The Supreme Court will review Harris v. Superior Court (Liberty Mutual Insurance) (2007) 154 Cal.App.4th 164, a case involving the administrative exemption as applied to certain insurance company claims adjusters under Wage Order 4-2001. A statement of issues has not yet been posted. We previously discussed the case in a post last August.
The Supreme Court closed and transferred two cases for reconsideration in light of Gentry v. Superior Court (2007) 42 Cal.4th 443. The two cases, both of which were discussed here previously, are Massie v. Ralphs Grocery and Konig v. U-Haul Co. of California.
Massie:
Petition for review after the Court of Appeal affirmed orders denying petitions to compel class arbitration in a civil action. The court ordered briefing deferred pending decision in Gentry v. Superior Court (S141502), which presents issues regarding the enforceability of an arbitration provision that prohibits employee class actions in litigation concerning alleged violations of California's wage and hour laws.
The above-entitled matter is transferred to the Court of Appeal, Second Appellate District, Division Seven, with directions to vacate its decision and to reconsider the cause in light of Gentry v. Superior Court (2007) 42 Cal.4th 443. (Cal. Rules of Court, rule 8.528(d).)
Konig:
Petition for review after the Court of Appeal affirmed an order granting a motion to compel arbitration in a civil action. The court ordered briefing deferred pending decision in Gentry v. Superior Court (S141502), which presents issues regarding the enforceability of an arbitration provision that prohibits employee class actions in litigation concerning alleged violations of California's wage and hour laws.
The above-entitled matter is transferred to the Court of Appeal, Second Appellate District, Division Five, with directions to vacate its decision and to reconsider the cause in light of Gentry v. Superior Court (2007) 42 Cal.4th 443. (Cal. Rules of Court, rule 8.528(d).
[Update] The court did the same in three other cases:
Dunn v. Superior Court (Kroger Co.):
Application for stay and petition for review GRANTED. Further action in this matter is deferred pending consideration & disposition of a related issue in Gentry v. Superior Court, S119334 and Murphy v. Kenneth Cole Productions, Inc., S140308 (see Cal. Rules of Court, rule 8.512(d)(2)), or pending further order of the court. Submission of additional briefing pursuant to Cal. Rules of Court, rule 8.520, is deferred pending further order of the court.
The above-entitled matter is transferred to the Court of Appeal, Second Appellate District, Division Two, with directions to vacate its decision and to reconsider the cause in light of Gentry v. Superior Court (2007) 42 Cal.4th 443. (Cal. Rules of Court, rule 8.528(d).)
Petition for review after the Court of Appeal reversed an order denying a motion to compel arbitration. The court ordered briefing deferred pending decision in Gentry v. Superior Court (S141502), which presents issues regarding the enforceability of an arbitration provision that prohibits employee class actions in litigation concerning alleged violations of California's wage and hour laws.
In light of the decision in Gentry v. Superior Court (2007) 42 Cal.4th 443, review in the above-entitled matter is dismissed. (Cal. Rules of Court, rule 8.528(b)(1).)
and Jones v. Citigroup:
Petition for review after the Court of Appeal reversed an order denying a motion to compel arbitration in a civil action. The court ordered briefing deferred pending decision in Gentry v. Superior Court (S141502), which presents issues regarding the enforceability of an arbitration provision that prohibits employee class actions in litigation concerning alleged violations of California's wage and hour laws.
The above-entitled matter is transferred to the Court of Appeal, Fourth Appellate District, Division Three, with directions to vacate its decision and to reconsider the cause in light of the decision in Gentry v. Superior Court (2007) 42 Cal.4th 443. (Cal. Rules of Court, rule 8.528(b)(1).)
To our knowledge, that means that all Gentry companion cases are now back at the trial courts or Courts of Appeal.
The default statute of limitations for an action to recover a statutory penalty is one year, unless the statute provides otherwise. Code of Civil Procedure § 340 ("Within one year: (a) An action upon a statute for a penalty or forfeiture, if the action is given to an individual, or to an individual and the state, except if the statute imposing it prescribes a different limitation.") Labor Code § 203, the statute for recovering waiting time penalties for failure of an employer to promptly pay an employee's final wages specifies a longer period:
“If an employer willfully fails to pay . . . any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days. . . . [¶] Suit may be filed for these penalties at any time before the expiration of the statute of limitations on an action for the wages from which the penalties arise.”
So it's pretty clear that an employee suing for waiting time penalties after, say, two years, shouldn't have to worry about those pesky statutes of limitations, right? As Lee Corso would say, "Not so fast, my friend."
In McCoy v. Superior Court (Kimco Staffing Services, Inc.) (2007) __ Cal.App.4th __, Derrick McCoy filed a class action complaint arising from Kimco Staffing's alleged practices of making employees wait for their final paycheck until the next regular payday. The defendant sought to strike parts of the complaint, saying that employees who had only a waiting time penalty claim, and who left Kimco Staffing's employment more than a year before the complaint was filed, should have their claims barred. Orange County Superior Court Judge Stephen Sundvold agreed, and struck portions of the complaint seeking waiting time penalties for late payment of wages. The plaintiff filed a writ petition, claiming that, pursuant to Labor Code § 203, even when an action seeks waiting time penalties only, the statute of limitations should be the same as that which would apply to a claim for wages. That measure, he argued, was four years (applying the four-year statute for unfair competition). The Court of Appeal disagreed, holding that
when a suit seeks for only waiting time penalties, the one-year statute under section 340(a) governs.
Why? Because Section 203 was enacted to give employees additional time to sue for waiting time penalties when they also bring an action for late wages. "Nothing in the statute otherwise negates the one-year period in section 340(a)."
Plaintiff contends the statute of limitations in section 203 applies to any action for penalties, regardless of whether there is also a claim “for the wages from which the penalties arise.” He points to Code of Civil Procedure § 312, which directs: “Civil actions, without exception, can only be commenced within the periods prescribed in this title [setting out the general statutes of limitations], after the cause of action shall have accrued, unless where, in special cases, a different limitation is prescribed by statute.” Plaintiff asserts that section 203 is “one of these ‘special cases’” that contains its own statute of limitations, thereby supplanting section 340. We agree with plaintiff to the extent the period set out in section 203 applies to actions for waiting time penalties sought in conjunction with back wages. But for suits seeking penalties alone, the objective of section 203, the legislative intent, and the common sense meaning of the section’s language persuade us defendant’s interpretation is correct.
The opinion is worded fairly strongly, and the court falls barely short of dismissing the plaintiff's arguments as silly. The court gave no weight to dicta in Murphy v. Kenneth Cole Productions, Inc., that appeared to support McCoy's view of Section 203:
In reaching its conclusion, the court referred to section 203, noting that the Legislature understood “it could, if it so desired, trigger a one-year statute of limitations by labeling a remedy a penalty.... Knowing that remedies constituting penalties are typically governed by a one-year statute of limitations, the Legislature expressly provided that a suit seeking to enforce the section 203 penalty would be subject to the same threeyear statute of limitations as an action to recover wages. [Citation.]” (Murphy v. Kenneth Cole Productions, Inc., supra, 40 Cal.4th at pp. 1108-1109.) Like the trial judge, we are not persuaded by plaintiff’s claim this dictates the one-year statute does not apply where an employees sues only for waiting time penalties.
Because of the holding limiting the claims to one year, the court did not address McCoy's claim that the "expiration of the statute of limitations on an action for the wages from which the penalties arise" is four years under the unfair competition theory. Handicapping this one, we would have found interesting the undecided issue of whether the measure is three years or four, but we wouldn't have given the employer much of a chance on the one-year issue.
You can download the full text of McCoy v. Superior Court here in pdf or word format.
Statement of issues on review have finally been posted in Arias v. Superior Court (Angelo Dairy), no. S155965:
Petition for review after the Court of Appeal granted a petition for peremptory writ of mandate. This case presents the following issues:
(1) Must an employee who is suing an employer for labor law violations on behalf of himself and others under the Unfair Competition Law (Bus. & Prof. Code, section 17203) bring his representative claims as a class action?
(2) Must an employee who is pursuing such claims under the Private Attorneys General Act (Lab. Code, § 2699) bring them as a class action?
Apparently, Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (2007) 148 Cal.App.4th 39, is the lead case. The first issue looks like an interesting one. The second one looks like a no-brainer.
The Department of Labor once used Batgirl, Batman & Robin to promote equal pay statutes.
The California Prevailing Wage Law mandates the payment of prevailing wages to workers employed in the execution of a contract for public works. Labor Code § 1771. In Williams v. SnSands Corporation (2007) __ Cal.App.4th __, Fred H. Williams, an employee truck driver for S&S Trucking (SnSands Corporation), sued for unpaid wages for hauling materials to, and off-hauling materials from, a public works construction project. The trial court applied prevailing wage standards and awarded Williams $76,853.27 in prevailing wages for his off-hauling work. The Court of Appeal reversed.
S&S Trucking’s off-hauling of the generic materials to a locale bearing no relation to the public works project site, as described in the two scenarios, was no more an integral part of the process of the public works project than the delivery of generic materials to the public works site by a bona fide material supplier. In the absence of evidence that, either by contract or custom, the off-hauling described in scenarios C and D was “‘an integrated aspect of the “flow” process of construction,’” (Sansone, supra, 55 Cal.App.3d at p. 444, quoting Green, 12 supra, 128 N.W.2d at p. 7), the prevailing wage statute was not applicable to the offhauling performed by Williams.
For the next 60 days or so, you can download Williams v. SnSands Corporation in pdf or word format.
While an undocumented alien generally cannot recover front pay in employment litigation, anyone, documented or not, is generally entitled to recover wages due for actual labor performed, even if they laborer lacked the requisite papers for lawful employment. Employers who discover that they owe wages to undocumented aliens often do not know how to process the payroll without a valid social security number. There is, however, a way to do it. The employee needs to obtain an individual taxpayer identification numbers (ITIN).
Since May 29, 1996, the IRS has assigned ITINs to aliens who are otherwise ineligible for SSNs but who need taxpayer identification numbers for tax purposes. 61 Fed. Reg. 26,788. A valid ITIN is a nine-digit number, like a social security number or any taxpayer identification number, and always begins with a 9. An ITIN is a tax processing number for both resident and nonresident aliens, as well as their spouses and dependents. It can be used only for income tax purposes. It does not entitle them to social security benefits or the earned income tax credit. It does not create any inferences regarding their immigration status. It bestows upon them no right to work in the U.S. Aliens must apply for an ITIN on IRS Form W-7 (Application for IRS Individual Taxpayer Identification Number). IRS Tax Topic 857.
The application must show a federal tax purpose for seeking the ITIN. In most cases, this will require attaching a federal tax return to the most current revision of the Form W–7 available. Along with the completed Form W-7, they will submit identity documents, and either a federal tax return, or other documentation to show the federal tax purpose for which they need the ITIN.
The identity documents are needed to verify both identity and foreign status; one must include a recent photograph. If one submits an original valid passport (or a notarized or certified copy of a valid passport) there is no need to submit any other documents. If one does not submit a passport document, one must provide a combination of documents (at least two or more) that are current and that (1) verify identity (that is, contains a name and a photograph), and (2) support your claim of foreign status.
If the ITIN is for a dependent, the documentation must prove that the dependent lives in the United States, Mexico, Canada, Japan, The Republic of Korea, and India. If the dependent is a minor, the documentation must establish the relationship between the dependent and the representative signing the application on the dependent's behalf. Such documentation could include a birth certificate, adoption papers, or other court-appointed papers showing legal guardianship.
In addition to a passport, examples of acceptable documentation include: national identification card (showing photo, name, current address, date of birth and expiration date); civil birth certificate; foreign driver's license; or visa. A complete list of acceptable documentation can be found in the instructions to the Form W-7. The documents must be originals or certified copies.
Aliens can apply for an ITIN by mail or in person at most IRS offices in the United States. If they apply in person, the documents will be reviewed and returned to them. Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number, has a list of IRS offices abroad which can accept Form W–7. If applying by mail, use the address shown in the Form W–7 instructions and in Publication 1915. If the original documents have not been returned within 60 days, call 1–800–829–1040 (in the United States), or 1–215–516–2000 (outside the United States), to find out about the status. It takes approximately 4 to 6 weeks for the IRS to notify the application in writing of his or her ITIN. For more information, refer to Publication 1915. You may also want to obtain Publication 519, U.S. Tax Guide for Aliens. For information about who qualifies to be claimed as a dependent, refer to Topic 354.
No substantive posts today. We might put up a canned post tomorrow. One that we wrote a long time ago and never got around to posting.
Employment Practices Liability Insurance generally does not cover wage & hour liability, but we've seen a few cases recently where defendants had policies with ELPI riders that provided some cost of defense coverage for defending wage & hour cases. We've also heard of a few cases tendered under officers & directors policies where some money was put on the table by insurer, but no one wants to provide the specifics.
We overheard someone (not a speaker) at a recent seminar opining that Wal-Mart settled its California meal period case for a fraction of the amount of the jury verdict. Not true. The appeal is still pending, and just a few days ago, Wal-Mart received yet another extension of time to file its opening brief. Savaglio filed an opening brief on the plaintiffs' appeal on August 24, 2007. Wal-Mart's brief is due on Christmas Eve.
A wage & hour class action lawsuit brought against Staples Inc. on behalf of approximately 1,700 current and former assistant store managers in California has been settled for $38 million. The settlement is still subject to court approval. A trial had been scheduled to start earlier this month. The suit alleged that the stores misclassified assistant managers as exempt under overtime pay regulations. According to a 2003 SEC filing, the lawsuit alleged damages of up to $150 million. The company denied the claims and admitted no wrongdoing in the settlement. A spokesperson for the office products firm said that "Staples believes that its store labor model, which is based on a commitment to fair and respectful treatment of its associates, is fully compliant with applicable California law.''
Anyone who litigates exempt misclassification cases is familiar with the issue of concurrent duties. Plaintiff's lawyers like to argue a head-and-hands analysis, which essentially urges the court to pay attention to what the hands are doing. A manager who is wiping up spilled soda while simultaneously observing that his employees are not stripping off their mandatory work uniforms, beating customers with sticks and leaving work early isn't really doing management tasks while his hands grip the mop, notwithstanding his eyes darting across the store every few seconds. Employer's lawyers focus on concurrent duties, suggesting that a manager who wears many "hats" is engaged in management activities whenever one of those "hats" is a manager's hat.
One of the best published opinions regarding the executive exemption was Murphy v. Kenneth Cole Productions, Inc. (2005) 134 Cal.App.4th 728. In it, the First District Court of Appeal wrote a seven page analysis, at pages 7-14 of the slip opinion, under the sections entitled Overtime Compensation and Exempt Employees, Governing Regulations – Executive Exemption, Authority to Hire or Fire, Exercises Discretion and Independent Judgment, and Primarily Engaged in Exempt Duties. The analysis is great, and it includes one of our favorite lines ever written in any such analysis:
"Murphy was a nominal coxswain who performed most of the time as an oarsman alongside the rest of the crew."
Once the Supreme Court granted review of Murphy, under the California Rules of Court, it became improper to cite the Court of Appeal's opinion. The Supreme Court did not address the exempt/non-exempt issue on review, so it all that wonderful language just disappeared into the dustbin. Or did it?
We were arguing one of the appeals in our class actions a few months back when we saw another lawyer in another case stammer a bit when arguing a point on which his brief had relied heavily upon a case that had since been ordered reviewed. "Argue the rationale," the Justice told him. "You need not cite the case." So certainly one can argue the points raised in the Murphy opinion. But should you mention where you got that analysis?
There was an interesting discussion a few weeks ago on the Volokh Conspiracy regarding an attorney named Peter Cannon, who was sanctioned by a court in Iowa for plagiarizing in his briefs from a law review article that he did not mention. The case is In re Burghoff (S.D. Iowa Aug. 21). The U.S. Bankruptcy Court had this to say about Mr. Cannon using another person's analysis without attribution:
It is a violation of the Iowa Rules of Professional Conduct for an attorney to "engage in conduct involving dishonesty, fraud, deceit, or misrepresentation." Iowa Rules of Prof'l Conduct R. 32:8.4. Plagiarism, which is "[t]he deliberate and knowing presentation of another person's original ideas or creative expressions as one's own," Black's Law Dictionary (8th ed. 2004), is a form of misrepresentation. Iowa Supreme Court Bd. of Prof'l Ethics & Conduct v. Lane, 642 N.W.2d 296, 300 (2002); accord In re Lamberis, 443 N.E.2d 549 (Ill. 1982) (finding plagiarism constitutes deceit under Illinois Code of Professional Responsibility); cf. United States v. Jackson, 64 F.3d 1213, 1219 n.2 (8th Cir. 1995) (disapproving of a brief that "directly track[ed]" a circuit court opinion which the attorney did not cite)....
Mr. Cannon's acts of plagiarism burden the Court, undercut his client's cause, and generate criticism of the legal profession. Moreover, parroting a scholarly article in this way is not an effective type of advocacy. See Frith, 325 N.E. 2d at 189. More fundamentally, Mr. Cannon's disregard for the true authors' property rights in their ideas reveals a lack of integrity that reflects poorly on the legal profession. Lane, 642 N.W.2d at 300; Lamberis, 443 N.E.2d at 551. The egregiousness of Mr. Cannon's conduct requires an appropriate sanction....
Although one cannot "cite" was Murphy v. Kenneth Cole Productions, Inc. (2005) 134 Cal.App.4th 728, one certainly is free to borrow heavily from its analysis, and if one does so, wouldn't the obligation to attribute require at least letting the court know that you were using the words of the First District Court of Appeal, albeit from an opinion which is no longer citeable, but which was not reversed? After all, you wouldn't want to suffer the fate of Peter Cannon. You aren't trying to deceive the court through a blatant act of plagiarism. You just want to argue you point as eloquently as the First District Court of Appeal put it in 2005. Right?
Two recent California Supreme Court oral arguments 11/5/2007 (Sacramento) and 10/2/2007 (Special Educational Session From Santa Rosa) are available on video at http://www.calchannel.com.
Over at criticsrant.com, they have a system to rate a blog's reading level, which I assume means how well you need to be able to read in order to comprehend the whole thing. We rated:
The criteria aren't explained well, so this might mean that we don't write in clear concise English and you have to be fairly intelligent to understand us. Perhaps it just means that we write well, without a bunch of f-bombs and references to bodily functions and likes and you knows. Your guess is as good as ours.
When you plug in your website address and it rates your site, it offers you some html code to make it easy to post the results on your own blog, or myspace page or anywhere else html code can be displayed. The html code has a little blurb in it that markets a cash advance website. Some of the blogs we saw that displayed elementary school levels in their posts still had the little cash advance link. You don't see it here or on the other genius level blogs. Coincidence?
We had someone forward a press release informing us that a group of assistant managers for a 116 store fastener company have filed an overtime claim under California law and the FLSA. In Calhoun et al v. Fastenal Company, Civ. No. 07- CV- 5326, Northern District of California, two assistant managers who worked for Fastenal in California and Pennsylvania are bringing claims in a state law class action as well as an FLSA collective action. The case itself isn't that remarkable, but it does serve as a potential example of one unintended side effect of the passage of the Class Action Fairness Act (CAFA).
As long as plaintiffs expect the defendant to force the case into federal court under CAFA, the employees might as well add a nationwide FLSA collective action to the pleadings. As a result, CAFA may be triggering a lot more national FLSA collective actions than would otherwise have been filed. That may or may not be what happened with Calhoun, but after some of what we've seen in our cases and those of some close colleagues, the thought crossed our minds when we saw the press release.
A summary judgment in favor of UPS on a wage & hour misclassification case has been reversed by the Ninth Circuit. Here's the order is Marlo v. United Parcel Service, Inc. There wasn't much analysis needed:
Appeal from the United States District Court for the Central District of California, Dean D. Pregerson, District Judge, Presiding
Argued and Submitted October 17, 2007 Pasadena, California Before: KOZINSKI and McKEOWN, Circuit Judges, and JONES, District Judge.
Michael Marlo appeals the district court’s grant of summary judgment in favor of United Parcel Service (“UPS”) on his claim that UPS misclassified its FILED OCT 25 2007 CATHY A. CATTERSON, CLERK U.S. COURT OF APPEALS Full-Time Supervisors (“FTS”) as nonexempt employees. Summary judgment is appropriate where, viewing the evidence in the light most favorable to the nonmoving party, there is no genuine issue of material fact. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Marlo has raised material issues of fact related to whether the FTS “customarily and regularly exercise[] discretion and independent judgment.” Cal. Code Regs. tit. 8, § 11090(1)(A)(1)(d) (2005). Accordingly, summary judgment as to that issue was improper.
REVERSED AND REMANDED.
You can listen to the oral argument by going to the court's website at http://www.ca9.uscourts.gov/ca9/media.nsf/Media%20Search?OpenForm&Seq=2. Enter case number 05-56446 to download or launch the audio file. While both sides performed admirably during their remarks, it was quite apparent that there were triable issues that compelled the court to reverse the summary judgment. Judge Kozinski's parting words to Mr. Wilcox were: "Let me give you two words of advice: Set-tle." That ended any meaningful drama for parties waiting for the opinion.
The International Quality and Productivity Center will be hosting a seminar on Wage & Hour Claims (Implementing Effective Strategies for Dispute Resolutions and Class Actions) in New York City from November 28 to November 30. Depending upon how much you want to see, and whether or not you are in-house counsel, the rates vary from $549 to $3,397. The list of speakers is impressive, and since we are readying class action complaints against at least one of the companies whose in-house counsel will be speaking, we're contemplating attending. If you do defense work, or if you want an excuse to write off a trip to New York, you might want to check it out.
We've had quite a few people ask whether they can subscribe by email or do searches within the Wage Law blog. Until now, no. Now, you can. Let us know if you spot any glitches.
Michael Hassen of Jeffer, Mangels, Butler & Marmaro, who publishes the Class Action Defense Blog put up an interesting post last month about a case called Guevarra v. Progressive Financial. In it, the U.S. District Court ofr the Northern District of California denied class certification without prejudice, and ordered the putative class counsel to show cause why the case shouldn't be referred to the California State Bar. Ultimately, United States District Chief Judge Vaughn Walker did not refer the matter for discipline, but the fact that a District Court Judge pondered the idea is interesting, to say the least.
The plaintiff's counsel's "offense" was to agree to divide a putative class to separate the prosecution of claims under the Fair Debt Collection Practices Act (FDCPA) under circumstances where the putative class could seek more damages in multiple proceedings than in a single proceeding. The reason for this was a peculiarity in the FDCPA which capped damages in any class action at one percent of a company's net worth in . The District Court was outraged, and considered this a move done solely to increase attorney's fees. The court ignored the fact that the tactic also dramatically increased the potential recovery by the class because of the quirk in the FDCPA.
In response to the court’s order to show cause, counsel cites Mace v. Van Ru Credit Corp. (7th Cir 1997) 109 F.3d 338 as authorizing their tactics. But in Mace, the court declined to impose a duty on the plaintiff to bring suit on behalf of the broadest possible class. Mace does not, however, condone post-suit collusion between counsel in separate actions in order to cut a class in two.
Mace nevertheless highlights a troubling aspect of the FDCPA, 15 USC §§ 1692 et seq, which provides that:
(a) [A]ny debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person in an amount equal to the sum of:
(1) any actual damage sustained by such person as a result of such failure;
(2) (A) in the case of any action by an individual, such additional damages as the court may allow, but not exceeding $ 1,000; or (B) in the case of a class action,
(i) such amount for each named plaintiff as could be recovered under subparagraph (A), and (ii) such amount as the court may allow for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector; and
(3) ... the costs of the action, together with a reasonable attorney fee....(15 USC § 1692k)
The problem lies with the statutory limit on damages in § 1692k(a)(2)(b)(ii), which applies to each FDCPA class action, not to all FDCPA class actions involving a particular debt collector. This encourages the multiplication of proceedings. If the debt collector has a net worth of less than $50 million, then the class may recover only 1 percent of that amount. Accordingly plaintiffs might divide into 100 classes which each take 1 percent. If the debt collector is worth more than $50 million, then each class may recover only $500,000, and plaintiffs might divide into an increasing number of classes, each taking a bite at the golden apple until the company is broke.
Maybe we're missing something, but it appears to us that the class counsel was entirely in the right here, and that a class action was appropriate, and it was a superior means of litigating these claims, but that, according to the best interests of the class, it was logical and appropriate to separate the classes into logically related smaller groups so that fewer class members would have their claims reduced by the recovery cap under the FDCPA. We can see why a defendant wouldn't like this, but that's how Congress designed the statute.
The case, incidentally, was dismissed with prejudice after the show cause hearing, pursuant to a stipulation filed three months earlier.
One other bill that Governor Schwarzenegger might have signed was Assembly Bill 1711, sponsored by Assemblyman Lloyd Levine, which would have substantially revised meal and rest period requirements, including extending the time to complete an employee meal period, and would have made expert witness fees recoverable in many wage and hour cases.
Under existing law, the prevailing party, with certain exceptions, is entitled to an award of attorney's fees in an action brought for nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, or in an action brought for underpayment of the minimum wage or overtime compensation. This bill would add expert witness fees to the prevailing party in any such recovery.
Existing law requires an employer to provide an employee who works more than 5 hours per day with a meal period of not less than 30 minutes, unless the employee's total daily work period is not more than 6 hours, in which case it may be waived by mutual agreement. An employee working more than 10 hours per day must be provided with a second meal period of not less than 30 minutes, unless the total daily work period does not exceed 12 hours, in which case the 2nd meal period may be waived by mutual agreement only if the first meal period was not waived.
This bill would require that the first of these meal periods must be completed before the end of the 6th hour of work. The bill also would permit an employer and employee to agree to on-duty meal periods, as specified, and subject to certain specified conditions. The bill would further provide that these provisions relating to meal periods would not apply to any employee covered by a collective bargaining agreement that expressly provides for employee meal periods, among other specified working conditions. The bill would also provide that where a collective bargaining agreement exists, any authorized individual waivers of an employer must be exercised by the employee's authorized representative for collective bargaining purposes. Additionally, the bill would require all private and public employers to pay their employees an additional hour of compensation for each split shift day worked, as defined.
There was also a third part of the bill to reduce the hourly rate for computer programmer exemptions, which, as we mentioned earlier, made its way into Senate Bill 929:
Existing law requires that an employee in the computer software field be exempt from the requirement that an overtime rate of compensation be paid if certain conditions are met, including a requirement that the employee's hourly rate of pay is not less than $41.00 or the annualized full-time salary equivalent of that rate, provided that all the other requirements for exemption are met and that in each workweek the employee receives not less than $41.00 per hour worked. This bill would decrease the threshold hourly rate of pay from $41.00 to $36.00 for purposes of that exemption.
AB 1711 died in the Assembly without a vote.
As we mentioned this morning, Governor Schwarzenegger vetoed just about everything the Chamber of Commerce didn't like. The Chamber didn't hate all of the wage & hour measures passed this year, however. Schwarzenegger signed two wage & hour measures, both of which benefit employers:
Senate Bill 812 (Correa): Pharmacist alternative workweeks.
Existing law generally requires premium overtime rates of pay for work in excess of 8 hours in a day and work in excess of 40 hours in a workweek with specified exceptions, including where the employer and employees have agreed to an alternative workweek pursuant to specified procedures. The Industrial Welfare Commission, pursuant to constitutionally authorized delegated powers from the Legislature, has established regulations, denominated wage orders, governing wages, hours, and working conditions in various industries. Pharmacists, depending on the nature of their work, may be regulated by Wage Order 7, relating to the mercantile industry, or Wage Order 4, relating to professional, technical, clerical, mechanical, and similar occupations, including employees in the health care industry. Although both wage orders permit the adoption of alternative workweek schedules by agreement for those employees performing work in those industries, Wage Order 7 requires that any such agreement provide not less than 2 consecutive days off within a workweek, whereas, Wage Order 4 has no such restriction.
This bill would provide that pharmacists engaged in the practice of pharmacy who are employed in the mercantile industry, pursuant to Wage Order 7, shall be permitted to adopt alternative workweek schedules allowed by Wage Order 4, including alternative workweeks that can be adopted by employees working in the health care industry.
Senate Bill 929 (Codgill): Computer programmer exemptions / Prevailing wage determinations.
Existing law provides that 8 hours of labor constitutes a day's work. Under existing law, any work in excess of 8 hours in one workday and any work in excess of 40 hours in any one workweek and the first 8 hours worked on the 7th day of work in any one workweek is required to be compensated at the rate of no less than 11/2 times the regular rate of pay for an employee. Existing law exempts a professional employee in the computer software field from this overtime compensation requirement if the employee is primarily engaged in work that is intellectual or creative, the employee's hourly rate of pay is not less than $41, and the employee meets other requirements. This bill would decrease the hourly rate of pay requirement for this exemption to not less than $36. Existing law generally requires contractors and subcontractors performing work on public works, as defined, costing over $1,000 to pay to their workers the general prevailing rate of per diem wages, including these wage rates for holiday and overtime work, in the locality in which the public work is performed. Existing law provides that per diem wages includes both hourly wage rates and employer payments for employee benefits, as specified. Existing law requires the Director of Industrial Relations to determine per diem wages by referencing collective bargaining agreements, wage rates for federal public works, and, in certain instances, data from the labor organizations and employers associations, as specified. If the director determines that the general prevailing rate of per diem wages is the rate established by a collective bargaining agreement, and that collective bargaining agreement contains definite and predetermined changes during its term that will affect the rate adopted by the director, existing law requires the director to incorporate those changes into his or her prevailing wage determination.
This bill would authorize contractors and subcontractors, whenever the director's prevailing wage determination contains a predetermined change but does not specify how the change will be allocated between hourly wages and employer payments for benefits, to allocate payments equal to that change to either hourly wages or benefits for a specified time period, as provided. This bill would also provide that, if the allocation of a predetermined change is subsequently altered by the parties pursuant to the collective bargaining agreement that was the basis of the prevailing wage determination, a contractor or subcontractor may allocate payments of not less than the amount of the definite and predetermined change in accordance with either the originally published allocation or the allocation as altered in the collective bargaining agreement.
That's your California wage and hour law legislative year-end in review.
The big 2007 legislative push is over, and Governor Schwarzenegger vetoed just about everything the Chamber of Commerce didn't like. He vetoed:
Assembly Bill 124: This bill would extend the protections afforded to employees covered by an order of the commission to pool lifeguards and stage assistants who are employed by a city, county, or special district , to the extent not in conflict with the provisions of a memorandum of understanding reached between an employer and a recognized employee organization.
To the Members of the California State Assembly:
I am returning Assembly Bill 124 without my signature.
This bill would extend the meal and rest period provisions of the California Labor Code to lifeguards and stage assistants employed by local governments. This bill is unwarranted for two reasons. First, existing law has created confusion relative to when and how employers must provide meal periods to their employees. This confusion has resulted in countless lawsuits against employers filed under the so-called “Sue Your Boss” law, and has denied employees flexibility in determining when they will take their lunch break. Unfortunately, this bill does nothing to solve this problem but instead exacerbates it by establishing penalties for yet another group of employers. Second, the group of employees covered by this bill are employed by public entities and covered by collective bargaining agreements. Any changes to meal period requirements for these employees should be negotiated through those agreements.
Assembly Bill 377: This bill would require an employer who is a farm labor contractor, as defined, to disclose in the itemized statement up to 5 names and addresses of the legal entities that secured the employer' s services, except as provided. In addition, this bill would make technical, nonsubstantive changes. Because a willful violation of the bill's provisions would be a crime, this bill would impose a state-mandated local program. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason.
To the Members of the California State Assembly:
I am returning Assembly Bill 377 without my signature.
Last year, I vetoed similar legislation intended to help provide farmworkers with better information about the companies with which farm labor contractors are contracting. While I maintain my support for the concept of helping farmworkers secure all wages owed to them, I am still concerned that this bill does nothing to bring unlicensed farm labor contractors and others who flaunt the law into compliance. Those who have not bothered to obtain the necessary licensure required by the state or otherwise comply with labor laws are highly unlikely to comply with this new requirement. As such, the only practical effect of this bill is to impose a new liability on farmers and growers who have lawfully contracted with licensed contractors. I cannot support such a measure.
Assembly Bill 435: This bill would extend the statute of limitations to 4 years for a civil action by an employee to recover wages and to 5 years for actions in which there is willful misconduct of the employer.
To the Members of the California State Assembly:
I am returning Assembly Bill 435 without my signature.
This bill would extend the statute of limitations on specified civil actions against an employer to recover wages. This bill is intended, like others I have vetoed before, to eradicate the historical trend of women earning less than men for doing the same work. While I support this intent, I still do not believe the provisions of this bill or previous years’ legislation are necessary in order to achieve this goal. I maintain my concern that measures like this bill will encourage frivolous litigation against employers and have little impact on the fight against gender pay inequity.
Assembly Bill 504: This bill would require employers, other than the state and its political subdivisions, that are convicted of a crime involving fraud, misrepresentation, or misconduct related to a lockout, as defined, to make restitution to employees for lost wages and benefits. The bill would impose a state-mandated local program by changing the penalties for a crime. This bill would provide that no reimbursement is required by this act for a specified reason.
To the Members of the California State Assembly:
I am returning Assembly Bill 504 without my signature.
This measure would add additional penalties against an employer found to have engaged in fraud, misrepresentation, or misconduct during a lockout. As I noted in my veto of a similar measure last year, I am concerned that the failure to define fraud, misrepresentation, and misconduct in this bill creates potential ambiguity over the bill’s application.
Furthermore, I maintain my position that employees presently have sufficient remedies against employers that engage in fraud or misconduct during a labor dispute. The proponents of this measure have failed to justify a need to expand upon these remedies.
Assembly Bill 1043: This bill would make void and unenforceable as against public policy any provision in an employment contract that requires an employee, as a condition of obtaining or continuing employment, to use a forum other than California, or to agree to a choice of law other than California law, to resolve any dispute with an employer regarding employment-related issues that arise in California.
To the Members of the California State Assembly:
I am returning Assembly Bill 1043 without my signature.
This bill appears to create a solution in search of a problem. California law currently ensures that employees can not be subjected to unconscionable contract provisions that would force them to forego the protections of California law or litigate their claims in an inappropriate out-of-state forum. Moreover, this bill creates unnecessary and unhelpful uncertainties for the employers and employees concerning issues of federal preemption.
Lastly, I strongly support the right of parties to freely contract for the terms of their employment relationship. This bill fundamentally conflicts with that policy.
Assembly Bill 1707: This bill would require employers to maintain employment records for a specified time and to provide inspection and copies within a specified time to current and former employees or their representatives. The bill would authorize those employees to recover a $750 penalty from an employer for failure to do so and to bring an action to obtain compliance, and it would provide that a violation of its provisions constitutes an infraction.
To the Members of the California Assembly:
I am returning Assembly Bill 1707 without my signature.
This bill attempts to clarify existing law relative to employees’ access to personnel
records kept by their employer. While I support the intent of this measure, especially as
it relates to non-English speakers and others that may need help in understanding the
contents of their personnel records, this bill is too broad and exposes employers to unfair
and unnecessary liabilities. I encourage the proponents of this bill to work with the Labor
Commissioner to adopt regulations that help ensure that all employees can appropriately
avail themselves of their rights under current law.
Senate Bill 180: This bill would permit agricultural employees, as an alternative procedure, to select their labor representatives by submitting a petition to the Labor Board accompanied by representation cards signed by a majority of the bargaining unit. The board would be required to conduct an immediate investigation to determine whether to certify the labor organization as the exclusive bargaining representative for the particular agricultural employees.
To the Members of the California State Senate:
I am returning Senate Bill 180 without my signature.
Since I became Governor, I have made strengthening workplace protections for
agricultural workers one of my top priorities. I have added labor law enforcement
positions, reformed farmworker housing laws, and worked to adopt the first regulations in
the nation that ensure agricultural workers have appropriate access to shade. These added
protections are being implemented under existing law without the changes proposed by
this bill to the historic Agricultural Labor Relations Act (ALRA). The changes this bill
would make to the ALRA are unnecessary to continue our forward progress in ensuring a
better working environment for agricultural workers.By setting in place a “card-check” organizing process, SB 180 significantly changes the
protections afforded to all of California’s agricultural workers under the ALRA. This
“card-check” process fundamentally alters an employee’s right to a secret ballot election
that currently affords them the opportunity to cast a ballot privately without fear of
coercion or manipulation by any interested parties. This bill also limits the opportunity
for employees to hear and consider other viewpoints on unionization.For these reasons, I am returning SB 180 without my signature. However, I am directing
my Labor and Workforce Development Agency to work with the proponents of this bill
to ensure that all labor laws and regulations are being vigorously enforced, and to make it
absolutely clear to all concerned that my veto is premised on an expectation that
agricultural workers receive the full protections of the law.
Senate Bill 622: This bill would prohibit willful misclassification , as defined, of employees as independent contractors. The bill would authorize the Labor and Workforce Development Agency to assess specified civil penalties from persons or employers violating the bill.
To the Members of the California State Senate:
I am returning Senate Bill 622 without my signature.
Although this bill is intended to promote the worthy goal of ensuring employees are not intentionally misclassified as independent contractors, thus deterring employers from conduct which may give them unfair economic advantages against their competitors, this bill also creates new mechanisms and incentives for litigation where sufficient remedies already exist. In creating new and redundant exposure to litigation and sanctions, this bill may cause businesses to avoid use of the independent contractor model even where it may be appropriately utilized. This will ultimately contribute to a negative perception of California as an inhospitable business climate.
Essentially, every bill that benefits employees is labeled a "job-killer" by the Chamber of Commerce, and Schwarzenegger vetoes between 80% and 100% of what anyone calls a "job-killer." Most of the vetoed bills will be introduced again in 2008, and most will eventually be signed into law; just not on Schwarzenegger's watch.
Labor Code § 515.5 exempts most highly compensated skilled computer professionals from California overtime laws. The exemption only applies to hourly employees who earn a certain hourly wage, which increased each year, from an initial $41 per hour to $49.77 per hour in 2007. However, under a bill signed by Governor Schwarzenegger on October 11 (SB 929), the minimum hourly rate will be reduced to $36 in 2008. As a result, many more IT employees may be reclassified as exempt. The hourly rate is not the only qualification, however, and a long test with many exceptions is set forth in the IWC wage orders:
(h) Except, as provided in subparagraph (i), an employee in the computer software field who is paid on an hourly basis shall be exempt, if all of the following apply:
(i) The employee is primarily engaged in work that is intellectual or creative and that requires the exercise of discretion and independent judgment.
(ii) The employee is primarily engaged in duties that consist of one or more of the following:
- The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications.
- The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications.
- The documentation, testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems.
(iii) The employee is highly skilled and is proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering. A job title shall not be determinative of the applicability of this exemption.
(iv) The employee's hourly rate of pay is not less than forty-seven dollars and eighty-one cents ($47.81). The Division of Labor Statistics and Research shall adjust this pay rate on October 1 of each year to be effective on January 1 of the following year by an amount equal to the percentage increase in the California Consumer Price Index for Urban Wage Earners and Clerical Workers.
(i) The exemption provided in subparagraph (h) does not apply to an employee if any of the following apply:
(i) The employee is a trainee or employee in an entry-level position who is learning to become proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering.
(ii) The employee is in a computer-related occupation but has not attained the level of skill and expertise necessary to work independently and without close supervision.
(iii) The employee is engaged in the operation of computers or in the manufacture, repair, or maintenance of computer hardware and related equipment.
(iv) The employee is an engineer, drafter, machinist, or other professional whose work is highly dependent upon or facilitated by the use of computers and computer software programs and who is skilled in computer-aided design software, including CAD/CAM, but who is not in a computer systems analysis or programming occupation.
(v) The employee is a writer engaged in writing material, including box labels, product descriptions, documentation, promotional material, setup and installation instructions, and other similar written information, either for print or for on screen media or who writes or provides content material intended to be read by customers, subscribers, or visitors to computer-related media such as the World Wide Web or CD-ROMs.
(vi) The employee is engaged in any of the activities set forth in subparagraph (h) for the purpose of creating imagery for effects used in the motion picture, television, or theatrical industry.
Wage order #4-2006, Professional, Technical, Clerical, Mechanical and Similar Occupations.
We'll post a more comprehensive wage and hour legislative update tomorrow.
Last month, the Seventh Circuit reversed a U.S. District Court order regarding attorneys' fees in a class action settlement because the trial court used the wrong method and, consequently, may not have awarded enough fees. Sutton v. Bernard (7th Cir. 2007) __ F.3d __ will be going into our research folder immediately.
Jon-Erik Storm asks, Why Does Everyone Diss the DLSE?
I was preparing to explore the theorizing that I and other bloggers did in the wake of Genrty that it would have implications for employment contracts in general, when I came across this footnote in the recent Murphy v. Check ‘N Go case. “Plaintiff requests judicial notice of information on the process for bringing claims before the Labor Commissioner, which is offered to show that this process ‘does not provide the same protections for the employee and is not an adequate substitute for a court proceeding. . . .’” (Slip. Op. at 9-10 n.1)
...
There are so many reasons: they are slow; they do not apply uniform standards; they are not taken seriously by defendants; they change policies depending upon the whim of the governor; they often don't follow the law; they lack the resources to effectively resolve large volumes of cases; they pass regulations without following appropriate protocols; they file amicus briefs against you even if they represented you when you won at trial.
Plus, they have the day off today, and we don't.
All state and federal courts are closed today in observance of Veteran's Day, which was actually yesterday.
Blawg Review has taken up a "top law blogs" meme. We got tagged a few weeks ago by by Kimberly A. Kralowec of The UCL Practitioner, who had been named by J. Craig Williams of May it Please the Court. We love both of their blogs and read them regularly (they are two of the three longest standing links on our sidebar), and we were pleased and appreciative of Kim's endorsement of California Wage Law. Like we mentioned earlier this week, blogging time was impacted last month by a variety of issues, so we're trying to catch up on all the interesting news and developments in wage and hour law, but we'll end the week with this. Excluding The UCL Practitioner and May it Please the Court, which would both be on our list of ten favorites, we suggest checking out the following ten blogs, in alphabetical order:
In September, the Fourth Appellate District reversed an order denying class certification in Lewis v. Robinson Ford Sales, Inc., a case involving negative equity financing under the Automobile Sales Finance Act, Consumer Legal Remedies Act, and Unfair Competition Law. The matter was ordered remanded with directions to enter an order certifying the class. Last month, the court granted a half dozen requests to publish the opinion.
The plaintiff alleged that the dealership inflated prices due by including deficiency balances on previous automobile loans without adequate written disclosure. The plaintiff's position was that mandatory disclosures regarding purchase price should be treated like strict liability claims for certification purposes, and individualized proof of reliance or harm was not required to establish liability.
The trial court applied incorrect standards, focusing on what the defendant characterized as individualized fraud and reliance issues. However, the claims were amenable to certification, with common questions of law and fact, because the statutory violations could be determined by examining the face of the defendant's own records; common law fraud, requiring specific findings of causation and reliance, was not an issue because CRLA claims do not require individualized proof of causation of injury from a deceptive practice. Moreover, individualized issues pertaining to potential punitive damages were not a ground for denial of certification. It was premature for the trial court to consider that issue because the merits had not been determined, but in any event, is has long been the law in California that a plaintiff seeking punitive damages is not barred from pursuing class certification. Legal and factual issues that go to remedies simply cannot outweigh the common issues related to liability when deciding certification.
A petition for rehearing was denied today. You can download the full text of is Lewis v. Robinson Ford Sales, Inc. here in pdf or word format.
Coral Gables-based communications construction firm MasTec will pay up to $12.6 million to settle wage disputes raised in a 2005 FLSA collective action filed in U.S. District Court in Tampa, Florida. The settlement class includes current and former employees from California, Florida, Georgia, Maryland, New Jersey, New Mexico, North Carolina, South Carolina, Texas and Virginia, who worked for the company or its affiliates from 2001 to 2007. One of the affiliates was MasTec Advanced Technologies, a firm handling DirecTV installation services. The complaint alleged that the company failed to pay overtime wages, including wages for off-the-clock mandatory meetings. Court records reflect that the settlement amount was calculated by assuming 1.61 hours of unpaid overtime for each day of work from October 10, 2002 to May 26, 2006. The settlement requires court approval, which has not yet been ordered. The $12.6 million maximum payout is based upon a 100% FLSA opt-in rate. In all likelihood, the total payout will be less than $6 million, including $3.8 million to the plaintiffs' attorneys, $750,000 for the named plaintiffs, and perhaps as much as $2 million for class members who opt in, based upon historically average opt-in rates.
We are not aware of any California class actions against MasTec for wage violations under state law, but we would be surprised if there isn't one out there.
The Supreme Court has denied the Labor Commissioner's request to depublish the opinion in Corrales v. Bradstreet. From a non-political, legal standpoint, we thought it was a silly request, since the heart of the opinion would apply to the DIR in future cases whether or not the opinion was published, but we're sure there were political reasons why the administration and/or its favorite campaign donors wanted the opinion gone. We discussed the opinion a few months ago in a post entitled, simply enough, Corrales v. Bradstreet.
Kim Kralowec liveblogged the recent Class Actions in Alameda County: Advanced Seminar:
Many thanks to the Alameda County Bar Association, Judges Freedman and Sabraw, and Messrs. Obbard and Stemmler for allowing me to bring this to my readers. Press the "refresh" button periodically for updates to this post throughout the evening. I'm told that the program will begin at approximately 6:00 p.m.
And then she shared her detailed notes from the seminar. The post is long and includes a lot of the best information conveyed at the seminar. It might be the single best legal blog post we've ever read. While we were busy with fire-related hassles and the wrap-up of three fairly sizable class action settlements, our blog was quasi-dormant for half of October, or we'd have posted this link a week ago. We're posting two-a-days to get caught up, because there has been much to talk about lately.
In the first published post-Gentry class action arbitration case, the First District Court of Appeal has affirmed an order denying a motion to compel arbitration. Murphy v. Check 'N Go of California, Inc. (2007) __ Cal.App.4th __. In Gentry, the Supreme Court set forth a standard for reviewing arbitration clauses with class action waivers, requiring lower courts to consider several factors which inherently favor employees seeking to invalidate the provisions, including: the modest size of any potential individual employee's wage claim, the possibility that putative class members would be retaliated against if they pursued individual claims, the fact that absent class members might not be well informed about their rights, and the difficulties in enforcement of putative class members' rights through individual arbitrations. After considering these factors, if the court finds that class arbitration is likely to be a significantly more effective means of enforcing employee rights, it must invalidate the class action waiver.
In Check ‘N Go, the court of appeal applied those factors and concluded that the agreement was both substantively and procedurally unconscionable with respect to the mandatory arbitration provision, the class action waiver and a third provision that bestowed upon the arbitrator the right to determine whether the arbitration agreement was enforceable.
Defendant Check ’N Go of California, Inc., appeals from an order denying its motion to compel arbitration of a wage and hour case filed by plaintiff Lisa Murphy. The main issues are whether the class action waiver in the arbitration agreement is unconscionable, a question we review with the benefit of the recent decision in Gentry v. Superior Court (2007) 42 Cal.4th 443 (Gentry), and whether that question should be resolved by the court, rather than an arbitrator appointed under the agreement. We conclude that the court was empowered to decide the unconscionability issue, agree with its ruling that the class action waiver is unconscionable, and affirm the order denying the motion to compel arbitration.
The court found that the agreement was a contract of adhesion. It was undisputed that employee received the agreement through interoffice mail, the terms were never explained to her, and she was never told that the agreement was optional or negotiable, supporting an inference, under the Gentry standards, that the employee reasonably expected that she was required to sign the contract as a condition of continued employment. The provisions were one-sided, and exculpatory, given the relatively small size of individual claims and the need for the class action remedy to deter the employer from misclassifying employees. Furthermore, the trial court did not abuse its discretion in refusing to enforce the entire arbitration agreement, rather than just severing the unconscionable provisions, because the agreement was permeated with unconscionability.
You can download the full text of Check ‘N Go here in pdf or word format.
Last week, the Supreme Court denied a request to depublish the opinion in Benson v. Kwikset. This was another of the many cases involving Proposition 64, and how to handle requests to amend to substitute new suitable plaintiffs in 17200 cases for which the plaintiff lost standing after the ballot initiative was passed. The 4th District held:
In accordance with Branick, we will remand the case to the trial court to consider whether plaintiff should be permitted to amend the complaint to plead facts satisfying the standing requirements under the revised statute. If so, the trial court shall conduct further proceedings limited to a determination of whether plaintiff can prove he has standing and can maintain this lawsuit as a representative action. In the event plaintiff does so successfully, the original judgment shall be reimposed and the balance of our opinion shall stand as resolution of the issues previously raised by the parties.
Benson presented an interesting twist because a judgment had been entered before Prop 64 passed.
More than ten requests for publication were filed in the Brinker case: Cross Country Healthcare, California Employment Law Council, Atkinson, Andelson, Loya, Ruud & Romo, Paul, Plevin, Sullivan, etc., Akin, Gump, Strauss, etc., Winston & Strawn, McKenna, Long & Aldridge, Sheppard Mullin, Wells Fargo, Proskauer Rose and Manatt Phelps Phillips. And the DIR. Proving that it is now little more than a political spoil, Labor Commissioner Angela Bradstreet also sought publication of the opinion, even though it contradicted a long-standing DLSE position (taken when the GOP did not control the DLSE's policies). The 4th District responded to the requests, and a petition for review, by sending a letter to the Supreme Court saying this:
Enclosed are 10 requests to publish the opinion in the above matter, together with a copy of the opinion. By separate letter, this court is requesting that the Supreme Court grant review and transfer the case to this court. This court recommends the opinion not be published on the ground it does not yet meet the standards for publication.
The separate letter said:
Chief Justice George: In the matter of Brinker Restaurant Corporation v. Superior Court of San Diego County/Hohnbaum, et al. (S157479, D049331), the Fourth Appellate District, Division One issued an opinion on October 12, 2007, stating the opinion is final as to this court immediately. The portion of the opinion stating it is final immediately is a clerical error, therefore this court respectfully requests that the Supreme Court grant review and transfer the case to this court. Please note a Petition for Review was filed on October 22, 2007. By separate letter from Acting Presiding Justice Gilbert Nares in response to the 10 requests to publish the opinion in the above matter, the court has recommended the opinion not be published on the ground that it does not yet meet the standards for publication.
In response, the Supreme Court quickly vacated the opinion:
At the request of the Court of Appeal, review is granted on this court's own motion. The cause is transferred to the Court of Appeal, Fourth Appellate District, Division One, with directions to vacate its opinion and reconsider the matter as it sees fit. The petition for review is denied as moot. The requests for publication are denied as moot. Votes: George, C.J., Kennard, Baxter, Werdegar, Chin, Moreno and Corrigan, JJ.
As a result, the opinion is, for the time being, not only unpublished, but vacated. When and in what form the final opinion will be published is anyone's guess. The court's website says a remittitur will be issued on November 13, 2007, but that clearly will not happen. Whether further briefing or argument will be permitted in connection with the reconsideration is unclear.
The Supreme Court has denied Circuit City's petition for rehearing in Gentry v. Superior Court. The three dissenting justices voted in favor of granting rehearing.
Labor Code § 2802 requires employers to indemnify employees for necessary expenditures incurred in discharge of their duties. What if an employer doesn't want to be bothered with that requirement, and instead, "ballparks" the usual costs and increases its workers' wages accordingly? In October 2005, in Gattuso v. Harte-Hanks Shoppers, Inc., the Second District Court of Appeal held that Section 2802 does not preclude employers from paying increased salaries or commissions "in lieu of" reimbursement for actual expenses, at least with respect to the expenses at issue in that case (automobile expenses). The Supreme Court granted review on the following issue:
Petition for review after the Court of Appeal affirmed orders in a civil action denying class certification. This case includes the following issue: May an employer comply with its duty under Labor Code section 2802 to indemnify its employees for expenses they necessarily incur in the discharge of their duties by paying the employees increased wages or commissions instead of reimbursing them for their actual expenses?
So, can the employer do this? The answer is, yes, but only if they do it carefully and they don't save underpay the employees by doing it that way.
Labor Code section 2802, subdivision (a), requires an employer to indemnify its employees for expenses they necessarily incur in the discharge of their duties. May an employer satisfy this statutory obligation by paying employees increased wages or commissions instead of separately reimbursing them for their actual expenses?
We conclude that an employer may satisfy its statutory reimbursement obligation by paying employees enhanced compensation in the form of increases in base salary or increases in commission rates, or both, provided there is a means or method to apportion the enhanced compensation to determine what amount is being paid for labor performed and what amount is reimbursement for business expenses.
As we will explain, our conclusion differs somewhat from that reached by the trial court and the Court of Appeal, and the differences affect the analysis of another issue presented here, whether the trial court abused its discretion in denying class certification. Accordingly, we reverse the Court of Appeal’s judgment and remand the matter to that court for further proceedings consistent with our opinion.
In essence, the court held that section 2802 does not prohibit an employer’s use of a lump-sum method to reimburse employees for work-related expenses, as long as (1) the amount paid is sufficient to actually fully reimburse employees for the expenses they necessarily incur, and (2) the reimbursement is accounted for separately from their regular income.
Regarding the first point, an employee must be permitted to challenge the lump-sum payment as being insufficient under section 2802, by comparing the payment with the amount that would be payable under either the actual expense method or the mileage reimbursement method. If the comparison reveals that the lump sum is inadequate, the employer must make up the difference.
As to the second point, an employer is not prohibited from combining wages and business expense reimbursements in a single enhanced employee compensation payment or from discharging its section 2802 business expense reimbursement obligation through an increase in salary or in commission rates, but the employer must provide some method or formula to identify the amount of the combined employee compensation payment that is intended to provide expense reimbursement. That method or formula must afford the employee (and state and federal officials) the ability to differentiate between wages and expense reimbursements. And a lump sum reimbursement formula does not violate Labor Code § 226, per se.
In light of the court's interpretation of section 2802, the trial court's denial of class certification was also reversed, and the case is to be remanded to the trial court for reconsideration of the class cert issues in light of the Supreme Court's ruling.
Harte-Hanks has taken the position that as to the members of this proposed class, it fulfilled its reimbursement obligation under section 2802 by paying them higher commission rates and higher base salaries than it paid to inside sales representatives. As we explained in the previous section, the validity of this claim will turn on the resolution of these questions: (1) Did Harte-Hanks adopt a practice or policy of reimbursing outside sales representatives for automobile expenses by paying them higher commission rates and base salaries than it paid to inside sales representatives? (2) If so, did it establish a method to apportion the enhanced compensation payments between compensation for labor performed and expense reimbursement? (3) If so, was the amount paid for expense reimbursement sufficient to fully reimburse the employees for the automobile expenses they reasonably and necessarily incurred? Neither the trial court nor the Court of Appeal framed the class certification issue in that way, and so neither court considered whether these inquiries are capable of resolution on a class-wide basis. Accordingly, the class certification issue is to be reconsidered upon remand.
We previously discussed the case here: "Supreme Court Appears Ready to Reverse Gattuso."
The court appears likely to hold that, to comply with this obligation by increasing compensation to cover expenses, there must be a specific allocation between expense reimbursement and other compensation; and in a dispute, the employer should be required to prove that the amount allocated to expenses exceeds the amount of actual expenses. Any other outcome would essentially permit employers to evade the legislature's objective under Section 2802 in almost any situation where the wages paid exceed the sum of an employee's expenses plus minimum wage. Harte-Hanks Shoppers, Inc.'s plan also unfairly saddled employees with additional tax obligations, since the reimbursements would have been fully taxable, but the expenses would have been subject to the two percent floor, and not available to all filers.
Once again, our friends in the audience brought us accurate information. Thanks, all.