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Irvine Business & Commercial Law Blog

DOL Issues First Opinion Letters in Nearly a Decade - FLSA2018-19

For the first time in nearly a decade, the Wage and Hour Division of the U.S. Department of Labor issued several Opinion Letters, including one addressing the compensability of fifteen minute rest breaks required every hour due to a non-exempt employee's serious health condition under the Family and Medical Leave Act ("FMLA").

Fraudulent Transfer Act is a Statute of Repose in California

In PGA West Residential Assoc., Inc. v. Hulven International, Inc., 14 Cal.App.5th 156 (2017), the California Court of Appeal reversed the Riverside County Superior Court and held that the California Uniform Fraudulent Transfer Act is a statute of repose (meaning that the time to file runs from the occurrence of some event other than the injury which gave rise to the claim). As such, if no action is brought within 7 years of the transfer, the transferee/transfer is entirely insulated. The Court held that to be true even in Hulven where the transfer at issue was the recording of a deed of trust in favor of the Debtor's corporation that had not been formed and did not exist at the time.

An Employee's Prior Salary Cannot Justify a Wage Differential Between Male and Female Employees

In Rizo v. Yovino, 2018 U.S. App. LEXIS 8882 (April 9, 2018), the en banc court held that "prior salary alone or in combination with other factors cannot justify a wage differential. To hold otherwise - to allow employers to capitalize on the persistence of the wage gap and perpetuate that gap ad infinitum - would be contrary to the text and history of the Equal Pay Act and would vitiate the very purpose for which the Act stands."

Equitable Tolling in Bankruptcy for Debtor's Bad Behavior

The Ninth Circuit Court of Appeals in In re Charlene Milby, Nos. 16-60022 and 16-60023, reversed the bankruptcy court and affirmed the BAP's decision, but on other grounds, to hold that the two year statute of limitations for avoidance actions could be equitably tolled based on the debtor's bad behavior, even when the trustee learned of the avoidance action before the running of the two year statute of limitations. In Milby, the debtor fraudulently conveyed assets before her bankruptcy filing and did not disclose the transfers in her bankruptcy. Just a few days before the expiration of the SOL, some of the debtor's creditors learned of the transfers and advised the debtor's trustee. The trustee did not file an action to avoid the transfers but the creditors did so almost a year later, after the trustee agreed to the creditors being appointed to challenge the transfers.

Supreme Court Determines Scope of Section 546(e) Safe Harbor Provisions

On February 27, 2018, in an opinion by Justice Sotomayor, the Supreme Court of the United States unanimously decided Merit Management Group, LP v. FTI Consulting, Inc. No. 16-784, holding that the only relevant transfer for purposes of the 11 U.S.C. § 546(e) securities safe harbor provision is the transfer that the bankruptcy trustee seeks to avoid, and not the component parts of the transfer.

Supreme Court Upholds Clear Error Review for Bankruptcy Court Determination of Insider Status

In U.S. Bank Nat'l Ass'n v. Village at Lakeridge, LLC the Supreme Court considered whether the Ninth Circuit's application of clear error review to a bankruptcy court's determination under its non-statutory insider test was erroneous. In the Ninth Circuit, an individual or entity is a non-statutory insider whose dealings with a bankruptcy debtor are subject to more scrutiny where (1) the closeness of its relationship with the debtor is comparable to the enumerated insider classifications in the Bankruptcy Code, and (2) the relevant transaction is negotiated at less than arm's length. In re Village at Lakeridge, LLC, 814 F.3d 993, 1001 (2016). Certiorari was granted only on the issue of whether the bankruptcy court's determination that a transaction was or was not at arm's length is a mixed question of law and fact for which de novo or clear error review was required.

Uncertainty in Ninth Circuit BAP's Application of the Mootness Doctrine to Sales of Property to Good Faith Purchasers (11 U.S.C. § 363(m))

In Perez v. Bui, No. CC-17-1102-FLKu, slip op. (B.A.P. 9th Cir. Feb. 8, 2018), the Ninth Circuit Bankruptcy Appellate Panel ("BAP") affirmed summary judgment in favor of the Chapter 7 Trustee for actual and constructive fraudulent transfer of real property. Before finding that the case was one of the unusual circumstances in which it is proper for a court to grant summary judgment on an issue of intent, the BAP took a narrower look at precedent with respect to constitutional and equitable mootness in order to reach the merits of the appeal.

Lawson v. ZB, N.A. - The Dispute Over Arbitrability of PAGA Claims Continues

In Lawson v. ZB, N.A., 18 Cal. App. 5th 705 (2017), Plaintiff asserted various wage and hour claims and a California Private Attorneys General Act ("PAGA") claim against Defendant employer seeking penalties and underpaid wages pursuant to Cal. Labor Code § 558. Defendant moved to compel arbitration of Plaintiff's individual claims and her Cal. Labor Code § 558 claim for underpaid wages pursuant to an arbitration agreement whereby Plaintiff waived her right to bring a class or representative action. The trial court granted Defendant's motion pursuant to Esparza v. KS Industries, L.P., 13 Cal. App. 5th 1228 (2017). Plaintiff filed a petition for writ of mandate challenging the trial court's order. 

9th Circuit Holds Minimum Wage Compliance May Be Based on Workweek as a Whole

In Douglas v. Xerox Bus. Servs., LLC, 2017 U.S. App. LEXIS 22967 (9th Cir. Nov. 15, 2017),the Ninth Circuit Court of Appeal considered whether compliance with the Fair Labor Standards Act's ("FLSA") minimum-wage provision should be determined based on the workweek as a whole or each individual hour within the workweek. Under the compensation plan at issue, employees were paid flat and variable rates for certain defined tasks, while other tasks had no specific designated rate. At the end of the workweek, the employer added the amounts earned for the defined tasks and divided the total by the number of hours worked that week. If the resulting hourly wage fell below minimum wage, the employer provided subsidy pay to ensure that, in the context of the workweek as a whole, the employee received the appropriate minimum wage. The employees argued that this payment plan did not comply with the FLSA because there were individual hours within the workweek for which they did not receive the minimum wage. The Court rejected this argument, finding that the relevant unit for determining compliance with the FLSA is the workweek as a whole and, therefore, the employer's practice was permissible.

Employer Alert: SB 396 Expands Harassment Training Requirements

The Fair Employment and Housing Act ("FEHA") currently requires that employers with 50 or more employees provide sexual harassment training to all supervisory employees. This training must first take place within six months of promotion/hire to the supervisory position and must thereafter occur at least once every two years. Effective January 1, 2018, FEHA requires that such training also include training on harassment based on gender identity, gender expression, and sexual orientation.

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