A rest break says what? Vaquero v. Stoneledge Furniture LLC holds that commission-only pay employees must be paid separately for rest periods.

California is the wage and hour gift that keeps on giving.  And if you thought every wage and hour question must have been answered by now....well....the naivete is charming.  A few weeks ago, in Vaquero v. Stoneledge Furniture LLC (February 28, 2017), the Court of Appeal (Second Appellate District, Division Seven) tackled two new questions related to rest breaks:

Are employees paid on commission entitled to separate compensation for rest periods mandated by state law? If so, do employers who keep track of hours worked, including rest periods, violate this requirement by paying employees a guaranteed minimum hourly rate as an advance on commissions earned in later pay periods? 

Slip op., at 2.  And how do you think the Court answered these questions?  Everyone should pass this test; it's still California we're talking about.  The Court said yes to both questions.

The facts are important to the outcome, since this result would not apply to every commission plan.  The defendant had two different plans in operation during the class period. The first was described as follows:

After a training period during which new employees received $12.01 per hour, Stoneledge paid sales associates on a commission basis. If a sales associate failed to earn “Minimum Pay” of at least $12.01 per hour in commissions in any pay period, Stoneledge paid the 3 associate a “draw” against “future Advanced Commissions.” The commission agreement explained: “The amount of the draw will be deducted from future Advanced Commissions, but an employee will always receive at least $12.01 per hour for every hour worked.”

Slip op., at 2-3.  Later, the plan was changed:

Effective March 30, 2014, Stoneledge implemented a new commission agreement that pays sales associates a base hourly wage of $10 “for all hours worked.” In addition, sales associates can earn various types of incentive payments based on a percentage of sales. Under the new agreement, no portion of a sales associate’s base pay is deducted from or credited against incentive payments.

Slip op., at 4.  The Court began its analysis by exhaustively setting forth the rest break requirement, the nature of Wage Orders, and the policies underlying California wage and hour laws, beginning with a citation to Augustus.  Next, the Court examined whether Wage Order 7 requires separate compensation for rest breaks:

The plain language of Wage Order No. 7 requires employers to count “rest period time” as “hours worked for which there shall be no deduction from wages.” (Cal. Code Regs. tit. 8, § 11070, subd. 12(A), italics added.) In Bluford v. Safeway Stores, Inc. (2013) 216 Cal.App.4th 864 the court interpreted this 12 language to require employers to “separately compensate[ ]” employees for rest periods where the employer uses an “activity based compensation system” that does not directly compensate for rest periods. (Id. at p. 872.)

Slip op., at 11-12.  After a thorough examination, the Court agreed that the approach in Bluford was correct:

We agree with Bluford that Wage Order No. 7 requires employers to separately compensate employees for rest periods if an employer’s compensation plan does not already include a minimum hourly wage for such time. (See Gonzales, supra, 215 Cal.App.4th at pp. 48-49 [concluding that the identical language in Wage Order No. 4 requires employers to separately pay piecerate workers for nonproductive time].) All of the federal courts that have considered this issue of California law have reached a similar conclusion and have held employers must separately compensate employees paid by the piece for nonproductive work hours.

Slip op., at 14.  The Court then concluded that the same result applies to commission-pay employees:

The plain language of Wage Order No. 7 covers employees paid by commission. (See Cal. Code Regs. tit. 8, § 11070, subd. 1 [applying to “all persons employed in the mercantile industry whether paid on a time, piece rate, commission, or other basis”]; id. at § 11070, subd. 2(O) [“wages” includes “amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation”].) Where, as here, the language of a wage order is unambiguous, it is dispositive. (Brinker, supra, 53 Cal.4th at p. 1028; see also Gonzales, supra, 215 Cal.App.4th at p. 49 [the wage order “does not allow any variance in its application based on the manner of compensation”].)

Slip op., at 15.  The Court explained that commission pay systems and piece rate systems were essentially identical in their treatment of rest breaks:

The commission agreement used by Stoneledge during the class period is analytically indistinguishable from a piece-rate system in that neither allows employees to earn wages during rest periods. Indeed, the purpose of a rest period is to rest, not to work.

Slip op., at 16.  After reaching its conclusion, the Court then spent the balance of its discussion disposing of various arguments by the defendant.  In one example, the Court rejected that a guaranteed base drawn against future commissions did not pay for rest periods:

For sales associates whose commissions did not exceed the minimum rate in a given week, the company clawed back (by deducting from future paychecks) wages advanced to compensate 23 employees for hours worked, including rest periods. The advances or draws against future commissions were not compensation for rest periods because they were not compensation at all. At best they were interest-free loans. Stoneledge cites no authority for the proposition that a loan for time spent resting is compensation for a rest period. To the contrary, taking back money paid to the employee effectively reduces either rest period compensation or the contractual commission rate, both of which violate California law. (See § 221 [prohibiting employers from collecting or receiving from an employee “any part of wages theretofore paid by said employer”]; § 222 [prohibiting employers from withholding any part of a wage agreed upon]; § 223 [prohibiting employers from “secretly pay[ing] a lower wage while purporting to pay the wage designated by statute or by contract”]; cf. Armenta, supra, 135 Cal.App.4th at p. 323 [averaging wages across pay periods to satisfy minimum wage requirements “effectively reduces [employees’] contractual hourly rate”].)

Slip op., at 22-23.  The Court then went through mathematical examples to show that the system in place earlier in the class period did compensate employees differently depending upon whether they took rest breaks or not.  If you are paid exclusively on commission, expect to see your compensation system get a tweak in the near future.

E-DISCOVERY: State-by-state resources to set you in the right direction

Quite some time ago, I covered a few e-discovery resources on this blog.  You can find that old post here.

I'm adding another to that list (additions being long overdue).  This list has an interesting collection of state-by-state links.  It might set you in the right direction if you have to deal with e-discovery in a state in which you don't normally practice:

Electronic Discovery Law Throughout the United States

In Mohamed v. Uber Technologies, Inc., the Ninth Circuit adds to the list of decisions severing PAGA claims from claims sent to arbitration

Mohamed v. Uber Technologies, Inc. (9th Cir. Dec. 21, 2016) isn't the first decision to hold, in the face of a motion to compel arbitration in a wage and hour suit, that (1) PAGA claims should be severed from the rest of the claims and proceed in Court, and (2) the arbitrability of all other claims was for an arbitrator to determine.  The Court said:

In Iskanian v. CLS Transp. L.A., LLC, 327 P.3d 129 (Cal. 2014), the California Supreme Court held that where “an employment agreement compels the waiver of representative claims under the PAGA, it is contrary to public policy and unenforceable as a matter of state law.” Id. at 149. We have held that the Federal Arbitration Act does not preempt this rule. Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 427 (9th Cir. 2015). 

Slip op., at 21.

California Supreme Court rejects "on duty" or "on call" rest breaks in Augustus v. ABM Security Services, Inc.

The California Supreme Court dropped a pretty big opinion in the wage and hour world today, reversing the Court of Appeal in Augustus v. ABM Security Services, Inc. (Dec. 22, 2016).  The Supreme Court specifically waded into the topic of rest breaks, and, specifically, whether an "on call" or "on duty" rest break is ever sufficient.  Here's the summary:

We granted review to address two related issues: whether employers are required to permit their employees to take off-duty rest periods under Labor Code section 226.7 and Industrial Welfare Commission (IWC) wage order No. 4-2001 (Cal. Code Regs., tit. 8, § 11040 (Wage Order 4)), and whether employers may require their employees to remain "on call" during rest periods. What we conclude is that state law prohibits on-duty and on-call rest periods. During required rest periods, employers must relieve their employees of all duties and relinquish any control over how employees spend their break time. (See Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1038-1039 (Brinker).)

Slip op., at 1.  While this decision won't directly impact most wage and hour cases, given that it is fairly specific to the sort of job circumstances encountered by employees like security guards, it will put a little bit of weight on the scale when rest break claims are up for settlement or certification.

If I can, I will write more about this decision later, but, for now, the first paragraph pretty much summarizes the result.

Roxborough, Pomerance, Nye & Adreani, Drew E. Pomerance, Michael B Adreani, Marina N. Vitek; The Ehrlich Law Firm, Jeffrey Isaac Ehrlich; Initiative Legal Group, Monica Balderrama, G. Arthur Meneses; Scott Cole & Associates, Scott Edward Cole, Matthew R. Bainer; Law Offices of Alvin L Pittman and Alvin L. Pittman were listed as counsel for Plaintiffs and Respondents.  Mr. Pomerance argued for Plaintiff.  Well done, Drew!

The California Rules of Court require revision or clarification regarding Motions for Preliminary/Final Approval of class action settlements

The California Rules of Court are just bursting with procedural rules designed to operate in conjunction with the Code of Civil Procedure.  However, while much effort clearly went into ensuring that the Rules work with each other in a smooth fashion, every now and then the Rules conflict with each other.  One area where I find this to be so arises in the context of motion page length when filing motions for preliminary (or final) approval of class action settlements. 

As most civil litigation practitioners in California would know off of the of their head, California Rules of Court, rule 3.1113(d) specifies that motions other than summary judgment or summary adjudication motions can be no longer than 15 pages, with 20 pages permitted for the summary adjudication and judgment motions.  There are no other listed exceptions in that rule. But California Rules of Court, rule 3.764(c) specifies that any motion seeking certification (or decertification) of a class action can be up to 20 pages in length.  Rule 7.764 then says that the remaining provisions of rule 3.1113 apply, apparently meaning that the page limit is intended as an exception to 3.1113.  The confusion arises in what is expected by Court ruling on motions for preliminary (or final) approval of class action settlements.  Those motions are required to discuss the key settlement terms, the settlement process, why the settlement if fair and adequate, and (and here's the rub), why certification of a settlement class is appropriate.  Now, that certification discussion is certainly more streamlined than on contested motion, but Courts still expect at least some discussion of certification requisites.  So, which page limit applies?  Is it 15 pages, or 20 pages, given that motions for preliminary (or final) approval of class action settlements discuss certification of a settlement class?

Court of Appeal examines "economic injury" and "causation" under the UCL in Veera v. Banana Republic, LLC

Very briefly, I direct your attention to Veera v. Banana Repulic, LLC (December 15, 2016), decided by the California Court of Appeal (Second Appellate District, Division Four).  In Veera, the Court examined the evidence necessary to create a triable issue of fact as to whether an advertisement of a sale resulted in an actionable economic injury caused by an unfair business practice.

The plaintiffs alleged that signs in Banana Republic store windows advertising a 40 percent off sale were false or misleading because they did not state that the discount applied only to certain items. The plaintiffs introduced evidence indicating that, in reliance on the allegedly false advertising, they were induced to shop at certain Banana Republic stores and selected various items for purchase at the advertised discount. However, as the items were being rung up at the cash register, they were told for the first time that the advertised discount did not apply to their chosen merchandise. The plaintiffs claimed that, after waiting in line to purchase the selected items, and due to frustration and embarrassment, they just bought some of the items they chose even though the discount did not apply.  Applying Kwikset, the Court of Appeal concluded that this evidence was sufficient to create a triable issue and defeat summary judgment.

One Justice dissented in the result. The dissent raises the interesting question of whether lost opportunity costs and time are sufficient to create injury under the UCL and/or the FAL.

Appellants were represented by Jones, Bell, Abbott, Fleming & Fitzgerald, William M. Turner, Asha Dhillon; Grignon Law Firm, Anne M. Grignon and Margaret M. Grignon.

Lubin v. The Wackenhut Corporation tackles Wal-mart Stores, Inc. v. Dukes, Brinker, and decertification

This opinion is like Christmas and Hanukkah, sitting in an Easter Basket filled with Valentine's Day treats.  And I overlooked it for two weeks!  In Lubin v. The Wackenhut Corporation, the Court of Appeal (Second Appellate District, Division Four) gets deep into the wage and hour weeds in 50-page opinion that is overflowing with interesting bits.  Here's the summary of how the matter ended up before the Court of Appeal:

Appellants Nivida Lubin, Sylvia M. Maresca, and Kevin Denton (together plaintiffs) filed this action on behalf of themselves and similarly situated persons, alleging defendant and respondent The Wackenhut Corporation (Wackenhut) violated California labor laws by failing to provide employees with off-duty meal and rest breaks and by providing inadequate wage statements. The trial court initially granted plaintiffs’ motion for class certification. However, as the case approached trial, the United States Supreme Court reversed a grant of class certification in Wal-Mart Stores, Inc. v. Dukes (2011) 564 U.S. 338 (Wal-Mart). Relying on Wal-Mart, Wackenhut moved for decertification. The trial court granted the motion. 

Slip op., at 2.

I don't have time to try and summarize this monster opinion at the moment, but it is a must read.  The Court spends a lot of time explaining why Wal-Mart is not applicable to wage and hour certification questions, notes that the Supreme Court, which decided Wal-Mart, held this year in Tyson Foods, Inc. v. Bouaphakeo, ___ U.S. ___, ___, 136 S.Ct. 1036, 1048 (2016) that statistical evidence is appropriately used in class actions, spends a substantial amount of time applying Brinker and the cases that followed to explain that variations in rates of missed meal and rest breaks, when certified based on an unlawful policy or procedure, is a damages issue, not a predominance question, and lots, lots, more!

Weinberg, Roger & Rosenfeld, Emily P. Rich, Theodore Franklin, Manuel A. Boigues; Posner & Rosen, Howard Z. Rosen, Jason C. Marsili, Brianna M. Primozic; James R. Hawkings, James R. Hawkings, and Gregory E. Mauro, represented the successful Plaintiffs and Appellants on appeal.

Morris v. Ernst & Young, LLP update

For those of you who recognized that the Ninth Circuit got it 100% right when it found in Morris v. Ernst & Young, LLP (9th Cir. Aug. 22, 2016) that an arbitration agreement that precludes collective actions violates rights protected by the NLRA, you may wish to know where things stand with that case on further appeal.  Right now, Morris is before the U.S. Supreme Court on a Petition for Writ of Certiorari.  Here is the Docket report:

• Sep 8 2016:  Petition for a writ of certiorari filed. (Response due October 11, 2016)
• Sep 21 2016:  Consent to the filing of amicus curiae briefs, in support of either party or of neither party, received from counsel for petitioners.
• Sep 29 2016:  Consent to the filing of amicus curiae briefs, in support of either party or of neither party, received from counsel for respondents
• Oct 3 2016: Brief amici curiae of National Association of Manufacturers, et al. filed. VIDED.
• Oct 3 2016: Brief amicus curiae of Chamber of Commerce of the United States filed.
• Oct 6 2016: Order extending time to file response to petition to and including November 14, 2016.
• Oct 7 2016: Brief amicus curiae of International Association of Defense Counsel filed.
• Oct 10 2016: Brief amicus curiae of Atlantic Legal Foundation filed.
• Oct 11 2016: Brief amicus curiae of The Employers Group filed.
• Oct 11 2016: Brief amicus curiae of The Retail Litigation Center, Inc. filed.
• Oct 11 2016: Brief amicus curiae of The Business Roundtable filed.
• Oct 11 2016: Brief amicus curiae of New England Legal Foundation filed.
• Nov 15 2016: Order further extending time to file response to petition to and including November 21, 2016.
• Nov 21 2016: Brief of respondents Stephen Morris, et al. in opposition filed.

Just look at those busy amicus filers.  I bet all those employers are telling the Supreme Court that the world would end in fire and death if they couldn't block class actions for wage and hour violations with arbitration agreements that employees have to sign to work.

Trump.

Hmmmm.  That was unexpected.

Court of Appeal holds that monetary value of accrued vacation need not appear on wage statements until payment is due

In Soto v. Motel 6 Operating, L.P. (Oct. 20, 2016), the Court of Appeal (Fourth Appellate District, Division One) held in a PAGA action that Labor Code § 226(a) "does not require employers to include the monetary value of accrued paid vacation time in employee wage statements unless and until a payment is due at the termination of the employment relationship." Slip op., at 2.  The Court easily concluded that the disclosure of such information on wage statements on a regular basis was not required by the current law.  Nothing to see here, folks. Move along.

Spencer C. Skeen, Jennifer L. Santa Maria, and Sarah A. Williams of Ogletree, Deakins, Nash, Smoak & Stewart represented Motel 6 Operating, L.P.