Wage Law

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?

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. 

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.

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.

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.

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.

We offer a hearty welcome to those of you who found this blog after attending Bridgeport's seminar on Wage & Hour litigation at UCLA on Tuesday and Wednesday. Every time I present something on recent developments in wage and hour law, I recite the mantra that this is one of the most busily changing areas of practice, and that rarely does a week go by without some significant development in the law coming from the courts, the legislatures, the DLSE or the DOL. Usually, something interesting pops up in the first few days after the seminar, and this was no exception.

Yesterday, the 4th District Court of Appeal 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, but attorney's fees are recoverable under  Labor Code § 218.5 "because it is now settled that compensation for missed meal and rest breaks are wages" [citing Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094]. Brewer v. Premier Golf Properties (2008) __ Cal.App.4th __.

The question of whether an aggrieved employee is entitled to punitive damages in an overtime case had never been squarely addressed in a published holding in a California case. The closest thing we had to a ruling on that issue was a bit of dictum in Gentry v. Superior Court (2007) 42 Cal.4th 443, that began with "Although exemplary damages are not available in overtime suits (see section 1194.2...)"

Employers seeking to avoid punitive damage claims would cite Gentry, and would argue something along these lines: Where a right is created by statute and the statute does not expressly permit punitive damages, punitive damages under California Civil Code section 3294 are not available. Turnbull & Turnbull v. ARA Transp., Inc. (1990) 219 Cal. App.3d 811, 826-27, 268 Cal. Rptr. 856 ("when a new right . . . is created by statute and a statutory remedy for the infringement thereof is provided, such remedy is exclusive of all others") (citing Orloff v. L.A. Turf Club (1947) 30 Cal.2d 110, 112-13, 180 P.2d 321); Czechowski v. Tandy Corp. (N.D. Cal 1990) 731 F.Supp. 406, 410 (penalty provision provided by Labor Code precludes award of punitive damages). Furthermore, claims under section 17200 of the Business and Professions Code will not support an award of punitive damages. Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal. 4th 1134, 1148.

The employees would argue Greenberg v. Western Turf Ass'n (1903) 140 Cal.357, 73 P. 1050, in which the California Supreme Court upheld the imposition of punitive damages where a statutory penalty had already been awarded, because it determined that the civil penalty was not meant to punish. Labor Code penalties, similarly, are not meant to punish, therefore, punitive damages are permitted for certain types of Labor Code violations where the defendant is guilty of blatant violations of law. See Bender v. Darden Restaurants, Inc. (2002) 26 Fed.Appx. 726 (compensatory damages in the sum of $9,860 and punitive damages in the sum of $943,000 for one plaintiff, and compensatory damages in the sum of $5,970 and punitive damages in the sum of $890,000 for the other plaintiff, all based upon denied meal and rest periods.)

Now, the analysis is much clearer:

"[P]unitive damages are not recoverable when liability is premised solely on the employer's violation of the Labor Code statutes that regulate meal and rest breaks, pay stubs, and minimum wage laws."  Brewer v. Premier Golf Properties (2008) __ Cal.App.4th __. "Labor Code statutes regulating meal and rest breaks, pay stubs, and minimum wages provide express statutory remedies, including penalties for violation of those statutes that are punitive in nature, that are available when an employer has violated those provisions, and are exclusive remedy available for such statutory violations absent evidence that statutory remedy is inadequate."

It is left to our imagination what kind of evidentiary showing would be necessary to establish that the statutory remedy under the Labor Code would be inadequate. We suspect that this holding would not have compelled a different result under so-called "slavery" cases, such as Bureerong v. Uvawas (1996) 922 F.Supp. 1450, where the District Court permitted punitive damages to be asserted in a wage claim brought by garment workers who were denied minimum wage and overtime.

Elsewhere in the Brewer opinion, the court upheld the trial court's award of $6,000 for unpaid meal and rest break wages (Labor Code § 226.7), $4,000 in pay stub penalties (Labor Code § 226), and $15,300 for "minimum wage" penalties (Labor Code § 1197.1). The court rejected the employer's statute of limitations defense on the penalties, rejected the employee's appeal of an order denying a JNOV based upon a claim for waiting time penalties, and held that the plaintiff had no obligation to exhaust any administrative remedies as a condition to the recovery of any penalties. The last point was founded upon the holding in Mokler v. County of Orange (2007) 157 Cal.App.4th 121, 133-136 that a party's failure to exhaust administrative remedies may not be raised for the first time in the appeal from the allegedly void judgment.

The published part of the opinion also addressed various FEHA issues, which is off topic for us, and we will leave that for others to discuss. For a the next few weeks, you will be able to download the full text of the opinion in Brewer here in PDF or MS Word format.

Without running afoul of the Fair Labor Standards Act or various California Labor Code provisions, a public entity is permitted to contract with employees to have the workers reimburse training costs if they leave their jobs within a certain time period. At least, the employer can do so if the employee fails to allege a violation of Labor Code § 2802. Nonetheless, employers cannot withhold a worker's final paycheck as a set-off to cover the expenses. City of Oakland v. Hassey (2008) 163 Cal.App.4th 1477.

The City of Oakland sued appellant Kenny D. Hassey for breach of contract after Hassey failed to reimburse the city (as agreed) for the costs of training him to become a police officer with the Oakland Police Department. Hassey filed a cross-complaint against Oakland and respondent Richard Word, the chief of the Oakland Police Department, alleging that the agreement to repay Oakland for training costs violated the Fair Labor Standards Act (29 U.S.C. §§ 201-219 (FLSA)) and various state laws. Specifically, the cross-complaint alleged causes of action for deprivation of civil rights (42 U.S.C. § 1983); violation of the FLSA; violations of Labor Code sections 221, 223, 432.5, and 450; “unlawful contract” (Civ. Code, §§ 1667-1668); “void contract” (Bus. & Prof. Code, § 16600); and unfair competition (Bus. & Prof. Code, § 17200). More notably, the cross-complaint failed to assert that the repayment agreement violates Labor Code sections 2802 [employer shall indemnify employee for all necessary expenditures and losses] and 2804 [any contract waiving provision invalid]. (Campos v. Anderson (1997) 57 Cal.App.4th 784, 794, fn. 3.

The trial court granted Oakland’s motion for summary judgment on its complaint, granted its motion for summary judgment on Hassey’s cross-complaint, and denied Hassey’s summary judgment motion on both complaints. The Court of Appeal concluded that Hassey failed to establish that the agreement to reimburse Oakland for training costs violated the FLSA, although Oakland’s withholding of Hassey’s final paycheck to cover his debt did.

The opinion was subsequently modified, and a petition for rehearing was denied. The modification was noteworthy, because it noted that one of the reasons Hassey might have lost was that he didn't rely on a statute that might have savd his case.

Appellant's petition for rehearing is denied. The opinion filed June 17, 2008, is modified as follows: Add, as the last three sentences of the eleventh paragraph in part II.A.2. of the opinion, "We decline to address Hassey's argument, raised for the first time in his reply brief, that the repayment agreement violates Labor Code sections 2802 [employer shall indemnify employee for all necessary expenditures and losses] and 2804 [any contract waiving provision invalid]. (Campos v. Anderson (1997) 57 Cal.App.4th 784, 794, fn. 3 [points raised in reply brief for first time will not be considered absent good cause].) We note that Hassey's answer to Oakland's complaint did not rely on Labor Code sections 2802 and 2804, and his cross-complaint did not allege causes of action based on them." The above modification does not effect any change in the judgment. [emphasis added]

Would Hassey have won a defense or cross-claim based upon Section 2802? Here's what section 2802 provides:

(a) An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.

(b) All awards made by a court or by the Division of Labor Standards Enforcement for reimbursement of necessary expenditures under this section shall carry interest at the same rate as judgments in civil actions. Interest shall accrue from the date on which the employee incurred the necessary expenditure or loss.

(c) For purposes of this section, the term "necessary expenditures or losses" shall include all reasonable costs, including, but not limited to, attorney's fees incurred by the employee enforcing the rights granted by this section.

Since the training was a prerequisite to getting the job in the first place, it's unclear. Moreover, the opinion relies somewhat on a 7th Circuit case entitled Heder v. City of Two Rivers (7th Cir. 2002) 295 F.3d 777, in which public policy concerns based upon the employer's status as a public entity, and particularly, an agency providing for public safety, suggest that a similar case brought against a private entity might face a different standard. Because section 2802 wasn't raised by Hassey until his appellate briefs, we'll have to wait for some other case to answer that question.

The Supreme Court denied a petition for review and a request for depublication. Justice Kennard voted in favor of review. You can download City of Oakland v. Hassey here in pdf or MS Word format.

Before it becomes even more irrelevant, here's a list we compiled of commentary about Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25:

• Brinker International simply announced it as a "Favorable Ruling From California Court of Appeal"
• Shaw Valenza blogged: Brinker: The Watershed Meal Period Decision Comes Down
• The UCL Practitioner quoted from the Recorder: "Workers Can't Catch a Break from Calif. Court"
• and then published this analysis: REST BREAK AND MEAL PERIOD CLAIMS AFTER MURPHY V. KENNETH COLE PRODUCTIONS.
• Cal Labor Law blogged about "Brinker Court Favorably Resolves Dispute on "Providing" Meal Breaks"
• Storm was his usual cautious self with: Brinker: Not So Fast
• California Workforce Resource blogged about how there were Meal and Rest Break Requirements Clarified By Court in Brinker v. Hohnbaum
• The Complex Litigator had Meal break class actions dealt major blow in Brinker Restaurant Corporation, et al. v. Hohnbaum, et al.
• The Retail Law Observer had a post titled after the case name.
• Class Action Defense chimed in with the long title: Labor Law Class Action Defense Cases–Brinker v. Superior Court: California Appellate Court Reverses Trial Court Order Certifying Labor Law Class Action Holding Employers Need Not “Ensure” Employees Take Meal And Rest Breaks
• First Mediation's blog had this: The Clock is Ticking … The Future of Meal and Rest Break Class Actions Remains to be Seen
• Sheppard Mullin wrote: Appellate Court Clarifies Meal and Rest Period Obligations
• Crowell Moring published this alert: Anxiously-Awaited Brinker Decision Holds That Employers Need Not Police Whether Employees Take Meal Periods
• Mofo was quiet, for obvious reasons. They said what they had to say in a lunch seminar.
• Ford Harrison issued a Legal Alert: California Court of Appeal Clarifies Meal and Rest Period Requirements for California Employees
• Wilson Sonsini put out a WSGR alert: California Appellate Court Clarifies Employers' Obligations Regarding Meal Period and Rest Breaks
• Littler told us how they really felt with: A Ray of Hope: California Court of Appeal Decides Compliance with Meal Period Obligations Requires an Opportunity, Not a Guarantee
• Gibson Dunn wrote: State Court of Appeal Holds That California Employers Need Only "Provide" Meal Periods, Not Ensure That Employees Take Them
• Jones Day had: ALERT: California Appellate Court Holds that Meal Periods Must be Made Available to Employees; California Labor Commissioner Follows Suit
• Nixon Peabody published this pdf: A major break for California employers: Court rules on longstanding meal and rest period issues.
• McGuire Woods published New Major Decision Holds California Meal Period, Rest Period, Off-The-Clock And “Time Shaving” Wage Claims “Not Amenable To Class Treatment”
• Seyfarth Shaw wrote: Court Provides Better Meal Deal For California Employers

If we didn't include your blog or firm alert on this list, you need to read up on Google's search algorithms.

Last week, the Supreme Court granted review of the pro-employer meal period opinion in Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25. Now comes Brinkley v. Public Storage, Inc. (2008) __ Cal.App.4th __, in which the Second District Court of Appeal also disagrees with Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949 regarding the extent of an employer's duty to make sure employees can take their lunch breaks. The case also involves an issue regarding the need to prove intent and injury from a paystub violation. The appeal arises out of an order granting summary adjudication of three claims asserted in a certified class action pending in Los Angeles. The holding reads:

Plaintiff asserts class action and individual claims for violations of the Labor Code. He alleges that defendant, his former employer, provided paystubs containing misstatements in violation of Labor Code section 226. An employer, however, cannot be liable for misstatements on paystubs unless it knowingly and intentionally makes such misstatements and an employee suffers injury as a result. Plaintiff cannot prove either element in this case.

Plaintiff also asserts causes of action based on section 226.7 on the ground that defendant failed to ensure that plaintiff and other class members took all meal periods and rest periods they were entitled to take. California law, however, only requires that employers make available such periods, which defendant did here.

 We affirm the trial court’s order granting defendant summary adjudication with respect to plaintiff’s section 226 and section 226.7 causes of action.

On the more interesting issue concerning meal periods, the court followed White v. Starbucks Corp. (N.D.Cal. 2007) 497 F.Supp.2d 1080, 1089, while attempting to reconcile itself with Cicairos.

The court noted that it would be impossible for employers with large work forces to enforce such meal breaks. (Ibid.) It further stated that “employees would be able to manipulate the process and manufacture claims by skipping breaks or taking breaks of fewer than 30 minutes, entitling them to compensation of one hour of pay for each violation.[ ] This cannot have been the intent of the California Legislature, and the court declines to find a rule that would create such perverse and incoherent incentives.” (Id. at p. 1089.) We agree with this analysis.

The court doesn't explain how it came to the conclusion that an employer with a large work force would find it impossible to schedule enforceable meal periods any more than it finds it impossible to schedule starting and quitting times for its employees, but in so doing, it found no triable issue of material fact as to whether the employer had met its burden.

The court also weighed in on the issue of meal period timing, stating that there is nothing in the law that mandates that a meal period occur "within the first five hours" of a shift.

Plaintiff argues that California law requires defendant to provide meal periods within the first five hours of a shift. We disagree. Nothing in the applicable statutes or wage order supports plaintiff’s position.

The evidence supporting the employer was summed up as follows:

In the present case, defendant produced substantial evidence that the employer provided meal periods to plaintiff and other meal period subclass members. Defendant showed that (1) defendant had a written policy providing for meal periods; (2) plaintiff and other managers were aware of this policy; (3) defendant reprimanded employees for not taking meal periods; and (4) defendant advised plaintiff and others at a meeting that they were required to take lunch and rest breaks. Defendant also produced 21 declarations of managers who worked for defendant. Each of these managers stated that they were allowed to take meal periods at their own discretion.

In response, the court found that the Plaintiff failed to meet his burden of showing a material issue of fact, supported by admissible evidence:

Plaintiff stated in a declaration: “I rarely if ever took timely rest breaks, that is a ten (10) minute break during the middle of any four (4) hour shift. As [an] hourly Bench Property Manager employee I was generally the manager on duty and could not take breaks.” We agree with the trial court that “[t]his is not an unequivocal statement that he was not authorized or permitted to take a ten-minute break every four hours.”

This is significant for at least two reasons: (i) the court essentially holds that "provide" means precisely the same thing as "authorize and permit", and (ii) the court expects clearer evidentiary facts to be set forth with specificity in the declarations. Worse for the plaintiff, an argument that might have carried the day was deemed waived:

Plaintiff claims on appeal that he and other employees were not allowed to leave the premises or lock the office during their meal periods. Such meal periods, plaintiff contends, were effectively “on duty,” and thus entitled employees to one hour of wages per meal period. (See Bono Enterprises, Inc. v. Bradshaw (1995) 32 Cal.App.4th 968, 975, disapproved on other grounds in Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 574.) Plaintiff, however, did not raise these facts or this argument in his brief or separate statement opposing defendant’s motion for summary adjudication. We therefore deem the argument waived. (City of San Diego v. Rider (1996) 47 Cal.App.4th 1473, 1493.)

Similar evidentiary issues plagued the plaintiff class's certified claims for rest period violations.

Plaintiff did not set forth any facts indicating that as a practical matter, he could not take rest breaks. Instead, he simply alleged that he “could not” do so, without describing any factual basis for this allegation. The closest plaintiff came was his statement that “[a]s a Bench Property Manager, I was required to be on the property at all times during my shift.” An employer’s requirement that an employee be “on the property” at all times, however, does not necessarily prohibit rest periods. Indeed, in many employment settings, there is no practical way for an employee to take a 10-minute rest period without staying on the property. Plaintiff therefore failed to raise a triable issue of material fact with respect to his rest period cause of action. (See Toigo v. Town of Ross (1998) 70 Cal.App.4th 309, 329.) ¶ Moreover, plaintiff’s statement that he “could not” take rest breaks is a conclusory allegation and does not raise a triable issue of material fact. [our emphasis]

In other words, don't just say you can't take a break. Tell the court specifically why you can't take a break, so that the court can decide whether the employer is to blame.

Finally, on the issue of paystub violations under  Labor Code § 226, the court upheld the summary adjudication order because (i) plaintiff could not prove that the violations were intentional; and (ii) the violations did not cause any sort of injury. On the first point:

Defendant met its burden of production by filing a declaration stating that the misstatement of the associated mileage rate was inadvertent and, when discovered, corrected. This evidence showed that plaintiff could not establish an essential element of his claim, namely that defendant intentionally and knowingly failed to provide required information on its paystubs. The burden of production thus shifted to plaintiff. Plaintiff, however, produced no evidence of knowing or intentional conduct by defendant.

With respect to the second element, the court distinguished Brinkley's claims with those in Wang v. Chinese Daily News, Inc. (C.D.Cal. 2006) 435 F.Supp.2d 1042, which continues to stand as a good example of how a paystub violation can cause actual injury.

Plaintiff argues that the receipt of an inaccurate paystub ipso facto constitutes injury within the meaning of section 226, subdivision (e). This interpretation, however, renders the words “suffering injury” surplusage and meaningless. Such an interpretation is disfavored. (Jones v. The Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1184.) We hold that section 226 means what it says: a plaintiff must actually suffer injury to recover damages or statutory penalties. The present case is distinguishable from Wang v. Chinese Daily News, Inc. (C.D.Cal. 2006) 435 F.Supp.2d 1042. In Wang, the paystubs stated that the employees worked 86.66 hours regardless of the number of hours actually worked, the length of the pay period, or the number of work days in the pay period. This caused the employees to suffer injury because they might not be paid for overtime work to which they were entitled and they had no way of challenging the overtime rate paid by the employer. (Id. at p. 1050.) Here, by contrast, plaintiff was not underpaid or given insufficient information to challenge the payments he received. This inadvertent technical violation of section 226 caused no resulting damages.

You can download Brinkley here in pdf or MS Word format. Mark your calendars for the last week in January, when the Supreme Court is likely to issue a "grant and hold" review order, deeming this a related case to Brinker Restaurant Corp. v. Superior Court.

The Supreme Court granted review today in Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25. Justice Werdegar was absent for this week's conference. The vote among the participating justices was 6-0 in favor of review.

We discussed the opinion when it was published in July; we saw this review coming,

With Brinker and Cicairos presenting such starkly contrasting views on California law, with Brinker presenting so many novel ideas regarding wage and hour claims and class actions, and with so many U.S. District Court cases disagreeing with Cicairos and each other, this case looks like an outstanding candidate for Supreme Court review.

Judging from past performance under the Schwarzenegger administration, which is undoubtedly disappointed by today's decision, the DLSE enforcement memo, on the need to change policies because of Brinker, will probably stay in place until and unless a court invalidates it.

The Supreme Court has denied petitions for review and depublication in Amaral v. Cintas Corporation No. 2 (2008) 163 Cal.App.4th 1157. Amaral addressed the constitutionality and application of a living wage ordinance enacted by the City of Hayward and incorporated into its municipal contracts, as well as several issues regarding penalties, fees and costs in wage and hour cases. Cintas was the petitioner seeking review. The Supreme Court docket reflects that both sides sought depublication or partial depublication, and each opposed the other's depublication requests. There were depublication requests and oppositions to depublication requests filed by various non-parties, too. We discussed the opinion in a June post that can be found at this link.

The Supreme Court has granted review in McCarther v. Pacific Telesis Group (2008) 163 Cal.App.4th 176 (Supreme Court case no S164692). All seven justices voted in favor of review. This is not a great surprise, as the opinion, which we discussed an earlier post, dealt with novel issues concerning sick leave rules in California. Moreover, review was urged by both the California Labor Federation and the California Chamber of Commerce, who rarely agree on such things. No statement of issues on review has yet been published.

The Supreme Court has denied a petition for review in Antelope Valley Press v. Poizner (2008) 162 Cal.App.4th 839. We previously discussed the case in posts that can be seen at these links.

The Supreme Court published a curious opinion this morning in Edwards v. Arthur Andersen, LLP (2008) __ Cal.4th __. Focusing on a non-competition agreement and two provisions in a release agreement called a Termination of Non-Compete agreement (TONC), the court analyzed whether the provisions violated public policy, and therefore met the third element (an independently wrongful act) of a cause of action for wrongful interference with prospective economic advantage.

the Court of Appeal held: (1) the noncompetition agreement was invalid under section 16600, and requiring Edwards to sign the TONC as consideration to be released from it was an independently wrongful act for purposes of the elements of Edwards’s claim for intentional interference with prospective economic advantage; (2) the TONC purported to waive Edwards’s indemnification rights under the Labor Code and was therefore in violation of public policy and an independently wrongful act; and [a third issue].

The Supreme Court only reviewed the first two issues, and decided that the non-competition agreement was a violation of public policy, but that the waiver of indemnity rights was not a violation of public policy because

a contract provision whereby an employee releases “any and all” claims does not encompass nonwaivable statutory protections, such as the employee indemnity protection of Labor Code section 2802.

So because the release should not have been construed to actually release "any and all claims," including claims arising out of non-waivable rights, it did not violate Labor Code § 2804.

a contract provision releasing “any and all” claims does not encompass nonwaivable statutory protections, such as the employee indemnity protection of Labor Code section 2802 and, accordingly, is not void under Labor Code section 2804.

Here's how they reached that conclusion. The opinion includes the full language of the "broad general release" Edwards was asked to execute in Arthur Andersen’s favor. Section (1)(d) of the TONC provided that Edwards must release and discharge Andersen from

“any and all actions, causes of action, claims, demands, debts, damages, costs, losses, penalties, attorneys’ fees, obligations, judgments, expenses, compensation or liabilities of any nature whatsoever, in law or equity, whether known or unknown, contingent or otherwise, that Employee now has, may have ever had in the past or may have in the future against any of the Released Parties by reason of any act, omission, transaction, occurrence, conduct, circumstance, condition, harm, matter, cause, or thing that has occurred from the beginning of time up to and including the date hereof, including, without limitation, claims that in any way arise from or out of, are based upon or relate to Employee’s employment by, association with or compensation from [Andersen] or any of its affiliated firms, except for claims (i) arising out of [Andersen’s] obligations set forth in this agreement or (ii) for any accrued and unpaid salary or other employee benefit or compensation owing to Employee as of the date hereof.”

The trial court had concluded that, as a matter of law, this release, though broadly worded, could not be construed to mean that Edwards was being asked to surrender any and all claims arising under Labor Code provisions establishing rights that cannot be waived. The Court of Appeal disagreed, finding that the broad language only excluded the expressly excepted claims, and therefore, the TONC agreement was unlawful or void under Labor Code § 2804. (“Any contract or agreement, express or implied, made by any employee to waive the benefits of this article or any part thereof, is null and void, and this article shall not deprive any employee or his personal representative of any right or remedy to which he is entitled under the laws of this State.”) Although the Court of Appeal noted that the TONC did not expressly waive Edwards’s indemnity rights, “[a] broadly worded release covers all claims within the scope of the language, even if the particular claim is not expressly listed.” Bardin v. Lockheed Aeronautical Systems Co. (1999) 70 Cal.App.4th 494, 505. In other words, "any and all" means "any and all," not just those which are listed, and for which a release is lawful.

The Supreme Court disagreed. You simply cannot construe "any and all claims" to include claims arising from unwaivable Labor Code rights unless the agreement expressly purports to include such an unlawfully broad release. As Clintonesque as it sounds, the Supreme Court said "the meaning [of the phrase 'any and all'] is in dispute and uncertain; we must therefore decide what the phrase 'any and all' means." The court then went on to say that because the agreement was ambiguous, it should be construed under the rule of interpretation that says you prefer an interpretation that makes an agreement lawful, over another interpretation that renders it unlawful. The Court relied upon Civil Code § 3541 (“an interpretation which gives effect is preferred to one which makes void”) and Civil Code § 1643 (“a contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect”.)

The TONC did not expressly reference indemnity rights, and we should not read it as encompassing a waiver of Edwards’s indemnity rights.  Giving the TONC such a reading is consistent with the tenets of contractual interpretation because it makes the contract lawful, valid and capable of being carried into effect.

We worry that this case is going to be misunderstood, as Justice Kennard's dissent explained:

As the Court of Appeal explained, quoting from Latona v. Aetna U.S. Healthcare Inc. (1999) 82 F.Supp.2d 1089, 1096: “ ‘[D]efendant’s argument, that the Agreement cannot violate public policy because . . . it is simply a nullity, ignores the realities of the marketplace. . . . Employees, having no reason to familiarize themselves with the specifics of California’s employment law, will tend to assume that the contractual terms proposed by their employer . . . are legal, if draconian. . . . Thus, the in terrorem effect of the Agreement will tend to secure employee compliance with its illegal terms in the vast majority of cases.’ ”

The dissent also discussed how the language of the TONC actually expressly included a release of claims such as those for "expenditures or losses" arising from employment, which is precisely the kind of agreement that Labor Code § 2804 prohibit. We agree, and if anything, think the dissent understates the problems. We see a greater potential for mischief in the acceptance of the in terrorem clauses.

There are going to be many more employers demanding broad releases and, even where plaintiffs are represented, shrugging off demands for more specific and limited release language by saying "any and all" doesn't really mean "any and all". Then, later, the same employers are going to take the broad language of these releases and tell employees "'any and all' means 'any and all'" and they are going to tell inexperienced lawyers that "'any and all' means 'any and all'", and they are going to go into mediations and convince mediators that "'any and all' means 'any and all'" and they are going to argue to judges that "'any and all' means 'any and all'," and some of them are going to be persuaded, and miscarriages of justice will follow.

But don't take our word for it. You can read the entire text of Edwards v. Arthur Andersen, LLP for yourself by downloading it here in pdf or word format.

The Supreme Court has granted review in Goodman v. Lozano (2008) 159 Cal.App.4th 1313, now California Supreme Court case no. S162655. Three justices were absent and did not participate, while the others voted unanimously to take up the case. The issue on review is:

Petition for review after the Court of Appeal affirmed an award of attorney fees in a civil action. This case presents the following issue: When a plaintiff settles with one tortfeasor and goes to trial against another but obtains no additional recovery because the amount of damages awarded is less than the setoff amount based on the pretrial settlement, is that plaintiff nevertheless a prevailing party as a matter of law for purposes of an award of fees and costs under Code of Civil Procedure section 1032?

As we mentioned in an earlier post, this isn't a wage and hour case, but�it stands�to�ruin the policy favoring and encouraging settlement of complex cases before trial, so we're watching it.

The Court of Appeal has finally considered the merits of the appeal inCalifornians for Disability Rights v. Mervyn's LLC (2008) __ Cal.App.4th __, reversing the trial court's decision in favor of the retailer. The decision on the merits is not pertinent to wage and hour law, but the case's procedural history after
Proposition 64's revision to the Unfair Competition Law was of interest to any wage and hour plaintiff who asserted pre-Prop 64 representative claims for which certification was in doubt.

While this case was pending on appeal, the voters of California amended the statute under which the case had been prosecuted. The voters’ enactment, popularly known as Proposition 64, was passed in the California General Election on November 2, 2004, and went into effect the next day. (Cal. Const., art. II, § 10, subd. (a).) At the time this case was tried, the UCL authorized any person acting for the general public to sue for relief from unfair competition. (Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 228 (Mervyn’s).) “Standing to bring such an action did not depend on a showing of injury or damage.” (Ibid.) Proposition 64 amended the UCL to limit private enforcement to those who have suffered injury in fact and have lost money or property as a result of such unfair competition. (Ibid.) Proposition 64 did not state whether this new limitation applies to pending cases. (Id. at p. 229.)

On December 6, 2004, Mervyn’s moved to dismiss this appeal upon the claim that Proposition 64’s change in standing requirements apply to pending cases. We denied the motion because new legislative enactments are presumed to operate prospectively, rather than retroactively, to avoid unfair impairment of existing rights and obligations. In July 2006, the California Supreme Court reversed our ruling, upon concluding that application of Proposition 64’s standing requirements to pending cases would not constitute a retroactive application of the law because the initiative measure did not change any existing rights or obligations. (Mervyn’s, supra, 39 Cal.4th at pp. 232-234.) While the measure “withdraws the standing of persons who have not been harmed to represent those who have,” it did not impair any rights because lack of standing is a jurisdictional challenge that can be raised at any time in a legal proceeding. (Id. at pp. 232-233.) The high court reversed our denial of Mervyn’s motion to dismiss the appeal and remanded the case to us “for further proceedings consistent” with its opinion. (Id. at p. 234.)

On remand to this court, CDR asked leave to move for substitution of plaintiff on appeal—it did not contend that it had standing to appeal in its own right as a party aggrieved by the judgment under Code of Civil Procedure section 902. We denied CDR’s request and granted Mervyn’s motion to dismiss the appeal for lack of standing by CDR. CDR petitioned for review in the Supreme Court. The Supreme Court granted review and transferred the case to us with directions to vacate our decision and to reconsider the cause in light of United Investors Life Ins. Co. v. Waddell & Reed, Inc. (2005) 125 Cal.App.4th 1300 (United Investors) and Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235 (Branick).

United Investors held that a plaintiff has standing to appeal dismissal of a UCL complaint following demurrer even if it has no authority to maintain its suit in superior court, because plaintiff “is sufficiently aggrieved by the dismissal of its complaint that it has standing to appeal under Code of Civil Procedure section 902.” (United Investors, supra, 125 Cal.App.4th at p. 1305.) Branick held that Proposition 64 does not forbid amendment of complaints in the trial court to substitute new plaintiffs for those who have lost standing under the new measure. (Branick, supra, 39 Cal.4th at pp. 241-242.) The “ordinary rules governing the amendment of complaints” apply. (Id. at p. 239.)

Upon reconsideration, we denied Mervyn’s motion to dismiss the appeal in a ruling we issued on April 17, 2007. We concluded that the two cases referenced by the high court, “when read in conjunction, lead to the following conclusion: CDR is a party aggrieved by entry of judgment against it and thus has standing to appeal the judgment even if CDR has no authority to maintain its suit in superior court (United Investors, supra, 125 Cal.App.4th at pp. 1304-1305); and, if CDR succeeds in its effort to reverse the judgment on appeal, it may seek leave in the superior court to amend its complaint to substitute a plaintiff who meets the Proposition 64 standing requirement.” (Branick, supra, 39 Cal.4th at pp. 240-244.) Mervyn’s petitioned for review in the Supreme Court, and the petition was denied on July 18, 2007.

The parties completed briefing on the merits of the appeal in January 2008, and the matter was argued and submitted for decision.

That decision involved yet another remand:

we conclude that a retailer does not meet its obligation to make its merchandise available to disabled individuals denied access to the retailer’s existing stores by constructing new and geographically distant stores that are accessible. Accordingly, we remand the case for consideration of appropriate alternative means for making merchandise available to disabled individuals who are denied physical access.

It all might be academic now, however, as Mervyn's filed for bankruptcy on Tuesday, automatically staying any claims against the retailer. You can review the full opinion in Californians for Disability Rights v. Mervyn's LLC here in pdf or word format.

The Supreme Court today denied the petition for review in Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, an opinion regarding meal period and rest period claims and class certification. Bufil followed Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949, and contained several passages that are difficult to reconcile with last week's opinion in Brinker Restaurant Corp. v. Superior Court of San Diego County (Hohnbaum) (2008) ___ Cal.App.4th ___. We previously discussed the case in a post that can be found at this link.

The Supreme Court has decided to review County of Santa Clara v. Superior Court (Atlantic Richfield Co.) (2008) 161 Cal.App.4th 1140, wherein the Sixth Appellate District reversed a Santa Clara County Superior Court order prohibiting the county from hiring outside counsel on a contingent fee basis. We discussed the opinion in an earlier post you can find here.

The repackaged opinion in Brinker Restaurant Corp. v. Superior Court (2008) __ Cal.App.4th __ was finally published today. The opinion is 53 pages long, and as interesting as it is, I'm going to have to pass on the opportunity to do an in-depth analysis for the same reason that I missed a wage and hour class action mediation today - my son's birth. The opinion is just as pro-employer and just as adverse to class action litigation as the original opinion, which was vacated shortly after a petition for review was filed last October. The case can be summed up with the following excerpts from the opinion:

In this action involving alleged violations of laws governing rest and meal breaks, we are presented with the following question:  Did the trial court err in certifying this matter as a class action without first determining the elements of plaintiffs and real parties in interest Adam Hohnbaum, Illya Haase, Romeo Osorio, Amanda June Rader and Santana Alvarado's (collectively plaintiffs) claims against defendants Brinker Restaurant Corporation, Brinker International, Inc., and Brinker International Payroll Company, LP (collectively Brinker)?

Reconsidering the matter following a transfer from the California Supreme Court and our vacating of the original opinion in this matter, we first recognize that "in light of the remedial nature of the legislative enactments authorizing the regulation of wages, hours and working conditions for the protection and benefit of employees, the statutory provisions are to be liberally construed."  (Industrial Welfare Com. v. Superior Court (1980) 27 Cal.3d 690, 702.)   We also recognize mandatory rest and meal breaks have "have long been viewed as part of the remedial worker protection framework" designed to protect workers' health and safety.  (Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1105, 1113 (Murphy).)  In addition, we note that in construing the applicable statutes and regulations, we look to the plain language of the laws and interpret them in a manner consistent with the Legislature's intent.  (Fitch v. Select Products Co. (2005) 36 Cal.4th 812, 818.)

With these principles in mind, we conclude the class certification order is erroneous and must be vacated because the court failed to properly consider the elements of plaintiffs' claims in determining if they were susceptible to class treatment.  Specifically, we conclude that (1) while employers cannot impede, discourage or dissuade employees from taking rest periods, they need only provide, not ensure, rest periods are taken; (2) employers need only authorize and permit rest periods every four hours or major fraction thereof and they need not, where impracticable, be in the middle of each work period; (3) employers are not required to provide a meal period for every five consecutive hours worked; (4) while employers cannot impede, discourage or dissuade employees from taking meal periods, they need only provide them and not ensure they are taken; and (5) while employers cannot coerce, require or compel employees to work off the clock, they can only be held liable for employees working off the clock if they knew or should have known they were doing so.  We further conclude that because the rest and meal breaks need only be "made available" and not "ensured," individual issues predominate and, based upon the evidence presented to the trial court, they are not amenable to class treatment.  Finally, we conclude the off-the-clock claims are also not amenable to class treatment as individual issues predominate on the issue of whether Brinker forced employees to work off the clock, whether Brinker changed time records, and whether Brinker knew or should have known employees were working off the clock.  Accordingly, we grant the petition and order the superior court to vacate its order granting class certification and enter a new order denying certification of plaintiffs' proposed class.

You can download the full text of Brinker Restaurant Corp. v. Superior Court here in pdf or Word format. If you do any wage and hour work, or any class action work, this is must reading until and unless the Supreme Court grants review.

Glancing over the opinion, I couldn't help but think that if this had been the first appellate decision in California concerning wage and hour class actions, there might never have been a second wage and hour class action. However, it was not the first, and Brinker disagrees with many prior opinions, most specifically, Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949, 962-963, which it discussed at length, and Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, which it did not even mention, and more generally, a string of cases which promote class actions as an efficient way to resolve wage and hour disputes and a string of cases which discuss the remedial nature of wage and hour laws in California. With Brinker and Cicairos presenting such starkly contrasting views on California law, with Brinker presenting so many novel ideas regarding wage and hour claims and class actions, and with so many U.S. District Court cases disagreeing with Cicairos and each other, this case looks like an outstanding candidate for Supreme Court review.

The Supreme Court has extended its time to decide whether to grant or deny review in County of Santa Clara v. Superior Court (Atlantic Richfield Co.) (2008) 161 Cal.App.4th 1140. In the opinion, the Sixth Appellate District reversed a Santa Clara County Superior Court order prohibiting the county from hiring outside counsel on a contingent fee basis. We discussed the opinion in an earlier post you can find here. If you would like to review the petition, a copy of it can be found at the UCL Practitioner's post from May 20, when the petition was filed.

The Court of Appeal has affirmed the sustaining of a demurrer to a wage complaint brought by former chaplains at Santa Rita Jail in Alameda County, alleging violations of state laws regarding wage and hour requirements covering overtime, meal breaks and rest breaks, as well as to three fraud causes of action (intentional misrepresentation, concealment, and false promise). Curcini v. County of Alameda (2008) __ Cal.App. __. In the part of the opinion which is of interest to wage and hour practitioners, the court held that Labor Code §§ 510, 512, 226.7 and 1194 do not apply to charter counties such as the County of Alameda in the circumstances presented.

Charter counties have exclusive power under the California Constitution to determine the compensation of their employees. Cal. Const., art. XI, § 1, subd. (b); County of Riverside v. Superior Court (2003) 30 Cal.4th 278, 284-285. Thus, the court found it easy to determine that "Labor Code §§ 510 and 1194 relating to overtime pay address matters of “compensation” within the County’s exclusive constitutional purview pursuant to article XI, sections 1, subdivision (b), and 4." After some analysis, the court determined the same for the meal and rest break claims.

Appellants contend that meal and rest break claims relate to working conditions and not to compensation. Considered in a vacuum, the argument seems plausible. However, appellants are actually seeking monetary compensation for having been required to work through meal and rest breaks. As in our discussion of overtime pay, the link to compensation seems clear. As we have discussed above, our Supreme Court has recognized that in addition to the statutory language and its legislative history, the “compensatory purpose of the remedy” provided in Labor Code section 226.7 for violations of meal and rest period regulations, “compel the conclusion that the ‘additional hour of pay’ (ibid.) is a premium wage intended to compensate employees . . . .”

You can download Curcini v. County of Alameda here in pdf or word format.

Until last month, no California appellate decision had construed the requirements of any municipality’s living wage ordinance, or addressed the constitutional challenges to any such ordinances. Now, however, most of the defenses commonly raised when employers challenge living wage ordinances have been rejected in an opinion published last month by the First District Court of Appeal in Amaral v. Cintas Corporation No. 2 (2008) __ Cal.App.4th __. Amaral addressed the constitutionality and application of a living wage ordinance enacted by the City of Hayward and incorporated into its municipal contracts. Defendant Cintas entered into such contracts with the City, but did not provide the minimum wages or benefits required by the ordinance to employees who worked in the company’s stockroom or laundry production facilities, which are located outside the City of Hayward. Some of those employees filed a class action seeking the living wages due, benefits, civil penalties and waiting time penalties. On cross-motions for summary judgment, the trial court found that Cintas violated the ordinance, which was enforceable; that it breached its contracts with the City, and violated the Unfair Competition Law and numerous Labor Code provisions. The court awarded back wages and unpaid benefits, imposed penalties under the Private Attorneys General Act of 2004 and awarded plaintiffs statutory attorneys’ fees and costs. However, the trial court found that, prior to the determination of its legal duties under the new ordinance, Cintas’s conduct was not “willful” so as to justify waiting time penalties. The Court of Appeal affirmed all of the trial court's rulings. The opinion is most noteworthy for its analysis of the constitutionality and vagueness attacks on the living wage ordinance, but for wage and hour lawyers, its 60+ pages were full of interesting analysis of wage and hour issues.

At issue was Hayward's Living Wage Ordinance, which provides:

Service contractors subject to this Ordinance shall pay their employees a wage of no less than eight dollars ($8.00) per hour, if health benefits are paid to the employees, or nine dollars and twenty-five cents ($9.25) per hour if no such health benefits are paid.” (Hayward Mun. Code, § 2-14.020, subd. (c).) For purposes of the ordinance, an employee is defined as “any individual employed by a service contractor on or under the authority of any contract for services with the City . . . .” (Hayward Mun. Code, § 2-14.010, subd. (c).) Considering these two provisions together, the plain language of the ordinance requires contractors to compensate every individual they employ to perform work on or under a service contract with Hayward with a wage of at least $9.25 per hour, or $8.00 per hour if the employer provides health benefits.

The court first disposed of Cintas's constitutional arguments:

Cintas’s first constitutional challenge to the LWO rests on article XI, section 7 of the California Constitution, a provision which Cintas contends prohibits attempts by a municipality to exercise power outside its territorial boundaries. However, the language of the provision and cases interpreting it make it clear the prohibition applies only where a local government exercises its regulatory or police power, as opposed to its contracting or proprietary power. (Burns Internat. Security Services Corp. v. County of Los Angeles (2004) 123 Cal.App.4th 162, 168.
...
Cintas also argues the LWO is so vague that it violates due process under the federal and state constitutions. “[D]ue process of law is violated by ‘a statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application.’ [Citations.]” (Britt v. City of Pomona (1990) 223 Cal.App.3d 265, 278.) It is true that the terms of the LWO do not spell out precisely how the ordinance will apply in situations where contractors perform work outside of Hayward or commingle an employee’s contract-related work with work for other customers. However, due process “does not . . . require that statutes must be drafted with the precision of a laser.” (Personal Watercraft Coalition v. Marin County Bd. of Supervisors, supra, 100 Cal.App.4th at p. 138.) “ ‘ “Reasonable certainty is all that is required. . . .” [Citation.] . . .’ [Citations].”

Cintas also contended that the plaintiff class members did not fit the LWO’s definition of employees because they rendered a service to Cintas, not to the City. The court noted that this argument was waived because it was not presented to the trial court, but went on to add that "[i]t is also nonsensical. ... When they laundered and maintained uniforms used by the City of Hayward, plaintiffs were carrying out Cintas’s obligations under service contracts with the City. Accordingly, these employees were working “on or under the authority of” a service contract."

The court rejected claims that the employees lacked a private right of action to enforce the living wage ordinance.

This issue has been addressed by courts of appeal in the analogous context of California’s prevailing wage law. (Lab. Code, §§ 90.5, 1720-1861.) This law requires that all contractors and subcontractors working on a public works contract must pay their employees the prevailing wage rate for work performed on the contract. (Lab. Code, §§ 1771, 1774.) Although the Labor Code imposes a statutory duty to pay prevailing wages and the prevailing wage law is incorporated into public works contracts, our Supreme Court has not yet decided whether employees have a right to enforce the prevailing wage law absent a specific provision in their employment contracts. (Department of Industrial Relations v. Fidelity Roof Co. (1997) 60 Cal.App.4th 411, 425 (Fidelity Roof); see Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 969, fn. 5.) Two appellate court decisions have considered the issue, however, and both conclude aggrieved employees are third party beneficiaries who may sue to enforce a contractor’s promise to pay prevailing wages.

Cintas also failed in its claim that the enforcement of Labor Code penalties under the Private Attorneys General Act (PAGA), Labor Code § 2698 et seq., constituted an unlawful retroactive application of a new statute. PAGA went into effect on January 1, 2004. PAGA allowed aggrieved employees to recover Labor Code penalties directly from their employers, whereas only the Labor Commissioner could do so before. Because PAGA did not become effective until after plaintiffs filed their lawsuit, Cintas argued its provisions could not be applied retroactively. The trial court and the Court of Appeal disagreed.

In this case, the only effect of the new statute was to allow private parties—class members who are present or former employees of Cintas—to recover penalties that previously could have been recovered only by the state Labor Commissioner. This change did not increase Cintas’s liability in any way, because the Labor Commissioner could have recovered the same penalties for Cintas’s violations before the passage of PAGA. It does not matter that Cintas’s wrongful conduct occurred before PAGA was enacted because the legal consequences of this conduct remained the same. “A statute is retroactive if it substantially changes the legal effect of past events. [Citations.] A statute does not operate retroactively merely because some of the facts or conditions upon which its application depends came into existence prior to its enactment. [Citations.]” (Kizer v. Hanna (1989) 48 Cal.3d 1, 7-8.) Nor does it matter that Cintas may have expected to be held accountable for penalties to the Labor Commissioner instead of to plaintiff class members. “A statute does not operate ‘retrospectively’ merely because it is applied in a case arising from conduct antedating the statute’s enactment [citation] or upsets expectations based in prior law. Rather, the court must ask whether the new provision attaches new legal consequences to events completed before its enactment.” (Landgraf v. USI Film Products, supra, 511 U.S. at pp. 269-270, fn. omitted.) Because PAGA did not increase Cintas’s liability for Labor Code penalties, its application in this case was not retroactive.

The Court of Appeal also found support for this position in the Supreme Court’s decision in Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, regarding the effect of Proposition 64's amendment of the standing provisions of the unfair competition law.

The Court upheld the trial court's findings of violations of Labor Code § 223: “Where any statute or contract requires an employer to maintain the designated wage scale, it shall be unlawful to secretly pay a lower wage while purporting to pay the wage designated by statute or by contract.”

The court addressed the meaning of "initial" violations under penalty provisions which increase for "subsequent violations". These statutes, which are substantially identical, provide for civil penalties as follows: "(a) For any initial violation, [fifty dollars ($50)] for each failure to pay each employee. (b) For each subsequent violation, or any willful or intentional violation, [one hundred dollars ($100)] for each failure to pay each employee...." The employees asserted that a violation occurs every pay period that an employee’s wages are underpaid, and that the first underpayment constitutes an “initial” violation, and all future pay periods are “subsequent” violations, penalized at the higher rate. Cintas argued that an employer could not be penalized at the higher rate for subsequent violations until it received some notice that its previous underpayment was a violation of the law. The court agreed with a different approach set forth in a February 22, 1984 DLSE memorandum.

an “initial” violation is “[a]ny violation occurring [after the penalty becomes law], regardless of whether penalties were assessed,” whereas a “subsequent” violation is “[a]ny violation which occurs after notice of a previous violation, regardless of whether penalties were assessed.” In describing how an investigating deputy should calculate penalties, the memorandum states: “If the violation is an initial violation, the citing officer will assess a penalty of $50 per each employee per each pay period. [¶] If the violation is a subsequent violation, the citing officer will assess a penalty of $100 per each employee per each pay period.”
...
The statutes state that a penalty for an initial violation is to be imposed “for each failure to pay each employee.” (§§ 210, subd. (a), 225, subd. (a).) This language conveys two things. First, by specifying a $50 penalty must be imposed “for each failure to pay each employee” (italics added), the language contemplates that an “initial violation” can result in more than one penalty at the $50 level. In other words, multiple $50 penalties can result from a single initial violation. The only way this could conceivably occur is if penalties are assessed at each pay period.
...
Until the employer has been notified that it is violating a Labor Code provision (whether or not the Commissioner or court chooses to impose penalties), the employer cannot be presumed to be aware that its continuing underpayment of employees is a “violation” subject to penalties. However, after the employer has learned its conduct violates the Labor Code, the employer is on notice that any future violations will be punished just the same as violations that are willful or intentional—i.e., they will be punished at twice the rate of penalties that could have been imposed or that were imposed for the initial violation. Accordingly, we conclude the trial court properly assessed penalties against Cintas under sections 210 and 225.5 at the rate of $50 per pay period per class member.

The court rejected Cintas's claim that the trial court incorrectly determined that it lacked discretion not to award civil penalties (as opposed to discretion to reduce them):

Sections 210 and 225.5 state that “every person who” fails to pay wages (§ 210) or unlawfully withholds wages due (§ 225.5) “shall be subject to a civil penalty” as described in the statute. The parties disagree about whether the trial court was required to impose penalties under sections 210 and 225.5, or whether it had discretion to forgo imposing any penalties because Cintas had a good faith dispute about whether wages were due. No authority brought to our attention supports Cintas’s claim of legal error. Cintas argues that a trial court imposing PAGA penalties can exercise its discretion based only on the considerations mentioned in section 2699, subdivision (e)(2). This argument rests on a misunderstanding of the nature of PAGA penalties: As we have explained, they are mandatory, not discretionary.

The court rejected Cintas's claims that the $258,900 penalty assessment was confiscatory.

The court received evidence that Cintas’s parent company had $2.81 billion in sales and $272 million in profits during fiscal year 2004. The penalty award is certainly not “astronomical” in comparison. (See, e.g., City and County of San Francisco v. Sainez (2000) 77 Cal.App.4th 1302, 1318-1319 [approving $663,000 penalty for housing code violations, which represented about 28.4 percent of the defendants’ net worth].) The penalty award, which totaled less than one-third of plaintiffs’ $804,783 damage award, was also proportional to Cintas’s misconduct. (See Kinney v. Vaccari (1980) 27 Cal.3d 348, 356 [punitive assessment should be proportional to defendant’s misconduct, sufficient to achieve penalty’s deterrent purpose, and not constitutionally excessive].)

Some of the statutory penalties sought by the plaintiffs, including waiting time penalties under section 203 and paystub penalties under section 226, are imposed only if an employers’ violation was “willful” or “knowing.” The trial court concluded that Cintas’s conduct was not “willful,” and it declined to impose or increase penalties under all provisions that include a “willfulness” component. The Court of Appeal followed Barnhill v. Robert Saunders & Co. (1981) 125 Cal.App.3d 1 and decided that the failure to pay wages was not “willful” because the legal duty to pay them was unclear at the time of the violation.

Even more so than in Barnhill, the legal obligations imposed on employers by the LWO were unclear at the time of Cintas’s violations. As Cintas’s vigorous defense of this class action has made clear, numerous arguments exist concerning the constitutionality of the LWO and its proper interpretation.

In so holding, the court distinguished the facts of this case from those in Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314, where the presumption of good faith was outweighed by evidence that the employer was in fact aware that its employees were not being fully compensated for their time, and Road Sprinkler Fitters Local Union No. 669 v. G & G Fire Sprinklers, Inc. (2002) 102 Cal.App.4th 765, where the employer’s legal obligation was clear and substantial evidence supported the lower court’s finding that the employer had acted in bad faith.

The court passed on the opportunity to address whether interest could be awarded on the restitutionary relief under the Unfair Competition Law claims pursuant to Civil Code § 3287(a), which provides for interest on an award of “damages certain, or capable of being made certain by calculation.” An award of interest was also authorized under the Labor Code for the wage claims, so the decision would have no practical effect on the judgment.

Finally, the court upheld the trial court's award of fees to plaintiffs’ attorneys based upon a lodestar multiplier of 1.65, which was less than the multiplier of 2.0 requested by the plaintiffs.

There certainly is a change that the Supreme Court will review this opinion, and the PAGA and other penalty issues add to the likelihood of review. Until and unless the case gets reviewed or depublished, however, it puts an end to the strongest and most frequently asserted defenses to living wage ordinances in California. You can download Amaral v. Cintas Corporation No. 2 here in pdf or word format.

The Supreme Court will review an unusual ruling in which a trial court compelled production of certain types of legal memoranda written by a party's attorneys. In Costco Wholesale Corp. v. Superior Court (2008) __ Cal.App.4th __, the Court of Appeal held that the trial court was correct to order Costco to produce portions of a pre-litigation attorney-client memo prepared for Costco by its outside counsel. We previously discussed the case in a post entitled Court Orders Production of Costco's Attorney-Client Communication in Overtime Class Action.

The statement of issues provides as follows:

#08-91 Costco Wholesale Corp. v. Superior Court S163335. (B197692; 161 Cal.App.4th 488, mod. 161 Cal.App.4th 1513c; Los Angeles County Superior Court; BC296369.) Petition for review after the Court of Appeal denied a petition for peremptory writ of mandate. This case presents the following issues: (1) Does the attorney-client privilege (Evid. Code § 954) protect factual statements that outside counsel conveys to corporate counsel in a legal opinion letter? (2) Does Evidence Code section 915 prohibit a trial court from conducting an in camera review of a legal opinion letter to determine whether the attorney-client privilege protects facts stated in the letter?

We would not be surprised to see a reversal.

Where an employer offers employees premium pay for work on holidays, the employees are not entitled to additional premium pay for those hours if the hours also put the employee into statutory overtime. Advanced-Tech Security Services, Inc. v. Superior Court (2008) __ Cal.App.4th __. In other words, if your boss pays you time-and-a-half for working on Memorial Day, any overtime hours you work that day give you the same time-and-a-half rate that you would have had if you were not working overtime, and they count as "overtime hours" when calculating your right to weekly overtime pay. If you make $10 an hour on normal days, and $15 an hour on holidays, your regular rate of pay for calculating overtime on holidays does not become $15 an hours, entitling you to $22.50 per hour or $30 per hour (double time) if those hours exceed the limits for daily or weekly overtime for that week.

In this case, Advanced-Tech had filed a motion for summary adjudication on the overtime claims on the ground that the plaintiff could not prove that she was not paid one-and-a-half times her regular rate of pay for the days she worked in excess of 8 hours per day and/or in excess of 40 hours in one week. The moving papers argued that she was paid time-and-a-half for her holiday work, and the holiday/premium pay was properly credited against overtime pay to the extent she worked in excess of a 40-hour workweek.

The opposition argued that she was entitled to premium pay for holidays, and if she worked in excess of 40 hours in the same week, she was also entitled to additional overtime payments because the pay provision for holidays set forth in her employee’s handbook was part of her regular rate of pay, citing Santa Monica Police Officers Assn. v. Board of Administration (1977) 69 Cal.App.3d 96, 100, footnote 3.

Advanced-Tech argued in the reply that in the applicable weeks, she worked 60 hours; she was paid at her regular rate for 40 hours; she received 12 hours of holiday pay; and she received 8 hours of overtime pay. Therefore, she was paid properly under section 510, with the premium holiday pay credited against overtime.

The trial court denied Advanced-Tech’s motion for summary adjudication and Advanced-Tech filed a petition for writ of mandate. The Court of Appeal issued a writ directing the trial court to grant the motion.

Labor Code section 510, subdivision (a) mandates that an employer pay an employee time and one-half for (1) more than 8 hours of work in one workday, and (2) more than 40 hours of work in any workweek. In this case, the employer agreed to pay the employee a premium rate of one and one-half times her regular rate of pay for work on designated holidays. The issue presented here is whether the employee is entitled to time and one-half of the premium holiday pay as overtime if the employee works more than 8 hours in a day or 40 hours in a week. We hold that the plain language of section 510 does not require an employer to compensate an employee at a rate higher than one and one-half times the regular rate of pay under the circumstances presented here. The employer is entitled to credit the time and one-half premium pay on holidays against otherwise earned overtime. Accordingly, we issue a writ of mandate and direct respondent court to vacate its order denying the employer’s motion for summary adjudication as to real party in interest’s first cause of action for failure to pay overtime compensation and enter a new and different order granting the summary adjudication motion.

Advanced-Tech contends it complied with section 510, subdivision (a), by paying Ms. Roman at a rate of one and one-half times her regular pay for all hours in excess of 8 hours per workday and 40 hours per workweek. In addition to the language of section 510, Advanced-Tech relies on related federal law—the Fair Labor Standards Act (the FLSA)—which excludes several types of remuneration from the regular rate of pay including “extra compensation . . . for work . . . on Saturdays, Sundays, holidays, or regular days of rest.” (29 U.S.C. § 207(e) (1-8), emphasis added.) We hold that Advanced-Tech’s interpretation of the pertinent law is correct and it was entitled to summary adjudication of the first cause of action.

You can download the full text of the opinion at the court's website in pdf or word format.

Last month, Tyson Foods, Inc. filed a reply brief in Tyson Foods, Inc. v. de Ascencio. seeking a determination of “whether the time spent donning light protective gear constitutes ‘work’ under the Fair Labor Standards Act if the activities do not require a significant level of exertion.” It makes for some interesting reading, but we can't help but wonder what sort of mischief could result from a "significant exertion test" to determine whether 'work' is compensable.

The Third Circuit's original opinion can be found at this Villanova law school link.

[Hat tip: SCOTUSblog, which has links to the reply brief, cert. petition and respondent's brief.]

The Second District Court of Appeal has issued an order modifying its opinion and denying rehearing in Antelope Valley Press v. Poizner (2008) __ Cal.App.4th __.

The opinion in this case that was certified for publication and filed on April 30, 2008 is modified in the following manner:

On page 15 of the opinion, add the following paragraph to footnote 12 as a second paragraph in that footnote:

We reject AVP’s contention that the court’s analysis in JKH Enterprises is flawed.  AVP asserts that JKH Enterprises did not “consider fully” the decision in Interstate Brands v. Unemployment Ins. Appeals Bd., supra, 26 Cal.3d 770, 773, 775, where the Supreme Court had affirmed the trial court’s determination that certain of the employees of Interstate Brands were not entitled to unemployment insurance benefits, and held that it was proper for the trial court to apply the independent judgment test in reviewing the evidence produced at an administrative hearing because the case affected a fundamental vested right of the employer.  We note that the Supreme Court denied review in JKH Enterprises.  We also note that the Interstate Brands court did not address the question whether the subject workers were employees or independent contractors.  Their employee status was admitted by Interstate Brands.  However, Borello did address that issue, and there the Supreme Court simply stated that “[t]he determination of employee or independent-contractor status is one of fact if dependent upon the resolution of disputed evidence or inferences, and the [administrative agency’s] decision [on that status issue] must be upheld if substantially supported.”  (Borello, supra, 48 Cal.3d at p. 349, italics added.)  The Borello court did not state whether the question of worker status involves or affects a fundamental vested right.  As noted in footnote 13, post, the evidence in this case is disputed.  Therefore, in deciding this appeal in favor of upholding the Commissioner’s decision that the carriers are employees and not independent contractors for purposes of workers’ compensation insurance, we did so by addressing the question whether that decision is substantially supported by the evidence in the administrative record.

The appellant’s petition for rehearing is denied.

There is no change in the judgment.

We discussed the original opinion last month.

A collective bargaining unit's attorneys can represent employees (who are not members of the unit) in a wage and hour class action even if the unit is subsidizing the litigation costs, as long as the attorneys' representation complies with Rule 3-310's disclosure and consent requirements. Sharp v. Next Entertainment, Inc. (2008) __ Cal.App.4th __.

The Writers Guild of America (the Guild) had reason to believe that reality television production companies and television networks violated wage and labor laws.  The Guild held meetings during which employees of reality television discussed the purported violations.  Some who participated in the meetings, along with other reality television employees, agreed to be the named plaintiffs in two wage and labor law class action lawsuits against the production companies and the networks (collectively defendants).  Thereafter, the trial court denied defendants’ motion to disqualify plaintiffs’ counsel, but did disqualify some plaintiffs from acting as representatives of the putative classes. 

On appeal from the trial court’s order denying the disqualification order, defendants rely on California Rules of Professional Conduct of the State Bar, rule 3-310 (Rule 3-310) to contend that the trial court erred in failing to disqualify counsel for plaintiffs.  This contention is based upon the facts that the firm who represented the Guild was also counsel for plaintiffs, the Guild paid for plaintiffs’ attorney fees and costs, and the litigation was conceived by the Guild as part of its organizing campaign, a campaign which many plaintiffs supported.  Defendants use many of the same facts to further contend that the trial court erred in failing to disqualify all plaintiffs from their roles as representatives of the uncertified classes.

In the published portion of this opinion (pts. I., II., III.A. & IV.), we hold that the trial court did not err in failing to disqualify class counsel and the trial court did not err in refusing to disqualify all plaintiffs from acting as the named representatives of the putative classes.

In their cross-appeal, plaintiffs appeal from the trial court’s orders directing their counsel to ask them certain questions relating to their association with the Guild.  In the unpublished portion of this opinion (pt. III.B.), we hold that the trial court’s orders were vague.

Thus, we affirm in part and reverse in part.

Prior to 1999, California employees had no right to use employer-provided paid sick leave to care for a sick family member, sometimes referred to as “kin care” leave, without the employer’s agreement. In 1999, the Legislature adopted Labor Code § 233, which, as amended, states in relevant part:

(a) Any employer who provides sick leave for employees shall permit an employee to use in any calendar year the employee's accrued and available sick leave entitlement, in an amount not less than the sick leave that would be accrued during six months at the employee's then current rate of entitlement, to attend to an illness of a child, parent, spouse, or domestic partner of the employee. All conditions and restrictions placed by the employer upon the use by an employee of sick leave also shall apply to the use by an employee of sick leave to attend to an illness of his or her child, parent, spouse, or domestic partner....
...
(b)(4) "Sick leave" means accrued increments of compensated leave provided by an employer to an employee as a benefit of the employment for use by the employee during an absence from the employment for any of the following reasons: (A) The employee is physically or mentally unable to perform his or her duties due to illness, injury, or a medical condition of the employee. (B) The absence is for the purpose of obtaining professional diagnosis or treatment for a medical condition of the employee. (C) The absence is for other medical reasons of the employee, such as pregnancy or obtaining a physical examination.

In McCarther v. Pacific Telesis Group (2008) __ Cal.4th __, the question was whether section 233's requirement that employers allow their employees to use "sick leave" to attend to an illness of a child, parent, spouse, or domestic partner, applies not only to traditional sick leave policies, but also to a "sickness absence" policy under which employees earn the use of five-day increments of compensated leave in the event of illness or injury, subject to the employer's attendance management policy. The Court of Appeal found the statute applicable, regardless of the name or description of the policy.

Plaintiffs’ appeal presents a pure question of law. Labor Code section 233 requires employers to allow their employees to use “sick leave,” as defined in section 233, to attend to an illness of a child, parent, spouse, or domestic partner, so-called “kin care” leave. Plaintiffs argue that section 233 applies to the “sickness absence” policy to which they are subject as employees of their respective defendant companies. Defendants argue that section 233 applies to “traditional accrual-based sick leave policies” only, and not to the “sickness absence” policy. We conclude that section 233 applies to the policy, and reverse the trial court’s judgment.

...the requirements of section 233 extend to the “sickness absence” policy because, pursuant to the policy, defendants provide “accrued increments of compensated leave . . . to an employee as a benefit of the employment for use by the employee during an absence from the employment” due to illness or injury. (§ 233, subd. (b)(4).) We base our conclusion on the plain and commonsense meaning of the statute’s text. The trial court erred in granting defendants’ motion for summary judgment and denying plaintiffs’ motion for summary adjudication.

You can download the full text of McCarther here in pdf or word format.

As an added bonus, the opinion contains this enjoyable footnote concerning the definition of the word "accrue":

The extensive debate calls to mind a passage in Lewis Carroll’s Through the Looking Glass, in which Humpty Dumpty explains his use of a word to Alice. “When I make a word do a lot of work like that, said Humpty Dumpty, I always pay it extra.” (Carroll, Tenniel and Gardner, The Annotated Alice (2000), p. 213.)

We're not sure when or where, but someday, we are going to figure out a way to cite to that footnote.

Education Code § 45028 requires that teacher salaries “shall be classified on the salary schedule on the basis of uniform allowance for years of training and years of experience.” To reduce salary stagnation among mid-level and upper-level teachers and stay competitive with other area school districts, the Stockton Unified School District and the Stockton Teachers Association entered into a collective bargaining agreement for a “compressed” salary schedule, allowing teachers to obtain merit increases in salary more quickly.

The district implemented the CBA by reassigning some teachers to “step” levels that did not correspond with their years of experience. In response, some of the affected senior teachers filed a petition for writ of mandate, claiming that the district’s actions violated Education Code § 45028. The trial court found that the district’s formulation of the compressed schedule constituted a uniformity violation; that no statutory exception to the uniformity requirement existed; and that the teachers had not waived their right to relief by virtue of the CBA's ratification.

The court ordered the district to restore the experience credit that the affected teachers had lost. The district appealed, and the Court of Appeal affirmed.

We agree with the trial court that the District’s implementation of the salary schedule violated the uniformity requirement of section 45028.  We also conclude that no exception applied and that the trial court did not exceed its powers in remedying the violation.  We shall affirm the judgment granting mandamus relief to the Teachers.

If that sort of holding affects you or your clients, you should read Adair v. Stockton Unified School District (2008) __ Cal.App.4th __. You can download the full text of the opinion here in pdf or word format.

Even though existing precedent held that a refusal to sign an arbitration agreement was not a protected activity that could support a claim of retaliation, the Eleventh Circuit has published an opinion holding that an employee’s refusal to sign an agreement that applied to a pending charge of discrimination can support such a charge.

In Goldsmith v. Bagby Elevator Company (11th. Cir. 2008) 513 F.3d 1261, the plaintiff was willing to execute an amended dispute resolution agreement that would not have applied to his pending charge against the employer, but Bagby Elevator insisted that he sign an agreement that applied to the pending charge as well as future disputes, and fired him immediately after he refused to do so. The 11th Circuit held that Bagby Elevator was not entitled to a judgment as a matter of law against Goldsmith’s claim of retaliation because there was sufficient evidence of a causal relation between the filing of his pending charge and later termination. The case isn't very old, but has already been followed or cited seven times.

We've seen employers try that trick twice during pending wage and hour class actions. So far, no problem.

Last week, the Supreme Court denied a petition for review in Harrington v. Payroll Entertainment Services, Inc. (2008) 160 Cal.App.4th 589, wherein the Court of Appeal reversed the denial of attorney's fees to a prevailing wage and hour plaintiff, then mandated an award of just $500. We previously discussed the case in a post you can read at this link. The opinion can be found here in pdf or word format. A request for depublication was also denied.

The Supreme Court also denied a petition for review in Combs v. Skyriver Communications, Inc. (2008) 159 Cal.App.4th 1242, which upheld a summary judgment for the defense based upon the administrative exemption. We previously discussed the case in a post you can read at this link.

The Supreme Court has granted a petition for review in Schachter v. Citigroup, Inc. (2008) 159 Cal.App.4th 10, which (temporarily) upheld the validity of a stock forfeiture plan in which participating employees who resign or are terminated for cause within a two-year vesting period forfeits the stock as well as the wages used to purchase it. We previously discussed the case in a post you can read at this link.

We've read it, but we find the twisted reasoning in section three of the opinion ("Enforcement of the Plan’s Forfeiture Provisions Does Not Violate Sections 201 or 202") to be a little Kafkaesque. Read it yourself and tell us if you disagree. You can download the full text of Schachter v. Citigroup. Inc. here in pdf or word format. One thing is for sure, the Supreme Court is taking a little extra time to consider this one. The High Court has extended its time to grant or deny review in the case to May 27, 2008.

Perhaps we weren't the only ones who saw too much of Kafka in that opinion. We would be very surprised to see the ruling upheld.

Last week, we briefly discussed McCoy v. Superior Court (Kimco) (2007) 157 Cal.App.4th 225 (review denied) and its effect on the nature of waiting time penalties and the statutes of limitation that apply to them. This week, we found out about Hoffman v. Uncle P Productions, LLC (2008) 2nd Appellate District, Case Number B198477, an unpublished opinion that disagrees with McCoy's holding regarding the statute of limitations on pure waiting time penalty claims.

Section 203 provides in pertinent part:  "If an employer willfully fails to pay . . . any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; the wages shall not continue for more than 30 days. . . .  [¶]  Suit may be filed for these penalties at any time before the expiration of the statute of limitations on an action for the wages from which the penalties arise."  A claim for wages is subject to the three-year statute of limitations contained in Code of Civil Procedure section 338, subdivision (a).  (Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1102.)  Thus, section 203 provides a three-year statute of limitations for a cause of action for waiting time penalties.

Our Supreme Court came to this same conclusion when it recently explained: "When an employer fails to pay an employee who has quit or been discharged, section 203 establishes that the unpaid wages continue to accrue as a 'penalty' for up to 30 days.  Knowing that remedies constituting penalties are typically governed by a one-year statute of limitations, the Legislature expressly provided that a suit seeking to enforce the section 203 penalty would be subject to the same three-year statute of limitations as an action to recover wages.  (§ 203.)"  (Murphy v. Kenneth Cole Productions, Inc., supra, 40 Cal.4th at pp. 1108-1109.)

The trial court did not explain in its statement of decision why it concluded that the three-year statute of limitations contained in section 203 did not apply to this lawsuit.  Interestingly, however, subsequent to the trial court's ruling in this case, the Fourth District Court of Appeal in McCoy v. Superior Court (2007) 157 Cal.App.4th 225, came to a similar conclusion.  In McCoy, the plaintiff in a putative class action suit was seeking waiting time penalties under section 203.  His complaint alleged that the defendant, a "temp" agency, instead of paying its employees upon discharge or within 72 hours of resignation, paid them on the next scheduled pay day.  The Court of Appeal affirmed the trial court's ruling that the waiting time penalties were subject to a one-year statute of limitations under Code of Civil Procedure section 340, subdivision (a).

The McCoy Court determined that the statute of limitations language contained in section 203 was ambiguous, and so resorted to extrinsic aids to discern its meaning.  It then concluded that the Legislature meant for the three-year limitations period specified in section 203 for continuing wage claims to apply when such claims are brought with the underlying wage claim, but not when they are not accompanied by a wage claim.  We cannot concur in this analysis.

Section 203 specifically states:  "Suit may be filed for these penalties at any time before the expiration of the statute of limitations on an action for the wages from which the penalties arise."  There is nothing the slightest bit ambiguous or uncertain about those words.  The McCoy Court acknowledged the Supreme Court's statement in Murphy v. Kenneth Cole Production, Inc. that "'. . . the Legislature expressly provided that a suit seeking to enforce the section 203 penalty would be subject to the same three-year statute of limitations as an action to recover wages.  [Citation.]'  (Murphy v. Kenneth Cole Productions, Inc., supra, 40 Cal.4th at pp. 1108-1109)."  (McCoy, supra, at p. 233.)  The Court of Appeal declared, however, that the statement was dicta, since the Court was not interpreting section 203, and that it provided no authority for a three-year limitations period for penalty-only claims, because the Murphy Court "does not purport to distinguish between an action where both wages and a waiting time penalty are sought as opposed to one for penalties only, as is the case here."  (McCoy, supra, 157 Cal.App.4th at p. 233.)  However, the statute of limitations for an action does not customarily change depending upon whether or not additional claims are included in the complaint.  Indeed, McCoy cites no authority at all for its application of a different statute of limitations based on its distinction between penalty-only claims and penalty-plus-wage claims, an interpretation of section 203 which disregards the express words contained in the statute and infers the Legislature's true meaning.

In sum, we find persuasive the Supreme Court's pronouncement of the statute of limitations for waiting time penalties in Murphy, notwithstanding the fact that the Court was not directly considering section 203, but analogizing to it in order to resolve the issue before it involving the statute of limitations for section 226.7 claims ["hour of pay" remedy for meal and rest period violations].  We conclude that, under the clear and unambiguous terms of the statute, a three-year limitations period applies to section 203 claims for waiting time penalties.  Plaintiffs' causes of action for those penalties were therefore timely. (our emphasis).

A request for publication was filed yesterday. For now, you can review Hoffman here in pdf or word format.

Most California casewatchers are focusing their attention this week on In re Marriage Cases. Wage and hour lawyers, however, are also busy talking about Bufil v. Dollar Financial Group, Inc. (2008) __ Cal.App.4th __.

Do you remember Alvarez v. May Department Stores Co. (2006) 143 Cal.App.4th 1223, the case that held collateral estoppel could apply to prevent future class actions once a court, any court, denies certification of a class? Well, what if the certification motion was denied because the group was too big and its putative members were too different to warrant certifying a class. Can you file a new class action and seek to pursue a smaller class, chosen from within the larger class that was denied certification? San Francisco Judge Peter Busch thought you could not. The Court of Appeal in Bufil suggests that you can and perhaps should.

On the heels of the denial of class certification against employer and respondent Dollar Financial Group, Inc. (Dollar), in a suit alleging violation of meal and rest break labor laws, appellant Caren Bufil pursued class certification in a new suit which significantly narrowed the class definition. Relying on the doctrine of collateral estoppel, the trial court granted judgment on the pleadings in favor of Dollar. Also relying on this doctrine as well as traditional concerns relevant to the issue of certification, the court denied Bufil’s motion for class certification. We reverse.

The trial court's two errors were (i) applying collateral estoppel to the earlier certification denial in another case and (ii) assuming that each class member would have to testify about their own understanding about meal period waivers.

Here the trial court denied the motion for class certification on the same basis it granted judgment on the pleadings—that is, on collateral estoppel grounds. Continuing, the court additionally indicated that liability as to the class involved substantial and numerous individual factual questions, giving, as the sole example, each employee’s understanding of his or her rights under the meal plan. Elaborating, the court explained: “Similar to the class in Nguyen, employees would have to individually testify as to their perceptions of their rights in signing or refusing to execute the meal agreement without suffering adverse consequences. These issues apply to both the rest period and meal period components of the class, thus the individual issues predominate over Plaintiff’s [claim that common issues predominate].” Finally, the court held that Bufil did not prove the existence of an ascertainable class of employees who purportedly missed off-duty rest periods.

The meal period waiver issue is one we often see. Trial courts don't seem to buy it, but defendants always argue that you can't litigate meal period claims as a class because they will be forced to frogmarch every single class member into court to cross-examine them to determine whether their intent to waive a meal period was the same as every other employees' intent. Bufil busts this myth.

The court made an erroneous assumption that each class member would need to testify as to his or her understanding of the meal period waiver. This was an issue in Chin/Nguyen but it is irrelevant to Bufil’s lawsuit. Bufil’s theory is that the two circumstances—single employee on duty or providing training—do not come within the “nature of the work” exception set forth in Wage Order No. 4-2001, so as to permit an “on-duty” meal period. This is a legal question concerning the liability of Dollar to each putative class member. Bufil is not concerned with whether a given employee signed a meal period waiver, does not assert that anyone was forced to sign anything, and does not attack the execution of the agreements or the intent and understanding of the parties regarding the same. Her position is that either the putative class employees were denied an off-duty meal for an improper purpose, or they were not. Under Bufil’s structuring of the case, the court could identify the class from Dollar’s records and determine liability as a matter of law. In this case Bufil proposes a class that on its face attempts to correct flaws identified in the Chin/Nguyen lawsuit resulting in denial of certification. The trial court here erred in ruling that the class proposed by Bufil involved “the same class problems involving liability” as were implicated in Chin/Nguyen, and thus erroneously concluded that issue preclusion should bar her quest for class certification. (See OShana v. Coca-Cola Bottling Co. (N.D. Ill. 2005) 225 F.R.D. 575, 579.)

The court also pointed out that one could ascertain a class of rest period claimants even though there are no records kept for the rest periods.

Arguing that the proposed class was not ascertainable as to rest period claims, Dollar states there are no records identifying whether any employee missed a rest period and it has no obligation to maintain such records. There is no disagreement on these points, but they are not pertinent to the issue of ascertainability because Bufil has defined a class precisely identified by Dollar records.

We loved this language:

Dollar does not notify its employees that they are authorized and permitted to take a 10 consecutive minute off-duty rest break every four hours. Nor does Dollar instruct supervisory personnel to take steps to provide employees with the opportunity to take the required rest breaks. The onus is on the employer to clearly communicate the authorization and permission to its employees. (citing Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949, 963.)

The myth that class actions are not superior ways to adjudicate wage and hour claims is also busted.

The trial court made a passing, perfunctory reference to superiority in its order denying class certification, finding that plaintiffs did not establish that the class action is a superior method for resolving the litigation. Courts regularly certify class actions to resolve wage and hour claims. (See Pressler v. Donald L. Bren Co. (1982) 32 Cal.3d 831, 837; see also Sav-On, supra, 34 Cal.4th at p. 340; Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 579-580; Earley v. Superior Court (2000) 79 Cal.App.4th 1420, 1423.) In this arena the class action mechanism allows claims of many individuals to be resolved at the same time, eliminates the possibility of repetitious litigation and affords small claimants with a method of obtaining redress for claims which otherwise would be too insignificant to warrant individual litigation. (Sav-On, supra, 34 Cal.4th at p. 340.)

Bufil was originally issued in April as an unpublished opinion, but the California Employment Lawyers Association prevailed Tuesday in a request to have the opinion published. You can download the full text of the opinion here in pdf or word format.

Under the Fair Labor Standards Act, time spent commuting to and from the workplace is generally not compensable. Under the Portal-to-Portal Act, the FLSA excludes from compensable time all of the time spent "traveling to and from the actual place of performance of the principal activity" of employment. There are various exceptions, generally arising when an employee's commute is substantially changed for the benefit of the employer. However, the fact that an employee carries its employer's documents to and from work does not invoke such an exception, and employees who carry a briefcase during their commute are not entitled to be paid a wage for their commute time, even if that means lugging 20 pounds worth of documents home each night, according to a recent Second Circuit opinion.

Plaintiffs-appellants Rajkumar Singh, Thomas S. Matthews, Vivek N. Patil, Trushant Shah, Faramarz Robeny and Fredo Joseph (collectively the "plaintiffs") appeal from a June 2, 2006 judgment of the United States District Court for the Southern District of New York (Castel, J.), granting summary judgment to defendant-appellee City of New York (the "City") and denying the plaintiffs' cross-motion for summary judgment. The plaintiffs are fire alarm inspectors employed by the City who assert that they must be compensated under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., for their commuting time because the City requires them to carry inspection documents during their commutes. We hold that carrying inspection documents while commuting is not work under the FLSA except to the extent that it increases the duration of a commute. Because the record shows that such an increase in commuting time is de minimis as a matter of law, we AFFIRM the district court’s judgment that none of the plaintiffs’ commuting time is compensable under the FLSA.
...
In the commuting context, we believe that the appropriate application of the predominant benefit test is whether an employer's restrictions hinder the employees' ability to use their commuting time as they otherwise would have had there been no work-related restrictions.

Singh v. City of New York (2nd Cir. 2008) __ F.3d __ (Case No. 06-2960-cv).

The paperboy is an employee, not an independent contractor, according to an unpublished opinion issued in February that was ordered published last week by the Second District Court of Appeal. Antelope Valley Press v. Poizner (2008) __ Cal.App.4th __ poses the specific question whether, for purposes of worker’s compensation insurance, persons who make deliveries of newspapers for the Antelope Valley Press are independent contractors or employees. The issue arises not out of a claim for worker’s compensation benefits, but a dispute over insurance premiums. The court expressly noted that its ruling was limited to this context.

Our review of the facts of this case and relevant law convinces us that the trial court correctly ruled that the administrative record supports the conclusion that the carriers are employees for purposes of workers’ compensation law, not independent contractors. Therefore, we will affirm the trial court’s judgment.

As usual, the court addressed a laundry list of relevant factors that tilted toward employment:

• Home deliveries are made by the carriers, who are paid according to the number of copies of the Press they are given to deliver.
• the per copy rate paid to the carriers varies.
• There are written contracts
• they provide that papers must be delivered in a safe and dry condition.
• If a carrier chooses to wrap the Press in a plastic bag to keep it from getting wet or otherwise harmed, the bag must be yellow or white.
• The carriers also receive approximately 20 complementary copies of the Press each day.
• These free samples, called the “C’s,” are dropped off by the carriers at homes of nonsubscribers.
• The carriers are paid 3 cents for delivering each C. They are required to put the C’s in orange plastic bags, which are provided by AVP
• The routes are checked once a week.
• Carriers also deliver AVP’s magazine-type publication called “Lifestyles.”
• Carriers are required to put Lifestyles in the white plastic bags that AVP provides, and they receive 5 cents per copy they deliver.
• AVP also publishes a free “TMC” (total market coverage) advertisement paper which is called the A.V. As with the C’s, the carriers are required to place the A.V. Express in colored plastic bags (red) that are provided by AVP, and management checks the routes to verify that deliveries of the A.V. Express are made.
• The carriers receive 3 cents per copy of the A.V. Express they deliver, and are charged 23 cents for each copy they do not actually deliver.
• Deliveries by the carriers are made according to AVP’s time schedules.
• The carriers are expected to pick up their bundles of newspapers by a specific time from a specific location.
• If a carrier is late, he or she is charged $35 per hour ($0.58333 per minute) to cover AVP’s cost of having someone oversee the pick-up location until the carrier arrives.
• Additionally, personnel of AVP may begin folding and bagging the tardy carrier’s newspapers after the deadline for pickup so as to facilitate prompt delivery of papers to the customers, and the carrier is charged for the bags even though carriers are not required to put the Press in bags.
• For the pick up location that is not manned by AVP personnel, the carrier runs the risk that the newspapers will be stolen if the carrier is not on site when they are dropped off, and stolen papers are the financial responsibility of the carrier.
• On weekdays, carriers are required to finish their deliveries by 5:00 a.m. on in town routes and 6:00 a.m. on out-of-town routes. On weekends, the delivery deadlines are 6:00 a.m. and 7:00 a.m., respectively.
• The A.V. Express is to be delivered by noon on Saturday.
• Home delivery subscribers pay their subscription fees to AVP, not to the carriers.
• If a home delivery subscriber fails to pay his or her bill, the carrier is not docked unless and until a written stop delivery notice for that customer is given to the carrier.
• The carriers are charged a $2.50 complaint recording fee if a customer does not receive his or her copy of the Press, does not receive it in a timely manner, or it is damaged.
• If there are more than 2 complaints per one thousand paid deliveries and the carrier has elected to have AVP redeliver the Press, the carrier is also charged a $2.50 redelivery fee per complaint. If the carrier has elected to correct subscriber complaints by himself or herself but does not make the correction within one hour of being notified of the problem, or cannot be reached to receive such notification, then if AVP corrects the complaint the carrier is charged $35 per hour and $.31 per mile driven by an AVP employee to correct the problem.
• Invoices are issued to them every two weeks. The invoices list credits and charges.
• The only information the manager seeks from the prospective carrier is whether he or she has a California driver’s license, proof of vehicle insurance, and a social security number.
• The form contract is for a term of one year. Either party can terminate the contract without cause with 30 days written notice. Either party can terminate the contract, effective immediately with written notice, if the other party commits a material breach.
• there was an extreme disparity in bargaining position between the Carriers and AVP.
• "the Carriers wanted work, and they signed what they needed to in order to get it.”
• the lengthy, small print contract was “drafted by sophisticated lawyers and is in no sense the product of arm’s length negotiations, as might occur, for example, in hiring an independent contractor, specialized and sophisticated in the costs of his business, and able to garner trade from other actual and potential customers.”
• There was no evidence that any of AVP’s carriers hold themselves out as being an independent delivery service that happens to have AVP as one of its customers.
• Further, AVP does not cite evidence showing that the carriers have a substantial investment in their AVP delivery duties other than their time and the vehicles they use; and their vehicles are not shown to be other than the vehicles they use for their own personal activities.
• there was no evidence that any of the carriers have a delivery business through which they can distribute that risk and cost.
• Delivering papers requires no particular skill. A carrier’s remuneration is in very large part dependent on nonnegotiated financial terms in the contract rather than on the carrier’s initiative, judgment or managerial abilities.

The court was not concerned about the parties' written arrangements characterizing the relationship as one involving contractors.

The Borello and JKH Enterprises courts also determined that the workers in those cases were employees despite their having signed agreements (migrant farm workers in Borello) or other writings (delivery service drivers in JKH Enterprises) that stated they are independent contractors.

Even though the case arose out of an insurance premium dispute, because the contractor/employee issue arises frequently with wage and hour implications, the opinion is a worthwhile read. You can download the full text of Antelope Valley Press v. Poizner here in pdf or word format.

A dispute over whether a group of workers were properly organized by a union lead to an interesting Ninth Circuit opinion earlier this year, discussing how Friendly Cab Co.'s cab drivers were employees, not independent contractors, and therefore were properly organized by the union. NLRB v. Friendly Cab Co. (9th Cir. 2008) 512 F.3d 1090 thoroughly discusses the federal test for determining independent contractor status. In spite of cab lease agreements and several other factors that appeared to favor the employer, the court found the workers to be employees after considering the economic realities of the relationship. We'd have mentioned it sooner, but this was another post we never got around to sharing while Mike was out on medical leave.

The Fourth District Court of Appeal has invalidated the arbitration agreement used by Ralphs Grocery Co. in California. In Metters v. Ralphs Grocery Co. (2008) __ Cal.App.4th __ (originally issued as an unpublished opinion, and but ordered published in April), the trial court found evidence that the employee had not been aware that he was agreeing to mandatory arbitration, and thus could not be bound by a "dispute form" used by Ralphs Grocery for its dispute resolution process.

The company's policy provides an agreement to arbitrate as part of the request for dispute resolution. The form is entitled "Notice of Dispute and Request for Resolution Form." Among other things, the court noted, the form does not resemble a contract, and its title does not alert employees to the nature of the document; it does not clearly warn employees to pay special attention to the arbitration provisions; no one tells employees they are signing an arbitration agreement. For these and other reasons, the trial court found no meeting of the minds, and therefore no contract to arbitration.

The court was not persuaded by language in the form which clearly stated that employees were not required to sign do so in order for their complaints to be investigated. "A transactional attorney sitting in an office somewhere…[could] figure out what it meant," but it wasn't likely that an employee would.

The court observed, “It could be that a transactional attorney sitting in an office somewhere could have this form, start kind of pulling on the string and follow it back somehow and maybe figure out what it meant, if that is possible. . . . [¶] . . . [¶] [I]t does appear to be an attempt to sort of backdoor . . . this employee through this kind of ambiguous, nebulous form and say, well, if you want your . . . complaint investigated, just sign this and life will be good. [¶] I don’t think I can find there is . . . in the real world a meeting of the minds between Mr. Metters and Ralphs based on this.”

Thus,

The record contains substantial evidence to support the trial court’s finding that there was no valid agreement to arbitrate Metters’ discrimination claim. The order denying the motion to compel arbitration is affirmed.

You can download the full opinion of Metters v. Ralphs Grocery Co. here in pdf or word format.

Another case that came down during our January downtime involved the enforceability of California Labor Code §§ 232 and 232.5, which protect the rights of employees to discuss their compensation and working conditions with coworkers without fearing retaliation from an employer. Labor Code § 232 provides:

No employer may do any of the following:

(a) Require, as a condition of employment, that an employee refrain from disclosing the amount of his or her wages.
(b) Require an employee to sign a waiver or other document that purports to deny the employee the right to disclose the amount of his or her wages.
(c) Discharge, formally discipline, or otherwise discriminate against an employee who discloses the amount of his or her wages.

Labor Code § 232 provides:

No employer may do any of the following:

(a) Require, as a condition of employment, that an employee refrain from disclosing information about the employer's working conditions.
(b) Require an employee to sign a waiver or other document that purports to deny the employee the right to disclose information about the employer's working conditions.
(c) Discharge, formally discipline, or otherwise discriminate against an employee who discloses information about the employer's working conditions.
(d) This section is not intended to permit an employee to disclose proprietary information, trade secret information, or information that is otherwise subject to a legal privilege without the consent of his or her employer.

In Luke v. Collotype Labels USA, Inc. (2008) __ Cal.App.4th __, the Court of Appeal held that an employee's wrongful termination claim under section 232.5 was preempted by the National Labor Relations Act (NLRA), 29 U.S.C. §§ 151 et seq. The employee had been fired after soliciting signatures for a letter denouncing management, telling his supervisor's boss that there were troubles brewing, encouraging others to record the problems they encountered and express their concerns to management, and offering help and support to other employees who complained about working conditions. The defendant moved for summary judgment, claiming that these activities were protected "concerted activity" under 29 U.S.C. § 157, such that the claim was therefore preempted.  See Linn v. Plant Guard Workers (1966) 383 U.S. 53, 60 (The NLRA impliedly preempts state regulation of activity which is arguably protected by section 7). On these facts, the Court agreed. If the conduct is protected by section 301 of the LMRA (29 U.S.C. section 185) and there is a collective bargaining agreement which governs, the wrongful termination action is preempted.

The opinion was issued in January, and ordered published a month later. No review was sought and a remittitur has been issued. You can download the full text of Luke v. Collotype Labels USA, Inc. here in pdf or word format.

As a general rule, under Code of Civil Procedure § 1033(a), the trial court has the discretion to deny attorney's fees as an element of costs of suit under Code of Civil Procedure § 1033.5(a)(10)(B) if the plaintiff recovers less than the minimum jurisdictional amount of the court. Thus, for example, if a plaintiff sues in unlimited civil court and recovers only $25,000, and not a penny more, the case could have been brought in the limited  civil division and therefore, some costs may be denied. In Chavez v. City of Los Angeles (2008) __ Cal.App.4th __,

a jury awarded appellant Robert Chavez $11,500 in a statutory retaliation action brought against his employer and a supervisor. Chavez then filed a motion seeking approximately $871,000 in attorney fees under the fee provisions of the Fair Employment and Housing Act (FEHA), Government Code section 12965, subdivision (b). Ignoring that statute, and instead exercising its discretion under Code of Civil Procedure section 1033, subdivision (a) to deny costs because Chavez’s recovery was below its jurisdictional minimum, the trial court denied the motion. Chavez appeals from the denial of the motion, contending the court applied the wrong statutory standard and abused its discretion by denying him fees. We agree and reverse the order.

The opinion contains a lengthy discussion regarding the court's proper exercise of discretion, the conflicting purposes of  Code of Civil Procedure § 1033(a) and Government Code § 12965, and the language in the latter which limits the exercise of discretion in a FEHA case. In certain important respects, the holding can be distinguished in a wage case, but significant elements of the opinion apply as clearly to a Labor Code case as to a FEHA case.

You can download Chavez v. City of Los Angeles here in pdf and word format.

...became slightly less thin with the publication of Chavez v. Netflix, Inc. (2008) __ Cal.App.4th __.

Frank Chavez sued Netflix, Inc. (Netflix) over its practice of advertising that it would send customers " 'unlimited' " DVD rentals with "1 Day Delivery" for a flat monthly fee. Alleging that both selling points were false, Chavez sought injunctive relief and damages on behalf of himself and a class of current and former Netflix subscribers. Before the class was certified, Netflix agreed to settle the class action by providing one month of free DVD rental services or upgrades to class members who claimed the benefit. The trial court approved the settlement and awarded attorney fees of $2,040,000 to be paid by Netflix to class counsel. The appellants in these consolidated appeals objected to the class action settlement and fee award in the trial court. They contend that the trial court abused its discretion in approving the settlement, affording notice to class members, and determining the amount of fees. Finding no abuse of discretion, we affirm the orders in issue.

The case is full of interesting language supporting settling parties. A detailed analysis has been posted over at the UCL Practitioner. We're in trial, so we'll just point you in that direction. You can download the case here in pdf or word format.

In an unusual opinion, the Second District Court of Appeal ordered Costco Wholesale Corp. to turn over some of its attorney-client communications during discovery in a putative class action alleging misclassification of Costco managers. In Costco Wholesale Corp. v. Superior Court (2008) __ Cal.App.4th __, the Court of Appeal held that the trial court was correct to order Costco to produce portions of a pre-litigation attorney-client memo prepared for Costco by its outside counsel. The memo analyzed whether Costco's department managers qualified for exempt status. Counsel took interviews, reviewed job descriptions, and prepared a detailed and lengthy memo analyzing the status of the managers. The trial court ordered an in-camera review by a referee, who determined that portions of the memorandum regarding the managers’ job duties were not privileged and should be produced.

Costco petitioned for a writ of mandate. After some odd procedural quirks, the Court of Appeal denied the writ, holding that Costco had not shown "irreparable harm” because the portions to be produced came from job descriptions and interviews with two managers; it was “inconsequential; and it did not “infringe on the attorney-client relationship.” The Court found that these were not work product, and that disclosure would cause no harm because the information would be readily available from other sources.

You can download the full text of Costco Wholesale Corp. v. Superior Court here in pdf or word format. A modification order was issued yesterday, which did not change the judgment. We read the whole thing, twice, and we might be incorporating a request for in camera review of much more from the privilege logs than ever before.

The Supreme Court has denied a petition for review, but granted a request for depublication in Bell v. Superior Court (H.F. Cox, Inc.) (2007) 158 Cal.App.4th 147, a class certification opinion involving truck drivers with overtime, off-the-clock, meal/rest period and vacation pay claims.

The petition for review is denied. The requests for an order directing depublication of the opinion are granted. The Reporter of Decisions is directed not to publish in the Official Appellate Reports the opinion in the above-entitled appeal filed November 21, 2007, which appears at 158 Cal.App.4th 147. (Cal. Const., art. VI, section 14; rule 8.1125(c)(1), Cal. Rules of Court.) George, C.J., was absent and did not participate. Kennard J., is of the opinion the petition should be granted.

The Court of Appeal had affirmed in part and reversed in part a multiple-issue certification ruling by the Superior Court.

Four employees of a petroleum transportation company sought to bring a wage and hour class action against their employer, alleging: (1) the failure to pay overtime; (2) the requirement of off-the-clock work; (3) the failure to provide meal and rest breaks; (4) the incorrect calculation of vacation pay; and (5) the failure to pay pro rata vacation pay upon termination of employment. The plaintiffs filed a motion for class certification. The trial court granted the motion in part, certifying only a class with respect to the claim for failure to pay vacation pay upon termination of employment. In all other respects, the motion was denied. Plaintiffs sought review by means of a petition for writ of mandate. We issued an order to show cause why relief should not be granted and stayed further proceedings. We now conclude the trial court erred in failing to certify a class with respect to the overtime pay and vacation pay claims. We therefore grant the writ petition and direct the trial court to vacate its order, and enter a new and different order granting certification of a class with respect to those claims.

While on its face, the opinion had seemed to favor the plaintiff (who was the petitioner seeking Supreme Court review) the Court of Appeal's endorsement of the denial of certification in the off-the-clock and meal period causes of action had been embraced by the employers' bar, who will lament the depublication of the case.

We previously discussed the publication of and holding in Bell in a post here.

Employers engaged on public works projects must pay prevailing wages to their workers if the project is “paid for in whole or in part out of public funds.” Until now, it was unclear whether tax credits provided by the state to facilitate construction of low-income housing comes within this definition. In State Bldg. & Const. Trades Council v. Duncan (2008) __ Cal.App.4th __, the trial court determined that it does. The Court of Appeal reversed.

we conclude otherwise—that however worthy the policy goals of encouraging the construction of low-cost housing and ensuring compliance with the prevailing wage requirements, the statutory language in its present form cannot be construed to command that result. Tax credits are, at best, intangible inducements offered from government, but they are not actual or de facto expenditures by government. As such, they do not qualify as either the “payment of . . . the equivalent of money by the state” (subd. (b)(1), or as a “transfer by the state . . . of an asset for less than fair market price” (subd. (b)(3)), the portions of the definition of “paid for in whole or in part out of public funds” considered here. We thus reverse.

You can download the full text here in pdf or word format.

An on-duty meal period is not a "waived" meal period; consequently, an employee may take two on-duty meal periods in one shift, as long as the requirements for an on-duty meal period are satisfied, according to an unpublished U.S. District Court opinion rendered last month in McFarland v. Guardsmark, LLC (N.D. Cal. 2008) 2008 U.S. Dist. LEXIS 20296 (granting summary judgment for the employer in a wage & hour class action).

In deciding dueling summary judgment motions, the question for the court was whether, when an employee agrees to "on-duty meal periods," that employee is waiving his or her right to a meal period, or is simply agreeing to a particular type of meal period. Labor Code § 512 generally requires that employees working shifts of more than five hours be provided with a meal period, and that employees working shifts of more than ten hours be provided with a second meal period. In addition, section 512 states that an employee can "waive" his right to a meal period, subject to certain limitations - an employee can waive his first meal period if his work day does not exceed six hours, and can waive his second meal period if his work day does not exceed twelve hours and the first meal period was not waived:

An employer may not employ an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than 30 minutes, except that if the total work period per day of the employee is no more than six hours, the meal period may be waived by mutual consent of both the employer and employee. An employer may not employ an employee for a work period of more than 10 hours per day without providing the employee with a second meal period of not less than 30 minutes, except that if the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent of the employer and the employee only if the first meal period was not waived.

The applicable IWC Wage Orders provide generally that employees must be provided meal periods if they work in excess of five hours, but that they can waive meal periods so long as they do not work more than six hours. In addition, the regulations provide that the employer can satisfy its obligation to provide meal periods by providing "on duty" meal periods, if those "on duty" meal periods are consistent with the nature of the work, if the meal periods are compensated, and if the employee expressly consents to the "on duty" meal period. In this instance, Paragraph 11 of Wage Order 4 provided, in part, that

(A) No employer shall employ any person for a work period of more than five (5) hours without a meal period of not less than 30 minutes, except that when a work period of not more than six (6) hours will complete the day's work the meal period may be waived by mutual consent of the employer and the employee. Unless the employee is relieved of all duty during a 30 minute meal period, the meal period shall be considered an "on duty" meal period and count as time worked. An "on duty" meal period shall be permitted only when the nature of the work prevents an employee from being relieved of all duty and when by written agreement between the parties an on-the-job paid meal period is agreed to. The written agreement between the parties shall state that the employee may, in writing, revoke the agreement at any time. (B) If an employer fails to provide an employee a meal period in accordance with the applicable provisions of this order, the employer shall pay the employee one (1) hour of pay at the employee's regular rate of compensation for each workday that the meal period is not provided.

Relying on the wage order, Labor Code § 512 and Labor Code § 219, Plaintiff argued that California law implicitly precludes second "on duty" meal periods, and that the second "on duty" meal periods he was provided (and was paid for) were legally insufficient under the statute; an "on duty" meal period is not a meal period at all. Guardsmark asserted that the underlined language in Wage Order 4 confirms that an "on duty" meal period is in fact a specific type of meal period; a "waived" meal period is one that has been abandoned or renounced, while a security guard who agrees to take an "on duty" meal period has simply agreed that he will be paid for the time he is allowed to eat, but will also be on duty to respond to any emergencies that might arise. Such an employee has not, according to Guardsmark, abandoned or renounced his right to a meal period.

The court held that Guardsmark's position was the correct one.

There is no support in § 512 for plaintiff's interpretation of "waiver" as applying solely to "on duty" meal periods, rather than to meal periods, generally. Section 512 plainly states that a second "meal period" may be waived only if the first "meal period" has not been waived. But where the employee agrees to take an "on duty" meal period, and gets paid for working during the time he is eating, there is no "waiver" of the meal period. The court reads "waiver of the meal period" to mean that the employee gives up his right to eat during that particular five-hour shift, period. The main problem with plaintiff's argument is that he appears to be confusing the concept of totally "waiving" a meal period with the concept of agreeing to take an "on duty" meal period in lieu of an "off duty" meal period. Because the word "waiver" in the first part of § 512(a) clearly means a waiver of any meal period, it cannot mean a waiver of a particular type of meal period later in the same statute. Moreover, neither the Wage Order nor § 226.7 establish that "on duty" meal periods are waived meal periods for purposes of § 512. The definition of "on duty" meal period in Wage Order P 11 makes no reference to the term "waiver." Similarly, § 226.7(a), which provides that no employer shall require any employee to work during any meal period or rest period mandated by an applicable order of the [IWC]," does not establish that "on duty" meal periods are waived meal periods, because "on duty" meal periods are by definition consensual.

Thus, the defendant's motion was granted, and the plaintiff's motion was denied.

We missed this one in February, but the California Supreme Court denied a request for depublication of the prevailing wage opinion in Williams v. SnSands Corporation. We previously discussed the opinion in a post you can find at this link. In a nutshell, the opinion held that wages did not need to be paid at the prevailing rate for employees hauling materials to, and off-hauling materials from, a public works construction project.