New Forms for California Paid Sick Leave Policies

AB 1522, the Healthy Workplaces, Healthy Families Act of 2014 goes into effect on January 1, 2015 (although paid sick leave accrual does not begin until July 1, 2015). Starting with the new year, employers must comply with AB 1522's notice provisions.

The DLSE has published a new poster template to notify employees of their paid sick leave rights. The notice must be posted in the workplace by January 1, 2015. You can download the poster at this link.

The DLSE has also updated the Labor Code § 2810.5 “Notice to Employee” to include information on employers' paid sick leave policies. This revised "Notice to Employee" must be used starting January 1.

Gordon Ramsey's Restaurant Hit With Class Action

Gordon Ramsey's Fat Cow restaurant has been hit with a wage and hour class action in California alleging failure to provide meal breaks, rest breaks, failure to pay minimum wage and proper overtime pay. It also seeks waiting time penalties for former employees who were not paid all wages due upon termination. Ramsey's PR firm released a statement explaining that the claims involve former workers, that the restaurant's "previous management" is at fault, and the practices have been corrected.


The NFL Returns to L.A. - For Litigation

This is off-topic, but it amused us, so we share with you this opening paragraph from the published opinion in National Football League et al. v. Fireman's Fund Insurance Co.

The National Football League has returned to Los Angeles, but not, as many Angelenos hope, bearing the gift of a new home team. The league administration and its intellectual property marketing arm have been sued in multiple states by dozens of former players alleging lifelong brain damage from on-field injuries dating back to the 1950's. In this case the plaintiffs, National Football League and NFL Properties LLC, seek a Los Angeles Superior Court declaratory relief judgment regarding the coverage duties of 32 insurance carriers pursuant to some 187 commercial liability policies that were issued over a 50-60 year period. All the same entities are parties to parallel coverage actions filed by some of the insurers in New York state courts at approximately the same time as the California case.

You can download here in PDF or Word.

Brinker Argument Will Be Broadcast Live

We received word from Katie Lichty, the Project Coordinator for the California Channel, that the Brinker hearing will indeed be broadcast live tomorrow morning at 9:00 a.m. You can watch it on cable if you get the California Channel, or you can watch it streamed live at

This proceeding will be heard at the Supreme Court’s Courtroom, Earl Warren Center, 350 McAllister Street, San Francisco, where you can watch it in person - if you come early enough to get a seat. For more information please contact the court’s press office at (415) 865.7726.

Employment Law News: Jerry Brown Proposes to Eliminate the FEHC

Among the ideas in Jerry Brown's new budget proposal: eliminating the Fair Employment and Housing Commission. This idea would not eliminate the Department of Fair Employment and Housing.

• Eliminate the Fair Employment and Housing Commission—The Administration will consult with stakeholders and evaluate options to phase out the stand~alone commission that handles appeals of employment and housing discrimination cases by January 1, 2012. Adjudication of employment and housing discrimination cases will be appealed to the Director of the Department of Fair Employment and Housing effectively eliminating the stand-alone Commission and consolidating workload. This results in a decrease of $428,000 all funds ($344,000 General Fund) and 1.4 personnel years in 2011-12.

Arnold Schwarzenegger proposed the same thing in 2007.


Employment Law Update: California Bereavement Leave Bill Put to Vote

Last year, the California Legislature passed AB 2340, a bill to allow employees up to three days of unpaid bereavement leave upon the death of certain family members. The bill was vetoed by Governor Schwarzenegger. Today, the Assembly votes on AB 325, which would allow employees to take up to four non-consecutive days of unpaid leave within 13 months after the death of a spouse, child, parent sibling, grandparent, grandchild or domestic partner. The bill would not apply to employees covered by certain collective bargaining agreements.

Supreme Court Grants Cert in Wal-Mart Class Action

The Supreme Court has granted certiorari in the landmark wage and hour class action case Wal-Mart Stores, Inc. v. Dukes, case no 10-277. The review is limited to two issues:

Petition GRANTED limited to Question I presented by the petition. In addition to Question I, the parties are directed to brief and argue the following question: "Whether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a)."

Question I was "Whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2) - which by its terms is limited to injunctive or corresponding declaratory relief - and, if so, under what circumstances.

If you'd like to review the petition-related documents, you can check them out at the links below:

Opinion below (9th Circuit)

Petition for certiorari

Brief in opposition

Amicus brief of Intel

Amicus brief of the U.S. Chamber of Commerce

Amicus brief of the Defense Bar

Amicus brief of Retail Litigation Center, Inc.

Amicus brief of Altria Group et al.

Amicus brief of the Equal Employment Advisory Council

Amicus brief of Pacific Legal Foundation

Amicus brief of Washington Legal Foundation

Amicus brief of California Employment Law Council

Petitioner's reply

More Cases Added to the Brinker Grant-and-Hold Group

There are now four cases in which the California Supreme Court has granted review and held pending further decision in the Brinker Restaurant v. Superior Court matter. Brinker, which "presents issues concerning the proper interpretation of California's statutes and regulations governing an employer's duty to provide meal and rest breaks to hourly workers" is fully briefed and awaits a hearing date for oral argument. The first grant-and-hold review was in Brinkley v. Public Storage (2008) 167 Cal.App.4th 1278, followed by the unpublished decision in Bradley v. Networkers International, LLC (Petition for review after the Court of Appeal affirmed the judgment in a civil action).

Add to them now Faulkinbury v. Boyd & Associates (2010) Cal.App.4th 1363 (Petition for review after the Court of Appeal affirmed in part and reversed in part an order denying class certification in a civil action) and the unpublished opinion in Brookler v. Radioshack Corporation (Petition for review after the Court of Appeal reversed an order decertifying a class action).

Next on the likely list of cases to be granted review and held - Hernandez v. Chipotle Mexican Grill, Inc. (2010) __ Cal.App.4th __.  (Opinion in pdf here, or in Word here). The Chamber of Commerce is taking a bit of a victory lap for this opinion, which was originally handed down as an unpublished decision, but was ordered published on October 28. It is likely to be a short lap, at least until and unless the Supreme Court weighs in on Brinker in favor of the employers.

Will a Wage and Hour Case Decide the California Election?


It apparently hasn't been filed yet, but the former housekeeper of Republican gubernatorial nominee Meg Whitman plans to file a civil action for unpaid wages and mileage reimbursement against Whitman. The housekeeper, Nicandra "Nicky" Diaz Santillan, has come forward and admitted that she is an illegal immigrant who deceived Whitman and the agency that placed her by using a fake social security card and a driver's license to prove her immigration status. Whitman fired her last year. Santillan says it was because Whitman planned to run for governor and didn't want the attention that comes from employing an illegal alien. Whitman says it's because Santillan came to her and asked for help obtaining legal status, at which point Whitman realized that she could no longer employ Santillan.

Santillan is represented by Gloria Allred, who issued a press release earlier this week that described Whitman's employment practices as "don't ask, don't tell" and said that "Don't ask don't tell may have become OMG, she will tell if I continue to employ her." That seems a bit counterintuitive to us. Ordinarily, we've found that employers are more like to worry about what people will tell if you fire them, not what they'll tell if you let them keep a job, especially when you are paying $23 an hour for a housekeeper.

Allred said Whitman caused the worker to "feel exploited, disrespected, humiliated, and emotionally and financially abused." As a result, she'll be suing for back wages for off-the-clock work, and unpaid mileage incurred while running errands. It wouldn't surprise us to learn that a wealthy executive had a personal assistant working off the clock and running errands without getting mileage, but that part of the case isn't getting much attention. All anyone cares about is that this woman wasn't in the U.S. legally. The hot topic is not whether Whitman cheated her employee out of wages or expense reimbursements. It's whether Whitman should have known Santillan was illegal after receiving a letter from the  U.S. Social Security Administration office, which advised Whitman that Santillan’s name did not match her Social Security number. Allred has already shared a blowup of the letter with the media. There are two versions of how the housekeeper got the letter. One version is that she pulled it from the trash and saved it for seven years. The other version is that Whitman's husband asked her to look into the problem. Curiously, the source for both versions is the housekeeper.

Perhaps it's because we don't love media attention as much as we love getting money for our exploited clients, but we can't help but think that this media circus benefits the lawyers and the Brown campaign more than it benefits the plaintiff. This is probably a case that could have been settled for a pretty big chunk of change, quietly and quickly, without exposing the plaintiff as a person who broke the law by falsifying documents and who is eligible for deportation. When we represented undocumented workers in wage claims, we make it a point to keep their immigration status as unknown as possible.

Workers Keep Pressing for All of Their Wages

Though we haven't had time to keep up with them over the last few months, wage and hour cases remain a hot topic of discussion. Check out today's feature on "Holidays Bring Out The Workers Suing Over Unpaid Wages."

Tis the season for overtime litigation, as new lawsuits, settlements and pro-employee rulings pile up under the tree.

In back-to-back rulings last week, federal judges gave early holiday gifts to class action plaintiffs who argue that getting ready for work should be compensated for.

In Minnesota, a federal judge on Dec. 17 denied a request by Qwest Communications International Inc. to decertify a class of more than 1,500 call center employees who allege that they have not been paid for time spent booting up and shutting down their computers. The day before, a federal judge in Arkansas granted class certification to a group of former Butterball employees who allege that the poultry company didn't pay them for time spent donning and doffing protective equipment and clothing.

On the new litigation front, security guards at Madison Square Garden on Dec. 16 filed a proposed class action in New York federal court, claiming that they have routinely and deliberately been shorted on overtime payments.

Our caseload has been keeping us too busy to blog. However, we've settled a few recently, and might be able to start squeezing out a little time to get caught up and publish all those draft posts we have queued up.

January DLSE Restaurant Sweeps Result in More than $800K in Fines

Last month, DLSE investigators issued another $800,000 in fines to businesses in the restaurant industry for various labor law violations. The 29 investigators conducted 245 inspections in 26 counties across the state on January 21-22. A total of 143 employers were cited. Most of the fines ($676,000  issued to 129 employers) were the result of a failure to carry workers’ compensation insurance. Other violations included failure to pay minimum wage or overtime, failure to provide itemized deductions to employees, and failure to abide by child labor laws for minors under the age of 18.

Litigation Increased From 2007 to 2008

Portfolio Media Inc.'s Law 360 Litigation Almanacs reports that U.S. District Court civil case filings increased 9% from 2007 to 2008, and class actions increased 8% (to 7,661). Employment cases were up just 6% from 2007. With the economy bringing layoffs and other terminations in large numbers, employment litigation will probably increase more in 2009 that other types of litigation.

DLSE Shuts Down Unregistered Carwashes

Since the passage of AB 1688 in 2003, California has required registration for all carwash and polishing businesses (the Carwash Worker Law, Labor Code §§ 2050-2067). The law is intended to protect employees in the car washing and polishing industry from under-the-table cash payrolls, child labor violations and a lack of workers’ compensation insurance. There were 845 licensed carwashes as of November 2008. California Labor Commissioner Angela Bradstreet recently filed an action in San Diego County Superior Court to shut down a San Diego carwash for failing to register with the Labor Commissioner’s Office as required under California Labor Code § 2050. In February 2007 and March 2008, Choufa Holdings, Inc. dba Action Car Wash was found operating and employing workers without properly registering with the Labor Commissioner’s Office. Penalties were levied and a judgment, still unsatisfied, was entered.

A similar lawsuit was filed in March 2008 against Scrub Boys, a Sacramento carwash. As a result of that lawsuit, Scrub Boys registered and paid $10,000 in fines.

DLSE Alleges Legal Marketing Company Fails to Pay Wages

The DLSE has filed a lawsuit in San Diego County Superior Court seeking nearly $250,000 in unpaid wages on behalf of a group of workers for Einstein Industries Inc., a San Diego online health care and legal marketing company. The complaint alleges that from August through November 2007, Einstein Industries Inc. failed to meet their obligation to timely pay wages to their employees, instead paying employees anywhere from one day to several weeks late. The company allegedly resumed this unlawful practice resumed in July 2008 and has continued ever since.

Perhaps the firm can now become a client of one of its clients.

Los Angeles Garment Industry Raids Find 67% Violation Rate

State investigators from the Economic and Employment Enforcement Coalition recently visited 21 garment industry businesses in Los Angeles County and cited 14 of them for various labor laws, including failure to maintain workers’ compensation insurance, failure to provide itemized deduction statements to employees, failure to pay the minimum wage and failure to pay overtime. The citations claimed more than $183,600 in penalties.

Northern California EEEC Sweep Finds 30 of 47 Businesses Violating Labor Laws

One of the few areas in which Governor Arnold Schwarzenegger is interested in enforcing labor law violations is where the violations contribute to the underground economy. To combat such violations, the Economic and Employment Enforcement Coalition conducts regular sweeps of certain high-violation industries, such as the agriculture industry. Last month, in a two-day enforcement sweep, investigators visited 47 agriculture businesses that included nurseries, greenhouses, landscapers, farm labor contractors, dairies and growers. Citations were issued to 30 of those businesses, resulting in $107,500 in penalties for failure to maintain workers’ compensation insurance, failure to provide itemized deductions to employees and failure to provide worker’s permit documentation for minors.

Senate Passes Lilly Ledbetter Fair Pay Act

By a vote of 61-36, the Senate has passed the Lilly Ledbetter Fair Pay Act (S. 181). As explained in a press release from the bill’s lead sponsor, Senator Barbara Mikulski (D-MD), the bill will “remedy the 2007 Ledbetter v. Goodyear Tire & Rubber Co. decision in which a divided Supreme Court held that workers must sue for pay discrimination within 180 days after the original pay-setting decision, no matter how long the unfair pay continues.” It amended Title VII of the Civil Rights Act of 1964 so that the statute of limitations runs from the date of the actual payment of a discriminatory wage, not just from the time of hiring. Thus, employees can seek a remedy based on each discriminating paycheck, not just during the first 180 days of pay discrimination.

All 36 nays were cast by Republicans. Five Republicans voted for the bill. The bill does not have to be returned to the House because the Senate approved the bill in the same form passed by the House. Here is the text of the bill:

Calendar No. 14
1st Session
S. 181
To amend title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967, and to modify the operation of the Americans with Disabilities Act of 1990 and the Rehabilitation Act of 1973, to clarify that a discriminatory compensation decision or other practice that is unlawful under such Acts occurs each time compensation is paid pursuant to the discriminatory compensation decision or other practice, and for other purposes.
To amend title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967, and to modify the operation of the Americans with Disabilities Act of 1990 and the Rehabilitation Act of 1973, to clarify that a discriminatory compensation decision or other practice that is unlawful under such Acts occurs each time compensation is paid pursuant to the discriminatory compensation decision or other practice, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
This Act may be cited as the `Lilly Ledbetter Fair Pay Act of 2009'.
Congress finds the following:
(1) The Supreme Court in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007), significantly impairs statutory protections against discrimination in compensation that Congress established and that have been bedrock principles of American law for decades. The Ledbetter decision undermines those statutory protections by unduly restricting the time period in which victims of discrimination can challenge and recover for discriminatory compensation decisions or other practices, contrary to the intent of Congress.
(2) The limitation imposed by the Court on the filing of discriminatory compensation claims ignores the reality of wage discrimination and is at odds with the robust application of the civil rights laws that Congress intended.
(3) With regard to any charge of discrimination under any law, nothing in this Act is intended to preclude or limit an aggrieved person's right to introduce evidence of an unlawful employment practice that has occurred outside the time for filing a charge of discrimination.
(4) Nothing in this Act is intended to change current law treatment of when pension distributions are considered paid.
Section 706(e) of the Civil Rights Act of 1964 (42 U.S.C. 2000e-5(e)) is amended by adding at the end the following:
`(3)(A) For purposes of this section, an unlawful employment practice occurs, with respect to discrimination in compensation in violation of this title, when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject to a discriminatory compensation decision or other practice, or when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.
`(B) In addition to any relief authorized by section 1977A of the Revised Statutes (42 U.S.C. 1981a), liability may accrue and an aggrieved person may obtain relief as provided in subsection (g)(1), including recovery of back pay for up to two years preceding the filing of the charge, where the unlawful employment practices that have occurred during the charge filing period are similar or related to unlawful employment practices with regard to discrimination in compensation that occurred outside the time for filing a charge.'.
Section 7(d) of the Age Discrimination in Employment Act of 1967 (29 U.S.C. 626(d)) is amended--
(1) in the first sentence--
(A) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively; and
(B) by striking `(d)' and inserting `(d)(1)';
(2) in the third sentence, by striking `Upon' and inserting the following:
`(2) Upon'; and
(3) by adding at the end the following:
`(3) For purposes of this section, an unlawful practice occurs, with respect to discrimination in compensation in violation of this Act, when a discriminatory compensation decision or other practice is adopted, when a person becomes subject to a discriminatory compensation decision or other practice, or when a person is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.'.
(a) Americans With Disabilities Act of 1990- The amendments made by section 3 shall apply to claims of discrimination in compensation brought under title I and section 503 of the Americans with Disabilities Act of 1990 (42 U.S.C. 12111 et seq., 12203), pursuant to section 107(a) of such Act (42 U.S.C. 12117(a)), which adopts the powers, remedies, and procedures set forth in section 706 of the Civil Rights Act of 1964 (42 U.S.C. 2000e-5).
(b) Rehabilitation Act of 1973- The amendments made by section 3 shall apply to claims of discrimination in compensation brought under sections 501 and 504 of the Rehabilitation Act of 1973 (29 U.S.C. 791, 794), pursuant to--
(1) sections 501(g) and 504(d) of such Act (29 U.S.C. 791(g), 794(d)), respectively, which adopt the standards applied under title I of the Americans with Disabilities Act of 1990 for determining whether a violation has occurred in a complaint alleging employment discrimination; and
(2) paragraphs (1) and (2) of section 505(a) of such Act (29 U.S.C. 794a(a)) (as amended by subsection (c)).
(c) Conforming Amendments-
(1) REHABILITATION ACT OF 1973- Section 505(a) of the Rehabilitation Act of 1973 (29 U.S.C. 794a(a)) is amended--
(A) in paragraph (1), by inserting after `(42 U.S.C. 2000e-5 (f) through (k))' the following: `(and the application of section 706(e)(3) (42 U.S.C. 2000e-5(e)(3)) to claims of discrimination in compensation)'; and
(B) in paragraph (2), by inserting after `1964' the following: `(42 U.S.C. 2000d et seq.) (and in subsection (e)(3) of section 706 of such Act (42 U.S.C. 2000e-5), applied to claims of discrimination in compensation)'.
(2) CIVIL RIGHTS ACT OF 1964- Section 717 of the Civil Rights Act of 1964 (42 U.S.C. 2000e-16) is amended by adding at the end the following:
`(f) Section 706(e)(3) shall apply to complaints of discrimination in compensation under this section.'.
(3) AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967- Section 15(f) of the Age Discrimination in Employment Act of 1967 (29 U.S.C. 633a(f)) is amended by striking `of section' and inserting `of sections 7(d)(3) and'.
This Act, and the amendments made by this Act, take effect as if enacted on May 28, 2007 and apply to all claims of discrimination in compensation under title VII of the Civil Rights Act of 1964 (42 U.S.C. 2000e et seq.), the Age Discrimination in Employment Act of 1967 (29 U.S.C. 621 et seq.), title I and section 503 of the Americans with Disabilities Act of 1990, and sections 501 and 504 of the Rehabilitation Act of 1973, that are pending on or after that date.

Democratic Policy Committee Bill Summary

Republican Policy Committee Bill Summary

We expect President Obama to sign the bill promptly.

Wage & Hour Division Collects Over $185 Million in 2008

The U.S. Department of Labor’s Wage and Hour Division announced that it recouped back wages totaling $185,287,827 in fiscal year 2008, for 228,645 workers, nationwide. The recovery actually represents a decrease from fiscal year 2007. But congratulations to the Department of Labor nonetheless. In 2008, they collected almost 11 times as much in unpaid wages as our law firm did.

He Did WHAT With The Settlement Money?

We were shocked by this story about Sandeep Baweja, an Irvine attorney who admits he stole most of the money from a $3.55 million wage and hour class action settlement in a case against ZipRealty. Lubocki, et al. v. ZipRealty, Inc., Case No. CV 07 2959 SJO (JCX) (C.D. Cal.)

As resumes and accomplishments go, Irvine attorney Sandeep Baweja was a superstar. Then, in the span of a few months this year, he threw it all away. In an unfolding case that has stunned colleagues, Baweja, 38, has admitted to burning through almost all of a $2.7-million settlement that was supposed to be shared by about 1,000 plaintiffs he represented in a class-action labor lawsuit. In legal filings, Baweja cites his inexperience as a stock market investor and this year's market freefall for the massive losses — money he had no right to transfer without court approval, according to legal documents.

We'd never met or heard of him, but apparently "superstar" Baweja is a ten year lawyer, active in politics and civic matters. And apparently, ZipRealty and/or the claims administrator Garden City Group released all of the settlement money to Baweja, who then spent several months playing the stock market with the money. Unfortunately for Baweja and his clients, mid-2008 was a bad time to be playing the stock market. He blew all but $54,846.90 of the settlement money.

Baweja and his co-counsel have taken down most of their website about the ZipRealty case, and replaced it with an update informing class members that Baweja is withdrawing due to a conflict of interest.

On December 24, 2008, Mr. Baweja filed a Motion to Withdraw as counsel in Lubocki v. Zip Realty, Inc. Case No. CV 07-2959-SJO (JCx). Mr. Baweja is asking to be removed as class counsel due to a conflict of interest. All class members should expect to receive a letter explaining the basis of the conflict of interest, with a copy of the Motion to Withdraw. The hearing on the Motion to Withdraw is currently set for January 26, 2009.

That motion will be granted. He also sent an email to class members that same day, confessing what he had done with their money. For a cached version of the site, check here. For a copy of the class notice, check out this blog post. There is no evidence that Ernest J. Franceschi or any of the other lawyers involved in the case played any role in the disappearance of the money.

What's next? A new class action to represent the class members in the pursuit of their class settlement money. Disciplinary proceedings are also a certainty. Playing with and losing your clients' money is about as serious a violation as a lawyer can commit. As one lawyer asked about the case and the rule Baweja violated put it this way: "That's Ethics 101." Actually, that's one you learn in kindergarten. Don't take what doesn't belong to you. Don't borrow without permission. You don't have to be a lawyer to know that.

On a side note, as further evidence that ratings are worthless, here's a link to his Avvo rating. "No ratings yet. ... We have not found any instances of professional misconduct for this lawyer." Perhaps when the angry clients and newspaper readers find out about Avvo, that will change. Baweja does have a wikipedia page now, though. Baweja was also the treasurer in Irvine for the Yes on Measure R and Yes on Measure S campaign committees. You can't help but wonder how clean those campaign accounts were kept.

California Minimum Wage For 2009

We've had several people inquire about the "new" minimum wage rates for 2009. There is no increase going into effect in 2009. The minimum wage was increased from $6.75 to $7.50 on January 1, 2007, and from $7.50 to $8.00 on January 1, 2008. There were bills that would have thereafter tied the minimum wage to a cost of living index, including a bipartisan bill that passed, but which the governor vetoed (AB 48). So, no change.

Now we're off to the Rose Bowl, where we're hoping to also see no change from the last year. Fight On!

EEEC Busts More Agricultural Businesses

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.

Recent DLSE Sweeps

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.

Another DLSE Settlement With a Car Wash

Yesterday, the California Labor Commissioner announced another settlement, this time for $450,000, for unpaid wage claims brought on behalf of carwash workers.

Sixty workers at a Redondo Beach carwash will receive $450,000 in unpaid wages, thanks to a settlement reached in a lawsuit against the carwash by the California Labor Commissioner on the workers' behalf. The Bruno Scherrer Corporation dba Hollywood Riviera shorted their employees' earned wages and intentionally failed to record employee total work hours. This deceptive practice resulted in payment of sub-minimum wage to the carwash employees.

The settlement arose from an investigation that began in October 2006, leading to a lawsuit filed by the Labor Commissioner in September 2007 in Los Angeles County Superior Court. Hollywood Riviera carwash had been paying employees minimum wage for as little as 3 to 4 hours of work then requiring them to finish out the day with no further wages, being paid in tips only. As a result of the settlement, each affected worker will receive an average of $7,500.

DLSE Loves to Go After Agriculture, Too

The one industry that the Labor Commissioner likes to pursue as much as the car wash industry, is the agriculture industry. In September, the DLSE issued citations totaling over $269,000 in fines to agriculture businesses in a statewide two-day enforcement sweep as part of an ongoing effort to address illegal operations in the underground economy. Twenty-four teams of investigators conducted the two-day sweeps on Sept. 24-25. Out of 194 inspections, 35 agriculture businesses were cited. Twenty-five agriculture businesses received stop work notices until they can provide workers’ compensation insurance for their employees. The violations included failure to: Provide work permits for minors; Failure to pay the minimum wage; Provide employees with an itemized wage deduction statement; Pay overtime wages; Pay the annual registration with the Commissioner’s Office and Provide workers’ compensation.

You'll recognize this quote from yesterday's post:

“Our efforts are directed at illegally operating businesses as part of the underground economy,” said California Labor Commissioner Angela Bradstreet. “These illegal operations have a negative impact on our state’s economy, do not provide the protection workers are legally afforded, and have an unfair advantage over competitors who do follow the law.”

Exploited farm workers are a good political subject matter. Sacramento notices those, too.

DIR Keeps Going After Car Washes

Almost every time you send a PAGA notice to the LWDA, you'll never hear back from them. If you are thinking about taking on a car wash, however, you will pique their interest. Almost every month, the Labor Commissioner toots her horn about car wash raids.

July 21, 2008: Officials with the State Division of Labor Standards Enforcement (Labor Commissioner’s Office) issued 47 citations totaling $356,200 in fines to car wash businesses in Los Angeles and Orange counties as part of an ongoing effort to address illegal operations in the underground economy. As part of the recent two-day enforcement sweep, investigators visited 64 carwashes in Los Angeles County and eight in Orange County. ... Thirteen investigators conducted the sweeps of 72 carwashes and found that 24 businesses were cited for not having the required registration and 19 businesses failed to have workers’ compensation insurance. In addition three businesses were found to be employing minors without the proper work permits and one business failed to provide itemized deductions to their employees.

August 22, 2008: Officials with the State Division of Labor Standards Enforcement (Labor Commissioner’s Office) issued citations totaling $521,000 in fines to car wash businesses in Northern California as part of an ongoing effort to address illegal operations in the underground economy. As part of the recent three-day enforcement sweep, investigators visited 97 carwashes. Fifteen teams of investigators conducted the two day sweeps on Aug. 13-14 and 54 carwash businesses were cited. Thirty out of the 54 carwashes received work stop notices until they can provide workers’ compensation insurance for their employees. The violations included failure to: Provide work permits for minors; Provide employees with an itemize wage deduction statement; Pay overtime wages; Pay the annual registration with the commissioner’s office and Provide workers’ compensation.

“Our efforts are directed at illegally operating carwash businesses as part of the underground economy,” said California Labor Commissioner Angela Bradstreet. “These illegal operations have a negative impact on our state’s economy, do not provide the protection workers are legally afforded, and have an unfair advantage over competitors who do follow the law.”

For some reason, car wash owners aren't producing the kind of jobs, or campaign donations, that show up on the radar in Sacramento. That, and they are easy pickings for investigators.

What an Obama Administration Could Bring

With the election of Barack Obama as the 44th President of the United States and with the Democrats gaining seats in the House and Senate, some changes in employment law, including wage and hour law, could be coming in the next four years. Some changes that are reasonably foreseeable:

  • Minimum Wage. Though the federal minimum has been increased in recent years, and moves to $7.25 per hour in 2009, greater increases in the federal minimum wage could follow.
  • Sick Leave. The Obama administration is expected to push for new legislation requiring employers to provide at least seven days of annual paid sick leave to employees.
  • Family and Medical Leave. The Obama administration is expected to expand the FMLA to cover more workers, including those employed by smaller firms (20-25 employees), and to cover a broader range of causes for leave.
  • Equal Pay. Though Senate Republicans filibustered the Lilly Ledbetter Fair Pay Act of 2007, intended to overturn the Ledbetter v. Goodyear Tire & Rubber Co. (2007) 550 U.S. ___, 127 S.Ct. 2162, 167 L.Ed.2d 982, decision, the Democrats will take up the cause again in 2009. The 5-4 opinion severely curtailed an employee's right to recover Title VII wage claims for violations of the Equal Pay Act. The losing plaintiff, Lilly Ledbetter, spoke at the Democratic National Convention.
  • NLRB/NLRA: Union membership is below ten percent. That could change with the passage of the Employee Free Choice Act, the RESPECT Act, and the Public Safety Employer-Employee Cooperation Act. President Obama's appointees to the National Labor Relations Board are likely to be much more protective of unions and employees than the appointees of President Bush, who tended to favor management and employers.
  • Executive compensation. Expect more executive compensation limitations, particularly in any future bailout legislation, including clawback provisions and bans prohibiting golden parachutes. Current restrictions are vague, prospective and limited in scope. Stronger regulations with more detailed limitations and a broader scope affecting existing contracts could pass.
  • Arbitration. Expect to see a new effort to pass the Arbitration Fairness Act, an amendment to the Federal Arbitration Act in 1925, which would provide new procedures and limitations on pre-dispute mandatory arbitration clauses in consumer and employment contracts.
  • ERISA. A key goal of the Obama administration will be the passage of a universal health care plan with guaranteed eligibility, comprehensive benefits, and affordable premiums and co-pays.
  • Supreme Court appointments. Barack Obama mentioned Ruth Bader Ginsburg and Stephen Breyer as examples of the kind of justice he would look for to fill vacancies in the SCOTUS. In the next four year, John Paul Stevens, 88, and Ginsburg, 75, are thought to be likely to retire. David Souter, 69, has expressed some interest in leaving Washington and returning to his home state of New Hampshire. Justices Anthony Kennedy and Antonin Scalia are 72 years old.

If you see anything else on the horizon, leave a comment.

Severance Packages on the Chopping Block

An article this week in Business Week (Now Severance Packages Are on the Chopping Block As the economy swoons, some companies are cutting workforces—and severance benefits) describes how companies looking to save costs in a difficult market are reducing severance packages for employees on their way out.

A lot of employees believe that companies provide severance pay to satisfy some sort of legal obligation. That is not true. Unless a guaranteed severance package is part of a verbal or written agreement between employees and the employer, there is no legal duty on the employer's part to provide severance pay to an employee who is terminated or who resigns.

Schwarzenegger to make state workers pay for legislators' budget dispute

Purportedly to avoid a full-blown fiscal crisis in California, Governor Arnold Schwarzenegger has signed an executive order that cuts the wages of 200,000 state workers to $6.55 per hour. The order will remain effective until the state passes a new budget. California State Controller Controller John Chiang has declared that he will not implement Schwarzenegger's order, and several employee unions have threatened to file suit to invalidate the order. California's current minimum wage is $8.00 per hour. Under the order, state employees will be paid the lower federal minimum wage under the FLSA. The order also eliminates 2,2000 part-time and temporary state jobs.

Emergency workers and certain other employees are exempt. Workers will receive back pay once the state legislature passes a budget. In other words, the state won't actually save money, it is simply borrowing at the expense of the working class and using them as pawns to motivate the legislature to resolve its differences. The full text of the governer's order is as follows:


WHEREAS the constitutional deadline for enacting a state budget for Fiscal Year 2008-09 has passed without the enactment of a budget; and

WHEREAS in the absence of a budget, State government is constitutionally prohibited from making payments that are not compelled by either the State Constitution or federal law; and

WHEREAS until there is a state budget, the State has no authority to pay the following payments:  (1) Vendors and Contractors for goods and services chargeable to Fiscal Year 2008-09; (2) Payroll for legislative staff, appointees, and exempt employees; (3) Payroll for other state employees beyond that required by federal labor law; (4) Highway User Taxes that are apportioned to the state, cities and counties for highway and road improvement projects; (5) Cal Grants to students in higher education; (6) Transfers to the Trial Courts; (7) Transfers to University of California, California State University, and Community Colleges; (8) Transportation Revolving Fund disbursements; (9) Non-revenue limit school payments; and (10) Payments for non-federally mandated social services programs such as Community Care Licensing, Adult Protective Services, State Only Foster Care; State Only Adoptions Assistance, and Cash Assistance Program for Immigrants; and (11) tax relief payments to low income seniors and disabled persons; and

WHEREAS on May 1, 2003, the California Supreme Court, in White v. Davis, issued a decision that, in conjunction with other pre-existing court orders, clarified that during a period that there is no state budget in place, federal labor laws require the State to pay its nonexempt FLSA employees either federal minimum wage or, for those employees that work overtime, their full salaries plus overtime; and

WHEREAS it is not known when a budget will be adopted for Fiscal Year 2008-09; and

WHEREAS as a result of the late budget, there is a real and substantial risk that the State will have insufficient cash to pay for state expenditures; and

WHEREAS since June 2008, the unprecedented number and size of fires in California has created states of emergency that have required additional and substantial expenditures of cash to ensure that there are sufficient resources to effectively fight these fires and save lives and homes; and

WHEREAS it is critical that the State be able to meet any unforeseen emergency such as fire, flood or public health emergency and to continue to make timely payments on constitutionally and federally-mandated obligations and existing obligations to pay holders of state bonds; and

WHEREAS due to the impending cash crisis and budget delay, the State may be forced to consider a Revenue Anticipation Warrant (RAW) at an exorbitant cost to the State, including hundreds of millions of dollars in credit enhancements, in order to make sure there is sufficient cash to pay for state expenditures; and

WHEREAS after the late adoption of a budget, there will be additional cash demands because all of the deferred payments that were not permitted to be made during the budget impasse will become due and payable; and

WHEREAS the late budget has resulted in loss of savings to the State in the amount of $164 million for July, and failure to enact a budget in August will result in additional loss of savings in the amount of $323 million; and

WHEREAS as a result of the late budget, additional mitigation measures must be implemented to offset the loss of savings and to ensure that there is sufficient cash to make the State’s payments; and

WHEREAS the State employs nearly 22,000 retired annuitants, permanent intermittent employees, and seasonal employees and the State hires new employees at the rate of approximately 1,700 per month; and

WHEREAS except for services and functions of state government deemed critical by this Order, additional mitigation measures need to be taken to immediately reduce expenditures and preserve cash, including the following: (1) halting all hiring, transfers and promotions of employees, and contracting for individuals to perform services; (2) prohibition of overtime; (3) termination of the services of retired annuitants, permanent intermittent employees, seasonal employees, temporary help workers and, student assistants; and (4) suspension of personal services contracts.

NOW, THEREFORE, I, ARNOLD SCHWARZENEGGER, Governor of the State of California, in accordance with the authority vested in me by the Constitution and the statutes of the State of California, do hereby issue the following orders to become effective immediately:

IT IS ORDERED that the services and functions of state government directly related to the preservation and protection of human life and safety, including but not limited to emergency and disaster response activities and the provision of 24-hour medical care, shall be deemed critical and exempt from this Order.

IT IS FURTHER ORDERED that except for services and functions of state government deemed critical and exempt by this Order, all State agencies and departments under my direct executive authority take immediate action effective July 31, 2008 to cease and desist hiring of employees (except in instances in which there is a bona fide offer and acceptance prior to the effective date of this Order), transferring employees between State agencies and departments, promoting employees, and contracting for individuals to perform services.

IT IS FURTHER ORDERED that except for services and functions of state government deemed critical and exempt by this Order and emergent situations to preserve and protect human life and safety, all State agencies and departments under my direct executive authority take immediate action to cease and desist authorization of all overtime for employees effective July 31, 2008.

IT IS FURTHER ORDERED that except for services and functions of state government deemed critical and exempt by this Order, all State agencies and departments under my direct executive authority take immediate action to terminate the services of the following five categories of employees and individuals effective July 31, 2008:  (1) Retired Annuitants; (2) Permanent Intermittent Employees; (3) Seasonal Employees; (4) Temporary Help Workers; and (5) Student Assistants.

IT IS FURTHER ORDERED that except for services and functions of state government deemed critical and exempt by this Order and except for services provided pursuant to multi-year contracts for Information Technology systems and services, all State agencies and departments under my direct executive authority take immediate action to suspend all personal services contracts effective July 31, 2008.

IT IS FURTHER ORDERED that all Agency Secretaries and Department Directors shall take immediate action to implement this Order, and any other action that will reduce state expenditures.

IT IS FURTHER ORDERED that the Director of the Department of Finance shall establish an exemption process that Agency Secretaries shall utilize to determine if an exemption is justified based on critical services and functions, which may include either cost-reducing or revenue-producing services and functions that will help ensure that there is sufficient cash for the State to make its payments.

IT IS FURTHER ORDERED that Agency Secretaries and Cabinet-level Directors shall report their exemptions to the Cabinet Secretary and the Director of the Department of Finance within 24 hours of approving an exemption.

IT IS FURTHER ORDERED that the Director of the Department of Finance and Director of the Department of Personnel Administration shall work with the State Controller to develop and implement the necessary mechanisms, including but not limited to pay letters and computer programs, to comply with the California Supreme Court’s White v. Davis opinion to pay federal minimum wage to those nonexempt FLSA employees who did not work any overtime.

IT IS FURTHER ORDERED that the necessary mechanisms to ensure compliance with the White v. Davis opinion must be in place to be effective for the August 2008 payroll.

IT IS HEREBY REQUESTED that during this budget impasse, the State Treasurer shall take all actions necessary to maintain the State’s ability to pay its bond obligations, including payment of principal and interest with funds in the State Treasury, and shall take all actions that are necessary to protect the State’s funds and investments.

IT IS FURTHER REQUESTED that other entities of State government not under my direct executive authority, including the California Public Utilities Commission, the University of California, the California State University, California Community Colleges, constitutional officers, the legislative branch (including the Legislative Counsel Bureau), and judicial branch, assist in the implementation of this Order and implement similar mitigation measures that will help to preserve the State’s cash supply during this budget impasse.

IT IS FURTHER ORDERED that this Order shall remain in effect until such time as both a Fiscal Year 2008-09 Budget is adopted and the Director of the Department of Finance confirms an adequate cash balance exists to meet the State’s fiscal obligations.

I FURTHER DIRECT that as soon as hereafter possible, this Order be filed in the Office of the Secretary of State and that widespread publicity and notice be given to this Order.

IN WITNESS WHEREOF I have hereunto set my hand and caused the Great Seal of the State of California to be affixed this 31st day of July 2008.

ARNOLD SCHWARZENEGGER - Governor of California

Governor Threatens to Cut All State Workers to Minimum Wage Until Budget is Passed.

According to a news report in the Sacramento Bee, California Governor Arnold Schwarzenegger threatened to sign an executive order today cutting the wages of more than 200,000 state employees to the federal minimum wage of $6.55. The order would provide that the balance of their wages would be paid once the state budget, due July 1, 2008, is passed.

The announcement caused quite a stir. Petitions were circulated, protests were planned and state Controller John Chiang announced that he would ignore the governor's order. "He will pay state workers the salaries that they have earned, and that's full salary," said Deputy Controller Hallye Jordan.

In addition to cutting salaries, including union and other contractually specified salaries, the order would require state agencies to stop authorizing overtime for most employees, impose a hard hiring freeze except for state jobs directly related to the preservation and protection of human life and safety, and suspend work for all retired annuitants, permanent intermittent employees, seasonal employees, temporary help workers, student assistants and some contractors.

As his deadline approached, the governor postponed the issuance of the order until at least Thursday.

GAO Sharply Criticizes Wage and Hour Division.

The New York Times published an article this week regarding two very critical reports from the Government Accountability Office discussing the poor performance of the Wage and Hour Division of the Labor Department. The reports accuse the division of mishandling many overtime and minimum-wage complaints, delaying investigating hundreds of cases for a year or more (in some cases dropping them because the statute of limitations was running), reducing the number of enforcement actions it takes each year, and ignoring low-wage industries where violations are most common.

Wage and hour cases in state and federal court, both individually and collectively, are still increasing. One reason is because businesses continue to violate wage and hour laws with great regularity. The other reason is because the state and federal agencies charges with enforcing the FLSA and state labor laws are doing a poor job of policing employers, forcing the aggrieved employees to seek their own remedies with private attorneys. The article, which can be found at this link, details some of the more surprising findings in the reports, including statistics showing that in the past ten years, the number of cases handled by the Wage and Hour Division declined 37%, and the number of investigators in the division went down 22% from 2001 to 2007.

One particularly egregious example from the report described a case in which:

a pool maintenance technician had complained about not receiving a final paycheck. The employer admitted that it did not issue that check, but then berated the wage investigator, saying it would not pay the back wages. Afterward, the investigator dropped the case.

The Labor Department defended its performance, saying that the “Wage and Hour Division is delivering pay for workers, not a payday for trial lawyers.” We would disagree. If the DOL was doing its job, wage and hour trial lawyers would be out of business. Not only would employees not need to hire their own lawyers to pursue claims, but eventually, strong enforcement would make it unprofitable for businesses to cheat employees out of their wages, and compliance would increase. Fortunately for us, we don't see that happening any time soon.

DLSE Busts 54 Construction Firms

The California Division of Labor Standards Enforcement issued 54 citations totaling more than $279,500 in fines to construction firms in Los Angeles, Orange, Riverside, San Bernardino and San Diego Counties for various labor law violations in a recent two-day enforcement sweep. Violations uncovered during the May 14 and 15 inspections included:
  • failure to provide workers’ compensation insurance
  • failure to provide itemized deduction statements to employees
  • failure to obtain a California contractor’s license

You can obtain a complete list of the violations and businesses cited by emailing the Department of Industrial Relations at [email protected].

EEEC Busts 22 Southland Sweatshops

The California Labor and Workforce Development Agency's Economic Employment Enforcement Coalition (EEEC) investigators issued 42 citations for labor law violations – with fines totaling $457,000 – in a recent sweep of 22 garment manufacturers in Los Angeles and Orange counties. The enforcement actions uncovered violations that included:
  • Failure to provide itemized deductions to employees;
  • Failure to register;
  • Failure to keep records and post labor notices as mandated by law;
  • Failure to pay minimum wage;
  • Failure to maintain workers’ compensation insurance;
  • Failure to pay overtime.

For further details, you can request a complete list of the violations and businesses cited by sending an email to the Department of Industrial Relations at [email protected].

Don't Forget the Metadata

From the Connecticut Law Tribune:

Lawyers involved in the class action sex discrimination case against Fairfield, Conn.-based General Electric in 2007 would rather you not read passages from various filings.

After all, the plaintiffs' firm, Sanford, Wittels & Heisler in Washington, D.C., took the time and effort to black out reams of pages in numerous briefs to make them inaccessible to the public -- or so they thought.

But as of late last week, you could download several documents through PACER's federal court filing system, copy the black bars that cover the text on the screen and paste them into a Word document.

Voilà. Information about the inner-workings of GE's white, male-dominated management and their alleged discriminatory practices against women, which is supposed to be sealed by court order, appears with little technical savvy required.

They warn you about this in ECF training courses. Sloppy information management "has been a huge problem" for lawyers, said Connecticut Chief Disciplinary Counsel Mark Dubois. "Metadata is a fascinating area of developing law. It is much discussed in the fields of risk aversion and risk management."

Add this to the list of lessons were are glad we learned by watching the mistakes of others.

Labor Commissioner Bars Deadbeat Contractor from Bidding on Public Works Contracts

The California Labor Commissioner's Office has issued an order prohibiting Contemporary Floors, Inc. and its CEO and president, Timothy Allen Kennady, from bidding on or receiving any public works contracts for three years as part of a settlement in which Contemporary Floors agreed to pay more than $245,000 in wages due, liquidated damages and penalties. The debarment begins June 16, 2008, and bars the firm from bidding or acting as a contractor or subcontractor on a public works project until June 2011. The firm was found to have willfully and fraudulently failed to pay prevailing wages, overtime, medical and 401K contributions and travel time or reimbursements, and to have repeatedly provided false certified payroll records signed under penalty of perjury.

DLSE Withdraws All Precedent Decisions

A recent memo to all DLSE Staff from chief counsel Robert Roginson notified the department that all prior precedent decisions have been withdrawn. Roginson wrote:

As a result of recently concluded litigation, it has been determined that the Labor Commissioner may not designate ODAs as precedent decisions. Accordingly, please be advised of the following:

1. The designation of each Order, Decision, or Award (ODA) previously designated as a precedent decision pursuant to Government Code section 11425.60 has been withdrawn by the Labor Commissioner.

2. Any ODA withdrawn as a precedent decision is not binding and is not to be relied upon in any manner in any other adjudication of employee claims by DLSE staff in section 98 proceedings.

3. The Labor Commissioner is not authorized to designate ODAs as precedent decisions.

The withdrawal follows the finality of the Corrales v. Bradstreet case, which we discussed last year in a post found at this link.

Brinker Argument

We've heard some strong praise for the lawyers who argued the Brinker case last week, especially Michael Singer. Already the court has received three requests for CD copies of the oral argument. We might make it four. In related news, all you need to do to get a CD of just about any oral argument in the Fourth District is to make a written request and send them a blank CD. They're fast, too.

Study Shows Courts Far More Reluctant to Vacate Employment Arbitrations if Employer Wins

According to a new study published by a professor at the University of Illinois Law Center, and discussed in the National Law Journal today, courts are more commonly vacating or partially vacating arbitration awards for employees, and rarely disturbing awards that favor employers.

"When courts vacate many awards that rule for employees, the individual must either return to a lengthy and costly 'do over' arbitration -- or worse, be stuck with a useless award, and no other recourse ... [Court review is becoming] "an insurance program that protects employers from costly awards."

Arbitration reform could be a significant issue in 2009 if the Democrats win the White House in November.

More on That Starbucks Verdict

Starbucks is not planning to pay its California baristas back for tips they shared with shift supervisors, nor to obey a San Diego Superior Court order to stop the practice. In a voicemail message to employees last week, Chief Executive Howard Schultz said the ruling "would take away the right of shift supervisors to receive the tips they earn for providing superior customer service" and the company executives "strongly believe that this ruling is extremely unfair and beyond reason."

We already discussed our take on the ruling last month. For the perspective of an employer-side blog, check out Entertaining Employment Law.

Meanwhile, some workers and lawyers in Massachusetts heard about the lawsuit, presumably, and decided to pursue similar claims there:

A former Boston-area Starbucks worker claims he was shortchanged by the coffee company's tips policy and he is now taking the coffee giant to court, claiming his managers swiped his tips. The lawsuit filed in Suffolk Superior Court comes days after the Seattle-based coffee company was ordered to pay millions in a similar case.

There will probably be more still.

Is Your E-Mail To Your Client Not Privileged?

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.

Breaking News: Starbucks Found Liable for Over $100 Million to Baristas

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.

Other Legal Blogs Weigh in on Gentry

Here are a few of the legal blogs we read, and their remarks about Gentry v. Superior Court.

We expect many of the large firms to be writing and publishing articles and alerts about Gentry, too, but we rarely spend the time to dig any deeper than the fifth page of our Google search results.

Slave Sweatshop Operators To Be Sentenced

Sweatshop operator Jimmy Quan was convicted in May by a federal jury on eleven felony counts, including conspiracy to conceal assets, the concealment of assets, bankruptcy fraud, the making of false statements, and money laundering regarding three separate bankruptcies. His wife, Anna Wong was also convicted of three felony counts, including conspiracy to conceal assets, the concealment of assets, and the making of false declarations in a bankruptcy proceeding. The jury acquitted Quan on four counts of making false entries and one count of concealing assets, and acquitted Wong on one count of concealing assets. The guilty verdicts followed a four month jury trial before U.S. District Court Judge William B. Shubb.

Evidence at trial showed that Mr. Quan, 47, and Ms. Wong, 45, of San Francisco, owned numerous companies, including several clothing manufacturing businesses in San Francisco in the 1990s through 2001. Mr. Quan also controlled a property management business in San Francisco. Over a period of time, from 1997 through 2003, Mr. Quan and Ms. Wong placed three of their businesses into Chapter 11 reorganization bankruptcy and then proceeded to defraud creditors of those companies by concealing and diverting assets and making false statements to the Bankruptcy Court under penalty of perjury. The total loss to the creditors was over $5 million.

The fraud started in 1997, when Mr. Quan, having failed to pay millions of dollars in taxes, filed for Chapter 11 protection for his clothing company Win Fashion Inc. Over the course of the next four years, while the company received bankruptcy protection from its creditors, Mr. Quan proceeded to divert millions of dollars of Win Fashion revenue to other companies that he and his wife controlled. The Bankruptcy Court eventually converted Win Fashion to a Chapter 7 bankruptcy in July 2001, forcing the liquidation of the company.

One month later, in August 2001, Mr. Quan and Ms. Wong continued the fraud by placing their second clothing manufacturing company, Wins of California Inc., into Chapter 11 reorganization bankruptcy. In connection with that bankruptcy, Ms. Wong made false statements under penalty of perjury on documents filed with the Bankruptcy Court regarding the true assets of the company. Ms. Wong also diverted Wins of California revenue to another company controlled by a family member, and then concealed that revenue from the Bankruptcy Court and Wins of California creditors. Creditors of Wins of California included hundreds of low-wage employees, who, by the time Wins of California filed bankruptcy, were owed at least one-half million dollars for work they had performed, but for which they had never been paid.

Mr. Quan was also convicted of bankruptcy fraud, concealing assets, making false statements, and money laundering in a third bankruptcy. This third bankruptcy involved a property management company, controlled by Mr. Quan, called Tomi LLC. Tomi LLC filed for Chapter 11 bankruptcy protection in July 2003. Mr. Quan again diverted and concealed over one-half million dollars of Tomi LLC assets from the Bankruptcy Court and Tomi LLC creditors. The evidence further showed that Mr. Quan concealed $270,000 of these assets by depositing them into his minor children’s personal bank accounts. These transfers formed the basis of the money laundering convictions.

The sentencing of Mr. Quan and Ms. Wong is scheduled for September 12, 2007 before Judge Shubb in San Francisco. The maximum statutory penalty for each count of conspiracy, 18 U.S.C. § 371; bankruptcy fraud, 18 U.S.C. § 157; concealment of assets, 18 U.S.C. § 152(7); and making false declarations, 18 U.S.C. § 152(3) is five years. The maximum statutory penalty for each count of money laundering, 18 U.S.C. § 1956(a)(1)(B)(i), is twenty years. The maximum fine for each of the counts charged is $250,000, plus restitution where appropriate. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Defense Firms Weigh In on Murphy

The Supreme Court has denied a petition to modify the opinion in Murphy v. Kenneth Cole Productions, Inc., filed by Steven Drapkin, who argued the defense side for amicus curiae. The petition sought to add a blurb stating that the Supreme Court was not expressing any view about about the applicability of the many consequences, adverse to employers, that could will flow from the Supreme Court's designation of the hour of pay as a wage, and which formed the basis of many of the defense arguments as to why the hour of pay shouldn't have been declared a wage. The opinion will continue to be discussed at great length over the next few months in courtrooms, at seminars and in places like this blog, but with the denial of this petition, the underlying material for the discussion has finally been completed.

With notable exceptions, such as Sheppard Mullin, with its Labor & Employment Law Blog, larger firms tend not to discuss important cases on their firm websites for a few days or weeks. By now, however, most of the large firms who have anything interesting to say about Murphy v. Kenneth Cole Productions, Inc. have said it. Here is a collection of what they had to say:

Littler Mendelson has published this: Missed Meal & Rest Periods Will Cost Employers More Following California Supreme Court Decision. Their first article, on the first appellate decision in Murphy ("an early Christmas present") can be read here. Their new one begins with "Everything you need to know about how the Kenneth Cole decision will cost you." That'll get an employer's attention.

Nixon Peabody wrote: California Supreme Court increases stakes for violations of meal and rest period rules. After calling the decision infuriating, they list several different ways an employer could be found liable for break violations, and end by listing ways to modify employer behavior to prevent liability. Curiously, they note that Murphy "leaves open the possibility" that a court would permit a fourth year of recovery. We don't see that as an issue that remains unanswered, and consider it well-established that a wage can be recovered under the UCL for four years.

Sedgwick Detert wrote: California Supreme Court Triples Employers' Exposure. In it, they claim to have found a "silver lining" in that the Murphy decision is that the court disagreed with the plaintiff's argument that the premium pay exposure was two hours per day if both the meal and rest periods were missed. However, that issue was never part of the appeal, and the Supreme Court did not discuss, much less hold, that a plaintiff can only recover meal period pay or rest period pay, but not both, in a single work day. Perhaps that will be the next big issue in meal and rest period litigation.

Jackson Lewis wrote: California High Court Triples Exposure for Missed Meal and Rest Periods, which includes a good laundry list of practices that employer's should avoid and practices employers should implement, such as, if a meal or rest period is interrupted, it must start over from the beginning, so that the break is a "net" 30 or "net" 10 minutes.

Fenwick West wrote California Supreme Court Rules that Payment for Missed Meal and Rest Periods is a "Wage" Subject to Three-Year Statute of Limitations, saying that the decision "not only significantly increases employers' potential exposure for meal and rest period violations, but it is also a sobering reminder to employers to ensure that their exempt employees are properly classified."

Bingham McCutchen wrote the similarly entitled: California Supreme Court Rules Payments for Missed Meal and Rest Periods Are Wages Subject to Three-Year Statute of Limitations, with a list of four lessons learned by employers.

Ford & Harrison wrote: California Supreme Court Classifies Pay for Missed Meal/Rest Breaks as Wages, which preaches this truth: "California wage and hour law is very different from the federal FLSA, so simply complying with the FLSA is not enough to protect employers from significant exposure in California." If more employers understood that, our caseload would be cut in half.

Pillsbury Winthrop wrote: Meal and Rest Period Claims: California Supreme Court Hands Employers a Setback, observing that the decision "will clearly result in the filing of even more meal and rest period cases against employers. Jury awards and settlement amounts will very likely increase." We think that is is technically correct that there will be even more of these cases filed, but there would be more cases filed either way. The real impact is that the amounts of the awards and settlements will increase.

Proskauer Rose wrote: California Supreme Court Gives Employers No Break. The gist of the article is that the court took it upon themselves to quadruple employers' liability for meal period and rest period violations. Of course, we've never seen it that way. Our view is that the Supreme Court has undone the appellate court's mistaken slashing of employee claims for meal and rest period pay.

Sidley & Austin wrote: California Supreme Court Refuses to Give Employers a “Break”, which included a list of six issues that they believe to be unresolved after Murphy: • Are the meal and rest period provisions adopted by the Industrial Welfare Commission legally void? • Is Section 226.7 limited to a total of one hour of pay per day for meal and rest period violations, regardless of the number of violations? • Does the duty to “provide” a meal period mean only that employees must be afforded the opportunity to take a meal? Or, must the employer force the employee to eat? • Are statutory attorneys’ fees and interest recoverable for Section 226.7 actions? • Are late wage payment penalties triggered by a failure to make Section 226.7 payments? • Are Unfair Competition Law claims permitted for purposes of collecting Section 226.7 payments? We think have of those issues are already decided.

Fisher & Phillips wrote: California Supreme Court Ruling Could Quadruple Potential Damages For Meal and Rest Period Violations, which was the first defense firm article that reinforced our belief that we might be correct in our decision to start adding paystub violation claims (Labor Code section 226) to our meal and rest period cases.

And Hogan & Hartson wrote: California Supreme Court Rules in Favor of Employees in Long-Awaited Meal and Rest Break Case, which echoed our opinions. "Employees who have quit or been terminated without receiving all Section 226.7 pay can now assert claims under Labor Code section 203 ... employees also may seek penalties for the failure to provide properly itemized wage statements if Section 226.7 pay is not included on pay stubs or other wage statements ... [and add] claims for unfair competition and conversion, previously not available for the recovery of penalties ... and employers will face increased claims for punitive damages and significant penalties under the Labor Code Private Attorneys General Act because the argument that such damages constitute a double penalty is no longer viable now that Section 226.7 pay has been declared not to be a penalty. Finally, employees now have a greater chance of collecting attorneys fees and statutory interest in actions based solely on meal and rest period violations." The authors of that update also recently published an article about Murphy in the Daily Journal. The link is subscription-only.

If your firm isn't mentioned, it isn't because we meant to skip you. The problem is that you haven't figured out how to make Google love you. We noticed, interestingly enough, that a Google search for "murphy kenneth cole" puts a pair of Wage Law posts at the top, but not the post we'd have chosen, nor the one we think most relevant. We haven't figured Google out completely ourselves, but we think one reason we're near the top is that we apparently have 45 different pages that discuss the Murphy case.

UC Not Immune From Waiting Time Penalty Suits

Review has been denied in Sarka v. The Regents of the University of California, upholding a determination that a UCLA doctor was terminated for insubordination, rather than for advocacy on behalf of his patients. The case has been discussed at length at other employment law blogs. You can read it here in pdf or Word format. What few commentators knew about Dr. Sarka was that, in addition to his wrongful termination claim, he also brought a wage claim.

Earlier this month, the Supreme Court denied publication of a different opinion -- the Superior Court Appellate Division decision in the other Sarka v. The Regents of the University of California (Case No.  04T01682) -- in which Dr. Sarka prevailed in his effort to assert waiting time penalty claims against the Regents. The issue was whether the California Constitution, Article IX, Section 9, provided the Regents with immunity from such claims. The trial court ruled that the Regents were immune, and sustained a demurrer without leave to amend. The Appellate Division held that the Regents were not immune. You can download a pdf of the Appellate Division's opinion here. While the opinion may not be published, because the issue is truly unique to claims against the University of California, it may be of great value to litigants with similar wage claims.

The Pharm-Bots Fight Back

The National Law Journal has published an article entitled "Drug Salespeople Sue for Unpaid Overtime," which discusses one of the latest trends in wage and hour litigation -- pharmaceutical representatives suing for overtime, challenging the commissioned sales exemption and seeking 10-20 hours per week of unpaid overtime. The article includes a quote from Eric Kingsley, who was our co-counsel in wage and hour class actions against Guitar Center and Darden Restaurants (Oliver Garden and Red Lobster):

"These reps aren't making sales. They're marketing products to doctors ... They are not sales reps, but pharm-bots who do and say as they are told."

Among the companies being sued under for such claims: AstraZeneca, Pfizer Inc., Johnson & Johnson, Amgen Inc., Eli Lilly & Co., GlaxoSmithKline PLC, Bayer Corp. and Hoffman-LaRoche Inc.