What's cooking at the courthouse for the Julia Child Foundation?

We all need a break from employment law sometimes.  Today's hotsheet (a list of new case filings in Santa Barbara, San Luis Obispo and Ventura Counties) has an interesting new lawsuit that will make many court-watchers' salivate (sorry, enough food jokes).

The Julia Child Foundation for Gastronomy and the Culinary Arts v. BSH Home Appliances Corporation dba Thermador was filed on August 28, 2012, in Santa Barbara County Superior Court by Los Angeles attorney Charles Harder of  Wolf Rifkin Shapiro Schulman & Rabkin, LLP.  

The lawsuit, for misappropriation of right of publicity, alleges that Thermador used Julia Child's name, photograph, likeness and other publicity rights in magazine and website advertisements, newsletters, and commercial marketing materials to promote and sell Thermador products without permission. The plaintiff is asking for revenues and profits received, the imposition of a constructive trust, an injunction preventing defendant from using Ms. Child's publicity rights, general and punitive damages.

This dispute has been brewing for a while, and the Los Angeles Times has a great story about it here.  According to the LA Times, "[t]he campaign rolled out this year by Thermador, a 96-year-old brand based in Irvine, ranged from a Facebook 'like' of its products by 'Julia Child, chef' to glossy magazine ads that showed photos of Child and two of the brand’s ovens with the caption, 'An American Icon and Her American Icons.'"

Julia Child, who would have celebrated her 100th birthday this year, loved Santa Barbara and set up home here late in life, giving her stamp of approval to scores of local restaurants.  

Arbitration provisions in the employment context

Including an arbitration provision in an employment agreement is almost the norm these days - however, including an enforceable arbitration provision is less common.  For a great primer on arbitration in the employment context, click here.

The Courts consider arbitration agreements to weigh in the employer's favor, at the expense of the employee's right to trial.  Because of this, an arbitration agreement should not be an afterthought but a separately signed agreement.  Second, an arbitration agreement must clearly state what it is intended to cover and indicate that the signatories understand that they are giving up their rights to trial.

In Simmons v. Morgan Stanley Smith Barney, LLC. (2012) _________, the United States District Court, Southern District of California ruled that arbitration provisions in promissory notes and bonus agreements did not cover statutory employment discrimination claims.

In that case, the agreements to arbitrate were included in an executive's promissory notes and bonus agreements with his employer.  They did not state that the executive waived his right to a jury trial on his statutory claims for employment discrimination or otherwise show that the executive had knowingly foregone his statutory remedies for such claims.  Because of this, the Court ruled that the agreements to arbitrate did  not apply to the claims for employment discrimination

The Court did find that the arbitration agreement covered the executive's remaining claims for wrongful termination in violation of public policy, fraud, and breach of contract, and his request for a temporary restraining order and preliminary and permanent injunction.

Moral of the story? A well-drafted arbitration provision can save you time and money, and a poorly-drafted provision could cause you big problems.

Mortgage underwriters ruled non-exempt, qualify for overtime and FLSA rules

In a class action lawsuit out of Washington state, the District Court has ruled that residential mortgage underwriters are not exempt from the requirements of the Federal Fair Labor Standards Act (FLSA) and Washington's version of the same law, the Washington Minimum Wage Act.

The case, Bollinger v. Residential Capital, LLC; Gmac Mortgage, LLC and Ally Financial, Inc., (2012) C10-01123-RSM, 2012 WL 1945033, is important for a number of reasons. 

Good Faith Does Not Protect Employers Who Make Mistakes

First, the employers in this case went the extra mile in trying to comply with the law. In 2006, they hired  law firm Morgan, Lewis & Bockius to audit their decision to classify Plaintiffs as exempt administrative workers. Morgan Lewis ultimately advised Defendants that the decision was proper.

In 2008, Morgan Lewis reviewed Whalen v. J.P. Morgan Chase & Co., 569 F.Supp.2d 327 (W.D.N.Y.2008), which held that mortgage underwriters fell under the FLSA's administrative exemption.  Morgan Lewis reviewed Whalen and concluded that it supported the employer's decision to classify Plaintiffs as exempt. The law firm also reviewed a 2006 opinion letter on loan officers, published guidance on financial services industry employees and other legal authority.  

In this case, despite the law firm's advice that the mortgage underwriters were covered by the administrative exemption, the employers were clearly concerned about the decision to classify their underwriters as exempt employees. Internal emails from May 2009 showed that the issue had been “a source of debate for some time.” The employers were particularly concerned because they knew that most of their competitors were paying their underwriters overtime.

The employers next hired another attorney, Maxine Goodman, to perform a new audit of the exemption decision. Like Morgan Lewis, Goodman concluded that the 2006 opinion letter on loan officers, published guidance on financial services industry employees, and Whalen supported Defendants' exemption decision. 

In this case, it seems like the employers were ahead of the legal curve - in November 2009, the Second Circuit issued Davis v. J.P. Morgan & Chase Co., 587 F.3d 529 (2d Cir.2009), which reversed Whalen and held that underwriters did not qualify for the FLSA's administrative exemption. 

Attorney Maxine Goodman reviewed the Davis decision and concluded that underwriter duties described in that case were analogous to Plaintiffs' duties. In January 2010, she recommended that the employers reclassify their mortgage underwriters as nonexempt. They did so about a month later.  

Think the employers were acting in good faith when they hired all those lawyers?  The court wasn't ready to say so.  Under the law, there is a very limited good faith defense available under § 260 of the Portal–to–Portal Act. Under § 260, “if the employer shows to the satisfaction of the court that the act or omission giving rise to [an overtime pay action] was in good faith and that he had reasonable grounds for believing that his act or omission was not a violation of the [FLSA], the court may, in its sound discretion, award no liquidated damages or award any amount thereof not to exceed the amount specified in [§ 216(b) ].” 29 U.S.C. § 260. 

What is the administrative exemption?  

Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees. Section 13(a)(1) and Section 13(a)(17) also exempt certain computer employees. To qualify for exemption, employees must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. 

Job titles do not determine exempt status. In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the Department of Labor’s regulations.

As of August 23, 2012 (remember, the law changes every day), to qualify for the administrative employee exemption, all of the following tests must be met:

• The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

• The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and

• The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Here, the mortgage underwriters were working in excess of 40 hours a week, and were expected to review a certain number of applications each day.  Incentive bonuses were based on the total value of reviewed loans, and evaluations included the number of errors made in applying the mortgage company's guidelines.

In short, the underwriter's duties were "functional as opposed to conceptual,"  as one employer witness said.  After mortgage applications went through an automated review system, the employees reviewed the application for compliance with guidelines the automated review system could not process and made the final decision about whether to approve the application.  They were able to recommend approval of loans that did not meet guidelines, but in those cases, the final approval went to another department.  The underwriters had limited freedom to calculate income and assets, but the calculations had to be in line with the employers' own criteria.

The law changes every day, and this legal analysis is for information purposes only.  Nothing herein is intended to create an attorney client relationship, nor is this intended as an advertisement for legal services.  You should always consult a licensed attorney for legal advice.  

What You Should Know About Trademarks

Summer is a great time to catch up on the training and education that you need to run your business (think of it as summer school for adults).  This program is a must-attend for those using trademarks in their business, and best of all, it's FREE!

What: The MIT Enterprise Forum of the Central Coast and the United States Patent and Trademark Office's Trademark Educational Outreach Program are pleased to announce a free event to be held on August 15, 2012.

When: Wednesday 8/15/2012 - 5:30 pm - 7:30 pm

Where: Cabrillo Pavilion Arts Center, 1118 E Cabrillo Blvd, Santa Barbara, CA 93103

Cost:  Free

About the Speaker
Craig Morris has been with the USPTO since 1983, currently as the Managing Attorney for Trademark Outreach in the Office of the Commissioner for Trademarks. For fourteen years prior, he was the Managing Attorney for the Trademark Electronic Application System, focusing on making the Trademark Operation a total e-government.

Click here to reserve your place.