make that much money, so every little bit helps, and numerous of the freelancers are thought to be located outside the United States.) The product sellers and freelancers are alleged to have found each other on www.fiverr.com, a marketplace for odd jobs and “gigs” of various types.
There are powerful incentives to plant fraudulent reviews online. About 45 percent of consumers consider product reviews when weighing an online purchase. Two-thirds of shoppers trust consumer opinions online. For small businesses, it can be more economical to pay for positive reviews than to buy advertising. For example, a half-star increase in a restaurant's online rating can increase the likelihood of securing, say, a 7 p.m. booking by 15 to 20 percent. “A restaurateur might be tempted to pay $250 for 50 positive reviews online in the hopes of raising that rating.”
As law professors, we are not beyond online reviews and thus potential abuses ourselves. See, for example, www.ratemyprofessor.com. There, anyone can claim that they have taken your course and rank you on your “Helpfulness,” “Clarity,” and “Easiness,” give you an overall grade as well as an indication of whether you are hot or not (clearly a crucial aspect of being a law professor…) To stay anonymous, people simply have to create a random anonymous sounding email address. Not even a user screen name appears to be required. Hopefully, that website does not have nearly as much credibility as, for example, Yelp or TripAdvisor, but the potential for abuse of online reviews is clear both within as well as beyond our own circles.
As shown, though, some companies are taking action. TripAdvisor claims that it has a team of 300 people using fraud detection techniques to weed out fake reviews. But fraudulent reviews aren't thought to be going away anytime soon. One source estimates that as many as 10-15% of online reviews are fake (to me, that seems a low estimate, but I may just be a bit too cynical when it comes to online reviews).
So, next time you are reading reviews of a restaurant online, I suppose the learning is that you should take the reviews with a grain of salt.
Friday, September 11, 2015
Very excited to be able to report on a UCC case from Indiana, JMB Manufacturing, Inc. v. Child Craft, LLC decided by the 7th Circuit. The opinion is long, but Judge Hamilton's introduction captures its spirit.
This case presents a merchant’s creative effort to avoid the limited remedies that contract law provides for a seller’s delivery of non-conforming goods. After the seller delivered about $90,000 worth of nonconforming wood products, the buyer sought recovery from both the seller and its president personally for tort damages on a tort theory, that they negligently misrepresented the quality of the delivered goods.
The district court ruled in favor of the buyer and awarded damages of more than $2.7 million on the theory that the non-conforming goods caused the complete destruction of the buyer’s business. This damages theory echoed the proverb of Poor Richard’s Almanack (“A little neglect may breed mischief; for want of a nail, the shoe was lost; for want of a shoe the horse was lost; for want of a horse the rider was lost; for want a rider the battle was lost.”), and Shakespeare’s story of Richard III [pictured], where the loss of a horse led in turn to the loss of a battle, the death of a king, and the loss of a kingdom. Cf. Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Rep. 145 (1854) (damages for breach of contract limited to consequences reasonably contemplated by both parties when they made contract).
We reverse the award of damages against the seller and the seller’s president, but for reasons that do not depend on the flawed “want of a nail” theory. Under Indiana law, a buyer who has received non-conforming goods cannot sue a seller for negligent misrepresentation to avoid the economic loss doctrine, which limits the buyer to contract remedies for purely economic losses. See Indianapolis-Marion County Public Library v. Charlier Clark & Linard, P.C., 929 N.E.2d 722 (Ind. 2010). Second, there is no basis for transforming the buyer’s breach of contract claim into a tort claim for negligent misrepresentation to hold the seller’s president personally liable. See Greg Allen Construction Co., Inc. v. Estelle, 798 N.E.2d 171 (Ind. 2003). In all other respects, we affirm the judgment of the district court.
The opinion includes a lengthy discussion of Indiana's economic loss doctrine.
The Complete Colorado provides this report about a court's grant of a preliminary injunction empowering a teachers' union to continue in its role as sole entity empowered to negotiate a new contract with the local school board. The ruling keeps the union's existing contract in force until its breach of contract claim can be heard, but the grant of the P.I. suggests the likelihood that the union will succeed on the merits of its claim. But the ultimate remedy remains unclear.
And in news that will make you say, "What the . . .???" we learn from this article from the Washington Times that Ashley Madison claims that its new users are flocking to its website after news of its massive security breach, about which Myanna Dellinger has written here, here and here. Other than quoting a spokesperson for the company who blathered about happy return customers, he Times does not speculate on the relationship between the scandal and the increase in users. Knock yourself out.
Friday, September 4, 2015
Yesterday, we blogged here about important considerations regarding whether an employee will be seen as an employee or a contractor.
In O'Connor v. Uber Technologies, U.S. District Judge Edward Chen just ruled that Uber's drivers may pursue their arguments that they were employees in the form of a class-action suit. One of the reasons was that Uber admitted that they treated a large amount of its drivers "the same."
Of course, millions of dollars may be at stake in this context. Profit margins are much higher for companies such as Uber, Lyft, Airbnb and other so-called "on demand" or "sharing economy" companies. That is because the companies do not have to pay contractors for health insurance benefits, work-related expenses, certain taxes, and the like. But seen from the driver/employee's point of view, getting such benefits if they are truly employees is equally important in a country such as the United States where great disparities exist between the wealthy (such as the owners of these start-up companies) and the not-so-wealthy, everyday workers.
Plaintiffs are represented by renowned employee-side attorney Shannon "Sledgehammer" Liss-Riordan who represented and won a major suit by skycaps against American Airlines some years ago, so sparks undoubtedly will fly in the substantive hearings on this issue.
Thursday, September 3, 2015
The National Labor Relations Board recently issued a decision , Browning-Ferris Industries of California, Inc., d/b/a/ BFI Newby Island Recyclery, that establishes a new standard for determining who is a joint employer.
BFI Newby Island Recyclery hired Leadpoint, a staffing services company, to provide some workers for its recyclery. BFI and Leadpoint had signed a temporary labor services agreement which could be terminated by either party upon thirty days' notice. The agreement stated that Leadpoint was the sole employer of the workers and that nothing in the Agreement shall be construed as creating an employment relationship between BFI and the personnel supplied by Leadpoint. In other words, the agreement contained language that is pretty standard in independent contractor agreements. The agreement also provided that Leadpoint would recruit, interview, test, select and hire personnel for BFI. BFI was not involved in Leadpoint's hiring procedures. BFI, however, had the authority to "reject any Personnel and...discontinue the use of any personnel for any or no reason." Again, this is fairly standard language in independent contractor agreements. In a departure from precedent, the NLRB ruled that a company that hires a contractor to provide workers may be considered a joint employer of those workers if it has the right to control them even if it does not actively supervise them. The dissenters were rather unhappy and their opinions are worth reading as they lay out the expected impact of the ruling.
It's a significant decision and one that should make lawyers take another look at their clients' independent contractor agreements to see whether they contain language that indicates the potential to control the contractor's employees. While the language in the contract was not the only factor influencing the Board's decision, it was an important one.
Tuesday, September 1, 2015
Uber. It just seems to always be in the news for one more lawsuit, doesn’t it. In late August, the district attorneys for San Francisco and Los Angeles filed a civil complaint against the company alleging that it is making misrepresentations about its safety procedures. The complaint, i.a., reads that Uber’s “false and misleading statements are so woven into the fabric of Uber’s safety narrative that they render Uber’s entire safety message misleading.”
On its website, Uber promises that “from the moment you request a ride to the moment you arrive, the Uber experience has been designed from the ground up with your safety in mind” and that “Ridesharing and livery drivers in the U.S. are screened through a process that includes county, federal, and multi-state criminal background checks. Uber also reviews drivers’ motor vehicle records throughout their time driving with Uber.”
However, Uber does not use fingerprint identication technology, which means that the company cannot search state and federal databases, only commercial ones.
The result? People with highly questionable backgrounds end up being on Uber’s payroll. For example, one “Uber driver was convicted of second-degree murder in 1982. He spent 26 years in prison, was released in 2008 and applied to Uber. A background report turned up no records relating to his murder conviction. He gave rides to over 1,100 Uber customers.” Yikes. Another “Another driver was convicted on felony charges for lewd acts with children. He gave over 5,600 rides to Uber customers.”
Add this to the ongoing lawsuit about whether Uber’s drivers should be legally classified as “employees” or “contractors,” and Uber is in a mound of legal trouble.
Certainly, a misrepresentation seems to have been made if the company deliberately touts its safety and its “industry-leading background check process” yet only uses a commercial database that does not even necessarily ensure that its drivers are who they say they are.
Still, Uber remains one of the most valuable start-ups in the world. It and similar “sharing economy” companies such as Airbnb have gained a good foothold on a market with a clear demand for new types of services. So far, so good. But initial success should not and does not equate with a “free-for all” situation just because these new companies are highly successful, at least initially. It seems that they are learning that lesson. Lyft, for example, already settled with prosecutors in regards to its safety. Perhaps Uber will follow suit.
Monday, July 13, 2015
Today's New York Times has an article about how Uber and Lyft are merely the latest incarnation of a decades-long trend towards replacing (or attempting to replace) employees with independent contractors. According to the Times, Uber is a rather extreme version, officially employing only 4000 people, while 160,000 people make their living through Uber. The Times attributes stagnating wages to this "gig economy," acknowledging that other forces, including the decline of unions and globalization, are also contributing factors. As of 2014, 18% of all jobs held in the United States are occupied by independent contractors.
But the process has its roots in older trends, such as the move towards franchises that got going in the 1960s and has continued its steady expansion. In the hospitality industry, hotel chains enter into franchise agreements with hotel operators, who in turn now increasingly turn to independent contractors to provide services within their hotels. The results has been a decline in wages in the industry in the 21st century.
As usual in Times articles these days, if you read on below the fold, you will learn the upside to the "gig economy." Some people choose to be self-employed consultants to that they can work flexible hours and work from home. But it's hard to find a silver lining here for ordinary workers. Some can succeed as independent contractors, but their wages tend to be low, they have no job security, and the work may come in uncontrollable bursts followed by long, anxiety-producing lulls.
Monday, June 8, 2015
As reported in the Washington Post here, Senators Al Franken (left) and Chris Murphy (right) have introduced the Mobility and Opportunity for Vulnerable Employees (MOVE) Act. The purpose of the Act is
To prohibit employers from requiring low-wage employees to enter into covenants not to compete, to require employers to notify potential employees of any requirement to enter into a covenant not to compete, and for other purposes.
The bill would prohibit non-compete clauses in the contracts of workers who earn $15/hour or less, unless the minimum wage is higher in the relevant jurisdiction. According to the Post, 12.3% of all workers' contracts include non-compete clauses, including some workers who make minimum wage or a bit more. The non-competes trap such workers in their current low-wage jobs when they could build in their work experience to pursue higher-paying jobs in the same field. California law already prohibits enforcement of non-competes.
There are counter-arguments,. Non-compete clauses protect employers and thus incentivize them to invest in their employees and give them on-the-job training in their fields. If that training becomes portable, employers might be less willing to provide it. However, as the Post story suggests, California's ban on non-competes has not prevented Silicon Valley from becoming a synonym for success in innovative, high-tech industries. No doubt Congress will weigh the pros and cons in a matter fitting the dignity we associate with that august institution and, after mature deliberation, take decisive action.
Hat tip to Rachel Arnow-Richman, one of many academics consulted in the drafting of the MOVE Act.