Wage Law

Arnold Schwarzeneggar had a busy week in California, signing and vetoing dozens of measures passed by the California legislature.

Being a man of the people, who cares about the people first and foremost, he was given the chance to allow California to raise its minimum wage, which is currently the lowest among western states. But he vetoed AB 48, a bipartisan bill to increase the minimum wage to slightly less than 15% above its 2002 level over the next two years, with future increases tied to increases in the consumer price index.

On the other hand, in spite of his claim to be a tort reformer, he signed a bill that makes it easier for celebrities to sue aggressive paparazzi for damages. Under AB 381, anyone who commits an assault in order to photograph or record a person can be sued and forced to forfeit all profit he or she makes from the incident.

Perhaps when he calls himself a man of the people, he means only the people who really count.

This afternoon, Judge Jonathan Cannon ruled on Main Street Restaurant Group, Inc.'s motion to strike portions of the third amended complaint in the TGI Friday's uniform, meal and rest period class action. The motion was primarily focused upon allegations that reach back more than one year from the filing date with respect to meal and rest period pay. The primary ground asserted in support of the motion was that an hour of meal and rest period pay is a penalty, such that claims more than a year old are invalid. The court rejected the defense position and ruled as follows:

ANALYSIS: Most of Defendant’s Motion rests on the proposition the remedies of Labor Code §226.7 are penalties, not wages. As discussed below, Defendant’s proposition is incorrect. This Court is not bound by the DLSE’s interpretation the provisions § 226.7 constitute a penalty rather than a wage. There is very little case law addressing the question as to whether the provisions of § 226.7 should be considered a wage or a penalty.

The Court in Tomlinson v. Indymac Bank F.S.B. (CD Cal. 2005) F.Supp.2d 8991 applied and interpreted California law in considering the issue. The Tomlinson Court stated: “The Court agrees with Plaintiffs that payments under Section 226.7 are restitutionary because they are akin to payment of overtime wages to an employee: both are “earned wages” and thus recoverable under the UCL. See Cortez, 23 Cal.4th at 178, 96 Cal.Rptr.2d 518, 999 P.2d 706. Just as an understaffed company may make the conscious decision to pay its employees time and a half to work overtime, the same understaffed company also can decide to have its employees forego their meal and rest breaks if it compensates them at a higher rate. In both instances, the employee earns the higher wage by working additional time.”

The issues regarding subclass “A” should have been raised at the hearing on certification. The statute of limitations regarding the 3rd cause of action may be addressed by way of summary adjudication.

RULING: The Motion to Strike is denied.

The ruling assures that the class, which was certified earlier this year, will be able to conduct all of the discovery needed to present a full case on the merits of all issues at trial.

The domain name www.laborcommissioner.com/ is taken, and it belongs to the Nevada Labor Commissioner's office. We often refer clients with very small cases to the labor commissioner's office, especially when their claims are worth less than the cost of two billable hours and we can't combine their claims with any other workers' claims. That sure would be an easy URL to remember. So there is at least that one advantage that Nevada wage and hour lawyers have over their California colleagues.

A class of 13,000 employees won a $22 million settlement against grocery chain Smart & Final, it was announced on Friday. The class-action suit on behalf of 13,000 current and former hourly employees alleged that the retailer did not properly calculate pay for overtime or for rest and meal breaks for six years. "This settlement gives back to the employees the money they earned," said Larry Willis, lead counsel for the plaintiffs and a principal at Callahan McCune & Willis in Tustin.

Luckily for Callahan, McCune & Willis's Smart & Final clients, the firm has been unsuccessful in its attempts to restrict class action rights in the TGI Friday's case, and in particular, its attempt to restrict meal and rest period rights beyond one year. (Callahan McCune & Willis represents the employer in the TGI Friday's case.)

Miles Locker reportedly still intends to speak at the State Bar Labor & Employment Law Conference at the Disneyland Hotel next month. He is scheduled to speak from 10:30 a.m. noon. Donna Dell, the current Labor Commissioner, is also scheduled to speak at the program. There is no word yet on whether Dell will be suspended for engaging in public speech.

Wal-Mart CEO H. Lee Scott Jr. "Gosh, I don't think of us as being anti-union." And, gosh, he probably doesn't think of John Kerry as being anti-Bush, either. Perspective can be a strange thing sometimes.

Of course, as long as Wal-Mart keeps unions out of its employee break rooms (like they've managed to keep employee breaks out of their employee break rooms), then unions are the world's biggest company's best friend. Unions keep Wal-Mart's competitors honest when it comes to employee compensation, and that gives Wal-Mart yet another competitive advantage. Maybe that's what he meant.

Not to pick on one company, but everywhere we turn, we are finding bad press on Wal-Mart, in particular, with its wage and hour practices. The evidence has been gathered, and this August 2004 report shows that Wal-Mart workers make so little, they are a drain on the economy and public assistance programs. To our knowledge, Wal-Mart has been unable to refute the report data, but merely contends that it doesn't have to pay any more than it can squeeze from the free market. But with all those full-time Wal-Mart workers on the public dole, perhaps the minimum wage is way too low. Or perhaps we need to have a two-tiered minimum wage, with fully grown adults earning much more than Wal-Mart currently pays.

Last week, fifteen employees in six countries filed a class-action lawsuit in Los Angeles against Wal-Mart Stores, Inc., claiming that the retailer disregards sweatshop conditions at its suppliers' toy and clothing factories in Bangladesh, Swaziland, Indonesia, China and Nicaragua. The plaintiffs allege that they were paid below minimum wage, forced to work unpaid overtime and beaten by their bosses.

One of the interesting twists is an unfair competition element in the lawsuit in which four California workers, including union employees of Ralph's and Safeway grocery stores who assert that Wal-Mart's entry into Southern California while using sweatshop labor and products forced their employers to reduce pay and benefits to remain competitive.Suddenly, California wage and hour law is big news in places like Calcutta, the U.K., and, of course, Bentonville, Arkansas.

The plaintiffs are represented by noted employee rights lawyer Dan Stormer. For further details, you can read the plaintiffs' press release or download a copy of the complaint.

The first major meal period trial in California got underway yesterday in Alameda County Superior Court. The plaintiffs gave their opening statements in Savaglio v. Wal-Mart Stores, Inc., a case involving about 116,000 former and current Wal-Mart Stores Inc. workers. The jury was told that Wal-Mart systematically and illegally denied workers lunch breaks. Savaglio was previously known as one of the more widely reported trial decisions characterizing meal break pay as a wage, rather than a penalty.

"Wal-Mart tried to make its profits and excuse its violations on the backs of the working poor," plaintiff's attorney Furth told the jury. "I will prove the reason they did this was for the God Almighty dollar," Furth added in his opening statement. Wal-Mart deferred its opening statement until after the plaintiffs' case is concluded.

Under California law, employees who work more than five hours must be given a 30-minute, unpaid lunch break. If the employee does not get the break, and does not voluntarily and without coercion or intimidation, waive the break, the employer is required to pay the employee an additional hour of pay. Breaks cannot be waived for shifts in excess of six hours.

The Wal-Mart lawsuit affects former and current employees in California from 2001 to 2005. Wal-Mart is asserting a statute of limitations, as well as claiming that most workers waived their breaks. uring discovery, Wal-Mart produced internal audits that reflected what they called "a chronic problem" with the meal breaks. A significant verdict against Wal-Mart could significantly affect settlements of the dozens of similar cases currently pending in California.

The case is entitled Andrea Savaglio v Wal-Mart Stores Inc., C-835687, Alameda County Superior Court, Oakland, California.

Arnold Schwarzenegger confirmed an open secret Friday, telling supporters that he's running for re-election next year — an early announcement designed to re-energize his sagging political momentum. We're now searching for an organization to support. If they call themselves anything remotely similar to "Republicans Against Schwarzenegger," they can count on our money and time.

On August 31, President Bush announced the recess appointment of Peter C. Schaumber to be a member of the National Labor Relations Board for the remainder of a five-year term expiring on August 27, 2010. The board now has three of its five seats filled. For a good discussion on the implications of this move, check out Law Labor Blog's President Bush Announces His Intention to Recess Appoint Peter C. Schaumber to the NLRB.

About two weeks ago, when gas prices suddenly jumped to more than three bucks per gallon, we found ourselves working a long shift that led us to order some delivery pizza. The delivery guy drove up in a rather large pickup truck, which, we guessed, didn't get great gas mileage. And it occurred to us that pizza delivery workers are probably hard hit by the increase in gas prices. At the standard IRS rate of 40.5 cents per mile, someone driving a gas hog that gets 8 mpg around town could actually have to pay more for gas than the 40.5 cents would cover. Wear and tear, depreciation, oil and other maintenance costs would be completely unreimbursed. In any event, whether they drove a Prius or a Hummer, any employees who received standard rate mileage allowances were effectively losing pay as a result of the gas price increase.

But there is some small relief on the way. The Internal Revenue Service and Treasury Department announced Friday an increase to the optional standard mileage rates for the final four months of 2005.

The rate will increase to 48.5 cents a mile for all business miles driven between September 1 and December 31, 2005. This is an increase of 8 cents over the rate applicable in the first eight months of 2005. “This is about fairness for taxpayers,” said IRS Commissioner Mark W. Everson. “People are entitled to deduct the real cost of operating a vehicle. We’ve responded to the recent gas price increases by making this special adjustment so taxpayers get the tax benefit they deserve.” In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2005. The IRS normally updates the mileage rates once a year in the fall for the next calendar year. “With many predicting a decline in gas prices over coming months, we will hold off on setting the 2006 rate until closer to January,” Everson said. Next year’s rate could be lower than 48.5 cents. While gasoline is a major factor in the mileage figure, other items enter into the calculation of mileage rates, such as the price of new vehicles and insurance.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of the extra burden of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. Under DLSE guidelines, the same rate may be used by California employers to satisfy their obligations under Labor Code § 2802 to repay all employment-related employee expenses.

If you read us regularly, you've noticed that we posted haphazardly for the past couple of weeks. We actually strive to write a post a day, but, being lawyers, we hate to put something over (or under) our names until we've proofed it abundantly. This weekend, we finished a lot of proofing, and published all of the recent posts we'd been working on, dated according to the date of origin, not the date of completion. We make no representations, guarantees or warranties concerning dates of publication, and all dates are stated for reference only. And, for whatever it's worth, we've already written tomorrow's post about the increase in mileage allowance under IRS regulations.

For those of you who are accusing the president of doing nothing in response to Hurricane Katrina, we offer you this decisive action:

He suspended the Davis-Bacon Act.

Davis-Bacon is the law the requires government contractors and subcontractors to pay prevailing wages for public construction contracts. The 1931 act allows for suspension of prevailing wage requirements in the event of a national emergency. On Thursday, George W. Bush issued the executive order allowing federal contractors to pay substandard wages in disaster areas within Alabama, Florida, Louisiana and Mississippi.

We agree with Rep. George Miller of California, who had this to say:

"The administration is using the devastation of Hurricane Katrina to cut the wages of people desperately trying to rebuild their lives and their communities."

Perhaps nobody said it better than Edward C. Sullivan, president of the Building and Construction Trades Department, AFL-CIO:

"Once again the poorest workers are exploited in this disaster. This Administration's continued disregard for the victims of this tragedy is evident in the President's proclamation suspending Davis-Bacon protection for workers in the hurricane torn Gulf.

Once again this Administration is looking out for corporations eager to profit from a national emergency. They want to pay the poorest workers the lowest wages to do the most dangerous jobs. Suspending Davis-Bacon protections for financially distressed workers in the Gulf states amounts to legalized looting of these workers who will be cleaning up toxic sites and struggling to rebuild their communities while favored contractors rake in huge profits from FEMA reconstruction contracts. This is a shameful action and a national disgrace. It’s time for this Administration and those members of Congress who blatantly carry the water for corporate gougers during a disaster to realize that denying fair wages to Gulf State workers is no way to help them get back on their feet."

Since the government is funding all such construction, and is not requiring "discount bidding" from the contractors, the move will only allow contractors to enjoy higher corporate profits at the expense of local workers who are trying to rebuild their lives after the worst natural disaster in American history. Since price-gouging is widely recognized and hated, wage-suppression is the only politically available profiteering move for the friends of the president.

But look at the bright side: if the move leads to suppressed wages, and that leads to inexperienced workers getting the jobs, and that leads to poorer construction on coastal highways and bridges, at least we know that the next time the bridges fall and roads wash out, we'll be able to look back on all this as a learning experience.

[Update: Jottings by an Employer's Lawyer has an interesting contrary view.]

If you worked for a Red Lobster restaurant in California at any time from February 1998 to June 2005, you should have received a claim form in the mail already. That claim form is due today. Claims postmarked after September 12, 2005 will be invalid.

Judge Maxine Chesney has given preliminary approval to the $37 million overtime settlement in the Merrill Lynch case we discussed here last month. Stock brokers working at Merrill Lynch in California alleged that they were not paid for work beyond 40 hours each week, even though they are not exempt from overtime pay under state and federal standards. Merrill Lynch denies any wrongdoing, but offers 37 million apologies to its overworked brokers.

In giving its approval, the District Court required changes to some of the language in the notice to the class members. A final fairness hearing is set for February 2006.

If you are a member of the class and you have any questions, don't call us. We didn't work on this case. Call class counsel Mark Thierman, whose contact information can be found here.

On Wednesday, the California legislature approved a minimum wage hike earlier this week, but the early indications are that Governor Schwarzenegger will veto the measure. If Schwarzenegger vetoes the bill, a ballot initiative, similar to one which passed in Florida with 71% of the vote, is expected in 2006. Schwarzenegger had previously proposed a deal whereby he would sign a bill calling for more gradual increases as part of larger legislation that would include a softening of overtime laws. The bill headed for his desk makes no changes to overtime pay rules in California.

This bill increases the minimum wage, in two stages over the next two years, from its current $6.75 (at one time, the highest in the nation) to $7.75 an hour. After the increase, future minimum wage levels will be set according to a cost of living index. The federal minimum wage of $5.15 per hour has not changed since 1997. The current minimum wage of $6.75 in California would yield an annual income of $14,040 per year, which is above the poverty level only for singles and couples. A family of three earning $14,040 would be more than $2,000 below the poverty level.

A senior attorney in the California Labor Commissioner's office, whose written legal opinions (withdrawn by the office late last year) said employers were required by law to make sure their workers take meal breaks, was placed on administrative leave last week. That lawyer, Miles Locker, had worked for the Division of Labor Standards Enforcement (DLSE) for 15 years, and was once its chief counsel. Locker was placed on indefinite administrative leave for violating an order not to speak at a July seminar hosted by the San Francisco Bar Association's Barristers Club. He had been given permission to speak at the program earlier, but that permission was withdrawn at the last minute under a new rule that DLSE lawyers were not to do any speaking to the public, even on their own time. We query whether that violates the First Amendment, as well as California Labor Code § 96, but we don't have time to turn this into a broad wrongful termination blog.

Locker has hired his own attorney to fight the decision. Locker's attorney, Steve Zieff, of Rudy, Exelrod & Zieff commented: "the de-publication reflects the new administration's revisionist view of what wage and hour standards require of employers. ... He's become a victim of what appears to be retaliation." The action certainly seems to carry with it all the badges of a political hit originating at the very top of the Schwarzenegger administration.

It probably didn't help Locker's popularity with the current administration when he told seminar attendees what we've been saying since December: that the administration's efforts to weaken employees' right to take meal and other breaks are based upon legal grounds that are shaky, at best.

While some might argue that free speech rights should not be given to lawyers hired by the government, it certainly appears that the political change in the office is resulting in punishment for those who previously enforced what the current administration hopes to become "the old law." We think that is a policy that will undermine the DLSE's persuasive authority in trial courts. Already, we have seen several instances in which Superior Court judges have rejected the DLSE's "change of heart" as political whims. Locker's suspension is further fuel for that fire.

This fall, Proposition 75 on the special election ballot offers voters the opportunity to require public unions to obtain member consents each year before using union dues for political contributions. The latest field poll regarding the measure show a 23 point lead for the "yes" vote. The proposed rule would hurt Democrats, and would be particularly effective in reducing support for employee-side positions on employment issues, where union support for pro-employee legislation is often critical.

On September 2, the 1st District Court of Appeal in Murphy v. Kenneth Cole declined to accept an amicus brief offered by Richard Simmons on behalf of The Employer's Group, arguing that Labor Code 226.7 remedies are penalties, not wage compensation. An employers group had already filed an animus brief drafted Steve Drapkin, and the court found the brief to be cumulative.

So far, three groups have filed amicus briefs supporting the employee position, and one has filed a brief favoring the employer's position. Perhaps the court finds the arguments favoring the designation as a wage to be more varied and interesting. In his application, Simmons represented to the court that hundreds of hours were spent drafting the brief, but from what I can tell, he must have been including the time spent on the almost identical briefs filed in support of the employer's position in the 4th district Banda and Orco Block cases.

Allstate Corporation agreed on Thursday to pay as much as $120 million to settle a class-action lawsuit pending in Los Angeles County Superior Court, brought by its California claims adjustors, who sought back overtime pay, and compensation for meal and rest break violations. The settlement affects Allstate claims adjusters who worked in California from November 27, 1996 to December 31, 2004. Approximately 2,000 adjusters are eligible to receive payments from $1,000 to $95,000, depending on their length of service and workload. The payout to the average worker is expected to be around $50,000, comparable to an adjuster's typical annual salary, but a worker who was employed throughout the entire claim period would expect to receive about $95,000.

An attorney for the adjusters, R. Rex Parris, had this comment:

It's very similar to what happened in the '40s with the sweatshops. The laptop had become the sewing machine of the 2001 era. Companies were sending these people home with their laptops. They'd work long hours at work, and then they'd go home and continue to work.

The settlement is a claims-made agreement, which means that employees must submit claim forms to collect their share of the settlement, and the value of claims that are not submitted will not be paid by the company. The settlement is not yet approved by the court, but approval is likely.

Despite 120 million indications of wrongdoing, the company steadfastly maintains that it did nothing wrong.