Following the Epic decision by the Supreme Court, today the Ninth Circuit formally vacated Morris v. Ernst & Young, LLP in a per curiam Opinion. And I bet you were wondering if they would Resist! They did not.
This post was stuck and didn’t publish. Fixed.
I won't hit you with too much analysis of a case right before the 4th of July holiday, but in Juarez v. Wash Depot Holdings, Inc. (July 3, 2018), the Court of Appeal (Second Appellate District, Division Six), upheld a trial court order declining to enforce an arbitration agreement. The peculiarity that led to the result is pretty simple:
A company provides its employees with a handbook setting forth its employment policies. The handbook is written in English and Spanish. The handbook requires arbitration of employment disputes and denies an employee's right to bring an action under the California Private Attorneys General Act (PAGA). The English version states that the denial of the right to bring a PAGA action is severable if such denial is found by a court to be unenforceable. The Spanish version provides that the PAGA denial is not severable.
Slip op., at 1. The Court concluded that this was potentially deceitful and declined to sever the provision regarding PAGA, agreeing that the entire agreement was unenforceable.
Jack Bazerkanian of Shin Ryu Bazerkanian, LLP, and James M. Lee, Caleb H. Liang of LTL Attorneys LLP, represented the successful Plaintiff and Respondent.
Set aside, for a brief moment, the legal arguments about rounding in the context of California law (I know...it's a legal blog, but I can digress because I say so). Here's what I don't get in the class context: how does it pass the smell test to say to some employees, who lost some wages from rounding, that it's cool because their money basically went to some other employees. Using the rationale of rounding jurisprudence, I think I could make wage system that randomly takes money from half a workforce and gives it to the other half. It's neutral as applied by definition. It's random so it's "fair" on its face. What's wrong with that? And if it's not okay, why is rounding okay.
Anyhow, in AHMC Healthcare, Inc. v. Superior Court (June 25, 2018), the Court of Appeal (Second Appellate District, Division Four) held that rounding was proper in a system the Court characterized as "neutral on its face and as applied." Slip op., at 2. On undisputed facts, it was shown that slightly more employees lost time than gained time, but the gainers did slightly better in aggregate. Slip op., at 4-5.
After discussing federal decisions that approved of rounding in the aggregate, the Court said this:
Because California’s wage laws are patterned on federal statutes, in determining employee wage claims, California courts may look to federal authorities for guidance in interpreting state labor provisions.
Slip op. at 11. I don't think that's right, at least not as stated. California extensively diverges from federal wage and hour law in many areas. The California Supreme Court has issued a number of decisions rejecting application of federal law in a variety of contexts, noting in several cases that Wage Orders must basically state express incorporation of a federal standard before it will be read into a Wage Order. Notably, and I think relevant to rounding, California's definition of what constitutes compensable time differs from the federal standard. What no Court has yet attempted to explain is why rounding is not analyzed in the way other wage and hour obligations are analyzed when comparing California law to federal law. Given the undeniably employee-centric nature of California wage and hour law, I find this at least peculiar.
This issue will receive more attention before it is settled I predict.
Jeffrey P. Fuchsman and Zareh A. Jaltorossian of Ballard Rosenberg Golper & Savitt represented the successful petitioner.
Episode 18 is here, discussing how Epic (and its utter termination with extreme prejudice of the NLRA theory that class waivers impair concerted employee activity) will drive PAGA litigation. And then we turn to Huff, which makes that prospect of more PAGA litigation significantly more daunting for employers.
Maybe this podcast thing will catch on one day...
American Pipe, we had some good time. Sniff. But now you're dead to me. Pack your stuff and get out. The Unites States Supreme Court, in China Agritech, Inc. v. Resh, et al. (June 11, 2018), answered a question that, as far as I have observed, wasn't being asked with any stridency for years. That question was whether American Pipe equitable tolling applied to a subsequent class action (as opposed to individual action) when the plaintiff bringing the second action (a putative class member from the first) would have a time-barred claim absent the equitable tolling.
Top-filers, start your engines!
Our Class Re-Action podcast crossed the 5,000 unique downloads mark earlier this month! Sure, it's an arbitrary number. I could get worked up about 4,500 or 5,123, but 5,000 is nice, big round number. It's actually pretty awesome, since I had no idea when I decided to try something whether anyone would listen. All I wanted to do was present information in a different way than the wave of blogging that surged for a while back when this blog started. I was concerned that the signal to noise ratio would become an issue if everyone had a blog.
This is my roundabout way of saying thank you for listening. Oh, and our next show is scheduled to record on June 10, 2018. There should be plenty to talk about, so stay tuned...
See what I did there? Shine. Spotlight. Nevermind. Today's wage and hour class action opinion comes to us courtesy of Shine v. Williams-Sonoma, Inc. (May 29, 2018). In Shine, the Court of Appeal (Second Appellate District, Division Four) reviewed de novo whether a demurrer to a reporting time pay complaint was properly sustained on res judicata grounds. Multiple bases were argued in support of the Trial Court's Order, but the Court found that the res judicata basis was sufficient alone, and did not require analysis of the other arguments. As to res judicata, the Court said:
The Morales complaint sought recovery of unpaid wages on behalf of class members employed by Williams-Sonoma since June 24, 2009. The allegations in that case included the claims of failure to provide meal and rest periods, overtime and minimum wages, timely wages, and final paychecks to the Morales class plaintiffs.
In the present action, Mr. Shine seeks reporting-time pay for on-call shifts that were canceled in early 2013, within the period covered by the Morales settlement agreement. Because reporting-time pay is a form of wages, a claim for reporting-time pay could have been raised in the Morales action. (See Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1111–1112 [reporting-time pay, like split-shift and overtime pay, is a form of wages even though it serves a dual purpose of shaping employer behavior].) The fact that no claim for reporting-time pay was alleged in Morales does not alter our determination that the same primary right, to seek payment of wages due, was involved in both Morales and this case. (See Boeken v. Phillip Morris USA, Inc. (2010) 48 Cal.4th 788, 798–799.)
Slip op., at 7. The Court also discussed Villacres, but, compared to Villacres, the outcome seems more obvious here when the language of the prior release is considered:
Like the Augustus release, the Bonilla settlement agreement released “all claims, demands, rights, liabilities and causes of action that were or could have been asserted (whether in tort, contract or otherwise) for violation of the Fair Labor Standards Act, the California Labor Code, the California Business and Professions Code, the Private Attorneys General Act (‘PAGA’), the applicable Industrial Welfare Commission Orders or any similar state or federal law, whether for economic damages, non-economic damages, liquidated damages, punitive damages, restitution, penalties, other monies, or other relief based on any facts, transactions, events, policies, occurrences, acts, disclosures, statements, omissions or failures to act pled in the Complaint, which are or could be the basis of claims that Defendant failed to pay wages or overtime, failed to provide meal or rest breaks or compensation in lieu thereof, failed to provide timely wages and final paychecks, committed record-keeping violations, provided noncompliant wage statements, failed to reimburse for business expenses, or engaged in unfair business practices at any time on or before the date of Preliminary Approval.” (Italics added.)
Slip op., at 12 (boldface emphasis added).
Separate from all of this, I have a concern about the Villacres holding that allows any enumerated list of released items to be treated as a "general release." This seems to muddy the waters as to what constitutes a general release and what constitutes a specific release. As it stands, this seems to re-define "specific release" to mean a release with an expressly enumerated scope and a "general release" to mean any release with coverage broader than what is expressly enumerated, particularly where identified by the phrase "all claims." So you can have a "general" release of "all" wage payment claims. Perhaps we should call "general" releases "total coverage" releases and all other releases "specific" or "itemized" coverage releases.
Respondents and Defendants were successfully represented by Melanie L. Bostwick, Randall C. Smith, Jessica R. Perry, and Allison Riechert Giese of Orrick, Herrington & Sutcliffe
I haven't posted anything yet about Epiq Systems Corp. v. Lewis (what's there to say that hasn't been kicking around for years in various ways), but certainly that decision motivates a renewed focus on PAGA claims in California. And would you look at that?! Here's a new decision about PAGA. In Huff v. Securitas Security Services USA, Inc., the Court of Appeal (Sixth Appellate District) examined the following question:
This case presents the question of whether a plaintiff who brings a representative action under the Private Attorneys General Act of 2004 (PAGA; Lab. Code, § 2698, et seq.) may seek penalties not only for the Labor Code violation that affected him or her, but also for different violations that affected other employees.
Slip op., at 1. So at this point, I must admit that my assumption for about 5 seconds was that the answer would be a big "No, they may not." To my surprise, the Court held to the contrary:
As we will explain, we conclude that PAGA allows an “aggrieved employee” –– a person affected by at least one Labor Code violation committed by an employer –– to pursue penalties for all the Labor Code violations committed by that employer.
Slip op., at 1. That was unexpected.
The Court's primary analysis is well summarized by this passage:
When we interpret a statute our primary task is to ascertain the Legislature’s intent and effectuate the purpose of the law. We look first to the words of the statute itself as the most direct indicator of what the Legislature intended. (Hsu v. Abbara (1995) 9 Cal.4th 863, 871.) PAGA provides in section 2699, subdivision (a) that “any provision of this code that provides for a civil penalty to be assessed and collected by the Labor and Workforce Development Agency or any of its departments, divisions, commissions, boards, agencies, or employees, for a violation of this code, may, as an alternative, be recovered through a civil action brought by an aggrieved employee on behalf of himself or herself and other current or former employees pursuant to the procedures specified in Section 2699.3.” The statute then specifically defines “aggrieved employee” in section 2699, subdivision (c): “ ‘aggrieved employee’ means any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.”
As the trial court did, we interpret those provisions to mean that any Labor Code penalties recoverable by state authorities may be recovered in a PAGA action by a person who was employed by the alleged violator and affected by at least one of the violations alleged in the complaint. Indeed, we cannot readily derive any meaning other than that from the plain statutory language, and Securitas does not offer a reasonable alternative for what those provisions mean when read together.
Slip op., at 5-6. After this, the Court spent a lot of time rejecting arguments that it should look to the legislative history (the Court held that when a statute is clear, it is not to consider legislative history) and other arguments about absurd results. It rejected all of those arguments.
Of course, in good Apple presentation fashion, this case has a couple of items that qualify as a "one more thing" moment. One of those moments included the following:
Section 2699, subdivision (f) creates a civil penalty for any Labor Code violation for which a penalty is not provided elsewhere in the law. The penalties under section 2699, subdivision (f) are “one hundred dollars ($100) for each aggrieved employee per pay period for the initial violation and two hundred dollars ($200) for each aggrieved employee per pay period for each subsequent violation.” Securitas posits that using the definition of aggrieved employees in section 2699, subdivision (c) to calculate those penalties would allow over-counting in some cases to include weeks worked by employees affected by just one of the Labor Code violations alleged in the complaint, even if it is not the one giving rise to the penalties imposed by section 2699, subdivision (f). To the contrary, it is entirely possible to harmonize the two provisions. The method of calculation under section 2699, subdivision (f) imposes penalties based on the total number of employees that have been affected by an employer’s Labor Code violations. Though Securitas calls that “over-counting,” it is not impermissible for the Legislature to impose penalties measured in that way. Even if the method of calculation provided for by section 2699, subdivision (f) is something of a blunt instrument, it is not our role to rewrite the statute. (People v. Garcia (1999) 21 Cal.4th 1, 14.) Separation of powers principles require us to interpret the law as written, “and leave for the People and the Legislature the task of revising it as they deem wise.” (Id. at p. 15.) We also note that PAGA gives a court broad discretion to “award a lesser amount than the maximum civil penalty amount … if, based on the facts and circumstances of the particular case, to do otherwise would result in an award that is unjust, arbitrary and oppressive, or confiscatory.” (§ 2699, subd. (e)(2).) So the statute incorporates a remedy if the penalty calculation is unfair or arbitrary as applied to a particular employer.
Slip op., at 12-13. Let that sink in for a moment. If I am not imaging things, I believe that this means that for subdivision (f) penalties, the Court held that the correct method of counting up the penalties would be to count the total number of employees that qualify as "aggrieved" by any violation an multiply that number by the $100 or $200 penalty. Oh my. So, if this stands the test of time, more employers will avoid class actions with class waivers in their arbitration agreements, but if there are violations of any of the sections included in PAGA, the penalty calculation for that one year will be absolutely brutal. Big winner? The LWDA. For California employers in the long run it will likely be a slight loss. While Epiq will cut into class actions, that will be countered with larger penalty recoveries. And since the statutory period is just one year, an employer that doesn't fully correct issues will see plaintiffs returning to that well with regularity.
Respondent and Plaintiff was successfully represented by Michael Millen.
UPDATE: In response to a question about my post, I want to clarify something that is potentially unclear. When I wrote, “…if there are violations of any of the sections included in PAGA, the penalty calculation for that one year will be absolutely brutal,” I was referring to the penalty look-back period of one year prior to filing. In other words, I was not saying that a specific one year period was implicated by this decision. I was only observing that the penalties for a one-year statute of limitation could be high, compared to a four-year statute in a wage and hour class action (plus whatever time passes while a case is pending).
On May 9, 2018, a panel of the Ninth Circuit certified questions to the California Supreme Court in two different cases involving airlines. In Ward v. United Airlines, Inc., the Court asked for review of the following two questions:
(1) Wage Order 9 exempts from its wage statement requirements an employee who has entered into a collective bargaining agreement (CBA) in accordance with the Railway Labor Act (RLA). See 8 C.C.R. § 11090(1)(E). Does the RLA exemption in Wage Order 9 bar a wage statement claim brought under California Labor Code § 226 by an employee who is covered by a CBA?
(2) Does California Labor Code § 226 apply to wage statements provided by an out-of-state employer to an employee who resides in California, receives pay in California, and pays California income tax on her wages, but who does not work principally in California or any other state?
Order, at 2-3.
In Oman v. Delta Air Lines, Inc., the Court asked for review of the following three questions:
(1) Do California Labor Code §§ 204 and 226 apply to wage payments and wage statements provided by an out-of-state employer to an employee who, in the relevant pay period, works in California only episodically and for less than a day at a time?
(2) Does California minimum wage law apply to all work performed in California for an out-of-state employer by an employee who works in California only episodically and for less than a day at a time? See Cal. Labor Code §§ 1182.12, 1194; 8 C.C.R. § 11090(4).
(3) Does the Armenta/Gonzalez bar on averaging wages apply to a pay formula that generally awards credit for all hours on duty, but which, in certain situations resulting in higher pay, does not award credit for all hours on duty? See Gonzalez v. Downtown LA Motors, LP, 155 Cal. Rptr. 3d 18, 20 (Ct. App. 2013); Armenta v. Osmose, Inc., 37 Cal. Rptr. 3d 460, 468 (Ct. App. 2005)?
Order, at 2.
Of the two sets of questions, Delta certainly presents questions that are likely of broader applicability.