Previous month:
January 2006
Next month:
March 2006

February 2006

Justice Alito's Final Words as a Circuit Judge

Though he was not championed as a pro-worker choice for the most recent vacancy on the U.S. Supreme Court, workers and their advocates can take some hope from the fact that Justice Alito's final decision as a Circuit Court Justice came in a reversal of a summary judgment for an employer in a retaliation and sex discrimination case. (Jensen v. Potter Case No. 04-0478, 3rd Cir. 1/31/06). The decision brought the 3rd Circuit into the majority view regarding liability for retaliatory harassment based on the actions of a coworkers. Justice Alito's last words before joining the SCOTUS:

As an abstract matter, retaliation against a person based on the person's complaint about sexual harassment is not necessarily discrimination based on the person's sex. If the individuals carrying out the harassment would have carried out a similar campaign regardless of the sex of the person making the complaint, the harassment, while actionable as illegal retaliation, would not also be actionable as discrimination based on sex.

In reality, however, when a woman who complains about sexual harassment is thereafter subjected to harassment based on that complaint, a claim that the harassment constituted sex discrimination (because a man who made such a complaint would not have been subjected to similar harassment) will almost always present a question that must be presented to the trier of fact.

In such a situation, the evidence will almost always be sufficient to give rise to a reasonable inference that the harassment would not have occurred if the person making the complaint were a man. The difficult task of determining whether to draw such an inference in a particular case is best left to trial.

We remain hopeful, particularly for that part of our practice which does not pertain to the wage and hour law, and we are especially hopeful that this holding bodes well for the employees in a pending Title VII case (White v. Burlington Northern & Santa Fe Railway Co. (6th Cir. 2004) 364 F.3d 789, that the SCOTUS agreed to review last year. The issue in White is the degree of injury an employer's conduct must inflict to constitute an "adverse employment action" in a retaliation case.


UBS Paying $89 Million to Settle Overtime Class-Action Suits

The $37 million Merrill Lynch settlement was just the tip of the iceberg. Earlier this month, financial services firm UBS AG agreed to pay up to $89 million to settle overtime wage disputes in a class-action lawsuit. The plaintiffs were employees, mostly financial advisors, who were improperly classified as exempt, made to work exhorbitant hours, and paid no overtime compensation. We are told that parties in several similar lawsuits are very close to announcing similar settlements.


Latest Meal and Rest Period Developments

Now that review has been granted in Murphy v. Kenneth Cole Productions, the two leading cases concerning meal and rest period pay are the National Steel and Shipbuilding Co. (it's a wage) and Mills (it's a penalty) cases. Our spies at Jackson Lewis, LLP tipped us off to a pending petition for depublication filed in National Steel and Shipbuilding Co. We would be surprised if a depublication order is granted, since we fully expect the employer to file a petition for review, and a grant-and-hold grant of review is what we anticipate in that case.

There is no petition yet pending in the Mills case.


Miles Locker DLSE Departure Is Final

We have learned that Miles Locker, former Chief Counsel of the Division of Labor Standards Enforcement (DLSE), who has been on paid leave since mid-2005, has been fired. At a Skelly hearing last Friday, before the chair of OSHAB, Candace Traeger, his prior discipline was upheld in a one-sentence decision. We have not heard any response from Locker or his attorney, Steven Zieff of Rudy, Exelrod & Zieff, but do not be surprised if a lawsuit is filed presently.

Locker was suspended after his attendance at a brown bag luncheon on lunch break rights on July 20, 2005, at a time when the current administration was trying to silence any pro-employee voices at the Department of Industrial Relations. There are ten charges on which the discipline was based, most of which relate to various aspects of the meal/rest break controversies of the past couple of years, including the Kenneth Cole case, the governor's "emergency" regulations, the Abeyance Policy and the Rupp Memo in the "underground regulations" controversy, Westside Concrete and finally, speaking in his personal capacity at the seminar. A number of worker advocates, including several we know, are mentioned in the Notice of Adverse Action as attorneys Locker allegedly "assisted" in litigation against the DLSE, DIR and/or LWDA or to whom Mr. Locker allegedly expressed views contrary to those of agency officials appointed by the new governor.

Boiled down to the purest truth of this action, the Schwarzenegger Administration is punishing Locker for having the audacity (or, as they would call it, the "disloyalty") to continue to try to enforce minimum labor standards for the protection of California workers over the objections of well-funded and generous interest groups such as the California Restaurant Association and the Chamber of Commerce. After sixteen years of of dedicated service as a senior DLSE attorney and countless contributions to California wage and hour law, protecting California workers from employers who refuse to obey the rules, Locker is out.

With Locker gone, Robert Jones is the current Chief Counsel. He also serves as acting Labor Commissioner. A current full organizational chart of the California Labor and Workforce Development Agency, of which the DLSE is a part, can be viewed here.


Review Granted in Murphy v. Kenneth Cole Productions

The California Supreme Court wasted little time granting review of the controversial opinion in Murphy v. Kenneth Cole Productions, Inc. calling meal and rest period pay a penalty rather than a wage. The court's ruling was as follows:

Request for judicial notice granted. Petition for Review GRANTED. The parties are directed to brief and argue the following issues:

(1) Is a claim under Labor Code section 226.7 for the required payment of "one additional hour of pay at the employee's regular rate of compensation" for each day that an employer fails to provide mandatory meal or rest periods to an employee governed by the three-year statute of limitations for a claim for compensation (Code Civ. Proc., § 338) or the one-year statute of limitations for a claim for payment of a penalty (Code Civ. Proc., § 340)? [and]

(2) When an employee obtains an award on such a wage claim in an administrative proceeding and the employee seeks de novo review in superior court, can the employee pursue additional wage claims not presented in the administrative proceeding?

Votes: George, C.J., Kennard, Baxter, Werdegar, Chin, Moreno, and Corrigan, JJ

There is a very strong chance that the other recently published opinions in Mills and National Steel and Shipbuilding Company will be given a "grant and hold" review status if petitions for review are timely filed. To date, no petition has yet been filed in either case.

In other news, among the many cases for which review and granted or denied today was the opinion in Claudio v. UC Regents, in which the UC Board of Regents' petition for review was denied. Also denied was the petition for review filed by Harpreet S. Brar, the Orange County attorney recently jailed for filing frivolous lawsuits.


Nabors Industries Hit With $26.5 Million Arbitration Award in Break and Travel Pay Class Action

In 2003, a group of field workers for an oil well maintenance company filed a class action against their employer, Pool Well Services, Inc. (Cortez v. Pool Well Services, Inc., Ventura County Superior Court Case No.CIV 222363) alleging claims for travel pay and meal period violations. The trial court certified a class of 2,649 current and former workers, and then sent the case to binding arbitration on a classwide basis. In late 2005, the parties arbitrated the case before retired Justice Richard Neal.

On February 6, 2006, Justice Neal awarded the workers $26.5 million. The employees will receive between $5,000 to $50,000 each. Because the ruling came after a binding arbitration, the award cannot be appealed.

The class members were represented by the law firm of McTague & Palay. The defendants Pool Well Services, Inc. and its successor entity, Nabors Well Services, Inc. were represented by the law firms of Fisher & Phillips and Littler Mendelson. The decision to take this case to decision may turn out to be disastrous for the decision-makers at Nabors. The firm had previously lost several California Labor Board cases involving the same issues, making an adverse award quite foreseeable. Worse, the most recent SEC quartlerly and annual filings do not list the case as a pending material litigation matter.  The stock has fallen from 81 to 68 since the announcement of the award. Perhaps the next class action will be a shareholder case.


But What If The Boss Fires Me When I Ask For Overtime

From an email we received recently:

Q: I know my employer is required to pay overtime when we work over eight hours per day, but they don't, and I am afraid I will lose my job if I speak out. Can they fire me for complaining about the overtime pay?

A: No. Demanding wages and reporting violations of wage and hour laws is protected conduct, favored by a fundamental public policy of the State of California. Retaliation or termination of an employee for demanding full payment of wages is a violation of public policy and supports a cause of action for wrongful termination. Gould v. Maryland Sound Industries, Inc. (1995) 31 Cal. App. 4th 1137, 1150; Phillips v. Gemini Moving Specialists (1998) 63 Cal. App. 4th 563.

We had a case a few years ago that would not have been worth taking but for the fact that the employee was fired for demanding about $1,500 in overtime pay. The case settled for many times what the employer owed in back pay.


Watching The Supreme Court

If you don't have the right cable listings, or you don't have TiVo, or you missed our post on Monday, and you still want to see the televised California Supreme Court arguments previously broadcast, you can view them here, in their full three hours, online. This is the February 14, 2005 broadcast. We really enjoyed the outstanding performance by Mr. Winikow in the Friends case.


Petition For Rehearing Denied in Gentry

On January 19, 2006, the Second District Court of Appeal held in Gentry v. Superior Court (Circuit City) that a pre-dispute arbitration agreement with a waiver of class action rights is not unconscionable when an employee has a meaningful (30 day) opportunity to opt out of the agreement. On February 9, 2006, the employee's petition for rehearing was denied. We anticipate that an appeal to the California Supreme Court will follow shortly.


Harpreet Brar Goes To Jail

Brea attorney Harpreet Brar went behind bars last week after Orange County Superior Court judge Peter J. Polos (the judge who oversees the Anaheim Angels case) called him an extortionist and found him to be in contempt of court for violating a November 2004 injunction against filing misjoindered cases in which multiple defendants were sued in one action involving unrelated allegations. Brar was ordered into custody immediately to serve 15 days in jail. He was also fined $3,000.

Brar's scheme involved large scale targeting of small business owners with dubious lawsuits alleging minor violations of consumer protection laws. Rather than seeking to right any wrongs, Brar would demand small settlements, often in the range of $1,000, hoping to profit from the fact that few businesses can hire a lawyer for less than $1,000.

Polos declared that Brar was "basically an extortionist" whose actions were as outrageous as those of the Trevor Law Group. Arguably, Brar is worse, because the Trevor Law Group stopped when the courts ordered them to stop. Not Brar. Despite the injunction, Brar filed many more lawsuits against liquor and convenience stores (for failing to disclose fifty-cent debit-card fees) including one in Pomona (which we blogged about a while back, drawing a comment from Mr. Brar himself), one in Norwalk and one in Orange County. Each case named several dozen unrelated defendants. The plaintiff was Brar's wife.

Brar argued, under that Code of Civil Procedure § 1209(c), he was entitled to a three-day stay of enforcement for any contempt finding punishable with jail time. Judge Polos noted that the code only applied to attorneys representing clients. Since Brar was the defendant, he ruled, section 1209(c) did not apply to Brar.

We were impressed, though not in a good way, that Brar knew about Code of Civil Procedure § 1209(c). Show me ten lawyers who know the law of attorney contempt procedure, and we'll show you ten lawyers whom we would rather not see practicing law.


Live Supreme Court Broadcasts Tomorrow

Normally, we never post on court holidays (Happy Lincoln's Birthday [observed]), and this is a bit off topic, since there are no wage and hour cases involved, but tomorrow, the California Supreme Court will offer a live TV broadcast of its oral arguments in the Stanley Mosk Library and Courts Building, Sacramento. The arguments can be viewed on California Channel, a public affairs network starting at 1 p.m. The justices will hear arguments in three cases, including the "Friends" writer's sexual harassment case.


When "Shall" Means "Never Mind."

The Fourth District Court of Appeal, Division One has issued a perplexing ruling concerning the need to post a bond to appeals from an adverse Labor Commissioner's award. In Progressive Concrete, Inc. v. Parker, D045798, Feb. 7, 2005, the court addressed the issue of whether an employer's failure to post an undertaking pursuant to Labor Code § 98.2(b) deprives the trial court of jurisdiction to consider the employer's appeal of the State of California Labor Commissioner's award in favor of the employee.

Below, the trial court had implicitly denied the employee's motion to dismiss the employer's appeal and after a de novo bench trial, the court entered a judgment awarding a lower amount. the employee appealed, contending that section 98.2(b) provides that an employer filing an appeal "shall" post an undertaking in the amount of the Commissioner's award and because the employer did not do so, the trial court should have dismissed the employer's appeal of the award.

Labor Code § 98.2(b) provides:

"Whenever an employer files an appeal pursuant to this section, the employer shall post an undertaking with the reviewing court in the amount of the order, decision, or award.  The undertaking shall consist of an appeal bond issued by a licensed surety or a cash deposit with the court in the amount of the order, decision, or award.  The employer shall provide written notification to the other parties and the Labor Commissioner of the posting of the undertaking.  The undertaking shall be on the condition that, if any judgment is entered in favor of the employee, the employer shall pay the amount owed pursuant to the judgment, and if the appeal is withdrawn or dismissed without entry of judgment, the employer shall pay the amount owed pursuant to the order, decision, or award of the Labor Commissioner unless the parties have executed a settlement agreement for payment of some other amount, in which case the employer shall pay the amount that the employer is obligated to pay under the terms of the settlement agreement.  If the employer fails to pay the amount owed within 10 days of entry of the judgment, dismissal, or withdrawal of the appeal, or the execution of a settlement agreement, a portion of the undertaking equal to the amount owed, or the entire undertaking if the amount owed exceeds the undertaking, is forfeited to the employee."

The appeal centered upon the meaning of the word "shall" in section 98.2. The court of appeal essentially held that, because the legislature did not "expressly provide for dismissal of the section 98.2 appeal or a "deemed" final adoption of the Commissioner's order, decision or award for an appealing employer's failure to post the undertaking," the word "shall" was merely informational, and that the trial court was within its rights to hear the appeal even if the employer did not do what the legislature said it "shall" do.

"We conclude the undertaking under section 98.2, subdivision (b) is directory and not mandatory or jurisdictional.  There is no contrary intent clearly expressed in section 98.2, subdivision (b).  That statute does not provide any consequence or penalty for an appealing employer's failure to post the undertaking."

The opinion, which can be viewed here in pdf or Word format, also included a curious discussion about how a prevailing party can "enforce" a Commissioner's award by filing a motion to confirm the award while the aggrieved party's appeal of that award is pending.


Class Action Settlements Are Never Rubber Stamped

To all those critics who claim that courts simply rubber stamp sweetheart deals in class actions, we offer this further exhibit in support of the class action bar and bench: Judge Jonathan Cannon's further inquiry into the reasons for the settlement in Pinto vs. Luxottica US Holdings Corp., Orange County Superior Court case number 04CC00639.

In a tentative ruling published today, Judge Cannon continued the hearing on a motion for preliminary approval of settlement, saying:

The settlement is rather low given the alleged violations of the Labor Code. The gross settlement is $495,000. After deduction of the requested fees and costs, the class will be left with a settlement fund of approximately $304,000.00. There are approximately 5,700 class members. That means each class member will receive an average of $53.00. That works out to approximately 17 cents a week if that employee worked all of the weeks included in the class definition. The parties need to explain to the Court what the expected payment per work week will be and why the amount is so low. Are there extenuating financial considerations on the part of the Defendant? Note: The declaration of counsel indicates he is seeking $58,500.00 in fees. The settlement agreement and notice to the class indicate counsel will seek fees of $148,500.00.

The parties were required to submit further briefing as to the fairness and reasonableness of the settlement ten days prior to the new hearing date.

This settlement might be a very reasonable settlement, and it may yet be approved, but when something comes in that looks too low, good judges will always scrutinize the deal to make sure class members are getting a fair deal. This is a good example of class action litigation working the way it was designed to look.


Uniform Rules Differ Between Private and Public Sector

A recent case illustrated the importance of understanding how employment laws differ between the public and private sector. Labor Code § 2802 provides, among other things, that

"An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful."

In In re Work Uniform Cases (2005) 133 Cal.App.4th 328, the court held that Labor Code § 2802 did not require public entities to pay claims for costs related to employee work uniforms. For county and city employees, pay for uniforms is part of the employees' compensation and is considered like any other payment of wages, compensation, or benefits.

This determination creates a conflict between an employee's right to reimbursement or indemnification for employee expenses under Labor Code § 2802 and a public entity's power to determine the compensation for its employees and to bargain with employee representatives under the Meyers-Milias-Brown Act (Government Code § 3500 et seq.)

The conflict was resolved in two ways, both weighing against the employees. First and foremost, the Supremacy of state constitutional provisions over contrary statutory provisions renders Section 2802 powerless against contrary provisions in Article XI of the California Constitution, which confers upon public agencies the power to prescribe the terms and compensation for their employees. Statutes which provide otherwise, including, arguably, Labor Code § 2802, infringe upon that constitutional delegation of power. Secondly, the broader provisions of Section 2802 are trumped by the specific treatment of public employee uniform obligations established under Government Code § 19850.1, which provides that "state employees shall be responsible for the purchase of uniforms required as a condition of employment. The state shall provide for an annual uniform allowance to state employees for the replacement of uniforms."

The private sector operates under different rules. Employee uniforms must be paid for by the employer, and uniform expenses are treated like a component of employee compensation. The Division of Labor Standards Enforcement is authorized to collect, as unpaid wages, the costs of required uniforms. In Department of Industrial Relations v. UI Video Stores, Inc. (1997) 55 Cal.App.4th 1084. And virtually all of the IWC wage orders provide that "When uniforms are required by the employer to be worn by the employee as a condition of employment, such uniforms shall be provided and maintained by the employer. The term "uniform" includes wearing apparel and accessories of distinctive design or color." None of the wage orders, of course, apply to employees in the industries of government or government administration.


Class Members Who Get No Notice

Unlike product liability and consumer cases, in most wage and hour class actions, notice is not published in any general circulation medium. Instead, notice of the class action and its settlement is provided by mail to an affected employee's last known address. What happens to the unlucky class member who moved and received no notice of a pending class action settlement? Under many circumstances, that employee has a good argument that he or she is not bound by the settlement.

What is clear is that unnamed class members are not bound by a settlement that does not comply with minimal due process requirements. Phillips Petroleum Co. v. Shutts (1985) 472 U.S. 797, 811-812. The class member must receive notice plus an opportunity to be heard and participate in the litigation, whether in person or through counsel. The notice must be the best practicable, "reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." The notice must describe the action and the plaintiffs' rights in it. Additionally, due process requires, at a minimum, that an absent plaintiff be provided with an opportunity to remove himself from the class by executing and returning an "opt out" or "request for exclusion" form to the court. Finally, the Due Process Clause requires that the named plaintiff at all times adequately represent the interests of the absent class members. Id.

What is unclear is whether the settlement is binding upon those persons who do not get notice, when publication is not made, and individual notices are returned as undeliverable. We believe that under Phillips Petroleum and Hansberry v. Lee (1940) 311 U.S. 32, such notice is not proper as to those persons. The notice "must be the best practicable, 'reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. If the parties know, because of a returned notice, that the class member did not get adequate notice, then the notice procedure is not calculated, under all the circumstances to give notice to those particular class members.

Under Federal rules, FRCP Rule 23(c)(2) requires "the best notice practicable under the circumstances," and that individual notice need be given only to members of the class "who can be identified through reasonable effort." Sometimes, that means first class mail, not only upon certification of the class, but at each time notice would thereafter be necessary. Phillips Petroleum Co. v. Shutts (1985) 472 U.S. 797, 811-812, 86 L. Ed. 2d 628, 105 S. Ct. 2965; Eisen v. Carlisle & Jacquelin (1974) 417 U.S. 156, 173-176, 40 L. Ed. 2d 732, 94 S. Ct. 2140 [where names and addresses of 2,250,000 class members were easily ascertainable, individual notice had to be given]. In Cartt v. Superior Court (1975) 50 Cal.App.3d 960, in a consumer case, a California court held that meaningful notice must be given in a form that "should have a reasonable chance of reaching a substantial percentage of the class members." Under Civil Code § 1781(d), notice by publication may be ordered "if personal notification is unreasonably expensive or it appears that all members of the class cannot be notified personally."

Evidence of actual receipt is not required. But, at least in class actions for damages or similar relief, the claims of class members whose notices are returned as undeliverable must be excluded from any judgment in the class action. Phillips Petroleum Co. v. Shutts (1985) 472 U.S. 797, at 813, 105 S.Ct. at 2975 (28,000 notices mailed, 1,500 returned as undeliverable). This does not, of course, invalidate the entire settlement. "Courts should not be deterred from Rule 23 economies in litigation by exaggerating the presumed requirements of due process, or by the specter of an occasional successful collateral attack on the basis of due-process." Philadelphia Electric Co. v. Anaconda American Brass Co. (E.D.Pa. 1968) 43 F.R.D. 452, 459. If the class member can show that the process was not reasonably calculated, under all the circumstances, to give him or her notice, then he or she would not be bound by the terms of the settlement. Other class members, however, will be.


Shuttle Bus Time Is Off The Clock If Voluntary

The Second District Court of Appeal has ruled that employees who voluntarily take advantage of an employer's shuttle to work should not be considered to be on-the-clock until they arrive at their place of work. In Overton v. Walt Disney Company (2nd District No. B179854, Los Angeles County Superior Court case no. BC281489), employees who drove to work were required to park in an employee lot roughly one mile away from their places of work at the Disneyland resort. Disney provided a shuttle from this lot to the employee entrance. Plaintiff, a former Disneyland employee, who was assigned such parking, brought a class action on behalf of all Disney employees who parked in the satellite lot, seeking compensation for their travel time on the shuttle.

The court considered this claim in light of Morillion v. Royal Packing Co. (2002) 22 Cal.4th 575 ("Morillion"), a case in which the California Supreme Court held that employees must be compensated for travel time when their employer requires them to travel to a work site on employer-provided buses.

However, the undisputed evidence in the case showed that Disney employees were not required to drive to work and take the shuttle. Employees could take any form of transportation they chose, and, unlike the workers in Morillion, could simply show up at the employee work site, rather than report to the shuttle bus location. On these facts, the court held, this case falls outside the mandate of Morillion. Consequently, Disney's summary judgment is affirmed.

Shuttle time at Disney will continue to be on the employee's own time. You can download Overton v. Walt Disney Company here in pdf or Word format.


TGI Friday's Class Action Stayed

Yesterday, Judge Cannon issued a 90 day stay in the certified TGI Friday's meal and rest period class action, Hernandez v. Main Street Restaurant Group, Inc., so that the court can reevaluate the statute of limitations on Labor Code § 226.7 claims in light of the pending petition for review in Murphy v. Kenneth Cole Productions, Inc. Judge Cannon had previously ruled that the extra hour of pay under Labor Code § 226.7 was a wage, with a four-year statute of limitations.


More Support for Citing Unpublished Federal Cases

With all of the issues of first impression we face in many of these wage and hour cases, we often turn to opinions not published in official reporters, as authority for various legal contentions. We've often cited, for example, Bender v. Darden Restaurants, Inc. as authority for the right to pursue punitive damages in a meal and rest period case. Defense counsel and judges are often taken aback by what they believe to be a violation of California Rules of Court, Rule 977, which general prohibits citation of cases not published in that court's official reporter.

There is, however, ample authority that such cases can be cited as persuasive authority if they were decided in other states, or in federal courts, as long as the opinions are published somewhere, such as on Lexis or on Westlaw's federal appendix ("Fed.Appx."). The latest such case is Discover Bank v. Superior Court (2005) 134 Cal.App.4th 886, 892, where the court writes:

Moreover, the next strongest authority that we have located on the issue is the unpublished decision of the United States Court of Appeals for the Third Circuit in Lloyd v. MBNA Am. Bank, N.A. (3d Cir. 2002) 27 Fed.Appx. 82, 84 [n2] which likewise affirmed the enforcement of a class action waiver under Delaware law.

[n2] Although California Rules of Court, rule 977 prohibits citation of unpublished opinions of California's appellate courts, it does not prohibit citation of unpublished federal opinions.

Unpublished opinions are never citeable if they are California state court decisions. But if they are federal cases, they can be fair game. You might need to educate the judge a bit, though, so at least cite Discover Bank in a footnote at the end of your unpublished federal citation.


Dismissal of Fictitiously Named Defendants

We recently had a judge insist upon dismissing all fictitious ("Doe") defendants at the trial setting conference. It is a case with potential "dual employer" relationship between a managing subsidiary and an asset-holding parent corporation. Because of this, we insisted that the court leave the unnamed defendants in the case. The judge didn't want to hear it until we quoted Government Code § 68616(h):

“Unnamed (DOE) defendants shall not be dismissed prior to the conclusion of the introduction of evidence at trial, except upon stipulation or motion of the parties.”

All of our defendants, named and unnamed, are still in the case.