Wage Law

We're taking the day off.

What are typical opt-in rates for FLSA collective actions? We've heard the figure 23% quite a few times, but we can't find any empirical data to support it. A December 2007 article published by the American Association for Justice reported that

Attorneys have found that the opt-in rate is usually low—less than 30 percent of the affected pool of workers.

Another article published last year by the American Bar Association reported that

Anecdotally, practitioners generally estimate that five to twenty percent of eligible plaintiffs will opt-in to a traditional opt-in case, while nearly all of the eligible employees will remain in an opt-out suit. ... [but] the low opt-in rate is not true, however, when FLSA claims are broughton behalf of a unionized workforce. Mullins v. City of New York (U.S. District Court for the Southern District of New York, Civil Action No. 1:04-cv-2979) [90% rate]; Abbey v. United States (U.S. Court of Federal Claims, Civil Action No. 07-272C) [70%].

Another article published in 2006 by defense firm Nixon Peabody LLP claimed that

Typically, the opt-in rate for these collective actions is between 15 and 30 percent.

Does anyone know of a solid empirical study that quantified the opt-in rates for collective actions over any recent period?

Many wage and hour lawyers do not know that a plaintiff with a claim for unpaid wages can apply for a right to attach order and obtain a prejudgment writ of attachment, and then levy upon the employer's assets to satisfy the eventual judgment.

In general, an unsecured claim for a certain or reasonably ascertainable sum, based upon an express or implied contract, can be secured by a right to attach order. Code of Civl Procedure § 483.010(a); Korea Water Resources Corp. v. Lee (2004) 115 Cal.App.4th 389. Even claims based upon quasi-contract qualify. "Implied contract" covers restitutionary obligations; e.g., where defendant has acquired plaintiff's property through fraud, conversion or mistake and refuses to return it. Klein v. Benaron (1967) 247 Cal.App.2d 607, 610. An attachment will lie upon an employment contract. Lewis v. Steifel (1950) 98 Cal.App.2d 648; Rose v. Pearman (1958) 163 Cal.App.2d 480, 483. Arguably, any wage claim arising out of the Labor Code can justify an attachment, because statutory obligations arise out of contract in their nature. Arcturus Manufacturing Corp. v. Rork (1962) 198 Cal.App.2d 208, 210.

However, by obtaining an attachment, the plaintiff is electing non-tort remedies for those particular claims. Because attachment lies only on contract claims, a plaintiff with alternative tort and contract claims based on the same set of facts waives the tort claim by obtaining a writ of attachment, or, to be more precise, the plaintiff is equitably estopped by virtue of having obtained an advantage by proceeding on the contract claim. Baker v. Superior Court (San Diego Best Builders, Inc.) (1983) 150 Cal.App.3d 140, 145. Hence, punitive damages cannot be recovered once a right to attach order and writ of attachment have been issued.

Don't be fooled by defense counsel who will argue that prejudgment attachment of earnings is prohibited under Code of Civl Procedure § 487.020(c). Some of our adversaries have cut and pasted language to that effect from Rutter's Practice Guide, without understanding that the prohibition applies not to an employee seeking attachment, but rather, to an employee's creditors seeking to attach the employee's wages.

In addition to the primary purpose of securing the satisfaction of an employee's inevitable judgment for unpaid wages, a prejudgment right to attach order is also a powerful settlement tool and one of the best discovery devices out there. When you serve interrogatories, the defense often begins with boilerplate frivolous objections, triggering the meet and confer process, followed by motions to compel. It can be months before you really find out what defenses are being asserted and what supports them. Apply for a right to attach order and the defense will lay their cards out on the table, all of them, in the opposition. It's better than a half dozen motions to compel.

Q: Suppose the Labor Commissioner or a judge determine that my contractors should have been classified as employees, what are the consequences?
A: There are many, but these are probably the most important:

• Stop orders and penalty assessments pursuant to Labor Code § 3710.1;
• Liability for overtime premium, meal period pay, and other remedies available to employees under the Labor Code and Industrial Welfare Commission Orders;
• Exposure for tort liability for injuries suffered by employees when workers compensation insurance is not secured (Labor Code § 3706);
• Exposure for unfair business practices (Business & Professions Code § 17200);
• Tax liability and penalties;
• Criminal liability (Labor Code § 3700.5).

When in doubt, treat them as employees.

Apparently, there are more than a few employers who are mining their email archives to search for email communications between employees and former employees and the attorneys representing them in claims against the employer. One judge in New York issued a ruling last year that such communications are not protected by attorney-client privilege. The case is Scott v. Beth Israel Medical Center, Inc. You can read the order here. We haven't researched whether any California cases are on point. We're just passing it along.

Remember that 2006 Philadelphia jury verdict against Wal-Mart for $78 million? Well, it's grown to $188 million now, including $49,568,541 for the Wage Payment and Collection Law (WPCL) verdict, $29,178,873.35 for the common law verdict, $62,253,000 for statutory liquidated damages, $33,813,986.24 in WPCL fees, $2,670,325.52 in wage payment and collection law expenses, $29,178,873.35 in common law nonstatutory claims, $10,163,863. in statutory interest, $11,880,589.76 in non-statutory attorney fees and $938,222.48 in nonstatutory expenses. The total cost is over $200 million, however, because Wal-Mart's defense costs included $10,048,944 in attorney fees and $7,006,982 in costs.

Don't feel too bad for Wal-Mart, though. The jury found that Wal-Mart had saved $1,031,430 by not paying their 124,506 employees for the time they worked off the clock, and another $48,258,111 by making them work instead of taking legally required breaks. And it's a pretty safe bet that the case could have been settled for less than the original savings.

California law prohibits managers and supervisors from sharing in employee gratuities. However, for years, that has happened at Starbucks coffee shops. As we mentioned yesterday, Starbucks was been found liable to 135,000 of its California baristas for more than $100 million in back tips and interest ($87 million in tips and $19 million in interst) that the coffee chain paid to shift supervisors. The parties have now put out some comments:

• Starbucks spokeswoman Valerie O'Neil said the company planned an immediate appeal of the ruling, calling it "fundamentally unfair and beyond all common sense and reason ... The decision today, in our view, represents an extreme example of an abuse of the class-action procedures in California's courts."
  
• Plaintiff Jou Chou said: "I feel vindicated ... Tips really help those receiving the lowest wages. I think Starbucks should pay shift supervisors higher wages instead of taking money from the tip pool."
  
• The coffee company also took issue with the brevity of the judge's ruling, which was only four paragraphs, saying she failed to address the unfairness to shift supervisors. "This case was filed by a single former barista and, despite Starbucks request, the interests of the shift supervisors were not represented in litigation," O'Neil said.
• Attorney Laura Ho, who tried the case for the plaintiffs, said the court's verdict follows state law. "Starbucks illegally took a huge amount of money from the tip pool to pay shift supervisors, rather than paying them out of its own pocket. The court's verdict rightfully restores that money to the baristas."

Essentially, Starbucks boosted its profits by about 1.6% annually (Starbucks earned more than $672 million on revenue of $9.4 billion during its 2007 fiscal year), by suppressing the wages of its shift supervisors and making up the difference by letting them dip their fingers into the tip jars of the employees who are entitled to the tips, as a matter of mandatory corporate policy. That sort of ripoff is exactly why class actions are permitted, because no one barista would be able to find the resources to make it feasible to challenge such a policy. The class action remedy merely allows the employees' claims, which are practically identical to one another, to be aggregated. And now the court has ordered Starbucks to pay their illegal savings back. We find that quite reasonable and have no trouble seeing how common sense permits such a fair redistribution. What strikes us as unfair is Starbucks complaining, after it failed to represent the interests of its management/supervisory employees, that those interests weren't represented.

San Diego County Superior Court Judge Patricia Cowett has ruled in favor of more than 100,000 Starbucks baristas and ordered the company to pay the employees more than $100 million in tip pool money that was diverted to management employees. The court had ruled last month that Starbucks's practice of paying shift supervisors from the tip pool violated California law. We previously discussed the case in a post found here. The ruling affects only California employees, and only the period October 8, 2000 to the date of trial.

then Qwest might be the right fit for you, when looking for your next place of employment.

This is old news, but we just heard it and thought we'd pass it along. After remittitur in Murphy v. Kenneth Cole Productions, the plaintiffs moved for $1.5 million in attorney's fees for the law professors and law students' time. San Francisco Superior Court Judge Anne Bouliane reduced the attorney's proposed hourly rates from $525 to $425 and reduced the law students' rate from $125 to $90, and applied a lodestar multiplier of 1.8. She cut 70 hours from one attorney's total, and 12 hours from lead trial counsel's total. The final bill: although it was a lot, we're betting that it was significantly less than Seyfarth Shaw charged the defendant for its work.

A recent unpublished opinion could resolve a conflict in the law between a 1988 case and a 1957 case which has been cited by employers seeking to dismiss wage and hour cases on demurrer.

In Oppenheimer v. Robinson (1957) 150 Cal.App.2d 420, an employee filed a complaint to recover unpaid wages. The company filed a special demurrer alleging that the complaint was uncertain and ambiguous because it did not allege the amount of wages the employee earned nor the amount due at the time of his discharge. The employee argued that the precise amount of wages due was an evidentiary matter that did not need to be pled with specificity in the complaint. The trial court sided with the employer and the Court of Appeal agreed.

The mere allegation that plaintiff was damaged in the sum of $ 6,000 by reason of the failure to pay the wages earned is meaningless in the absence of any allegation as to the amount of wages due plaintiff. That allegation is an obvious attempt to claim a sum as damages that would give the superior court jurisdiction of the action, while suppressing facts that would determine whether the action was within the jurisdiction of the superior court. The court was not required to give any effect to the allegation of damage in the absence of the allegation of facts showing liability in damages, nor to proceed further in the action in the face of the refusal of plaintiff to plead essential jurisdictional facts.

We take that to mean that you must allege facts showing that the amount of wages due are within the jurisdiction of your court. In Superior Court, that can be satisfied, for example, by alleging that the amount of unpaid wages exceeds the minimum jurisdiction of the Superior Court. However, many defendants read that passage to mean that a wage and hour plaintiff must allege, to the dollar, if not the penny, exactly what wages and penalties are due, and why. So far, we've never encountered a judge who agreed, particularly because the 1988 case, Hernandez v. Mendoza (1988) 199 Cal.App.3d 721, makes it clear that even at trial, the specific number of hours, and hence, the precise amount of wages due, need not be proven by the employee. In permitting an employee to meet his burden by alleging an estimate of the amounts due, the court held that

[o]nce an employee shows that he performed work for which he was not paid, the fact of damage is certain; the only uncertainty is the amount of damage. [Citations.] In such a case, it would be a perversion of justice to deny all relief to the injured person, thereby relieving the wrongdoer from making any restitution for his wrongful act.

Although last week's opinion in Gonzalez v. Western Pacific Roofing Corp. does not mention Oppenheimer, it appears that the trial court must have followed it, and if it did not, it followed its reasoning, granting a demurrer in a prevailing wage class action on uncertainty grounds. In reversing the order sustaining the demurrer, the Court of Appeal held:

Plaintiffs are required only to set forth the essential facts of their case with reasonable precision and with particularity sufficient to acquaint a defendant with the nature, source and extent of his cause of action. (Youngman v. Nevada Irrigation Dist., supra, 70 Cal.2d at p. 245.) Plaintiffs are not required to plead the specific amount of damages. (Furia v. Helm (2003) 111 Cal.App.4th 945, 957.)

The amount of unpaid wages due to each plaintiff is only a matter of proof (the number of hours worked on public works projects multiplied by the difference between the lawful wage and the wages actually paid). The amount of waiting time penalties under section 203 is also a simple matter of proof; the penalty is the amount of unpaid wages for a 30-day period. (Lab. Code, § 203.) Defendants should have full and complete records dealing with this subject. “Once an employee shows that he performed work for which he was not paid, the fact of damage is certain; the only uncertainty is the amount of damage. [Citations.] In such a case, it would be a perversion of justice to deny all relief to the injured person, thereby relieving the wrongdoer from making any restitution for his wrongful act. [Citation.]” (Hernandez v. Mendoza (1988) 199 Cal.App.3d 721, 726-727.)

That makes perfect sense to us. If you don't have to prove the precise amounts at trial, you certainly would not be required to plead those amounts in your complaint, as long as the complaint alleges facts that establish Superior Court jurisdiction and each of the elements of the cause of action.

You can download the full text of Gonzalez v. Western Pacific Roofing Corp. here in pdf or word formats. We anticipate that requests for publication will be filed.

It has been brought to our attention that the First District Court of Appeal modified an October 2007 opinion in Murphy v. Check 'N Go of California, Inc. (2007) 156 Cal.App.4th 138, regarding arbitrations and class action waivers, as follows:

The words “involving unwaivable statutory rights” are added to the second sentence of the first full paragraph on page 10, so that the sentence reads: Gentry confirmed that Discover Bank’s reasoning was not confined to consumer actions involving miniscule damages, and extended Discover Bank’s rationale to wage and hour cases involving unwaivable statutory rights where a class action waiver could likewise be “exculpatory in practical terms because it can make it very difficult for those injured by unlawful conduct to pursue a legal remedy.”

We previously discussed Murphy v. Check 'N Go of California, Inc. at a post that can be found at this link. The modification order was entered shortly after we posted about the case.

Last July, we discussed a landlord-tenant case with a novel class certification twist (Justices: Are You Serious?). In Ortiz v. Lyon Management Group, Inc., the defendant won a summary judgment motion, before hearing any class certification motion was heard. Hoping to apply res judicata to any similar future claims by any putative class members, the defendant moved for certification, seeking to force the vanquished plaintiff to serve as an unwilling class representative on a doomed claim, and to serve a notice to class members informing them that they were bound by the loss of the uncertified class. The Superior Court denied the motion. The Court of Appeal affirmed the denial (No Post-Judgment Class Certification Orders) in Ortiz v. Lyon Management Group, Inc. (2007) 157 Cal.App.4th 604. Finally, now, the Supreme Court has denied review (sought by the plaintiff, and presumably limited to the review of the underlying judgment, rather than the post-judgment orders), and several requests for depublication were also denied.

meFor the past seven years, assistant managers have been pursuing overtime claims against The Home Depot in California. The first of three consolidated class actions was filed in Riverside County Superior Court in July 2001. In 2005, those plaintiffs filed a motion for class certification that was granted by Superior Court Judge Roger A. Luebs. Home Depot sought a writ petition, challenging the order in the Fourth District Court of Appeal. In an unpublished opinion, the petition was granted and the trial court was ordered to reconsider the motion using different standards. Judge Edward D. Webster reconsidered the motion and denied class certification the second time around.

In November 2007, in another unpublished opinion, the Fourth District upheld Judge Webster's order denying certification, finding that the lower court did not abuse its discretion in determining that individual questions of fact predominated over common issues, making the case unsuitable as a class action. Specifically, the court noted that the number of employees and departments supervised by each of the 1,400 to 2,700 class members varied considerably among stores. The plaintiffs filed a petition for review.

On March 12, 2008, the Supreme Court denied review of the unpublished opinion. Home Depot Overtime Cases, Supreme Court case no. S159596. Justices Chin and Moreno did not participate. A request to publish the opinion was filed by The Employers Group on December 7, 2007, and quickly withdrawn on December 11, 2007.

The decision means that Home Depot assistant managers will have to file and pursue individual claims against the retailer, which may still prove quite worthwhile to pursue, in light of the declarations of 42 assistant managers who said they always worked at least 55 hours a week and often worked many more hours (as many as 90 hours a week), including on scheduled days off and during vacations, did not get lunch and rest breaks, and in more than half of the cases, performed the same tasks as hourly employees. It will be interesting to see how many individual cases are brought.

The Supreme Court has denied a petition for rehearing in Marathon v. Blasi (2008) 42 Cal.4th 974, involving talent agency agreements governed by Labor Code §§ 1700 et seq. We previously discussed the case in a post here.

On page 981, in the fourth full paragraph on that page, the following two sentences are deleted:
“The Labor Commissioner agreed, finding that Marathon had violated the Act by providing talent agency services without a license, including “procur[ing] work for [Blasi] as an actress on the . . . television series, Strong Medicine.”  It voided the parties’ contract ab initio and barred Marathon from recovery.”

Substitute the following for the deleted sentences:
“The Labor Commissioner agreed.  The Commissioner found Marathon had procured various engagements for Blasi, including a role in the television series Strong Medicine.  Concluding that one or more acts of solicitation and procurement by Marathon violated the Act, the Commissioner voided the parties’ contract ab initio and barred Marathon from recovery.”

This modification does not affect the judgment.

In January 2007, after 16 days of trial, a jury returned a unanimous verdict awarding $2.5 million to a group of employees of the Chinese Daily News, Inc. for violations of state and federal labor laws concerning overtime, meal and rest breaks. We first discussed the case in a post that can be found here: http://wagelaw.typepad.com/wage_law/2007/01/employees_preva.html. On February 28, 2008, Federal District Court Judge Consuelo B. Marshall issued a post-trial ruling and entered a judgment awarding the employees $3,514,998.00 in damages and penalties plus $1,676,019.74 in interest. The newspaper published announced last week that it intends to appeal.