Wage Law

When I was 17, it was a very good year. Except for those two days when I worked at Taco Bell.

You see, I was out of work, starting my second semester of college, and I needed money for registration, books, gas and insurance, and I had applications on file with about 30 restaurants trying to get my foot in the door as a busboy, so that I could wait tables as soon as I turned 18 -- the minimum age for serving alcohol at a dinner house.

I got that job a few weeks later, but in the interim, I decided to just take whatever was out there. The nearest mediocre, but easily attainable, job was at a Taco Bell that was two blocks from my house.

My first night, it was a three person crew -- the general manager, an assistant manager and me. Normally, I was told, there would be two closers -- me and either the general manager or an assistant manager. That meant we would be finishing up early my first night, because I was certainly speeding things up. There was little time lost training me. My instructions were along the lines of "Mike, go turn all the chairs upside down on the tables and mop the floor. Mike, go pick up all the trash in the parking lot. Mike, go carry all these containers back to the refrigerator. Mike, go sweep the floor." I was saving the crew at least half a minute of time for every minute they had me there.

At around 12:40 a.m., I heard the assistant manager ask the general manager what time it was. When she heard the answer, she replied, excitedly, "oh, we'll be out of here early tonight."

I sighed. 12:40 was early? What constituted late?

About twenty minutes later, it was time to clock out. Oddly, the timecards were in a spot from which you couldn't see the clock. As I grabbed my timecard and the attached-by-a-string pen, I was still out of the clock's sight line, so I asked what time it was. The general manager rushed over, as if in a panic. "Oh," he said, "just put down '6-C.' Whenever you work the closing shift, you put down '6-C'."

What? "But, how will they know how many hours to pay me?" I asked.

"Well," he replied, "when you close, they pay you until midnight. That gives you an incentive to work harder and get done sooner. If you're done before midnight, you still get paid the full six hours."

"Does that ever happen? Do people get out of here before midnight? Ever?"

"Um, I don't know. I never have."

I put down "6-C."

What was I to do? I'd been cheated out of $3.35. Who was going to care? I would get cheated out of $3.35 two or three times per week as long as I worked there. But even after being cheated 100 times, no lawyer was going to take my case. The newspaper wasn't going to pick up the story. Nobody was going to do anything for me. And I was certain that if I complained, I'd get fired. And I couldn't imagine a more embarrassing fate than to go home and tell my parents that I couldn't hold down a job at Taco Bell.

So I did the only honorable thing. As an at-will employee, I decided to work just enough hours to pay for the brown polyester pants they had made me buy, and then I was going to quit, on the spot. After my second shift (the early, 4-9 pm shift), I had earned, after taxes, enough to cover the cost of the pants, so after I confirmed the math that night, I decided that when I reported for my third shift, I would just turn in my uniform shirt at the start of the shift and go back home. When I did, they asked me why. I told them I didn't like to work for free, especially after midnight. The manager gave me a disapproving look like I was a lazy bum destined to someday become a beggar or a welfare cheat, but I didn't care. For $3.35 per hour, I didn't have enough cushion in my pay rate to justify donating time to the franchisee.

Fast forward about a dozen years. I'm now an attorney, several years out of law school and trained by a large and prestigious law firm in the dark art of employment defense work. I open the Daily Journal and read about a class action that has been filed on behalf of a large group of Taco Bell employees for, among other things, being forced to perform off-the-clock work.

And I remember having to put down "6-C." And I think about all those poor Taco Bell employees who aren't in college, destined to get an advanced degree, who aren't on the verge of landing a new job at a fancy dinner house that pays cash tips every night, the ones who have resigned themselves to getting cheated out of an hour of pay two or three times a week, because they don't think there is anything they can do about it. And I find my calling as a lawyer.

I'm now busy changing the world, one workplace at a time. It might take a while.

Irvine auto-repair chain Caliber Collision Centers is being sued for alleged minimum wage and overtime violations. According to the complaint, filed in Los Angeles County Superior Court on March 23, Caliber also failed to provide breaks or meal periods and falsified the number of hours worked. The suit also alleges that Caliber did not pay back wages or accrued vacation time owed to workers who left the company.

In general, auto repair shops are likely candidates for such actions, because there are a number of illegal wage, hour and working condition violations that are common within the industry. Every time we consult with an employee from a car dealership or repair shop, we anticipate that the case will be a strong one, and we are rarely surprised.

In this case, according to the Orange County Register, the suit seeks class action status on behalf of Caliber workers who worked for the chain as hourly employees on shifts of more than 3½ hours, from 1992 to 2004. Class counsel Anthony N. Luti says he believes the class will include a total of about 600 workers from the 38 stores in the chain.

When we read the article, we wondered how Mr. Luti and his clients planned to reach back to 1992. We assumed there had to be some misunderstanding, because normally, the longest limitations period available is four years under the unfair competition law. On a complaint filed in March 2005, that would leave the wage claims accruing before March 2001 uncompensable. so we contacted Mr. Luti, and he confirmed what we suspected.

The 1992 reference was a misquote. "The statute of limitations is four years ... 1992 reflects the year one of the representative plaintiffs began working for Caliber. It does not represent the length of the class period," he said.

The statute of limitations for unpaid wages under the Labor Code is three years (Code Civ. Proc. § 338 -- liability on statutory obligation), but the applicable limitations period for the claims in this class action extends to four years, because each wage violation also constitutes a violation of the California Unfair Competition Law, Business & Professions Code §§ 17200 et seq.

"As the Supreme Court unequivocally stated in Cortez v. Purolator Air Filtration Product Co. (2000) 23 Cal.4th 163, 178: “Section 17208 is clear. It provides that ‘[a]ny action to enforce any cause of action under this chapter shall be commenced within four years after the cause of action accrued.’ (italics added.) We recognize that any business act or practice that violates the Labor Code through failure to pay wages is, by definition (§17200), an unfair business practice.” Id. (emphasis added). As a consequence, the Labor Code violations in this action are subject to the four year statute of limitations in Section 17208 of the UCL. Accordingly, the class period for Plaintiff’s claims in this class action starts four years prior to the filing of the Complaint."

There is no trial date or certification schedule yet in place. Curiously, Caliber has filed a demurrer to the complaint based upon Labor Code § 2699’s administrative filing requirements, even though the complaint does not seek penalties under section 2699. We would be surprised if the court sustained the demurrer.

We recently had a similar case in which the defendant took this same tactic. The court acknowledged that there was no duty to exhaust administrative remedies for penalties which the plaintiffs do not seek, since section 2699 explicitly states that it does not preclude any other rights employees have under any state or federal statute. However, we told the judge we would go ahead and exhaust the remedies anyhow, and we sent our notice in and later amended the case to include the 2699 penalties. The state did nothing in response to the notice; we amended the complaint; and now the defendant's potential exposure has increased by about 2,000%. As they say, "be careful what you wish for...."

Steven Bromberg, a well respected Orange County employment attorney with the law firm of Bromberg and Yaeger, was appointed to the Orange County Superior Court last week. In addition to his employment practice in Newport Beach, Mr. Bromberg worked as a mediator and arbitrator for Judicate West, where he had a reputation as a fair and effective neutral. He was also in his second term as the mayor of Newport Beach. The appointment will require him to resign his post as mayor prior to being sworn in as a Superior Court judge, which should happen sometime in June or July.

Today, the 4th District Court of Appeal lifted the stay in Orco Block to allow the parties to seek approval of a settlement in the trial court. The tentative ruling will likely never be published. The order provides:

Pursuant to the parties' joint request filed 5/23/0, this court's 11/19/04 stay of the Superior Court action is lifted for the purpose of obtaining the Superior Court's approval of the class action settlement; writ proceedings in this court are stayed pending further order of the court; parties are directed to serve and file, by 7/8/05, a letter informing this court of the status of the Superior Court's approval of settlement; if Superior Court denies final approval of settlement, parties are directed to inform this court immediately, at which time the stay of this action will be lifted and the matter reset for oral argument; parties are notified that if matter is not resolved in Superior Court by 11/23/05, this court will lift the appellate stay, reimpose the stay on the Superior Court action, and set the matter for oral argument. All amici requests to proceed with oral argument were denied due to a lack of standing.

The best authority on the subject, therefore, remains Judge Selna's decision in the Tomlinson case that meal and rest period pay is a wage, rather than a penalty.

Morgan Spurlock has involved himself in a 30 day experiment for one of his exposé documentaries. The show will premiere on the FX network June 15. In "30 Days," people must, for one month, adopt a lifestyle they've never experienced before. Themes will vary. One episode will follow a Christian who lives as a Muslim for 30 days. Another will observe a conservative straight man who moves in with a gay roommate.

But the pilot episode, if you can call it that, will feature Spurlock attempting to live on minimum wage in Columbus, Ohio, where he and his fiancé take minimum-wage jobs and try to live on $5.15 an hour.

We're thrilled. The more people understand how hard life is when you only make the minimum, the more support our cases will find among juries who pass judgment on the employers we sue, who not only suppress their employees' wages, but then cheat them out of their nickels and dimes to get them back to practically nothing in some cases, whether by denying them overtime, assigning off the clock work, making them skip breaks (sometimes making them clock out while they work through that break) or making them pay for uniforms or equipment. These are the people we prefer to represent, because we sleep very well at night knowing that we have done something to protect the people who can't afford, or don't know how, to protect themselves.

Not that we aren't willing to take the cases of high net worth individuals rich people, from time to time....

United States District Judge Gary Taylor (Central District, California) is retiring from the bench at the end of June. I best remember Judge Taylor for his pro-employer decision in U.S. E.E.O.C. v. Newport Mesa Unif. Sch. Dist. (C.D.Cal.1995) 893 F.Supp. 927, which contained a number of quotes I often used when I primarily represented employers, including this gem: "In a for-profit enterprise, the essence of employment decisions is whether an employee's salary is justified by that employee's productivity." That quote was later cited in Marks v. Loral, a decision that has sent many a prospective client walking out my door without a lawyer.

The general public, and my fellow USC alumni might better recall him as the judge whom former Rams and UCLA cornerback Darryl Henley tried to have killed in 1997. Other significant cases overseen by Judge Taylor included the Orange County bankruptcy case and, more recently, a challenge to the Defense of Marriage Act and California's ban on gay marriages.

On June 21, 2005, at Pacific Club in Newport Beach, The Orange County Bar Association and the Federal Bar Association, OC Chapter are co-sponsoring a reception in his honor. I assume that Judge Taylor will be active in the lucrative ADR industry, but I haven't heard whether he's joined any of the major associations.

The parties in the Orco Block notified the Court of Appeal yesterday that the case has settled. This should end the appeal, in which a tentative ruling called the remedies under Labor Code 226.7 "penalties," rather than "wages." The court will issue an order on May 24, apparently. If the settlement goes through, and results in the tentative decision remaining unpublished, the count will remain:

1 published US District Court decision calling them wages (Tomlinson v. Indymac Bank);
1 unpublished California decision on Westlaw calling them wages (Savaglio v. Wal-Mart);
1 unrendered Court of Appeal decision calling them penalties (Orco Block v. Superior Court).

Our meal and rest period class action against Main Street and Main, Inc., the largest franchisee of T.G.I.Friday's restaurants in California, was certified this afternoon by the Orange County Superior Court. Judge Jonathan Cannon certified the two subclasses for meal period violations and rest period violations. However, because class representative April Hernandez testified that she couldn't recall her purchases of uniforms and equipment -- towels and aprons, primarily -- the court conditioned its certification of the uniform and equipment subclasses upon the amendment of the complaint to include a new representative for those subclasses.

This was one of the few rest period class actions to proceed to a contested certification hearing. Several have been denied. We're trying to confirm how many others have been certified.

The court's ruling was as follows:

ANALYSIS:

"To obtain certification, a party must establish the existence of both an ascertainable class and a well defined community of interest among class members. [ citation.] the community of interest requirement involves three factors: "(1) predominant questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class." Linder v Thrify Oil Co. (2000) 23 CA4th 429. Here, Plaintiff has met the above requirements.

Each of the defined subclasses demonstrate a predominant question of law or fact necessary for certification. Plaintiff has presented substantial evidence the employees where denied rest and meal breaks. Defendant presented evidence some employees waived their right to a meal break when they accepted employment. The effectiveness of that waiver cannot be determined at this point.

Defendant has pointed to circumstantial evidence of employees enjoying meal and rest breaks. Defendant has attached photographs of employee break areas, provided evidence of its 50% off on food policy for employees and some testimony of employees that they did indeed take a break to eat or saw other employees taking a break to eat. However, Defendant has not produced any evidence to contradict the 200+ declarations submitted by Plaintiff, that employees were not allowed an uninterrupted, 30 minute meal break for shifts more than five (5) hours. It may be true some of the employees used the meal discount and ate in the employee break areas, but there is nothing showing the employees did that during their shift or that the meal break was for 30 uninterrupted minutes.

Because Plaintiff has provided substantial evidence of meal and rest break violations, she has claims typical of those subclasses and she can adequately represent the class on those issues, the class will be certified as to subclasses "a" through "d".

Certification is a little more problematic with regard to the uniform and equipment subclasses. Plaintiff has provided the required substantial evidence of violations of the Labor Code with respect to uniform and equipment requirements, however it does not appear Plaintiff's claims are typical of the claims of the members of those subclasses. Plaintiff testified she never purchased a uniform or equipment from Defendant. Therefore, she is not a suitable class representative with regard to those claims. Plaintiff will have to find another class member to represent the uniform issues.

RULING:

The Motion for Certification is granted as to subclasses " a" though "d". Certification is granted as to subclasses "e" and "f" on the condition Plaintiff finds a suitable class representative within the next fifteen (15) days.

Countrywide Financial Corp. has agreed to pay $30 million to settle a class action lawsuit alleging that its misclassified its account executives as exempt employees and overworked them with no overtime pay. Approximately 400 employees at the firm's Southern California call centers will share in the settlement. The terms were given preliminary approval last month by Los Angeles County Superior Court Judge Victor Person. A hearing on final approval is set for late June.

The employees claimed that Countrywide denied them overtime pay by giving them management titles but mostly nonmanagerial job duties. Countrywide alleges that the employees were exempt, and that the lawsuit was meritless, and it asserts that the $30 million settlement was given solely to avoid the risks of litigation.

"While the company continues to believe that its original classification of account executives was lawful and that it would have been upheld at trial, it decided to settle in order to avoid the expense and uncertainty of litigation."

We had never actually seen or heard of a company paying out $30 million to settle a meritless claim, so we looked more closely at the case. After reviewing the facts and the publicly available evidence, we still think we've never seen or heard of a company paying out $30 million to settle a meritless claim.

Mexican president Vicente Fox has stirred up a hornet's nest. Fox initially refused to apologize yesterday for saying Mexicans in the U.S. do the work that "even blacks" won't do. The exact quote, if the Spanish translators aren't leading me astray, was this:

"There is no doubt that Mexicans, filled with dignity, willingness and ability to work, are doing jobs that not even blacks want to do there in the United States."

Fox's spokeshole, Ruben Aguilar, said the remark has been misinterpreted, and that Fox was only defending Mexican migrants from new attacks as certain factions in the U.S. attempt to crack down on illegal immigrants. After Jesse Jackson and Al Sharpton raised a fuss and demanded an apology, Fox reconsidered and apologized Monday night.

I enjoyed the controversy, and I was glad Fox said it, not because it was true, but precisely because it was not true. And it was a lie that needs to be exposed. And nothing gets exposure like a racially insensitive remark.

While there are some jobs -- particularly agricultural jobs -- that Americans do not like to do for the wages offered, it is a myth that illegal aliens are taking only those jobs that Americans (black, white or otherwise) consider to be "beneath them." Most of the jobs that they take are the jobs in which employers want to exploit a labor pool that does not understand its rights, or is afraid to enforce those rights.

One of the most common fact patterns we encounter is the illegal alien getting paid a fraction of the prevailing wage on public works construction projects. How much are those jobs supposed to pay? If you guessed $10 per hour, you would be very low. But if you were a hispanic man without a green card or a social security number, and you guessed $10, you would be hired immediately.

The "prevailing wage" for most low end construction jobs pays in the $32-$35 range. With overtime, prevailing wage earners can easily make $75,000 per year. That's a better wage than most opening salaries for college graduates. Are these jobs that "even blacks won't do?" Sure, if those happen to be blacks with degrees in law, medicine, accounting or engineering. However, lesser educated and unemployed Americans of any color might consider swinging a hammer for $33 per hour.

Of course, those American workers might still complain if their employer made them kick back two-thirds of their wages in cash; or made them work off the clock; or committed others among the myriad of wage and hour violations that creative employers try. Undocumented workers who are paranoid about being deported, on the other hand, might be willing to sign over a $33/hour paycheck in exchange for $400 in cash, even if they have to work 60 hours a week to earn it.

It isn't about the race of the worker. It's about the willingness to be exploited, illegally, by an employer. And no, American blacks are not thrilled to be criminally exploited by corrupt employers. Nor are Asian Americans. Nor are white Americans. But illegal aliens are willing to be exploited, because many of them come from places where the best opportunities are not as good as the opportunity to be exploited by a lawbreaking California construction firm.

If it takes a racist comment by Mexico's president to draw attention to that fact, so be it.

One of the hottest topics being discussed by California wage and hour attorneys -- especially in class action mediations -- is whether the premium pay under Labor Code § 226.7 is a wage or a penalty. If it is a penalty, then the one-year statute of limitations under Code of Civil Procedure § 340(a) applies. If it is a wage, then Code of Civil Procedure § 338(a) applies a three-year statute, and an unfair competition claim under Business & Professions Code § 17200 could reach back four years. Furthermore, if it is a wage, then the prevailing party in an action to recover such pay could recover attorney's fees, and employees could be entitled to additional "waiting time" penalties if the extra hour of pay was not provided.

The DLSE has long considered the pay a wage, but no appellate court has weighed in on the issue in a published opinion. That is likely to change next month. The Fourth District Court of Appeal, Division Two, has issued a tentative ruling and set oral arguments in Orco Block Co., Inc. v. DeGonia et al., case no. E036955, a writ proceeding. The tentative opinion deems such pay a penalty. The matter will be heard on June 7, 2005, even though the petitioner/employer had written a letter to the court asking that the case not be expedited because the parties were in settlement discussions.

Assuming that the opinion is published soon thereafter, the Fourth District will have acted much more swiftly than the First District, which has granted several briefing extensions in the case of Murphy v. Kenneth Cole Productions, Inc., case no. A108346, the other pending case that addresses the same issue. Murphy is a individual misclassification case in which the San Francisco Superior Court, in a bench trial, made legal findings that 226.7 compensation constituted a wage. The case was appealed in July 2004, and the respondent's brief is due June 24, 2005. By then, the Fourth District's opinion may well be published and subject to a petition for review.

U.S. District Court Judge James V. Selna has issued a decision, recently published at 359 F.Supp.2d 891 (Tomlinson v. Indymac Bank, F.S.B., 2005 WL 469291), which provides the first real guidance as to whether Labor Code § 226.7 pay is a wage or a penalty. Judge Selna found such pay to be a wage. Under Section 226.7, the employee is paid an amount (equal to one hour of regular pay) for labor performed during his meal break or rest period. For these reasons, the court found that an employee earns the additional hour of pay when he or she is not given a meal break or rest period. This "is consistent with the Labor Code's definition of 'wages,' which is 'all amounts for labor performed by employees ....' [citing Cal. Lab. Code § 200(a)]"

The court disagreed with the recent reasoning of the DLSE in its efforts to roll back meal and rest period rights, and disregarded the agency's reasoning in accordance with Bonnell v. Medical Board of California (2003) 31 Cal.4th 1255, 1264 (in California, "agency interpretations are not binding or ... authoritative" and "[c]ourts must, in short, independently judge the text of a statute.")

The implications of the ruling were many. Among other things, as a wage, an award under Section 226.7 is restitutionary and thus may be recovered under the California unfair competition law (UCL). Perhaps most importantly, because an award under Section 226.7 is not a penalty, the four-year statute of limitations governing UCL claims, rather than the one-year statute in California Code of Civil Procedure § 340(a), applied.

Judge Selna's decision will not be the last word on the subject. Absent contrary precedent under state law, California courts often find federal decisions, even District Court opinions persuasive, but they are not binding upon a Superior Court or a California Appellate Court. There are at least two such cases we are following in the appeals courts, and a decision is expected in one of those cases next month.

As much as we enjoy writing about wage and hour issues in this forum, our time in the past eight weeks has been dominated by the need to meet our fiduciary duties to clients. Since our last substantive post, our firm has wrapped up three class actions, tried (and won) two cases and taken over most of the practice of a sole practitioner who is no longer with us, in addition to the "usual" press of business. However, we've been jotting things down as the spare time finds us, and we have a lot to talk about. We'll start tomorrow with a note on recent developments in the biggest issue right now for California wage and hour practitioners -- the statute of limitations for meal and rest period pay.