Wage Law

You may have read last week in the Los Angeles Times about a $2.5 million federal jury verdict in a wage and hour class action against the Chinese Daily News. Here are some more details.

The case is entitled Wang et al v. Chinese Daily News Inc et al, U.S. District Court, Central District of California, case number 2:04-cv-01498-CBM-JWJ. Plaintiffs Lynne Wang, Yu Fang Ines Kai, and Hui Jung Pao, on behalf of themselves and all others similarly situated, filed this suit on March 5, 2004, alleging multiple labor violations by Defendant Chinese Daily News, Inc. pursuant to the Fair Labor Standards Act ("FLSA"), the California Business and Professions Code § 17200 et seq. and the California Labor Code. Defendant publishes the largest Chinese language newspaper in North America. Plaintiffs are current and former employees of Defendant's Monterey Park office, which has nearly 200 employees. None of the Plaintiffs is a native English speaker, and some cannot read or write in English. Plaintiffs allege that Defendant violated California Labor laws by denying its employees the following protections: (1) overtime wages and statutory penalties to which they are entitled; (2) the opportunity to take meal and rest breaks or to receive appropriate penalties in lieu of such breaks; and (3) appropriate payroll records and itemized wage statements containing the information required by state law.

In November 2004, Judge Consuelo B. Marshall granted a motion certifying the class under FRCP 23(b)(2). The order provided that:

1. The class is certified with respect to the following claims set forth in the Plaintiff Complaint, and all issues and defenses applicable to such claims: Second Claim for Relief (failure to pay overtime compensation and other wages, failure to pay wages on termination, failure to provide accurate itemized wage statements, failure to provide paid breaks and unpaid meal breaks, and failure to pay of one hour of additional pay for each missed break) and the Third Claim for Relief (unfair business practices under Cal. Bus. and Prof. Code 17200, et seq.). 2) The class is certified on behalf of all former, current, and future non-exempt employees of Defendants who worked at Chinese Daily News in Monterey Park, California at any time since March 5, 2000.

The case lead to several published trial court decisions. After a motion for reconsideration, the court issued a certification order published as Wang v. Chinese Daily News, Inc. (CD Cal., Jan. 20, 2005) 231 F.R.D. 602, pet.denied by Wang v. Chinese Daily News, 2005 U.S. App. LEXIS 29407 (9th Cir. Cal., Aug. 5, 2005). The court reasoned that the numerosity requirement was satisfied where the evidence presented by the employer indicated that approximately 40 current employees in the Monterey Park Office were classified as exempt. This left approximately 160 employees who were classified as non-exempt by the employer. The court also found that the employees set forth numerous common questions of law and fact arising from the employer's alleged pattern of violating state labor standards. Additionally, since the named plaintiffs raised the same Labor Code violations as other putative class members, their claims were typical of the class. Next, the court found that the class should be certified under Rule 23(b)(2). The court reasoned in part that the Second Claim for Relief appeared to be predominantly for monetary damages. Moreover, California's wage and hour laws did not provide an explicit, private right to injunctive relief.

The defendant's later motion to decertify the class action and collective action under the FLSA was denied at Wang v. Chinese Daily News, 2006 U.S. Dist. LEXIS 43274 (C.D. Cal., May 9, 2006). Defendant argued that the class no longer fulfilled Rule 23(a)(1) or (a)(4) in light of the numerous opt outs filed. The Plaintiffs filed a motion to invalidate the opt outs.

The plaintiffs' motion resulted in an order invalidating opt-outs, requiring a curative notice, and restricting the defendant's communications with the class. Wang v. Chinese Daily News, Inc., 236 F.R.D. 485 (June 6, 2006).

A court's authority under Rule 23(d) includes the invalidation of opt outs where the court finds that the opt outs were procured through fraud, duress, or other improper conduct. See, e.g., Kleiner v. First National Bank of Atlanta, 751 F.2d 1193, 1202 (11th Cir. 1985); Impervious Paint Indus. v. Ashland Oil, 508 F. Supp. 720 (D.Ky. 1981); Georgine v. Amchem, 160 F.R.D. 478 (E.D. Pa. 1995). Courts need to ensure that individual decisions to opt out are independent and free from coercion. Manual for Complex Litigation, Fourth § 21.33 (2004). It is obviously in defendants' interest to diminish the size of the class and thus the range of liability by soliciting opt out requests. Kleiner, 751 F.2d at 1202. The danger of improper tampering is only enhanced when, as here, the class and the class opponent are involved in an ongoing business relationship. Id. Indeed, the relationship at issue in Kleiner was between a bank and its borrowers; here the relationship is even more potentially coercive where Defendants are the individuals' employers and there is evidence that implicit and explicit threats were made linking participation in the lawsuit with job security. ... Where there is unsupervised, unilateral communications with the putative class members, there is a particular risk of the sabotage of informed and independent decision-making. Kleiner, 751 F.2d at 1203.

Finally, a few months before trial, the court granted a summary judgment motion by the plaintiffs regarding liability on several counts. Wang v. Chinese Daily News, Inc. (C.D. Cal., 2006) 435 F. Supp. 2d 1042, 11 Wage & Hour Cas. 2d (BNA) 998. (under Cal. Lab. Code § 227.3 the employer's "buy back" of unused, but accrued, vacation days should have been computed by reference to the employees' regular rate of pay, the wage statements violated Cal. Lab. Code § 226, and reporters and salespersons were not exempt employees under FLSA). The court also ruled (at pages 1058-1059) that the hour of pay for break violations, under Labor Code § 226.7, was a wage, not a penalty.

After reading the various California appellate opinions on the matter, this Court finds that the stronger and more persuasive argument is in favor of characterizing the compensation as a wage, and thus applying the longer statute of limitations. Courts that have so found have noted that payments for violations of the meal and rest period requirements are restitutionary in nature. Employees earn an additional hour of pay when they have not been given their break. Such compensation is akin to the payment of overtime wages. Second, courts have noted that characterizing the compensation as wages is consistent with the definition of wages found in the California Labor Code, which is "all amounts for labor performed by employees." Under Section 226.7, employees are paid an amount for labor performed during their meal break or rest period. Third, courts have held that the statute is self-executing, which further supports that the compensation is not a penalty, The statute creates an affirmative duty on the employer to provide one hour's pay for each day an employee works through her meal or rest period. Thus, the employee is immediately entitled to the Section 226.7 payment, akin to the immediate entitlement to overtime. See, e.g., National Steel & Shipbuilding Co. v. Superior Court, 135 Cal. App. 4th 1072, 38 Cal. Rptr. 3d 253 (2004). The Court finds that Section 226.7 compensation is properly characterized as wages and accordingly finds that the four-year statute of limitation applies here.

The case went to trial in November 2006. In January 2007, after 16 days of trial, the jury returned a unanimous verdict awarded the employee $2.5 million for violating state and federal labor laws concerning overtime, meal and rest breaks. Congratulations to Virginia Keeny, Randy Renick, and Cornelia Dai, who represented the class at trial.

Incidentally, this case makes for the third rest period certification we've heard about. The other two include a case our firm is handling against Main Street Restaurant Group, Inc. (TGI Friday's franchisee) and a case against the Brinker Restaurant Group. If you know of others, let us know.