Wage Law

Minimum Wage Headed Down in California?

The hard working U.S. House of Representatives worked through the weekend to pass a bill to cut the minimum wage for tipped workers while eliminating the estate tax on large estates. The Estate Tax and Extension of Tax Relief Act of 2006, H.R. 5970, passed the House on July 29. It raises the minimum wage for most employees in states that do not have higher minimum wages under state law, from $5.15 per hour now, to $5.85 an hour, beginning on January 1, 2007, then $6.55 an hour beginning June 1, 2008 and peaking at $7.25 an hour beginning June 1, 2009.

However, in states with higher minimum wages that do not include tips in the calculation (Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington), the bill means a pay cut for tipped workers, because the bill actually contains a provision that bars states from enforcing laws that require a higher minimum wage for tipped employees.

How? The federal minimum wage law currently allows employers to pay as little as $2.13 an hour, leaving tipped workers to rely on customer tips to make up the rest of the $5.15 per hour minimum wage. California requires employers to pay tipped employees the same $6.75 that everyone else gets, because it excludes tips from the minimum wage calculation. H.R. 5970 prohibits states that do so from enforcing any higher minimum wage standards with respect to tipped employees making more than $30 a month in tips. Such a law would be unprecedented. Congress has never before placed a ceiling, rather than a floor, on minimum wage rates. Here is the actual language from the bill:

1. SEC. 402. TIPPED WAGE FAIRNESS.

Section 3(m) of the Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)) is amended—

(1) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively;

(2) by striking `Wage' paid to any employee' and inserting `(1) `Wage' paid to any employee';

(3) in subparagraph (B) (as so redesignated), by inserting before the period the following:

Provided, That the tips shall not be included as part of the wage paid to an employee to the extent that they are excluded therefrom under the terms of a bona fide collective bargaining agreement applicable to the particular employee'; and

(4) by adding at the end of the following:

(2) Notwithstanding any other provision of this Act, any State or political subdivision of a State which on or after the date of enactment of the Estate Tax and Extension of Tax Relief Act of 2006 excludes all of a tipped employee's tips from being considered as wages in determining if such tipped employee has been paid the applicable minimum wage rate, may not establish or enforce the minimum wage rate provisions of such law, ordinance, regulation, or order in such State or political subdivision thereof with respect to tipped employees unless such law, ordinance, regulation, or order is revised or amended to permit such employee to be paid a wage by the employee's employer in an amount not less than an amount equal to—

(A) the cash wage paid such employee which is required under such law, ordinance, regulation, or order on the date of enactment of the Estate Tax and Extension of Tax Relief Act of 2006; and

(B) an additional amount on account of tips received by such employee which amount is equal to the difference between the cash wage described in subparagraph (A) and the minimum wage rate in effect under such law, ordinance, regulation, or order, or the minimum wage rate in effect under section 6(a), whichever is higher.'

If this bill becomes law, California workers who earn tips will lose most of their non-tip compensation unless the legislature amends California law to include some portion of tips in its minimum wage calculations. If the legislature wants to maintain the status quo, it could avoid most of the impact of the act by including the first penny of a person's tips in the minimum wage calculations, as the act only affects a minimum wage statute that "excludes all of a tipped employee's tips from being considered as wages..." Of course, the generosity that the California Restaurant Association has shown to the current administration in California makes it unlikely that such an amendment would be signed by anyone other than Phil Angelides.

PAGA Exhaustion Still Not Required For Non-PAGA Cases

In spite of clear authority under the Caliber Bodyworks (134 Cal.App.4th 365) decision, defense lawyers continue to argue that plaintiffs cannot file suit for remedies such as waiting time penalties, meal and rest period pay, and other claims under Labor Code §§ 203, 226, 226.7, etc. Every so often, a trial court agrees. To our knowledge, no appellate court has ever agreed.

Yesterday, in an unpublished opinion, yet another Court of Appeal (addressing a trial court ruling that was issued pre-Caliber Bodyworks) upheld an employee's right of private action, without any regard for or compliance with the Labor Code Private Attorneys General Act of 2004 (PAGA), to seek damages and statutory penalties for those various Labor Code violations. Dunlap v. Superior Court (Bank of America) (2nd District, Div. 3, 7/27/2006, Case No. B185247)

After a motion to strike was granted by Los Angeles County Superior Court Judge Judith Chirlin, Dunlap filed a petition for writ of mandate, seeking the issuance of a writ directing the trial court to vacate its order granting the motion to strike and to enter a new order denying the motion. The Court of Appeal granted the writ.

Plaintiff Omar Dunlap, a former employee of defendant Bank of America, N.A. (“Bank”), seeks a writ of mandate directing the trial court to vacate its order granting the Bank’s motion to strike certain portions of Dunlap’s first amended class action complaint and to enter an order denying the motion to strike. The essential issue presented is whether the trial court properly struck Dunlap’s claims for statutory penalties on the ground he failed to exhaust his administrative remedies in accordance with the Labor Code Private Attorneys General Act of 2004 (PAG Act) (Lab. Code, § 2698 et seq.). Dunlap’s second through fifth causes of action, which are at issue herein, did not seek any penalties which previously were recoverable only by the Labor and Workforce Development Agency (LWDA). The only penalties being sought therein were various statutory penalties, which penalties already were recoverable by employees under the Labor Code prior to the adoption of the PAG Act. Therefore, Dunlap was not required to comply with the PAG Act’s administrative prerequisites to filing suit before pursuing statutory penalties in said causes of action. Accordingly, the trial court erred in granting the motion to strike. We grant the relief requested.

The decision took quite some time to reach, as far as writ proceedings go. The petition for writ of mandate was filed on August 19, 2005; the case was argued on January 18, 2006; and the opinion was issued on July 27, 2006. Govern yourselves accordingly if you are before this panel, as they noted in April that "[d]ue to the press of other court business and the complexity of the issue in this case, a brief additional amount of time is needed to complete and file the opinion in this matter." You can download the opinion here in pdf or Word format.

Albertson's Class Action Certified

Albertson's wasn't able to enjoy its victory in Dunbar v. Albertson's for very long. On the same day (July 20) that the Court of Appeals upheld a denial of certification in an Alameda County class action, San Diego Superior Court Judge Linda Quinn granted a motion for class certification in a meal and rest period, and off-the-clock work case for hourly front-end store managers (Wilcox v. Albertson's, Inc., San Diego County Superior Court case no. GIC833922).

The primary claim in the case is that the employees (current and former hourly key-carrier employees of Albertson’s, Inc. within the state of California, including service operations manager, assistant service operations manager, fifth person key carrier, fourth person key carrier, third person key carrier, service supervisor, front end manager, assistant front end manager, and front end clerks) are required to remain on-duty during rest and meal periods. Under Sav-On, the same broad discretion that doomed the appeal in Dunbar will likely preserve the certification order in Wilcox. Congratulations to Michael D. Singer and Eva K. Wojtalewski of Cohelan & Khoury, who represent the class.

Review Denied: Jones v. Gregory

In Jones v. Gregory (March 14, 2006, G030347) the Fourth District Court of Appeal affirmed that there is no liability as an "employer" for officers and directors whose companies fail to pay wages, unless there is an allegation that the person was the entity, or that the entity was an alter ego of the person. This morning, the California Supreme Court denied a petition for review, effectively putting to rest any notion that officers and directors have personal liability for unpaid wage claims unless those officers and directors are also liable, generally, for the debts of their corporation.

Guitar Center Settlement Approved

Our settlement in a wage and hour class action on behalf of the hourly workers at California Guitar Center stores has been granted final approval at a fairness hearing before Los Angeles County Superior Court judge James Dunn yesterday morning. Payments will be made to eligible class members within a few weeks, provided that they submitted their claims forms on or before July 3, 2006. Any class members with questions should contact us by telephone or email. Do not post questions by leaving a message in the comments.

Prop 64 Applies to Existing Cases

MThis morning, the California Supreme Court held that the provisions of Proposition 64 do apply retroactively to existing cases (Californians for Disability Rights v. Mervyn's LLC) but that plaintiffs have the right to bring a motion to amend to substitute a new plaintiff, within the permissible scope of Code of Civil Procedure § 473 (Branick v. Downey Savings & Loan). The court announced no new law concerning the relation-back doctrine, and instead suggested that on remand, should plaintiffs file a motion to amend, trial courts should decide the motions by applying the established rules governing the relation back of amended complaints as stated in Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 408-409 ( “The relation-back doctrine requires that the amended complaint must (1) rest on the same general set of facts, (2) involve the same injury, and (3) refer to the same instrumentality, as the original one.”)

We know better than to think that our analysis would be any better or more detailed than Kimberly A. Kralowec's, who writes The UCL Practitioner. We are certain that she will have a lot to say about these landmark decisions sometime today, so check out her blog.

You can download the opinion in the Mervyn's case here in pdf or Word format, and the opinion in the DSL case here in pdf or Word format.

Review Denied in Best Buy

In March, we wrote a post about Best Buy Stores v. Superior Court, wherein the 4th District Court of Appeal upheld an Orange County Superior Court order authorizing discovery in a class action case to locate a suitable class representative in cases where the existing class representative has been found to be unsuitable or, in this case, while the court is in the process of determining the suitability of the putative class representative. Last week, the Supreme Court denied review of Best Buy. Though it is a consumer case, some of the language in that opinion should be kept handy on the desktop of every wage and hour class action lawyer.

Albertson's Cert Denial Upheld

The Court of Appeal has affirmed an Alameda County Superior Court order denying certification in a misclassification claim brought on behalf of 900 Albertson's grocery managers, Dunbar v. Albertson's Inc.

Plaintiff Maurice Dunbar, a grocery manager for defendant Albertson's, Inc., seeks overtime compensation and other relief on the theory that defendant erroneously classified him as an executive employee exempt from the overtime wage laws. He appeals from the order denying his motion for certification of a class of defendant's grocery managers to pursue these same claims. He contends that the order must be reversed because the court failed to apply proper criteria, and neglected to perform necessary analysis, in deciding whether common questions were predominant in the case. We find no error in the court's determination of the matter and affirm the order.

The opinion is unpublished, but makes for interesting reading and, of course, reenforces the emerging rule that certification is within the trial judge's very broad discretion.

[Further comment] As one colleague pointed out today, this language provides very clear advice to the moving party in a certification motion:

It is not sufficient, in any event, simply to mention a procedural tool; the party seeking class certification must explain how the procedure will effectively manage the issues in question, and plaintiff has failed to do so here. (See Block v. Major League Baseball (1998) 65 Cal.App.4th 538, 545 [court not required to consider subclasses when not given “a concrete proposal describing how such subclasses would be defined, how they would be administered, or how they would help the court deal with the complexities inherent in the proposed class”]; see generally Sav-On Drug Stores, Inc. v. Superior Court, supra, 34 Cal.4th at p. 326 [party seeking certification bears burden of establishing predominance of common questions]; Frieman v. San Rafael Rock Quarry, Inc., supra, 116 Cal.App.4th at p. 34 [moving party bears burden of demonstrating that substantial benefits will result from class certification].)

At the same time, this language may prove quite persuasive in overcoming the old objection seeking to exclude ANY "merits-based" discovery.

That Other Case Related To Murphy

If you checked the status of Murphy v. Kenneth Cole Productions, in addition to noting that the respondent has requested and received an extension to file its brief, you may have noticed that there is now a fourth related case. The fourth related case is Chalecki v. State Farm Mutual Automobile Insurance Co., a Los Angeles case in which the trial court (Judge Anthony J. Mohr) appears to have ruled that meal and rest period pay is an hour of penalties. The employee filed a writ petition, which received a "postcard denial" from the Second District Court of Appeal on April 4, 2006. Shortly thereafter, the employee filed a petition for review, which was granted on May 24.

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

Although we know this is meaningless, we were pleased to read that the remittitur is expected by September.

The Superior Court case docket looks interesting. There are almost 50 plaintiff in intervention, and there is something called a defense "Motion to Determine Threshold Legal Issue re the Tolling of the Statute of Limitations" pending. Our curiousity is piqued.

Both Candidates Lead Race For Governor

Depending upon who you ask and who they polled, Phil Angelides either leads the California gubernatorial race by a 46% to 44% margin, or he trails badly, 37% to 44%.

Another Restaurant Rest Period Case Certified

We congratulate Michael Singer and our friends at Cohelan & Khoury, Lorens & Associates and the Law Office of William Turley for getting their meal and rest period class action against Brinker International Inc. (Chili's, Romano's Macaroni Grill, On The Border, etc.) restaurant chain certified. San Diego County Superior Court Judge Patricia A.Y. Cowett certified the class of 63,000 current and former employees. Tracee Lorens was quoted in the Daily Journal last week opining that the case could be worth $250 million. Brinker previously paid $10 million to settle a similar case filed by the California Department of Labor in 2002, but the violations continued. Like our case against TGI Friday's and unlike the Wal-Mart case, this one includes certification of the rest period claims. Brinker, like TGI Friday's has enforced policies which deprive workers of the chance to take paid rest breaks. Next month, the court will rule on the plaintiff's motion for injunctive relief, seeking to force the company to let workers take their meal periods after 5 hours of work.

Judge Cowett has previously issued "advisory opinions" for the purposes of a mediation in that case, indicating that there is a violation for the employer to have employees take their breaks during the first hour, then work more than five hours without a meal period, and that the statute of limitations is four years for claims under Labor Code section 226.7.

As a percentage, very few of these class actions are not settled before the certification hearing. Among the few that did not settle before a certification ruling, there are now two (and they are two of the largest) classes that have been certified as rest period classes.

Ralphs Pleading Guilty

Rather than proceed to trial on August 15, 2006, the Ralphs supermarket chain has indicated that it plans to plead guilty to charges that it illegally re-hired hundreds of locked-out workers using aliases during a 2003 labor dispute. In June SEC filing, Kroger Co., the owner of the Ralphs Grocery Co. chain, announced that it "expects to enter into an agreement that will include a plea of guilty to some of the charges" under a 53-count federal grand jury indictment.

Under Item 8.01 Other Events:

On June 29, 2006, the Company filed its Quarterly Report on Form 10-Q for its fiscal quarter ended May 20, 2006. In that Report, the Company disclosed, among other things, that its Ralphs Grocery Company subsidiary (“Ralphs”) expected to enter into an agreement that would include a plea of guilty to some of the charges contained in the indictment against Ralphs in the matter styled United States of America v. Ralphs Grocery Company , United States District Court for the Central District of California, CR No. 05-1210 PA.

On June 30, 2006, Ralphs entered into an agreement settling all matters related to the indictment. Under the terms of the agreement, which must be approved by the Court, Ralphs will plead guilty to five of the 53 counts in the indictment; these include violating Social Security and Internal Revenue Service record keeping laws, violating ERISA reporting laws, identity fraud, and one count of conspiracy to violate federal law. Ralphs has agreed to pay a fine of $20 million to the government and to create a $50 million restitution fund that will be administered by a Special Master appointed by the Court.

In addition, Ralphs will be placed on probation for a period of three years. If and when the Court approves the settlement, all remaining counts in the indictment will be dismissed. The agreement will resolve all pending and potential criminal claims against Ralphs related to this matter. In addition, a pending appeal at the National Labor Relations Board challenging the legality of the lockout by Ralphs of its employees during the strike will be dismissed.

While the Company can provide no assurance that the Court will approve the settlement, if the Court does approve the settlement the reserves established through the first quarter 2006 will fully cover Ralphs’ exposure in connection with these legal proceedings.

The plan to pay $50 million in back wages to approximately 19,000 workers represents about 7 weeks pay for each of the United Food and Commercial Workers Union workers who were locked out for 20 weeks in 2003 and 2004.

We look forward to our next case against Ralphs, and specifically, to propounding form interrogatory 2.8, wherein we can inquire whether Ralphs has ever been convicted of a felony, etc., and getting back a "yes."

Class Representative Enhancements

Most class action settlements include a provision establishing an enhanced settlement share for the class representatives, who take all of the risk, and incur most of the time, pursuing the rights of their class. The case law discussing the standards for such an award is quite scant. Last month, in Edelist v. First USA Bank, the 4th District issued an unpublished opinion dealing with the objections of one Rosie Ross, who complained about certain class action settlement terms and attorney's fees in a consumer class action. The opinion did not address class representative enhancements, but apparently, the objector wanted those discussed, too. Hence, this week, the 4th District added a section to their opinion, still unpublished, discussing the representative's incentive award.

Edelist requested an incentive award of $5000. In a footnote in her preliminary opposition, the objector argued there was no justification or support for the award. The trial court agreed, noting that "Counsel has not offered any evidence justifying the $5000.00 incentive award. There is no indication Mr. Edelist participated in this litigation whatsoever (with the exception of lending his name to the caption)." The trial court then reduced the award to $2500 (a common order in Orange County). The 4th District said that "the trial court apparently felt the $2500 incentive award was an appropriate amount for a plaintiff lending his name to the caption in this case, and held that the case law, though scant, supports the trial court’s conclusion. Here is what the court noted about that case law:

In Staton v. Boeing Company (9th Cir. 2003) 327 F.3d 938, the court refused to approve a class action settlement because, inter alia, it awarded the named class representatives damages averaging sixteen times more that the amount to be received by each unnamed class member. The total payment to the class of 15,000 was over $7 million, and ‘29 named class representatives are designated to receive payments totaling $890,000.’ (Id. at p. 977.) The court found the ‘large differential’ in damages could not stand on the record before it. (Id. at p. 978.) “The Staton court remarked, however, that ‘named plaintiffs, as opposed to designated class members who are not named plaintiffs, are eligible for reasonable incentive payments,’ pointing out that it had approved incentive awards of $5000 each to two named plaintiffs in In re Mego Fin. Corp. Sec. Litig. (9th Cir. 2000) 213 F.3d 454. (Staton v. Boeing Corporation, supra, 327 F.3d at pp. 976-977.) In Mego, the incentive awards were approved without discussion; the opinion revealed no evidence of the extent of the named plaintiffs’ involvement in the litigation. (In re Mego Fin. Corp. Sec. Litig., supra, 213 F.3d 454.) “In In re Continental Illinois Sec. Litig. (7th Cir. 1992) 962 F.2d 566, the court upheld the trial court’s refusal to approve a $10,000 award to a named plaintiff whose involvement consisted of a few hours of deposition and a ‘slight risk of being made liable for sanctions, costs, or other fees should the suit go dangerously awry.’ (Id. at pp. 571-572.) The court observed that the risk was slight ‘because the case was a clear winner and ... if the named plaintiff had dropped out because he couldn’t hope to be compensated for his modest efforts there were plenty of others to take his place without demanding compensation. The implicit reasoning is that the market would have produced a named plaintiff willing to charge a price of zero ....’ (Id. at p. 572.) The court observed, however, that an incentive award was not per se inappropriate. ‘Since without a named plaintiff there can be no class action, such compensation as may be necessary to induce him to participate in the suit could be thought the equivalent of the lawyers’ nonlegal but essential case-specific expenses, such as long-distance phone calls, which are reimbursable.’ (Id. at p. 571.) “Here, there was considerable risk that the case would be unsuccessful, thus exposing Edelist to costs or sanctions. Where the litigation resulted in a $7 million settlement fund and the value of the injunctive relief as much as $50 million, the modest $2500 incentive award to Edelist for merely ‘lending his name to the caption’ was not an abuse of discretion.”

With the modification, we are considering asking the 4th District to publish the case so that we can all stop citing (and attaching copies of) 7th Circuit authority in support of our final fairness motions.

Northrop Meal Period Settlement Approved

Our $2 million settlement in the Northrop meal period case was given final approval at a final fairness hearing on Monday, July 10, 2006. There were no objections. Approximately 90% of the class participated in the settlement. We will be moving as quickly as possible to have the Los Angeles County Superior Court enter judgment on the order and findings issued by Justice Trotter as general referee. We will post further details on www.northroplawsuit.com, including the expected payment date, as such details become available.

Employee 9, L'Oreal 0

In a unanimous decision authored by Justice Baxter, the California Supreme Court has held that an employee’s whose employment terminates upon the completion of an agreed-upon period of employment or a specific task, the employee has been “discharged” within the meaning of Labor Code § 201 such that “the wages earned and unpaid at the time of discharge are due and payable immediately. As we expected, Smith v. Superior Court found in favor of employees' rights and discussed, among other things, the absurdity that would have resulted if prompt payment laws applied to "bad" employees who did not fulfill their obligations and were fired, but did not protect employees who fulfilled their teams of employment. The holding was stated as follows:

Excluding employees like plaintiff from the protective scope of sections 201 and 203 would mean that employees who fulfill their employment obligations by completing the specific assignment or duration of time for which they were hired would be exposed to economic vulnerability from delayed wage payment, while at the same time employees who are fired for good cause would be entitled to immediate payment of their earned wages (§ 201) and many employees who quit without fulfilling their employment obligations would have a right to wage payment no later than 72 hours after they quit (§ 202). While we are not prepared to say the Legislature could not validly adopt a statutory scheme that operated in this fashion, our review of the relevant statutory language and the overall statutory scheme, the legislative history, and the intended purpose of the immediate wage payment legislation to address the economic vulnerability of discharged employees and potential harm to the public, leads us to conclude the discharge element of sections 201 and 203 may be satisfied either when an employee is involuntarily terminated from an ongoing employment relationship or when an employee is released after completing the specific job assignment or time duration for which the employee was hired.

The opinion states or repeats a number of excellent quotations that can be included in many briefs discussing wage and hour issues, including:

The public policy in favor of full and prompt payment of an employee’s earned wages is fundamental and well established.

Delay of payment or loss of wages results in deprivation of the necessities of life, suffering inability to meet just obligations to others, and, in many cases may make the wage-earner a charge upon the public.

California has long regarded the timely payment of employee wage claims as indispensable to the public welfare:  “It has long been recognized that wages are not ordinary debts, that they may be preferred over other claims, and that, because of the economic position of the average worker and, in particular, his dependence on wages for the necessities of life for himself and his family, it is essential to the public welfare that he receive his pay when it is due.

An employer who knows that wages are due, has ability to pay them, and still refuses to pay them, acts against good morals and fair dealing, and necessarily intentionally does an act which prejudices the rights of his employee.

[T]he policy involves a broad public interest, not merely the interest of the employee.

Finally, defendant relies on Hale v. Morgan (1978) 22 Cal.3d 388 (Hale) and other authorities in asserting that penalties are never favored by courts of law or equity and that statutes imposing penalties or creating forfeitures must be strictly construed.  (Hale, at p. 401; see also No Oil, Inc. v. Occidental Petroleum Corp. (1975) 50 Cal.App.3d 8, 29.) These authorities and principles do not aid defendant’s position.  The rule of strict construction of penal statutes “has generally been applied in this state to criminal statutes, rather than statutes which prescribe only civil monetary penalties.”  (People ex rel. Lungren v. Superior Court, supra, 14 Cal.4th at p. 312.)  Moreover, Hale, supra, 22 Cal.3d 388, “did not purport to alter the general rule that civil statutes for the protection of the public are, generally, broadly construed in favor of that protective purpose.”  (People ex rel. Lungren v. Superior Court, supra, 14 Cal.4th at p. 313.)

The opinion is also filled with colorful historical references, including a discussion of the treatment of seasonal Alaska cannery workers, and how the Bureau of Labor Statistics (then the agency that enforced wage-related legislation) considered their plight “a grave one, for it must be borne in mind that, when you cast several thousand irresponsible men who are penniless—or almost penniless—adrift in [San Francisco], after they have toiled for five or six months—you add a large factor to the criminal element of the community."

For those looking for hints about where the justices might lean on the Murphy v. Kenneth Cole Productions case, there were some interesting comments about looking to a legislative scheme as a whole, including other related statutes, in order to glean the proper construction, and considering where, by article and division, a code section appears, to determine legislative intent. We think this discussion suggests good news for employees in that debate.

Congratulations to to Petitioner's counsel Kevin Ruf,Lionel Glancy and Avi Wagner, as well as Peter Rukin, Cynthia Rice, Julia Montgomery and others who worked on the amicus briefs.

You can download the full text of Smith v. Superior Court here in pdf or Word format.

L'Oreal Decision Coming Today

The California Supreme Court is going to issue an opinion later this morning in Smith v. Superior Court of Los Angeles County (L’Oreal USA, Inc., Real Party in Interest). This case presents the following issue:

When an employee’s employment terminates upon the completion of an agreed-upon period of employment or a specific task, has the employee been “discharged” within the meaning of Labor Code section 201 such that “the wages earned and unpaid at the time of discharge are due and payable immediately”?

We will discuss it later today if time permits, but we have a final fairness hearing and an MSC today, so we probably won't comment until tomorrow.

DOL Opinion Letter on Volunteerism

The U.S. Department of Labor has issued a new opinion letter setting forth the common sense rule that volunteer employees cannot volunteer to perform the same work they are paid to do. In this case, volunteers who chaperoned field trips and bingo games were not covered under FLSA, but only because the "services are not the same type of service the employee is employed to perform and take place outside of the employee’s normal working hours."

Starbucks Tip-Sharing Case Gets Ruling

A San Diego Superior Court judge reversed her earlier tentative ruling and ruled that a group of Starbucks employees can proceed to trial on a class action alleging that they were unlawfully forced to pool and share their tips with shift supervisors. The case, Chou v. Starbucks Corp., could affect more than 100,000 at over 1,400 California Starbucks locations. Judge Patricia Yim Cowett had issued a tentative ruling against the class, which was certified in March, but after hearing argument on the matter, took the issue under submission for a week, and reversed course. Congratulations to class counsel Terry Chapko and Eric Aguilera.

The general rule on tip-pooling in California is that employees who serve the public and receive tips can be required to pool their tips with the other tipped employees, but owners and management are not permitted to take any share of those tips. In the Starbucks case, the issue is whether shift supervisors are considered "management" for the purpose of determining eligibility for tip pool revenues.

Starbucks did secure one favorable ruling, in which the judge threw out "waiting time penalties" on behalf of former employees who might have been eligible for up to 30 days pay for having to wait too long after termination or resignationto receive their wages. Tips, like most employee compensation, are considered wages under the California Labor Code.

The Burlington Buzz

This is off topic for a wage and hour blog, but most wage and hour lawyers also engage in other kinds of employment related litigation, so we have to at least mention the U.S. Supreme Court's recision landmark decision in Burlington Northern & Santa Fe Railway Co. v. White, which held that employers may be held liable on retaliation claims for a wide variety of retaliatory acts. The elements of a retaliation claim are three-fold: (i) an employee engaging in a protect activity; (ii) an employer taking an "adverse employment action" and (iii) a causal link between the first two elements.

What is an  "adverse employment action?" The SCOTUS has now informed us that a plaintiff must show that a reasonable employee would have found the action materially adverse, which means it well might have "dissuaded a reasonable worker from making or supporting a charge of discrimination." In this case, a 37 day unpaid suspension, later converted to a paid suspension was an "adverse employment action," as was an assignment to more physically difficult job duties.

We were not surprised by the ruling. We once took a case in which the employee was told that if he engaged in the protected activity, he would be transferred to Chicago, where he would "spend the winter working 20 stories up on a cold I-beam" for a construction company. He stood his ground, but resigned in the face of the threatened transfer. The case settled for a reasonably handsome sum.

Anyhow, we took a long weekend and don't much feel like blogging today, so we'll point you in the direction of some other good legal blogs that feature recent commentary on the case, such as SHRH, Nathan Newman, the SCOTUSblog, and the Workplace Prof Blog, along with some news media whose articles included some interesting quotes from practitioners, including: The Houston Chronicle Ruling widens ability to sue; the Chicago Tribune High Court Widens Protection for Workers Against retaliation; the San Francisco Chronicle Ruling protects workers from retaliation Firms can't punish employees who file bias complaints; MSNBA US workers win more power in job discrimination lawsuits; the Seattle Times Court makes it easier for workers to sue; the NY Times Supreme Court Gives Employees Broader Protection Against Retaliation in Workplace.

Dobbs: Congress Stiffs Working Americans

Lou Dobbs is not exactly the champion of the little guy, but even he took offense at the recent Congressional pay raise in the face of still another session of Congress passing without a raise in the minimum wage. Dobbs write:

With no Congressional action on raising the minimum wage since 1997, inflation has eroded wages. The minimum wage in the 21st century is $2 lower in real dollars than it was four decades ago and now stands at its lowest level since 1955, according to the Economic Policy Institute and Center on Budget and Policy Priorities

And the standard argument that raising the minimum wage costs jobs, Dobbs revealed this reality:

The myth that raising the minimum wage will lead to job cuts is just that: a myth. In fact, research suggests just the opposite. According to the Fiscal Policy Institute, since 1998, states with higher minimum wages experienced better job growth than states paying only the federal minimum wage. Among small retail businesses in those higher minimum-wage states, job growth was double the rest of the country.

Lou Dobbs: a conservative with both a brain and a heart.

Happy Anniversary To Us

We never post on weekends or holidays, but today, we are celebrating our ten year anniversary as a business. Until June 1996, Michael Walsh worked as a defense lawyer in large California law firms. On July 1, 1996, he and another associate opened the law offices of Draper & Walsh. After Mr. Draper's departure, it became Walsh & Associates, and now operates as Walsh & Walsh, P.C. It's been ten years, precisely, since we stopped answering to The Man, and we've thoroughly enjoyed it.

Most Unpaid Internships Are Unlawful

As intern came to us recently and asked if her internship, which was unpaid, complied with the wage and hour laws. It did not; she had a handsome claim for unpaid wages. Interns who do "volunteer work" or other unpaid training programs are entitled to be paid minimum wage, overtime, if applicable, and they are entitled to meal periods and rest periods, just like any other employee. When must an employer pay for the intern's work?

The answer isn't always always, but it comes close. The U.S. Department of Labor (DOL) has set a standard under the Fair Labor Standards Act (FLSA). As part of that standard, the DOL has developed six criteria for determining whether a novice worker is a paid performer or a lawfully unpaid learner or trainee:

1. The training, even though it includes actual operations of the facilities of the employers, is similar to that which would be given in a vocational school.
2. The training is for the benefit of the student.
3. The student does not displace a regular employee, but works under the close observation of a regular employee or supervisor.
4. The employer provides the training and derives no immediate advantage from the activities of the student; and on occasion, the operations may actually be impeded by the training.
5. The student is not necessarily entitled to a job at the conclusion of the training period.
6. The employer and the student understand that the student is not entitled to wages for the time spent training.

Not all six factors have to be present in order for the individual to be considered a trainee. The experience, however, should look more like a training/learning experience than a job. We find that the third and fourth factors are often lacking.

If you do work, other than pure practice, or work on dummy files, you are probably entited to get paid, and your claim can go back four years. We certainly hope you weren't an unpaid worker for four years.

It is unclear whether the 4th prong in this analysis renders traditional college internships unlawful. They are usually part of the curriculum, but participants tend to do actual work, to get a feel for the business world. Several DOL rulings, while not directly addressing the criterion, suggest that as long as the internship is a prescribed part of the curriculum, is part of the school's educational process, and is predominately for the benefit of the student, the fact that the employer receives some benefit for the student's services does not make the student an employee for purposes of wage and hour law.

A list of questions collected by R.K. Kaplan, Legal Counsel, National Association of Colleges and Employers, has been prepared to try to distinguish between a proper internship and an underpaid/unpaid trainee. A legitimate internship program should be able to answer "yes" to at least half the following questions if an unpaid internship is being contemplated:

1. Is the work that you are offering an integral part of the student's course of study?
2. Will the student receive credit for the work or is the internship required for graduation?
3. Does the student have to prepare a report of his/her experience and submit it to a faculty supervisor?
4. Have you received a letter or some other form of written documentation from the school stating that the internship is approved/sponsored by the school as educationally relevant?
5. Will the student perform work that other employees also perform, with the student doing the work for the purpose of learning and not necessarily performing a task for the employer?
6. Is the student working and providing benefit to you less than 50 percent of the time and/or is the student in a shadowing/learning mode?
7. Will you provide an opportunity for the individual to learn a skill, process, or other business function, or operate equipment?
8. Is there educational value to the work performed, that is, is it related to the courses the person is taking in school?
9. Is the individual supervised by one of your staff members?
10. Is it clear that a job is not guaranteed upon completion of the training or completion of the person's schooling?

The dollar amounts can be bigger than you think. If an employee works just four weeks as an unpaid intern, the minimum wage due would be $1,080. The aggreived intern would also be entitled to $1,620 in waiting time penalties. The intern is also entitled to recover interest and attorney's fees. If the internship lasted more than 8 hours of work per day, overtime pay was due, and interns are entitled to the same paid rest periods and unpaid meal periods as other employees. Often, the claims of a few or all of the affected employees can be brought in a single case.

If you have worked an unpaid internship in the last four years and have questions about your rights, feel free to call us at (714) 544-6609.