Wage Law

The IRS mileage rate for business miles was 48.5 cents per mile in 2007. From January 1, 2008 through June 30, 2008, the rate was 50.5 cents per mile. From July 1, 2008 to December 31, 2008, the rate is 58.5 cents per mile. On January 1, 2009, the rate will drop to 55 cents per mile, as follows:

• 55 cents per mile for business
• 24 cents per mile for medical or moving purposes
• 14 cents per mile in service of charitable organizations

The IRS press release can be found here.

In California, the DLSE presumes that employers who reimburse mileage at the IRS rate have correctly reimbursed their employees for expenses incurred in the use of their cars and complied with Labor Code § 2802. However, under Gattuso v. Harte-Hanks Shoppers, Inc. (2005) 133 Cal.App.4th 985, the IRS standard mileage rate may not conclusively establish compliance with Section 2802. If an employee can show that his or her actual expenses exceed 50.5 cents per mile, an employer may have to pay the higher amount.

The San Francisco city minimum wage will increase from $9.36 per hour to $9.79 per hour on January 1, 2009. The San Francisco Minimum Wage Ordinance requires annual rate adjustments to be made each year. Information about San Francisco’s MWO requirements can be found at the San Francisco Office of Labor Standards Enforcement's website.

The ABA Journal has published a list called the Blawg 100, a list of the 100 best legal blogs. Sadly, we did not crack the list, nor did many of the other outstanding legal blogs we regularly read. The list is interesting, but it includes a great many blogs that, frankly, we don't think of as "blawgs", e.g., Daily Kos. Many good reads can be found there. We suggest you check them all out, and bookmark the four or five you like best.

The NELA 2009 Annual Convention will be held June 24-27, 2009 in Rancho Mirage, California at the the Westin Mission Hills Resort. This will be NELA's 20th Annual Convention. The two previous conventions were in San Juan, PR and Atlanta, GA. If you are a California lawyer, this is probably an easy road trip for you.

There is still no hearing date for oral argument in Martinez v. Combs (Cal. S. Ct. Case No. S121552) 2003 WL 22708950. The Supreme Court granted review on the following issue:

“Can the officers and directors of a corporate employer personally be held civilly liable for causing the corporation to violate the statutory duty to pay minimum and overtime minimum wages, either on the ground such officers and directors fall within the definition of "employer" in Industrial Welfare Commission Wage Order 9 or on another basis?”

The current appeal, which turns five years old today, was fully briefed in 2006. The only sniff of activity in the case since 2006:

Letter dated July 15, 2008 from William G. Hoerger, lead counsel for Appellants (Martinez et al.) requesting the court not to set oral argument during the period of September 25 through Nov. 7, 2008. He and wife have purchased non-refundable airline tickets for a trip departing 9/25/2008 and returning Nov. 7, 2008.

Perhaps sometimes in 2009 . . . .

In 2007, the minimum hourly rate for exempt computer software professionals in California was $49.77 per hour. This hourly rate was reduced to $36.00 per hour in 2008. Until 2008, the exemption applied only to hourly workers. In September 2008, AB 10 amended California Labor Code § 515.5 to apply the overtime exemption to qualifying computer programmers, analysts and engineers who are paid a monthly salary of $6,250 or more each month ($75,000 annually, excluding bonuses). Alternatively, employers can also keep such employees on an hourly basis and enjoy the exemption if the employees are paid at least $36 per hour for all hours worked. The bill was passed as urgency legislation and is already in effect.

The Division of Labor Statistics and Research adjusts the rate annually for inflation in accordance with Labor Code § 515.5(a)(4). Pursuant to that provision, effective January 1, 2009, the rate will increase from $36.00 to $37.94; the minimum monthly salary exemption from $6,250.00 to $6,587.50; and the minimum annual salary exemption from $75,000 to $79,050.

A full rate history of the wages required under Labor Code § 515.5 can be downloaded here in PDF.

The licensed physicians and surgeons employee's minimum hourly rate of pay exemption will increase from $65.59 to $69.13 on January 1, 2009.

In 2007, the California Supreme Court held in Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360, that a trial court has the discretion to authorize a pre-certification communication to members of a putative class in a consumer case, informing the putative class members that their names and addresses would be released to the attorneys for the putative class unless they affirmatively objected. Pioneer Electronics was quickly applied to a wage and hour case in Belaire-West Landscape, Inc. v. Superior Court (2007) 149 Cal.App.4th 554.

Since Belaire-West, there have been several cases strengthening the right to discovery and access to witnesses in class actions. The latest: Alch v. Superior Court (2008) 165 Cal.App.4th 1412, involving subpoenas to third parties. The need for balancing of privacy rights is not a sufficient ground to prevent plaintiffs from access to data necessary to their attempt to prove their case, and a statistical study need not be proven valid in advance simply because the underlying data is subject to privacy claims.

Television writers filed class action lawsuits against studios, networks, production companies and talent agencies, asserting an industry-wide pattern and practice of age discrimination. The writers served subpoenas on third parties, including the Writers Guild of America, seeking data on Writers Guild members from which they could prepare a statistical analysis to support their claims of age discrimination. A privacy notice was sent to 47,000 Writers Guild members, advising them of their right to object to disclosure of personal information on privacy grounds. Some 7,700 individuals filed objections. The writers moved to overrule the objections. The trial court sustained the objections in their entirety. The writers sought a writ directing the trial court to vacate its order and allow access to certain of the requested information, arguing the information was critical to proving their claims and privacy concerns were minimal. We grant the writ petition.

Thus, notwithstanding the privacy objections of the members, the plaintiffs get work history information and demographic data. You can download the full text of Alch here in PDF or MS Word format. A petition for review was denied.

With so many mass layoffs this year, it might be a good time to hone your skills bringing or defending WARN Act claims. This link has a very good chart that compares the rights and obligations under the California and federal statutes.

A trial court order denying class certification must be reversed if the trial court refused to allow discovery of class member identity and contact information. Lee v. Dynamex (2008) 166 Cal.App.4th 1325. Following the trend that began with Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360, the Courts of Appeal are leaving no doubt that denying information to class representatives and their counsel cannot be used as a means to defeat class certification. 

After first denying Lee’s motion to compel Dynamex to identify and provide contact information for potential putative class members, the trial court denied Lee’s motion for class certification. Because the trial court’s discovery ruling directly conflicts with the Supreme Court’s subsequent decision in Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360 (Pioneer), as well as our decisions in Belaire-West Landscape, Inc. v. Superior Court (2007) 149 Cal.App.4th 554 and Puerto v. Superior Court (2008) 158 Cal.App.4th 1242 (Puerto), and that ruling improperly interfered with Lee’s ability to establish the necessary elements for class certification, we reverse both orders and remand for further proceedings regarding class certification.

If you have discovery disputes pending in a putative class action, be sure to read Lee. You can download the full text of Lee at these links in PDF or MS Word format.

In light of this and the Alch case, which we discussed in today's first post, it would seem to us that delay (or hoping to capitalize upon an inexperienced class counsel's mistake) is the only benefit a defendant can hope to achieve by resisting plaintiffs' efforts to obtain putative class member contact information.

Holiday Closure of Los Angeles Office of
the Supreme Court of California
December 29, 2008 - January 2, 2009

Filings should be sent by priority or express mail, or by
a common carrier - overnight delivery (see Cal. Rules of Court, rule 8.25(b))
to the court's main office at 350 McAllister Street,
San Francisco, CA 94102-4797
(415) 865-7000

When you are bolgging, typos are no big deel.

However, typos can be very expensive if you are seeking attorneys' fees in front of a jurist like U.S. District Judge J. William Ditter, Jr. Ruling upon a fee motion in which a successful plaintiff sought more than $180,000 in fees, the judge reduced the amount to $105,000 to account for claims dismissed before trial, then cut that amount by another 75 percent to account for claims rejected by the jury, and what he called “questionable time records, lack of candor and slip-shod submissions," citing spelling errors such as "plaintf," "Philadehia," "attoreys," "reasonbale" and "Ubited States"; a misquoted a federal statute; citing wrong court rules; and calling a U.S. Supreme Court dissenting opinion a concurring opinion. The judge noted that an amended petition had corrected most of the misspellings but still contained several errors, including the wrong first name for a police officer, errors in case and statute citations, missing words and “challenging” assertions; plus, the new version incorrectly listed the amount of damages awarded by the jury in the civil rights suit as $15,000 instead of $150,000. Bottom line: the fees were reduced from $180,000 to $26,000. The case is McKenna v. City of Philadelphia. How much of the $154,000 haircut resulted directly from the typos is unclear, but it is clear that the errors were a big part of the judge's motivation to slash the fees.

The minimum monthly salary for California sheepherders is currently $1,422.52, up from $1,333.20 in 2007. Wages paid to sheepherders may not be offset by meals or lodging provided by the employer. Those are pretty modest levels, given the hours a sheepherder works.

The good news for the sheepherders is that the employer can't get away with paying them sheepherder wages and making them do tasks other than the herding of sheep.

Any employer or any other person acting on behalf of the employer who employs sheepherders and who requires them to engage in non-sheepherding duties shall be subject to the following penalties: (1) Initial violations—a civil penalty of one week’s pay computed on a basis of a 60 hour workweek and a wage of n less than the current minimum wage in effect. (2) Second violation—a civil penalty of one month’s pay computed on a basis of a 252 hour month and a wage of no less than the current minimum wage in effect. (3) Third and subsequent violation—a civil penalty equal to the cost of the contract of the approved “H2A” job order.

Bringing tidings of joy cannot be made part of the job description.

Merry Christmas nonetheless.

U.S. District Judge Morrison C. England Jr. has approved a $3 million settlement between Starbucks and approximately 6,000 of its California shop managers, arising out of claims for reimbursement of travel expenses - mileage for business errands run using the employees' own vehicles. The settlement will net the average class member about $86. The class consists of managers, assistant managers and shift supervisors who worked in California Starbucks coffee shops between March 12, 2003, and March 19, 2008. Starbucks also agreed to change its policy to reimburse store managers for mileage expenses. The court also awarded an enhancement of $5,000 to class representative Jonelle Lewis.

The trend toward reversing certification decisions on appeal is no longer limited to state courts in California. If you have a certification order up on appeal in the Ninth Circuit, you need to read Parra v. Bashas', Inc. (9th Cir. 2008) 536 F.3d 975. The Ninth Circuit has repeatedly affirmed commonality findings in employment cases (Dukes v. Wal-Mart, Inc. (9th Cir. 2007) 474 F.3d 1214), but the converse was not true. In fact, until this year, the Ninth Circuit had never reversed a district court finding that commonality was lacking in an employment suit. They did, however, in Parra, wherein the Ninth Circuit held that where the denial of certification was predicated on lack of commonality, and commonality is apparent from the record, District Court’s order denying class certification in a pay discrimination class action is an abuse of discretion and must be reversed.

[T]he Plaintiffs here establish commonality even though their individual factual situations differ because they all seek a common legal remedy for a common wrong. Plaintiffs here not only presented evidence of discriminatory pay scales, but also provided statistical and anecdotal evidence of discrimination by Bashas’, Inc. These pay scales were common for all Bashas’, Inc. employees and provided for different pay for similar jobs based only on the store where the employee worked. The proposed class here shares the alleged discriminatory pay scales of Bashas’, Inc. The class definition seeks to reach those Hispanic employees who suffered past discrimination under these pay scales.

The defendant argued that "the difficulty in redressing the harm and calculating the various pay disparities for the different employment positions precludes class certification." The Ninth Circuit disagreed. "We have previously held that classes with far more complex remedies can seek redress in the form of a class action. ... The claimed difficulties in the calculations of damages, as they affected the various class members, do not preclude class certification." (citing Staton v. Boeing Co. (9th Cir. 2003) 327 F.3d 938).

Back to the District Court.

The nation's largest retailer announced yesterday that it will pay up to $640 million to settle 63 class action wage and hour lawsuits across the country, some of which date back to 2000. Not among the cases settled: Savaglio v. Wal-Mart Stores, Inc., which we previously discussed in posts you can find at links here, here, here and here.

Plaintiffs who opt-in during a collective action under the FLSA must disclose their computation of damages under Rule 26(a), just as any other plaintiff must, or risk exclusion of such evidence at trial. Hoffman v. Construction Protective Services, Inc. (9th Cir. 2008) 541 F.3d 1175.

The trial court certified an FLSA collective action, but there was no pre-trial disclosure of damage calculations for the individual opt-in plaintiffs. At trial, the court excluded all evidence of damage for the opt-ins, but allowed evidence regarding claims of the named plaintiffs. The class appealed the exclusion of damages evidence and an award of attorney fees. The Ninth Circuit affirmed.

The punitive damage decision in Brewer v. Premier Golf Properties (2008) 168 Cal.App.4th 1243, though hardly a surprise to wage and hour specialists*, has been received as good news for employers and their attorneys, but some are not taking the good news far enough. In the past week, we have seen two separate alerts that have advised employers that the Brewer decision is binding precedent in the counties of the 4th District Court of Appeal, meaning San Diego, Imperial, Orange, Riverside, San Bernardino and Inyo Counties. Technically, that's true, but it's not the whole truth. Brewer is binding precedent in the trial courts of all 58 counties in California. People v. Bullock (1994) 26 Cal.App.4th 985, 990, 31 Cal.Rptr.2d 850, 854 (opinions of the various district appellate courts are equally binding on all trial courts.) Stare decisis binds your trial court in Los Angeles just as surely as it does your trial court in San Diego.

Another Court of Appeal, in another district or another division of the 4th District, would not be similarly bound, but the only case we know of that currently has the opportunity to go in another direction is Savaglio v. Wal-Mart Stores, Inc., which is now stayed pending the outcome of Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25.

* There is no wage and hour specialty certified by the State Bar of California.

The Class Action Fairness Act of 2005 provides, at 28 U.S.C.A. § 1715(b), for notice of class action settlements to be given by the defendant to the appropriate federal and state attorneys:

In General.— Not later than 10 days after a proposed settlement of a class action is filed in court, each defendant that is participating in the proposed settlement shall serve upon the appropriate State official of each State in which a class member resides and the appropriate Federal official, a notice of the proposed settlement consisting of—

(1) a copy of the complaint and any materials filed with the complaint and any amended complaints (except such materials shall not be required to be served if such materials are made electronically available through the Internet and such service includes notice of how to electronically access such material);

(2) notice of any scheduled judicial hearing in the class action;

(3) any proposed or final notification to class members of—

(A) (i) the members’ rights to request exclusion from the class action; or

       (ii) if no right to request exclusion exists, a statement that no such right exists; and

(B) a proposed settlement of a class action;

(4) any proposed or final class action settlement;

(5) any settlement or other agreement contemporaneously made between class counsel and counsel for the defendants;

(6) any final judgment or notice of dismissal;

(7)

(A) if feasible, the names of class members who reside in each State and the estimated proportionate share of the claims of such members to the entire settlement to that State’s appropriate State official; or

(B) if the provision of information under subparagraph (A) is not feasible, a reasonable estimate of the number of class members residing in each State and the estimated proportionate share of the claims of such members to the entire settlement; and

(8) any written judicial opinion relating to the materials described under subparagraphs (3) through (6).

An order giving final approval of a proposed settlement may not be issued earlier than 90 days after the later of the dates on which the appropriate federal official and the appropriate state official are served with the required notice. 28 U.S.C.A. § 1715(d). If the notices are not provided, a class member may choose not to be bound by a settlement agreement or consent decree in a class action. Take it from a defense attorney whom we will not name: This is one of those many lessons in life that are best learned by observing the mistakes of others, rather than learning from one's own mistakes.

Investigators from the California Economic and Employment Enforcement Coalition (EEEC) visited 47 agricultural businesses in Northern California earlier this month, including nurseries, greenhouses, landscapers, farm labor contractors, dairies and growers. They cited 30 of the 47 businesses for various labor law violations, issuing $107,500 in penalties. The violations included failure to maintain workers’ compensation insurance; failure to provide itemized deductions to employees; and failure to provide worker’s permit documentation for minors. Almost two-thirds of the businesses were found to be violating the law on easy-to-prove issues. Employers and their attorneys often ask, rhetorically, why there are so many wage and hour lawsuits. The answer is simple: because there are so many companies out there that refuse to follow the law.

The Ninth Circuit has held that a California shopping mall operator’s rules banning various speech-related activities on mall property has violated the National Labor Relations Act and engaged in unfair labor practices by prohibiting union picketing and handbilling. United Bhd. of Carpenters and Joiners of Am., Local 848 v. NLRB (9th Cir. 2008) 540 F.3d 957.

This petition for review presents the question of whether six restrictions on expressive activity promulgated and enforced by two California shopping malls infringe on the free speech rights guaranteed by the California State Constitution and therefore interfere with protected union activity in violation of the National Labor Relations Act (“NLRA”) when applied to union picketing and handbilling actions. We hold that the six rules impermissibly infringe free speech rights and unlawfully interfere with protected union activity.

The six “Rules for Public Use of Common Areas” that regulate expressive activity in each mall were:

1. Identification Ban: a ban on activities that identify by name the mall owner, manager, or tenants;
2. Commercial Purpose Rule: a ban on signage and written materials that interfere with the “commercial purpose” of the mall;
3. Signage Ban: a ban on the carrying or wearing of signs;
4. Application Requirement: an application process that requires the pre-submission of written materials;
5. Designated Areas Rule: the exclusion of exterior areas, including mall sidewalks, from designated areas where expressive activities may occur; and
6. Peak Traffic Rule: the prohibition of expressive activities during “peak traffic days.”

The union filed unfair labor practice charges against the mall property manager, claiming a violation of § 8(a)(1) of the NLRA. An administrative law judge that this constituted unfair labor practices by promulgating and enforcing rules that restrict protected collective bargaining activity. The NLRB upheld rules 1, 2 and 4, but found the other three rules to be lawful time, place, or manner restrictions under California law. On appeal, the Ninth Circuit found each of the rules to be either unlawful content-based restrictions, or overbroad restrictions that did not survive strict scrutiny or intermediate scrutiny. Thus, as applied, the rules infringed upon the speakers' free speech rights under the California Constitution and violated § 8(a)(1).

An arbitration agreement may expressly provide for judicial review, on the merits, of the arbitrator’s decision. Cable Connection, Inc. v. DirectTV, Inc. (2008) 44 Cal.4th 1334 (upholding an arbitration agreement that permits review of decisions where the arbitrators “exceeded their powers” and provided that “arbitrators shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected on appeal to a court of competent jurisdiction for any such error.”)

Can someone remind us again how arbitration continues to sell itself as a fast, cheap alternative to litigation?

Not everyone enjoys wage and hour law as much as we do. Here's Workplaceprofblog's take on the recent Wal-Mart settlement in Minnesota:

We don't do much wage and hour stuff on this blog because these cases tend to come down to whether nurses on standard-size ambulances are exempt from overtime pay. But Wal-Mart sure got another lesson on why it should not ignore the Fair Labor Standards Act (FLSA)

Congratulations to the bloggers over at Workplaceprofblog on their 1,000,000th hit. We've still hit just half that. Their subject matter is broader, and hence, of broader interest.

In October, the DLSE issued 115 citations totaling $477,966 in fines to construction firms across the state for various labor law violations. Thirty-three teams of investigators conducted the inspections of 369 companies at residential and commercial construction sites across the state. Officials subsequently made referrals to the District Attorneys in San Francisco, Yolo and Los Angeles counties. Nearly a quarter of the firms investigated lacked required workers’ compensation insurance. Many incorrectly designated their employees as independent contractors. Other common violations included failure to obtain California contractor’s licenses and failure to provide itemized deductions on payroll statements.

In November, DLSE investigators issued 71 citations totaling $267,600 in fines in a two-day statewide enforcement sweep. The sweep targeted 269 employers in 25 counties, including nurseries, greenhouses, landscapers, farm labor contractors, dairies, growers and other agricultural businesses. Forty eight businesses that were inspected received fines of $198,000 for failure to provide workers’ compensation coverage for their employees and stop work orders were immediately issued. Another $64,000 in fines were levied against 16 businesses for failure to provide employees a wage deduction statement or failure to keep records as required under Labor Code § 226.

A group of former Heller, Ehrman employees have filed a class action lawsuit against the firm under the WARN Act (29 U.S.C. § 2101) and the California WARN Act (Labor Code § 1400)  Werth v. Heller, Ehrman, White, & McAuliffe LLP (N.D. Cal., Case No. C084799). The complaint alleges, among other things, that the firm conducted a mass layoff without providing sixty days advance written notice. We hear that a similar complaint has been filed against Thelen, but we haven't seen the complaint yet.

Personally, we think getting $303 million from a company that might not exist in six months is a great result, and if the large team of lawyers from five firms who chased that result for the past three years, with the risk that they might get nothing for their 25,000 hours of work, might end up with 19% of such an all-cash settlement (roughly equivalent to the cost of two to three very good pitchers winning about 20 games each at the major league level), the shareholders should be pleased that their nickel per share is getting a 400% return on those attorney's fee expenses.

Not everyone would agree with us, however. To some, $303 million now qualifies as a "nuisance settlement to avoid further litigation" that reaps "minimal benefit" for class members. A judge will decide who is right at a hearing on Monday December 22.

A pre-filing attempt to settle might be relevant in determining the amount of an award of reasonable attorney's fees under a fee application under Code of Civil Procedure § 1021.5, but the statute does not require such an attempt as a condition to recovery of fees by a prevailing plaintiff. Vasquez v. Superior Court (2008) 45 Cal.4th 243. Thus, where the attorney fee award does not depend on the “catalyst” theory (Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553) a court may award private attorney general fees to a plaintiff even if the plaintiff made no attempt to settle before resorting to litigation. Because the plaintiffs in Vasquez obtained actual relief, and were prevailing parties, this is not a catalyst case and that the “limitations on the catalyst theory” adopted in Graham do not apply.

The case did have an underlying wage and hour issue, in that it arose out of Proposition 139, known as the Prison Inmate Labor Initiative of 1990 (Penal Code § 2717.1 et seq.), which instructs the Secretary of the Department of Correction and Rehabilitation to establish joint venture programs with private employers within state prison facilities to employ inmates. The law provides, among other things, that inmates be paid wages “comparable to wages paid by the joint venture employer to non-inmate employees performing similar work for that employer” or wages “comparable to wages paid for work of a similar nature in the locality in which the work is to be performed.” (Penal Code § 2717.8.) The law also requires the Secretary to deduct up to 80 percent of each inmate employee’s gross wages for taxes, room and board, restitution to the victims of crime, and support for the inmate’s family.

The original plaintiffs alleged defendants had committed unfair business practices by failing to pay comparable wages (Penal Code § 2717.8) or minimum wages (Labor Code §§ 1197, 3351(e)), by directing inmates working on joint ventures with private employers to remove and replace “Made in Honduras” labels with others reading “Made in the USA,” and by selling these garments to consumers throughout California. Vasquez later joined the action asserting standing as a taxpayer to prevent the waste of state property (Code of Civil Procedure § 526a), alleged the State had failed to collect and disburse payments due from the joint venture employers. This failure had occurred, Vasquez alleged, because the State had permitted employers, in violation of Proposition 139, to require inmates to complete unpaid training periods of 30 to 60 days and to pay less than comparable wages.

The trial of the taxpayer claim resulted in a stipulated injunction, which the court approved and entered as a judgment. Vasquez subsequently moved for attorney fees under Code of Civil Procedure § 1021.5 and was awarded $1,257,258.60, based on a lodestar amount of $967,122 and a multiplier of 1.3. The Court of Appeal affirmed, as did the Supreme Court.

While this is not a catalyst case (see post, at p. 19), defendant argues the rule just mentioned should apply whenever fees are sought under section 1021.5.  We hold that no such categorical rule applies in noncatalyst cases.  In all cases, however, section 1021.5 requires the court to determine that “the necessity and financial burden of private enforcement . . . are such as to make the award appropriate . . . .”  (Ibid., italics added.)  In making this determination, one that implicates the court’s equitable discretion concerning attorney fees, the court properly considers all circumstances bearing on the question whether private enforcement was necessary, including whether the party seeking fees attempted to resolve the matter before resorting to litigation.

You can download the full text of Vasquez here in PDF or MS Word format. A modification of the opinion was published yesterday; the holding remains undisturbed. 

This opinion piece was first published in the Daily News on November 4, 2008. We reprint it here today with the permission of the author, Aaron T. Knapp:

In recent years, defense lawyers have enjoyed a pro-business trend in California court decisions.  The Court of Appeal’s decision in Brinker Restaurant Corp., et al. v. Superior Court of San Diego, 2008 DJDAR 11267, which many of us have been watching closely, is no exception.

In Brinker, employees of a large international restaurant chain operating more than 175 restaurants in California, claim they were improperly denied meal and rest breaks.  The plaintiffs argue their case is certifiable as a class action under California law.  The Court of Appeal disagreed, vacating a lower court’s order certifying the case as a class action.

On October 22, the California Supreme Court agreed to review the case.

The Court of Appeal’s core legal holding was that break periods need not be “ensured” by the employer but only “made available.” This, despite the fact that an earlier case, Cicairos v. Summit Logistics, Inc., 133 Cal.App.4th 949 (2005), held that California “employers have ‘an affirmative obligation to ensure that workers are actually relieved of all duty’” during a break.

According to the Court of Appeal, the statistical proof offered by the plaintiffs showed only that breaks were not taken. While this might have resolved the question of whether the defendants “ensured” the breaks, it did not show that the defendants failed to “make them available.” The Court of Appeal held that too much individualized proof would be needed to litigate the claims on the latter standard, making class certification inappropriate.

The Court of Appeal’s underlying legal holding in Brinker is rife with problems. The California Labor Code indicates that employers must “provid[e]” meal breaks.  The Industrial Welfare Commission similarly mandates rest periods.  Plaintiffs argue that under these provisions, employers should be required to make sure employees take their breaks.  The Court of Appeal rejected this argument, emphasizing how burdensome it would be for the corporate defendants to ensure that employees utilize their break time; and how under this standard, individual employees might game the system to the significant detriment of their employers.

According to the Court of Appeal, therefore, all employers should be required to do is merely permit meal and rest breaks.   This was the court’s fundamental error.

To be sure, “providing” breaks to employees does not mean holding a gun to their heads until they take them.  The requirement cannot be that employers force employees to take breaks.  But, by the same token, requiring employers merely to permit breaks, without any additional teeth, seems far too lenient under the circumstances.

So worried was the Court of Appeal about not imposing any additional administrative burden on employers, and about individual employees “gaming” their bosses, that it failed to recognize how its relaxed standard could be unfairly exploited by California employers.

The Court of Appeal suggested that an employer complies with the statutes so long as employees are not “forced to forego” breaks.  But this ignores the many ways in which organized managers can unfairly treat employees in connection with break time, short of actually “forcing” an employee not to take a break.

An employer can comply by merely granting (or at least not refusing) express requests, if any, to take permissible breaks, but failing otherwise to broach the issue.  Meanwhile, the employer is free to pile substantial work on employees under time requirements and a demeanor that suggest no break should or can be taken.

The Court of Appeal’s holding focuses too narrowly (and too inflexibly) on a pointy-headed dictionary definition, ignoring the practical context in which these rights are exercised, or not. In a busy, time-constrained work environment, there are many natural disincentives to take breaks. Managers and supervisors, even while recognizing break rights, often look askance at them and the employees who dutifully take them.

Employees who work through their breaks, or take shorter breaks, may get more praise and credit than those who don’t. The dynamic is intensified in an uncertain economy and for many immigrant groups who can be exceedingly obedient and timid.

If affirmed, Brinker will substantially “chill” the exercise and enforcement of break rights because employees may not be able to find representation.  Plaintiffs’ lawyers are less likely to pursue individual meal and rest break cases because it will not be worth it to them.

Without lawyers, these important individual rights will not be asserted as much in court. And an unasserted right is, for all intents and purposes, a nonexistent right. Brinker’s procedural holding therefore has immense practical ramifications that I’m not sure the Court of Appeal, in its pro-employer analytical framework, properly took into account.

Taking into account context and good policy, the law can, and should, be read to require employers not only to give meaningful, individualized notice of break rights, but also affirmatively to schedule breaks for all employees.  Breaks should be part of each employee’s schedule, and employers should be required regularly to encourage and remind employees to take them.

Under this more balanced standard, these cases would be about whether breaks were scheduled and regularly encouraged by the employer -- which would be the employer’s burden to prove. Class status would be easier to attain since the cases would not involve lots of individualized proof.  And with class status comes a more level playing field, and therefore a fairer result.

The Supreme Court should buck the pro-business judicial trend and reverse the Court of Appeal in Brinker.

Aaron T. Knapp is a writer, speaker, and sole practitioner in San Francisco with significant experience in employment matters. He is also the founder of The Post Partisan (http://postpartisannews.com), a public affairs opinion/blogging/community website.

We've added a Twitter account to our blogging process. We'll try to put a link to each post and each bit of wage law news into a "tweet". Maybe we'll find other uses for Twitter, too. You can follow us at http://twitter.com/wagelaw.

Cruise ship employees’ employment contracts are “considered as commercial” under Title 9 of the United States Code. Therefore, arbitration provisions contained in their employment contracts can be enforced by the employer. Rogers v. Royal Caribbean Cruise Line (9th Cir. Cal.) __ F.3d __, 2008 WL 4811882.

Have you ever wondered why the staff on those ships seem to come from every corner of the Earth except the U.S.? It's so the ship can hire people at wage rates like the ones described in this passage:

Michael Rogers, a citizen of Trinidad and Tobago, and Hulya Kar, a citizen of Turkey, worked on cruise ships operated by Royal Caribbean Cruises Ltd. (“Royal Caribbean”). Rogers worked as a “cabin boy” and “stateroom attendant,” and Kar worked as an assistant waiter.

Counsel for Rogers and Kar have stipulated that both employees signed a written employment agreement with Royal Caribbean. Kar’s employment agreement provided that Royal Caribbean would pay her $50 in “[m]onthly basic pay,” and that she was entitled to $890 in “[m]onthly [g]uaranteed [p]ay including [g]uaranteed [o]vertime.” According to the employment agreement, “the monthly guaranteed pay is inclusive of all gratuities provided by passengers.”

They need overtime to get to their guaranteed $890 per month ($10,680 a year)? Ouch. For American's working at sea, the wage protections are much greater than they are for foreign workers. As Judge Noonan's dissent points out:

Among the statutes enacted by the First Congress was the Act of July 20, 1790 establishing a seaman’s right to the prompt payment of his wages and a remedy for this right in federal court. 1 Stat. 133. No other class of contracts was so marked off. No other class of potential plaintiffs was provided with a timetable in terms of which the debt owed them had to be paid. Seamen’s wages were bound by law to the ship the seamen sailed. A lien on the vessel for their payment was “so sacred” that “it adheres to the last plank of the ship.” Sheppard v. Taylor, 30 U.S. 675, 710 (1831) (per Story, J.).

The connection of ship and wages due was such that it could be said that a seaman’s wages “are nailed to the ship.” The Eclipse, 58 F. 273, 277 (N.D. Cal. 1892). This extraordinary solicitude for seamen — this linkage of seamen and ship and federal supervision — was not the product of a romantic vision of life at sea, but came from a grasp of its grim realities: the resources, social status, and bargaining position of the vessel owner set over against the paltry options of the individual seaman. Together with that appreciation of the seaman’s lot went a sense of the importance of a merchant marine and its sailors to the economy of the nation and to its defense. The classic expression of the convergence of all these interests in federal solicitude for the seaman is the opinion of Justice Story, a native of the port of Salem, as he sat on circuit in Maine. Harden v. Gordon, 11 F. Cas. 480 (C.C.D. Me. 1823). The continuing strength of this convergence was confirmed by the Supreme Court’s citation and quotation of Harden in Vaughn v. Atkinson, 369 U.S. 527, 531 (1962).

In time the protection of federal law was extended by statute to foreign seamen whose ships were in American ports. Strathearn S.S. Co. v. Dillon, 252 U.S. 348, 354 (1920). The extension was undoubtedly designed to prevent American seamen, who could sue, from being replaced by those who could not. Id. at 355-56. The statute is of special relevance here where the plaintiffs are foreigners and where counsel for Royal Caribbean acknowledge in their brief that many of its employees are foreigners. Even with the significant change in bargaining power brought about by the National Labor Relations Act of 1937, the seaman’s right to sue directly for his wages was prized by individual seamen and upheld by the Supreme Court. U.S. Bulk Carrier, Inc. v. Arguelles, 401 U.S. 351 (1971). Deciding Arguelles, the Supreme Court noted that the explicit remedy permitting the seamen’s suit was “not clearly taken away” by the National Labor Relations Act. Id. at 357. The Court added: “What Congress has plainly granted we hesitate to deny.” Id. And the Court did not deny it. This precedent speaks powerfully in the case at bar.

Not powerful enough to let the cabin boy from Trinidad and Tobago have his day in court, unfortunately. It's off to the arbitrator for him and his Turkish assistant waiter friend. We hope they've been socking away a big chunk of that $890 a month guarantee, because the arbitrators are not going to be cheap.

In 2003, a California trial court certified a class in Savaglio v. Wal-Mart Stores, Inc., reportedly consisting of more than 115,000 hourly Wal-Mart employees, which sought to recover premium payments from Wal-Mart under Labor Code § 226.7 for missed or late meal periods. In December 2005, an Alameda County jury awarded the class more than $66 million in premium payments and $115 million in punitive damages. Wal-Mart appealed and the case is currently pending before the First Appellate District, Division Four.

The appeal is now fully briefed, and the First District granted numerous requests for leave to file amicus briefs. However, after the parties requested oral argument, and before any argument could be heard, the Supreme Court granted review in Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25. Consequently, the First District has issued a stay:

"Subject to further order of this court, appellants' motion to stay further proceedings pending the Supreme Court's decision in Brinker v. Superior Court is granted. The request to establish a briefing schedule following the decision in Brinker will be addressed at a later time."

Among the issues that Wal-Mart raised on appeal was whether California's "new right-exclusive remedy" rule bars a punitive damage award in a wage and hour case. The 4th District Court of Appeal recently ruled that punitive damages are generally unavailable as part of a claim for meal break, rest break or overtime claims based upon Labor Code violations in Brewer v. Premier Golf Properties (2008) __ Cal.App.4th __.

While Brinker will be binding upon the Court of Appeal in the Savaglio case, Brewer will not be binding upon the First District, and the case does present a possibility of a split between appellate districts. However, we expect a petition for review to be filed in Brewer, and the Supreme Court will likely have denied or granted review in that case long before the stay is lifted in Savaglio.

We previously discussed Savaglio in posts you can find at links here, here, here and here.

You hear stories about attorneys fight each other over fees, especially in class actions, all the time. Usually, however, the fight is not literally a fight. Usually.

Trial courts must determine the fairness of a class action settlement agreement based upon admissible evidence presented to the court during the approval process. Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116.

Objector Crystal Echeverria and two other objectors appeal from a judgment approving the terms of a settlement agreement entered in this class action against defendant Foot Locker Retail, Inc. (Foot Locker). They contend the trial court erred in finding the terms of the settlement to be fair, reasonable and adequate without any evidence of the amount to which class members would be entitled if they prevailed in the litigation, and without any basis to evaluate the reasonableness of the agreed recovery. The settlement was reached in arms-length negotiations between competent counsel with the assistance of an experienced mediator and may well, in fact, be entirely reasonable in view of the strength of the claims and defenses and the cost and risks of further litigation. Nonetheless, we agree with objectors that the court bears the ultimate responsibility to ensure the reasonableness of the settlement terms. Although many factors must be considered in making this determination, and the court is not required to decide the ultimate merits of the class members’ claims before approving a proposed settlement, an informed evaluation cannot be made without an understanding of the amount that is in controversy and the realistic range of outcomes of the litigation. It is possible that the data necessary to make such an evaluation in this case was given to the trial court during informal discussions with counsel, but no such information appears in the record. Therefore, we must vacate the order approving the settlement and remand the matter to permit the trial court to reconsider the fairness and adequacy of the settlement in light of such additional information as the parties may present concerning the value of the class members’ claims should they prevail in the litigation and the likelihood of their so prevailing.

The approval was reversed on appeal because the trial court and the objectors were not given sufficient information with which to evaluate the fairness of the settlement.

More fundamentally, neither Dunk, 7-Eleven, nor any other case suggests that the court may determine the adequacy of a class action settlement without independently satisfying itself that the consideration being received for the release of the class members’ claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation. The court undoubtedly should give considerable weight to the competency and integrity of counsel and the involvement of a neutral mediator in assuring itself that a settlement agreement represents an arm’s length transaction entered without self-dealing or other potential misconduct. While an agreement reached under these circumstances presumably will be fair to all concerned, particularly when few of the affected class members express objections, in the final analysis it is the court that bears the responsibility to ensure that the recovery represents a reasonable compromise, given the magnitude and apparent merit of the claims being released, discounted by the risks and expenses of attempting to establish and collect on those claims by pursuing the litigation. “The court has a fiduciary responsibility as guardians of the rights of the absentee class members when deciding whether to approve a settlement agreement.” (4 Newberg on Class Actions, supra, § 11.41 at p. 118; 7-Eleven, supra, 85 Cal.App.4th at p. 1151.) “The courts are supposed to be the guardians of the class.” (Dickerson, Class Actions: The Law of 50 States (2008 ed.) § 9.02[2], p. 9-6.)

On remand, the settling parties shall have the opportunity to supplement their showing in support of the settlement; the objectors will be permitted to renew their discovery requests, "which should not be denied simply because the requested information was disclosed during the mediation leading to the proposed settlement." The trial court will limit discovery in view of the context in which it is being requested, namely, to provide sufficient information to permit an intelligent evaluation of the terms on which the case is proposed to be settled. "The objecting parties should not be permitted to frustrate the mutual interest of the class members and the defendant to resolve the litigation promptly by conducting extended or unnecessary discovery." Thereafter, the trial court shall redetermine whether the proposed settlement is fair, adequate and reasonable.

The court may and undoubtedly should continue to place reliance on the competence and integrity of counsel, the involvement of a qualified mediator, and the paucity of objectors to the settlement. But the court must also receive and consider enough information about the nature and magnitude of the claims being settled, as well as the impediments to recovery, to make an independent assessment of the reasonableness of the terms to which the parties have agreed. We do not suggest that the court should attempt to decide the merits of the case or to substitute its evaluation of the most appropriate settlement for that of the attorneys. However, as the court does when it approves a settlement as in good faith under Code of Civil Procedure section 877.6, the court must at least satisfy itself that the class settlement is within the “ballpark” of reasonableness. (See Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499-500.)
...
By remanding we do not suggest that the proposed settlement ultimately may not pass muster. We hold only that the trial court may not finally approve the settlement agreement until provided with sufficient information to assure itself that the terms of the agreement are indeed fair, adequate and reasonable.

We've seen Superior Court judges compare the "good faith settlement" standards under Tech-Bilt with the fairness analysis under Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794. After Kullar, we'll probably see more of that. The mediator in this case, by the way, was Mark Rudy. 

You can download the full text of Kullar here in PDF or MS Word format. If you handle wage and hour class actions in California, this is must-read material. 

A request for depublication has been filed with the Supreme Court.

Employee overtime and breaks has somehow become a hot topic in the fight to balance California's budget. We aren't quite sure how cutting employee wages and breaks will put the state back in the black again, and we still haven't seen the specifics of how the Republicans want to gut the 8-hour workday and the right to take meal and rest periods, but Assembly minority leader Mike Villines has provided his list of wants to the Sacramento Bee. Reportedly, these points, along with some relaxation of certain other business regulations, easing of environmental restrictions, and tax credits, form the basis of the GOP's demand for compromise in exchange for their support of higher taxes to solve the current budget crisis in California:

• Employee Schedule Flexibility
• Expanding Health Care Options for Employees (Health savings accounts)
• Reducing Unwarranted Litigation
• Overtime for high way earners
• Meal and Rest clarification
• Eliminate "needs test" to allow more apprenticeships

We have a pretty good idea what he means by "flexibility" and by "clarification." What counts as "unwarranted litigation" is still a bit of a mystery. However, to state the obvious: our personal view is that if this is the price for high taxes, we'd rather just suffer along and keep the existing, lower taxes.

As the legislature mulls over proposals to weaken the meal and rest period statutes and regulations, here's a link to the report of the Public Forums on Meal and Rest Breaks by State Labor Commissioner Angela Bradstreet, as well as a link to the Summary of Comments and a link to the transcripts.

Objectors sometimes fail to recognize that there are often very good reasons why class action settlements are lower than the amount each class member would receive in an individual trial with a favorable result. The risks are many: that the class would not be certified, or would be decertified after the initial certification; that the defendant could win on liability at trial, or before; that the defendant would go broke; that the damages would come in lower than expected; that the law will change while the case is pending. Sometimes, a bird in the hand is worth two a flock in the bush. There were a couple of interesting objection cases that came down recently, and we'll have a post on those soon, but first, we'd like to share this cautionary tale, as set forth in the very specialized blog Freelance Rights, published by one of the objectors in a case entitled Reed Elsevier Inc. v. Muchnick, which was known in the trial court as In re Freelance Literary Works in Electronic Databases Copyright Litigation.

This is a case that settled in 2005 for $11.8 million, and was approved in district court, but thrown out by the Second Circuit Court of Appeals last November. The objectors, led by Mr. Muchnick, challenged the terms of a global settlement of publishers’ alleged infringement of the works of freelance writers. The objectors appealed the trial court's approval of the settlement, and the Second Circuit invalidated the settlement, not on the basis of the merit arguments, but on the ground that a class action copyright settlement could not include the claims of copyright holders whose works were not formally registered with the Copyright Office. Thus, no one gets anything.

The U.S. Supreme Court is now considering a petition for writ of certioriari, and it was on the agenda on September 29, 2008, November 14, 2008, November 25, 2008, December 5, 2008, and again December 12, 2008. So far, no order has been entered.

One anonymous class member had this reaction:

The bottom line is that if Mr. Muchnick and the other objectors had not filed an appeal, the settlement would have been final and the claims paid. With the additional attorneys fees incurred through appeals the settlement now, as Mr. Muchnick phrased it, would indeed be worth "crumbs" even if the court grants Cert and the appeal is eventually denied. The objectors will tell you that they were against the settlement on principle. The truth is that they were greedy and felt the settlement was not enough. They envisioned the Second Circuit ruling in their favor and sending the case back to District Court for more negotiations and eventually more cash. Well it backfired. The court threw the entire case out on jurisdictional grounds, which could easily have been predicted by reading the federal code concerning copyright registration. Because of their greed, thousands of freelance writers will get zero for past works.

In full disclosure, I am a freelance newspaper writer who submitted thousands of columns over the years. If the Supreme Court does not overturn the Circuit Court's ruling, I stand to lose a great deal of money.

If the SCOTUS denies certiorari, as they usually do, the class member will be right. That'll be $11.8 million down the drain for the class members, the attorneys, and everyone except, of course, the defendants.

Ralphs Grocery Company has lost some high profile attempts to enforce its employee arbitration ageements, but it recently won one in Macias v. Ralphs Grocery Co. (2nd App. Dist, Div 2, Case No. B202625) , wherein the trial court denied their petition to compel arbitration of an action for sexual harassment and retaliation under the FEHA, but the order was reversed on appeal. The Second District did not publish the opinion. No petition for review was filed, but Ralphs sought publication of the opinion, and the Supreme Court denied the publication request.

We've added Griego's California Employment Law  and The Post Partisan to the blogroll. Both are worth checking out.

We wrote our first blog post in this forum four years ago today. We weren't really sure what we set out to accomplish, but we figured that, if we got half as many hits as our personal blogs, we'd  get a pretty decent audience. At the same time, we had trouble finding a blog that kept track of what we cared about most - the rapid change and development in California's wage and hour law. Since then, we've followed more than a half dozen big, highly anticipated cases, we've talked to reporters all over the country about wage and hour cases and trends, and we've met more than half of the lawyers who practice in this area in California.

This blog is still authored by Michael J. Walsh and Mark A. Walsh, the principals in Walsh & Walsh, P.C., but we've had a couple of guest posters. We continue to talk about what we set out to talk about, which are matters of interest to California employees and employee's rights attorneys, with a particular emphasis on working conditions and wage and hour matters, including:

• Unpaid Overtime
• Misclassification of Salaried Employees
• Failure to Permit Meal Periods and Rest Periods
• Failure to Pay Final Wages Upon Termination
• Unlawful Docking of Pay for Shortages or Breakage
• Failure to Provide and Maintain Uniforms
• Compelled Patronage / Wardrobing

In hindsight, we didn't talk much about uniforms and wardrobing. The rest has continued to draw our attention. As more wage and hour cases have made it to the Court of Appeal as class actions, we've found ourselves talking more and more about class actions - settlements, strategies, scandals, and of course, CAFA. We think Equal Pay might become a popular topic in 2009 and 2010.

We have spent a lot of time on the project, but on the whole, it has been a good investment. Hopefully, reading it has been a good investment for you.

The California legislature has convened a special session to consider some of the proposals governor Arnold Schwarzenegger made in November. A copy of the governor's proclamation regarding the special session can be seen at this link.

Among the proposals on the table:

Broaden Overtime Exemptions:

Exempt employees in executive, sales, administrative, and professional jobs who earn more than $100,000 annually from overtime pay.

Eliminate Eight Hour Work Days:

Allow employees to work flexible hours in excess of 8 per day, i.e., 10/40 work weeks without overtime.

Weaken Meal And Rest Period Laws:

Relax existing law regarding meal and rest periods to provide employers and employees with a clear understanding of meal breaks and offering flexibility to both businesses and workers.

We haven't been able to find yet exactly what meal and rest period proposals are on the table, but we have a list of meal and rest period bills that were vetoed or stalled in 2008:

AB 124 - Price - Meal and rest periods (Vetoed)

This bill would have extended protections afforded to employees covered by an order of the Industrial Welfare Commission to pool lifeguards and stage assistants who employed in the public sector. The bill specified that pool lifeguards and stage assistants employed by a city, county, or special district, shall not be required to work during any meal and rest period required for non-exempt employees under existing law.   The bill specified that if the public sector employer failed to provide a meal or rest period, the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation.  In addition, the bill specified that should these requirements be in conflict with the provisions of a memorandum of understanding (MOU) reached between an employer and a recognized employee organization, the provisions of the MOU shall control.

AB 628 – Price - Meal and rest periods: pool lifeguards (Vetoed)

This bill would have extended protections afforded to employees covered by an order of the Industrial Welfare Commission to pool lifeguards who are employed in the public sector. The bill specified that pool lifeguards employed by a city, county, or special district shall not be required to work during any meal and rest period required for non-exempt employees under existing law.   The bill specified that if the employer failed to provide a meal or rest period, the employer would have to pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest period was not provided.  In addition, the bill specified that if these requirements were in conflict with the provisions of a memorandum of understanding (MOU) reached between an employer and a recognized employee organization, the provisions of the MOU shall control. This bill was very similar to AB 124 (Price) from the previous year which addressed meal and rest period requirements for both pool lifeguards and stage assistants, however, this bill targets only pool lifeguards.

AB 1666 – Price - Meal and rest periods: stage assistants (Vetoed)

This bill would have extended protections afforded to employees covered by an order of the Industrial Welfare Commission to stage assistants who are employed in the public sector. The bill specified that stage assistants employed by a city, county, or special district shall not be required to work during any meal and rest period required for non-exempt employees under existing law.   The bill specified that if the employer failed to provide a meal or rest period, the employer would have to pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest period was not provided.  In addition, the bill specified that if these requirements were in conflict with the provisions of a memorandum of understanding (MOU) reached between an employer and a recognized employee organization, the provisions of the MOU shall control. This bill was very similar to AB 124 (Price) from the previous year which addressed meal and rest period requirements for both pool lifeguards and stage assistants; however, this bill targets only stage assistants.

SB 342 – Torlakson - Employment: rest and meal periods. (Without further action)

This bill would have declared the intent of the legislature to clarify the law regarding on-duty meal periods for employees who work in the armored car industry. 

SB 1192 – Margett - Employment: meal and rest periods. (Without further action)

This bill would have allowed employees to take their first meal period before the conclusion of the 6th hour of work, decreased the statute of limitations on penalties for failing to provide a meal period, and defined the employer’s responsibility to provide a meal period as making a meal period available without interference.

SB 1539 – Calderon - Meal periods. (Without further action)
            
This bill would have required an employer to provide meal periods to employees covered by Industrial Welfare Commission Wage Orders before the conclusion of the sixth hour of work; defined an employer responsibility to provide a meal period as giving the employee an opportunity to take a meal period; would have exempted all employees covered by collective bargaining agreements from meal period requirements if the collective bargaining agreement covers meal periods, and would have codified and expanded on-duty meal period requirements.

AB 1034 – Keene - Employment: meal periods. (Without further action)

This was originally introduced as a bill related to water; later it was re-referred to this committee ( L. & I.R.) pursuant to Senate Rule 29.10.  Bill was held in committee pursuant to Senate Rule 29.10. This bill would have stipulated that meal periods must begin no later than the conclusion of an employee’s 6th hour of work, exempted employees covered by a collective bargaining agreement that dealt with meal periods, codified on-duty meal period regulations, and permitted the Department of Industrial Relations (DIR) to adopt regulations specifying the circumstances preventing employees from being relieved of all duty during a meal period.

The sessions, so far, have been unproductive.

A fee splitting agreement amongst class counsel must always be disclosed to the court as part of the class action settlement process. In Mark v. Spencer (2008) 166 Cal.App.4th 219, there was a legitimate fee splitting agreement, but it was not disclosed to the court. The court awarded attorney fees in conformity with the declarations, rather than the fee splitting agreement. The attorney who got less the agreement provided then sought to enforce the agreement, but was bound by the order establishing the distribution of fees.

Plaintiff Ronald H. Mark appeals from a judgment of dismissal entered after the trial court sustained a demurrer to his first amended complaint without leave to amend. The complaint sought enforcement of an agreement between Mark and defendant Jeffrey P. Spencer to divide fees awarded to them as cocounsel representing plaintiffs in an earlier class action lawsuit. Mark contends his failure to disclose the fee-splitting agreement to the court in the class action, as required by California Rules of Court, rule 3.769, did not preclude him from bringing a separate action to enforce the agreement.

We conclude the trial court did not err in sustaining the demurrer without leave to amend. Rule 3.769 was designed to protect class members from potential conflicts of interest with their attorneys by requiring the full disclosure of all fee agreements in any application for dismissal or settlement of a class action. Rule 3.769 would be effectively nullified if attorneys could conceal a fee-splitting agreement from the court in seeking approval of a class action settlement and later enforce the agreement in a separate action.

As a separate and independent basis for upholding the trial court's action, we conclude Mark's claims are barred by res judicata. Mark was provided a fair opportunity to litigate the fee-splitting agreement before the court in the class action. Because the class action court fully and finally determined the attorneys' respective entitlement to fees, Mark may not relitigate the issue here. We therefore affirm the judgment.

The pertinent facts: Mark brought Spencer in to help with a labor law class action against GNC (Capelouto v. General Nutrition Corp.), and the two attorneys agreed to split fees, along these terms: (a) Mark and Spencer would evenly split any attorney fees generated in the action; (b) the 50-50 split shall “be in effect even if counsel are required to submit fee applications individually”; (c) in the event “either attorney or firm fails to perform their reasonable share of the joint representation,” the parties “shall renegotiate the fee split set forth above”; (d) Mark and Spencer “will both have equal duties and responsibilities in the litigation . . .”; and (e)  their respective firms would split the costs evenly. The case settled, and the attorneys sought $600,000 in fees. At no time, in the filings or in open court, did the attorneys disclose the existence of the fee-splitting agreement.

Spencer appeared at the final fairness hearing; Mark, apparently, did not. Orange County Superior Court Judge Ronald Bauer entered an order approving attorney fees in the amount of $401,275.43 to Spencer and $76,470 to Mark, to be paid within 30 days. Mark then asked Spencer to honor the fee-splitting agreement by transferring enough money to make their receipt of fees equal. Spencer refused, and Mark responded by suing to enforce the fee-sharing agreement.

The morals of the story: (i) always disclose your fee-splitting agreement to the court, and make sure you ask that the court award the fees in accordance with that agreement; (ii) always personally attend the final fairness hearing, even if there will be another half-dozen attorneys there for the class; and (iii) be careful about entering into fee-splitting deals with Jeffrey Pincock Spencer.

After a minor modification to the opinion, a petition for review was filed, and on Wednesday, the Supreme Court denied review. You can download the full text of Mark v. Spencer here in PDF or MS Word format.

[Update: A representative of Mr. Spencer sought to comment upon our list of morals, but, as Typepad puts it, Some users are experiencing issues with the comment form on their weblogs. We are working on this currently, so we'll give him the ability to comment a different way:

Mr. Spencer's counsel, Jeffrey Wilens, responds.

I am Mr. Spencer's appellate counsel. Mr. Walsh's characterization of the facts of this lawsuit is a ridiculous distortion in a lame effort to be funny.  The fee agreement between Mark and Spencer required each side to do half of the work or the fee arrangement would be modified; it did not require each attorney to get paid equally under all circumstances.  Mark shirked his responsibilities (which was the opinion stated by Superior Court Judge Ronald L. Bauer).  He did not bother showing up at the first fees hearing or (after being put on notice his fees were in jeopardy) at the second hearing and ended up with a much lower fee award which also lowered the aggregate fee award.  In Judge Bauer's opinion, Mr. Mark's effort was "short of the mark."  Accordingly, Judge Bauer did not award much to Mark.

Here are the morals of the story.  Yes, attorneys should disclose a fee splitting agreement but should not expect it will necessarily be upheld.  Yes, attorneys should attend the hearing on their requess for fees, especially when the Judge states at the first hearing that the fees request is excessive.  Finally, attorneys should always take care drafting fee-splitting agreements with anyone but there was no call for the cheap shot against Mr. Spencer.  The fact is Mr. Spencer attempted to honor the fee splitting agreement by re-negotiating the allocation as contemplated in the agreement if both sides did not do equal amounts of work.  Mr. Mark refused to accept anything less than half of the fee even though Judge Bauer thought his work was not even worth 20 percent of the aggregate fee award.  Instead, Mr. Mark decided to sue, but he lost in the trial court and then in the appellate court.

We reply:

We did not characterize the facts, much less (with the exception of initially crediting Judge McEachen for the underlying fee order) distort them. We just pulled the facts from the appellate opinion. We did characterize the lessons to take from the case, but we were being more serious than Mr. Wilens assumes. We've had co-counsel arrangements go south, too, and we've always honored the fee split. We would have disclosed the arrangement to the court and requested that fees be awarded and divided evenly between the firms. If the case had originated with another lawyer, we wouldn't have ever considered aiming for a larger split. Obviously, the courts have determined that what Mr. Spencer did was lawful, but nonetheless, if we were entering into an agreement with an attorney we knew to hold such a different view of joint venturing cases, we'd be very careful about doing business with him.]

In our post earlier today regarding Freedom Communications, Inc. v. Superior Court (2008) 167 Cal.App.4th 150, we neglected to mention that the case settled recently.

The Orange County Register and the home delivery carriers who deliver the newspaper have agreed to a settlement of a class action lawsuit filed on behalf of those carriers. Through such settlement, The Register will pay to the class members not more than $22 million through a claims-made settlement process. The ultimate amount paid will be based on the number of claims submitted and validated through this process.

No amount has been set for Plaintiffs’ attorneys’ fees. It is up to the sound discretion of the trial court to determine the reasonable amount of such fees. Although Plaintiffs’ counsel is seeking $12 million in fees, it is by no means certain that the Court will award that amount, and it can award less.

The Register also changed the way it classifies its carriers some of its policies and practices regarding newspaper carriers.

A government employee hired into a position expressly classified as exempt from civil service is not entitled to the protections of the civil service system upon the employee’s release from the position, even if a court finds that, based on the duties of the position, it should not have been classified as exempt. Kreutzer v. City and County of San Francisco (2008) 166 Cal.App.4th 306.

In this opinion, we conclude that a government employee hired into a position expressly classified as exempt from civil service is not entitled to the protections of the civil service system upon the employee’s release from the position, even if a court finds that, based on the duties of the position, it should not have been classified as exempt. We also hold that where a government employee is released from employment for reasons characterized only as non-disciplinary, and not otherwise publicly disclosed, the employee’s liberty interest in reputation has not been infringed, and the employee is entitled to no relief. Accordingly, we reverse the trial court’s judgment in this case, which ordered a government employer to reinstate a former exempt employee into a non-exempt position.

A petition for review was filed, and yesterday, the Supreme Court denied review. You can download a complete copy of the Kreutzer opinion from the court's website in PDF or MS Word format. 

A trial court does not have the right to prohibit a newspaper from covering the testimony in a lawsuit against it. In Freedom Communications, Inc. v. Superior Court (2008) 167 Cal.App.4th 150, the Court of Appeal reversed an order prohibiting the the Orange County Register from reporting on the trial of a wage and hour class action in which the Register is the defendant. You can download Freedom Communications here in pdf or MS Word format. On the eve of trial in a certified wage and hour class action against the The Orange County Register, judge David Velasquez issued an order enjoining the Register from reporting on trial testimony in the case against it. The Court of Appeal grantd the newspaper's writ petition, finding the order an impermissible prior restraint violative of both the United States and California Constitutions.

Finding plain error, we issue a peremptory writ of mandate in the first instance directing the trial court to vacate the order barring The Register from publishing the testimony of witnesses at trial.

 The opinion is final. No petition for review was filed.

A petition for review has been filed in Brinkley v. Public Storage, Inc. (2008) 167 Cal.App.4th 1278, the paystub violation and meal and rest break case that was published on October 28, 2008. We previously discussed Brinkley in posts that can be found here and here. We think that, even if there was no Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25, the Brinkley opinion's break with Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949 would make a compelling case for Supreme Court review. Among other things, Brinkley draws the conclusion that it would be "impossible" for employers with large work forces to enforce meal breaks; that there is no requirement for employers to schedule breaks within the first five hours; and that employers only have to make breaks available, applying a standard that equates the "provide" language in the meal period regulations with the "permit and authorize" language of the rest period regulations.

You can download Brinkley here in pdf or MS Word format. The Supreme Court has 60 days from December 4, 2008, to decide whether to grant or deny review. Absent an order granting themselves another 30 days, which is somewhat unlikely in this case, that means that a decision on the petition for review can be expected on or before January 28, 2009. We expect the Supreme Court to issue a "grant and hold" review order, deeming this a related case to Brinker Restaurant Corp. v. Superior Court.

The need to individually examine each class member's records to determine whether he or she qualifies for inclusion in the class does not establish a lack of ascertainability or manageability or establish that common questions of fact or law do not predominate, therefore, an order decertifying class was error and must be reversed. Harper v. 24 Hour Fitness, Inc. (2008) 167 Cal.App.4th 966.

Putative class representatives Bryan Harper and Mark Salzwedel appeal from the trial court’s order decertifying a limited class that had previously been recognized for their unfair competition claims under Business and Professions Code sections 17200 and 17500 (UCL claims) challenging a form contract 24 Hour Fitness, Inc. used to enroll new members. Because the trial court’s decertification order is largely predicated on its erroneous legal assumptions concerning the scope of relief available in an individual action under sections 17200 and 17500, we reverse.

If you prosecute wage and hour class actions, the heart of the opinion can be found here:

The other factor central to the trial court’s analysis, the ongoing difficulty in properly identifying the members of the certified class from 24 Hour Fitness’s records, may be considered as part of a properly conducted evaluation of the superiority of proceeding by class action. However, the need to individually examine each member’s contract to ultimately determine whether he or she qualifies for inclusion in the class does not, as suggested, demonstrate a lack of ascertainability or manageability or establish that common questions of fact or law do not predominate. (See Lee v. Dynamex, Inc. (2008) 166 Cal.App.4th 1325.) [fn. 5]

With respect to the difficulty in confirming the identity of all class members prior to a determination on the merits, Division One of this court recently affirmed certification of a class consisting of FedEx drivers over FedEx’s objection “the members of this class shifted ‘in and out, sometimes on a day-to-day basis.’” (Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1, 14.) The court explained, “The class is ascertainable if it identifies a group of unnamed plaintiffs by describing a set of common characteristics sufficient to allow a member of that group to identify himself as having a right to recover based on the description. [Citation.] [¶] . . . If FedEx’s claim is that every member of the class had to be identified from the outset, FedEx is simply wrong.” (Ibid.; accord, Lee v. Dynamex, Inc., supra, 166 Cal.App.4th at p. 1335; see also Sav-On Drug Stores, supra, 34 Cal.4th at p. 333 [“‘a class action is not inappropriate simply because each member of the class may at some point be required to make an individual showing as to his or her eligibility for recovery’”]; Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, 1207 [class of employees ascertainable in spite of absence of specific rest period records; “speculation that goes to the merits of ultimate recovery [is] an inappropriate focus for the ascertainability inquiry”]; Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, 744 [fact that class may ultimately turn out to be overinclusive not determinative; most class actions contemplate eventual individual proof of damages, including possibility some class members will have none].)

[Fn. 5: It appears this difficulty in identifying class members    and, in particular, in determining which contracts have the words “bonus,” “bonus time” or similar handwritten notations on their face    is attributable, at least in substantial part, to the inadequacy of 24 Hour Fitness’s computer records.  We have previously cautioned an employer may not avoid class certification by making a business decision to commingle or fail to document particular job assignments or tasks.  (Aguiar, supra, 144 Cal.App.4th at p. 134.)  A similar principle would seem applicable here.]

The opinion is bit unusual in that it reverses an order granting a motion to decertify a class, thus the standard of review on appeal was abuse of discretion. It was also noteworthy that the opinion was 2-1, with a dissent by Justice Woods.

A petition for review was filed on December 2, 2008. You can download the full text of Harper here in pdf or MS Word format.

One defendant's timely notice of removal under the Class Action Fairness Act of 2005 is sufficient to remove the entire action, even if other defendants file their notices of removal too late. United Steel, Paper & Forestry v. Shell Oil Company (9th Cir. 2008) __ F.3d __.

Defendants Shell Oil Company and Tesoro Refining and Marketing Company were sued in a single wage and hour class action in state court. Each filed separate notices of renewal, relying, in part, upon CAFA's provisions at 28 U.S.C. §§ 1332(d), 1453, as a basis of jurisdiction. Shell's notice was filed on the 30th day after service upon the first defendant. Tesoro's notice was filed a day later.

After opening two separate cases, the District Court remanded Shell’s case on the ground that Tesoro had failed to consent to removal within thirty days of service on the first-served defendant, and then remanded Tesoro’s case for the same reason. Shell and Tesoro filed separate petitions for permission to appeal, which were granted. The Ninth Circuit then held that under § 1453(b) of CAFA, Shell’s timely notice of removal effected removal of the entire action, including the claims against Tesoro, and the trial court's orders to remand the cases back to state court were erroneous.

You can download the full text of the opinion at this link.

In Alvarez v. May Department Stores Co. (2006) 143 Cal.App.4th 1223, the Court of Appeal established that collateral estoppel could prevent future class actions once a court denies certification of a particular class. However, in Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, the courts distinguished Alvarez, holding, among other things, that a narrower class can be certified later, even if a larger putative class had earlier been denied certification.

In Johnson v. GlaxoSmithKline, Inc. (2008) 166 Cal.App.4th 1497, Alvarez has been further distinguished and its reach limited. Where a prior attempt to certify a nationwide class action was not identical to the current attempt and the current putative class is not the same as the prior class which was not certified, collateral estoppel does not bar plaintiff’s efforts to certify a class action.

In two published decisions the United States District Court for the Central District of California denied class certification in putative class actions brought by current and former users of the prescription drug Paxil against GlaxoSmithKline, Inc. (GSK), the drug’s manufacturer, which alleged GSK had deceptively advertised Paxil as nonhabit-forming. Relying upon those decisions and Alvarez v. May Dept. Stores Co. (2006) 143 Cal.App.4th 1223 (Alvarez), which applied established principles of collateral estoppel to class certification issues, the trial court granted GSK’s motion for summary adjudication precluding this case from proceeding as a class action, ruling Kevin Johnson’s superior court lawsuit against GSK sought to certify the identical putative class, pursuing the same legal claims, as had been disallowed in the federal actions. Because the class issues actually litigated in the federal court Paxil cases differ from those presented by Johnson’s putative class action, we reverse.

In dictum, the Court of Appeal cited a recent SCOTUS case, Taylor v. Sturgell (2008) ___ U.S. ___ [128 S.Ct. 2161, 2171 & fn. 4, 171 L.Ed.2d 155, 167] and noted that it appears to preclude the use of collateral estoppel to bar absent putative class members from seeking class certification following the denial of a certification motion in any earlier lawsuit.

A motion for rehearing was denied by the Court of Appeal, and an immaterial modification was made to the opinion. A petition for review was filed on October 29, 2008, and a decision to grant or deny review by the California Supreme Court is expected before the end of the year. You can download the full text of Johnson here in pdf or MS Word format.

Wal-Mart Stores Inc. has agreed to pay up to $54.25 million to settle a wage and hour class action lawsuit involved breaks and off the clock work brought on behalf of roughly 100,000 employees in Minnesota. The class period runs from September 11, 1998 to November 14, 2008. As part of the settlement, Wal-Mart also agreed to maintain electronic systems, surveys and notices to stay compliant with wage and hour requirements under Minnesota law. Earlier this year, a judge found Wal-Mart to have committed two million violations. At the punitive damages stage, Wal-Mart faced a potential $2 billion liability. The court will hear a motion for preliminary approval of the settlement on January 14, 2009.