The Class Re-Action podcast is back in business with new Episode 16, how available anywhere digital technology is! We discuss Alvarado v. Dart Container with attorneys who argued the case before the California Supreme Court. Listen loud! Listen often!
The California Supreme Court has agreed to weigh in on the issue of whether time spent on security searches is compensable. Here is the Court's description of the issue:
Frlekin v. Apple, Inc., S243805. (9th Cir. No. 15-17382; ___ F.3d ___, 2017 WL 3723235; Northern District of California; Nos. C 13-03451 WHA, No. C 13-03775 WHA, C 13-04727 WHA.) Request under California Rules of Court rule 8.548, that this court decide a question of California law presented in a matter pending in the United States Court of Appeals for the Ninth Circuit. The question presented is: “Is time spent on the employer’s premises waiting for, and undergoing, required exit searches of packages or bags voluntarily brought to work purely for personal convenience by employees compensable as ‘hours worked’ within the meaning of California Industrial Welfare Commission Wage Order No. 7?”
Justice Chin was recused and did not participate in the decision. Between this and other issues currently before the California Supreme Court, we will see more changes in wage and hour litigation in the next few years.
Briefing on the merits is complete in Troester v. Starbucks Corporation (S234969). The California Supreme Court granted the Ninth Circuit's request to decide an issue of California law. The issue, taken from the California Supreme Court's Case Summary page is:
Request under California Rules of Court, rule 8.548, that this court decide a question of California law presented in a matter pending in the United States Court of Appeals for the Ninth Circuit. The question presented is: Does the federal Fair Labor Standard Act's de minimis doctrine, as stated in Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 692 (1946) and Lindow v. United States, 738 F.2d 1057, 1063 (9th Cir. 1984), apply to claims for unpaid wages under California Labor Code sections 510, 1194, and 1197?
If you are interested, I've made the Briefs available here. A new sidebar link will also get you there.
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.
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!
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.
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.
In Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), the Ninth Circuit Rule 23 predominance was defeated where many (or even most) class members “were never exposed to the allegedly misleading advertisements” (666 F.3d at 597) because the defendant subjected only a small segment of an expansive class of car buyers to misleading material as part of a “very limited” advertising campaign (id. at 595). This decision raised questions about how federal courts in the Ninth Circuit would actually evaluate UCL claims when faced with reconciling In re Tobacco II and Mazza. In Ruiz Torres v. Mercer Canyons Inc. (9th Cir. Aug. 31, 2016), a wage & hour suit in which the District Court certified a class, the Ninth Circuit analyzed Mazza in a manner demonstrating that it may be constrained in its application moving forward.Read More
The Ninth Circuit tackles a complicated set of arbitration issues in Mohamed v. Uber Technologies, Inc. (9th Cir. Sept. 7, 2016). Among other things, the panel held that the District Court erred when it decided the question of arbitrability, since the question of arbitrability was delegated under the agreement to an arbitrator. But the panel agreed that the defendants could not compel arbitration of the PAGA claim asserted in the case, severing that claim for further proceedings in before the trial court. Finally, the panel agreed that a separate defendant not party to the arbitration agreement could not assert a right to enforce the agreement as an agent of Uber.
Agencies love their power. They grow like a cancer, absorbing more and more of it from the body politic. But every now and then a court reminds an agency that its power is limited by the terms of its statutory authority. For instance, in Gerard v. Orange Coast Memorial Medical Center (Feb. 10, 2015), the Court of Appeal (Fourth Appellate District, Division Three) did just that with regard to a provision of an IWC Wage Order.
Health care workers sued their hospital employer in a putative class and private attorney general enforcement action for alleged Labor Code violations and related claims. Plaintiffs alleged, among other things, that the hospital illegally let health care employees waive their second meal periods on shifts longer than 12 hours. Under the Labor Code, employers are required to provide two meal periods for shifts longer than 12 hours. But an order of the Industrial Welfare Commission (IWC) authorizes employees in the health care industry to waive one of those two required meal periods on shifts longer than 8 hours. The trial court, finding the IWC Wage Order valid, and granted summary judgment and denied class certification on that basis.
The Court examined Labor Code section 512 and Wage Order 5 to determine whether the Wage Order exemption was authorized. The Court first observed that section 512 says: “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.” (Italics added.) And section 516 says: “Except as provided in Section 512, the [IWC] may adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in California consistent with the health and welfare of those workers.” (Italics added.)
Next, the Court noted that the authority of an administrative agency is limited by enabling legislation, holding that the IWC is constrained where the Labor Code expressly sets forth requirements:
“The IWC has long been understood to have the power to adopt requirements beyond those codified in statute. [Citations.] Section 516 creates an exception; it bars the use of this power to diminish section 512’s protections. . . . While the Legislature in section 516 generally preserved the IWC’s authority to regulate break periods, it intended to prohibit the IWC from amending its wage orders in ways that ‘conflict[ ] with [the] 30-minute meal period requirements’ in section 512. [Citations.]” (Brinker, supra, 53 Cal.4th at pp. 1042-1043.)
Slip op., at 8. In its discussion, the Court cited frequently to Bearden v. U.S. Borax, Inc., 138 Cal. App. 4th 429 (2006), which held that another provision of a Wage Order issued by the IWC was invalid as an act inconsistent with statutory provisions.
The Court then directed the trial court to determine the retroactive application of portions of the Court’s holding, since the issue of invalidity was not evaluated by the trial court, holding that “with the exception of plaintiffs’ premium wage claims based on section 226.7, the retroactive application of our decision must be litigated on remand.” The Court concluded that “there is no compelling reason of fairness or public policy that warrants an exception to the general rule of retroactivity for our decision partially invalidating section 11(D).” Slip op., at 17.
The Court then turned to the grant of summary judgment in the matter. The discussion detoured into evidentiary disputes. The defendant objected to the introduction of time cards attached to counsel’s declaration, saying that they were merely purported to be authentic. The Court disagreed:
Evidence Code section 1414 provides: “A writing may be authenticated by evidence that: [¶] (a) The party against whom it is offered has at any time admitted its authenticity; or [¶] (b) The writing has been acted upon as authentic by the party against whom it is offered.” The Coats declaration satisfies both subdivisions.
Further, while Claudio v. Regents of University of California (2005) 134 Cal.App.4th 224, 244 did say the declaration of the plaintiff’s attorney was not proper authentication for the disputed letter, the critical problem was that, “Plaintiff’s [own] declaration did not mention the letter.” The same is not true in this case.
Here, Gerard’s own declaration (an exhibit to the Coats declaration) states: “Attached as Exhibit B are true and correct copies of a portion of my time records from August of 2004 through March of 2008, which were produced by Defendant in this litigation. Also attached as Exhibit B are true and correct copies [of] a portion of my wage records from August of 2004 through March of 2008, which were produced by Defendant in this litigation.” A comparison of the bates numbers in Exhibit B reveals they are the same as the relevant documents in Exhibits 7 and 8.
Slip op., at 18. The Court concluded its analysis of the summary judgment motion by finding that triable issues of fact were shown by the plaintiffs.
Finally, the Court held that the trial court abused its discretion when it denied class certification, relying on incorrect criteria:
McElroy and Carl argue the court improperly denied class certification for several reasons. Among other things they cite as an abuse of discretion the court’s community interest analysis based on its erroneous “legal assumption that ‘liability is not established by an illegal policy.’” Plaintiffs contend that assumption is contrary to the holding of Brinker, supra, 53 Cal.4th at page 1033, and Faulkinbury v. Boyd & Associates, Inc. (2013) 216 Cal.App.4th 220, 232. We conclude this argument has merit.
Slip op., at 20. The Court remanded the matter for further consideration of the other aspects of certification that were not fully considered by the trial court.