Wage Law

On January 19, the Second District Court of Appeal published an opinion in Gentry v. Superior Court (Circuit City), upholding a clause in a pre-dispute arbitration agreement that precluded class arbitrations. The clause required all employees to agree to arbitration for all "covered disputes" and to assert those claims only as individuals and not on behalf of a class. If enforceable, it would have precluded any class litigation by Circuit City employees. The court found the Supreme Court's holding in Discover Bank v. Superior Court (2005) 36 Cal.4th 148 (striking a class action waiver clause in a credit card agreement) inapplicable to the Circuit City employee's circumstances.

Today, the California Supreme Court granted review of Gentry v. Superior Court, and granted and held review of a similar case, Jones v. Citigroup, Inc., in which the Court of Appeal enforced a class action waiver added to a credit card agreement through a billing notice which included a right to opt out. Congratulations to Matt Righetti, Ellen Lake and Dennis Riordan, who represent Gentry.

In our opinion, the Electronic Arts overtime class action was one of the five or ten most significant cases to settle in the past five years. The story of how that case evolved, from a group of disgruntled workers who were resigned to grinning and bearing, to a group of class members willing to assert their (substantial) wage claims, is a very interesting one, which began with a "deep throat" sort of intrigue. The tale began with anonymous blog posting by someone who called herself "EA_Spouse."

Many people wondered if EA_Spouse was a real person, or if it was actually an EA worker. Well, she was real. Her name is Erin Hoffman. Her story is an interesting read.

After taking a nice vacation, we're back, and the first thing we noticed in our in box was that the Supreme Court denied review in Overton v. Walt Disney Company, the case which held that shuttle time is non-compensable if an employer does not require the employee to use its parking shuttle service.

The Second District also issued various minor revisions to its opinion in Harris v. Investor's Business Daily, as did the Fourth District in Jones v. Gregory.

Today, in both Mills and National Steel:

"Petition for review GRANTED. Further action in this matter is deferred pending consideration and disposition of a related issue in Murphy v. Kenneth Cole Productions, Inc., S140308 (see Cal. Rules of Court, rule 28.2(d)(2)), or pending further order of the court. Submission of additional briefing, pursuant to California Rules of Court, rule 29.1, is deferred pending further order of the court. Werdegar, J., was absent and did not participate. Votes: George, C.J., Kennard, Baxter, Chin, Moreno, and Corrigan, JJ."

It could all change on any Wednesday. If you hear of any other cases, let us know.

In Bearden v. U.S. Borax, Inc., the Second District Court of Appeal has held that the Industrial Welfare Commission (IWC) wage order's meal period exceptions for workers with collective bargaining agreements are invalid because they conflict with the employer's meal period obligations under Labor Code § 512.

In Bearden, six mine workers appealed from an order dismissing their complaint based on their employer’s failure to allow a second meal break for the 12-hour shifts they were working. The Labor Code requires that two meal breaks be allowed for shifts of that length. But an order of the IWC exempts employees covered by a collective bargaining agreement. The principal issue before the court concerned the validity of that order. The court held that "the exemption contravenes the statute and is invalid." In so doing, the court adopted the plaintiffs' argument that the IWC exceeded its authority in enacting section 10(E) because it creates an additional exemption for employees governed by collective bargaining agreements, beyond the exemptions expressly included in section 512.

At the applicable times, Labor Code § 512 provided only two exceptions to the requirement that employees who work more than 10 hours per shift be given two 30-minute meal periods. One allows waiver of the second meal period by mutual consent of the employer and employee. Labor Code § 512(a). The other exempts workers in the wholesale baking industry, and there is now a third provision applicable to employees in the motion picture and broadcasting industries. There is no general exemption for workers with collective bargaining agreements. Therefore, the court concluded,

The broad powers granted to the IWC do not extend to the creation of additional exemptions from the meal period requirement beyond those provided by the Legislature. This is especially true in light of the express language of section 516, which we have discussed. We conclude that the IWC exceeded its authority in adopting section 10(E) of the Wage Order and that the exemption therefore is invalid.

That was easy to decide. But what next? The court certainly leaves us wondering.

With a single exception, we do not take a position at this time on the potential liability of Borax for violations of section 512 committed before the filing of this opinion. That matter must be initially addressed in the trial court, allowing the parties an opportunity to fully litigate the general rule of retroactivity and its exceptions. Nevertheless, the claim based on section 226.7 presents an issue of law that is fully developed in the case before us. Section 226.7 prohibits employers from requiring an employee to work during a meal or rest period mandated by an applicable order of the IWC. It also provides for a penalty where the employer fails to provide a meal or rest period in accordance with an applicable IWC order. The problem with plaintiffs’ position is that there was no violation of an IWC order. Even though we hold that the exception of section 10(E) is invalid, it is part of the IWC order. Consequently, there is no basis for application of section 226.7.

If the decision is not reviewed, we can't wait to find out what remedy can flow from a violation of meal period obligations under Labor Code § 512, where there is no applicable wage order provision triggering the payment of an hour of pay under Labor Code § 226.7.

But more curiously, how did the court simultanously declare an exemption invalid, while at the same time, effectively enforcing it? Here is the language of the wage order, with the portions declared invalid stricken:

10. Meal Periods.

(A) No employer shall employ any person for a work period of more than five (5) hours without a meal period of not less than 30 minutes, except that when a work period of not more than six (6) hours will complete the day’s work the meal period may be waived by mutual consent of employer and employee. (See Labor Code Section 512.)

(B) An employer may not employ an employee for a work period of more than ten (10) hours per day without providing the employee with a second meal period of not less than 30 minutes, except that if the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent of employer and employee only if the first meal period was not waived. (See Labor Code Section 512.)

(C) In all places of employment the employer shall provide an adequate supply of potable water, soap, or other suitable cleansing agent and single use towels for hand washing.

(D) Unless the employee is relieved of all duty during a 30 minute meal period, the meal period shall be considered an "on duty" meal period and counted as time worked. An "on duty" meal period shall be permitted only when the nature of the work prevents employee from being relieved of all duty and when by written agreement between the parties an on-the-job paid meal period is agreed to and complies with Labor Code Section 512.

(E) Collective Bargaining Agreements. Subsections (A), (B), and (D) of Section 10, Meal Periods, shall not apply to any employee covered by a valid collective bargaining agreement if the agreement expressly provides for the wages, hours of work, and working conditions of the employees, and if the agreement provides premium wage rates for all overtime hours worked and a regular hourly rate of pay for those employees of not less than 30 percent more than the state minimum wage.

(F) If an employer fails to provide an employee a meal period in accordance with the applicable provisions of this order, the employer shall pay the employee one (1) hour of pay at the employee’s regular rate of compensation for each workday that the meal period is not provided. In cases where a valid collective bargaining agreement provides final and binding mechanism for resolving disputes regarding enforcement of the meal period provisions, the collective bargaining agreement will prevail.

Now that the regulation exception has been declared invalid, those employees are covered. If they are covered by the wage order, then Section 226.7 should apply. The court of appeal, however, treated it as though there was a clause entitling non-union workers to certain rights, and a non-stricken clause that set forth the standards for union workers. There was not. There is a broad entitlement, with an invalid exclusion for certain workers. If that exclusion is invalid, then subdivision (B) now controls. These workers should be covered by the wage order now, and should be entitled to their  remedies under Section 226.7.

To illustrate, ponder this hypothetical: Suppose subsection (E) instead said "Subsections (A), (B), and (D) of Section 10, Meal Periods, shall not apply to any employee who is black." Could anyone justify any interpretation that provides, after the provision is stricken, that black workers are still not covered by the wage order? If you can, we'd love to hear it.

The full text of the Bearden case can be read here in pdf or Word format.

P.S. The opinion included this gem that should be used by every employee's counsel in every brief involving a matter of statutory or regulatory interpretation: “[S]tatutes governing conditions of employment are construed broadly in favor of protecting employees.” (National Steel, supra, 135 Cal.App.4th at p. 1084; Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976, 985.) We construe wage orders, as quasi-legislative regulations, in accordance with the standard rules of statutory interpretation. (Collins, supra, 105 Cal.App.4th 171, 178-179.)

We haven't posted since the end of March due to a trial and a class action mediation for which the defense dumped the documents on us with barely enough time to review before committing to the numbers. We are just about caught back up. And this is a bit off topic, but we wanted to pass along this unfortunate news. Judicate West mediator David Serena has passed away, apparently due to a sudden cardiac arrest. Mr. Serena was better known for mediating tort claims than wage claims, but he was fair to both sides of the bar and we liked him.