ZB, N.A., et al. v. Superior Court (Lawson) holds that "wages" are not recoverable as a PAGA penalty through Labor Code section 558

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So, it turns out that the answer to my question is GOAT, not goat (he says with tongue planted firmly in cheek). ZB, N.A., et al. v. Superior Court (Lawson) (September 12, 2019) was issued this morning, and, unsurprisingly I think, the Supreme Court dropped an off speed pitch over the plate and froze everybody. You could see the windup with the italics added by the Court to this passage:

Before the enactment of the PAGA, section 558 gave the Labor Commissioner authority to issue overtime violation citations for “a civil penalty as follows: [¶] (1) For any initial violation, fifty dollars ($50) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages. [¶] (2) For each subsequent violation, one hundred dollars ($100) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages.” (Id., subd. (a), italics added.)

Slip op, at 1-2. See that? It’s the tell for what’s coming:

What we conclude is that the civil penalties a plaintiff may seek under section 558 through the PAGA do not include the “amount sufficient to recover underpaid wages.” Although section 558 authorizes the Labor Commissioner to recover such an amount, this amount –– understood in context –– is not a civil penalty that a private citizen has authority to collect through the PAGA. ZB’s motion concerned solely that impermissible request for relief. Because the amount for unpaid wages is not recoverable under the PAGA, and section 558 does not otherwise permit a private right of action, the trial court should have denied the motion. We affirm the Court of Appeal’s decision on that ground. On remand, the trial court may consider striking the unpaid wages allegations from Lawson’s complaint, permitting her to amend the complaint, and other measures.

Slip op., at 2-3. So that’s it then.

There is, of course, a bit more, given that the Opinion is 30 pages long, but after the procedural history, the balance of the discussion is a detailed example of statutory construction. For instance, the Court finds that the wages referred to in Section 558 must be treated as a compensatory wage, else the provision would be internally inconsistent with Section 1197.1. Read it, if for no other reason than to see the thoroughness with which a sentence can be parsed, and persuasively I might add.

The Court was unanimous in its decision.

It isn’t entirely clear who you would call the “winner” here, given the disconnect between affirming the Court of Appeal and the practical result, but James L. Morris, Brian C. Sinclair and Gerard M. Mooney, of Rutan & Tucker, represented the Petitioners, who no longer have to deal with the potential for an award of unpaid wages as part of Section 558 penalties under PAGA.

ZB, N.A., et al. v. Superior Court (Lawson) will issue tomorrow

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Another question that had divided courts will be decided tomorrow, when the California Supreme Court releases ZB, N.A., et al. v. Superior Court (Lawson). The question under review is whether a representative action under the Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) seeking recovery of individualized lost wages as civil penalties under Labor Code section 558 falls within the preemptive scope of the Federal Arbitration Act. That’s the stated issue. After the supplemental issue briefing, however, I’m putting my chips on the long-shot square and betting that everyone has been wrong. My Karnak the Magnificent prediction is that the Court will say that the “wages” mentioned in Section 558 cannot be recovered under PAGA because PAGA authorizes the recovery of “penalties” where a penalty amount is stated (or a catch-all penalty where no amount is specified) but not every type of relief otherwise available to the Labor Commissioner. Remember that Section 558 also includes true penalties of $50/$100 for initial and subsequent violations. There’s my guess. GOAT or goat, we’ll see tomorrow.

Episode 23 of the Class Re-Action Podcast, discussing L'Chaim House, Inc. v. DLSE, is now available

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Still on a show bender, we are back with Episode 23 of the Class Re-Action Podcast. We discuss the unicorn known as the “on-duty meal period” by chatting about L'Chaim House, Inc. v. Div. of Labor Standards Enforcement (July 31, 2019).

People keep telling me they prefer shorter shows more often, so we are sticking with it for a while. And, as always, guests are welcome if you want to talk about something recent that interests you.

Tech Tip: Updating Dell computers to Windows 10 version 1903 (the May 2019 update)

I absorb the pain so you don’t have to. If you have a fairly new Dell computer from the Dell Business line of offerings (as opposed to the Home machines), and run into a blocking bug that prevents you from updating from Windows 10 version 1809 to Windows 10 version 1903, here’s a possible solution.

If the update fails immediately with an error that preinstall.cmd scripts could not run, it is likely that the Dell Data Security software is blocking the update. But…you will likely not be able to uninstall all of that software. Some of the elements have very deep hooks into the system, and using the uninstall programs settings page will not work. In addition, there are installed components that do not register as standalone programs, so you can’t remove them with a simple uninstall option.

The solution is that Dell makes a tool to remove all of these components, but you have to call Dell and get to the team that handles the Data Security software. They will make sure that you are not using the encryption and data security tools (NOTE: if you remove the Dell Data Security and Encryption software, you can’t access encrypted data, but unless you are in an enterprise that is managing a lot of Dell machines, odds are that you are NOT using any of those tools — this issue appears to happen only if you have ordered a Dell machine from the Business line, where data security is a selling point, rather than the Home line). The tool Dell provides quickly removes the offending data security tools, and the Windows update seems to work without a hitch thereafter.

If this has been driving you nuts, I hope it helps. I separately note that there are a lot of blocking issues that could stymie a Feature Update, like driver compatibility, etc. This is only for update failures that never start because the preinstall.cmd scripts cannot run.

Episode 22 of the Class Re-Action podcast, discussing Voris v. Lampert, is now available

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This is almost looking like a trend. We are back with Episode 22 of the Class Re-Action Podcast. We discuss Voris v. Lampert (August 15, 2019), but I don’t know if we will convert anyone with our analysis. Ahhhh?!?!

NOTE: Correcting a comment I made on the podcast about Lawson, somehow I got it stuck in my head that opinions are due 60 days after submission. It’s 90 days, and I’m either becoming senile or too much junk is taking up valuable storage space in my head.

Episode 21 of the Class Re-Action podcast, discussing Noel v. Thrifty Payless, is now available

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Back so soon?!?! Yes we are, with Episode 21 of the Class Re-Action podcast. We discuss Noel v. Thrifty Payless (July 29, 2019), an objective show topic that is easy to ascertain. See what I did there?

In Voris v. Lampert, the California Supreme Court finally provides the definitive answer to the question of whether wages can be recovered via a conversion tort claim

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I recall that in the early 2000’s it was common to see a conversion claim for relief included in a wage & hour complaint, on the theory that the wages owed and unpaid were property of the employee. When this was challenged by demurrer, I observed that the demurrer was successful well over half the time, but there wasn’t a definitive appellate ruling on point. The demurrers that worked would usually focus on the argument that a conversion tort for money had to specifically identify the precise amount in question (essentially, identify the specific cash in question).

Today, in Boris v. Lampert (August 15, 2019) the California Supreme Court answers a question I long ago quit wondering about: whether a conversion claim is cognizable for unpaid wages. In a split 5-2 decision, the Supreme Court said it was not.

The conversion of specific sums of money guided the majority’s analysis:

The employee’s claim is not that the employer has wrongfully exercised dominion over a specifically identifiable pot of money that already belongs to the employee—in other words, the sort of wrong that conversion is designed to remedy. Rather, the employee’s claim is that the employer failed to reach into its own funds to satisfy its debt. Indeed, in some cases of wage nonpayment, the monies out of which employees would be paid may never have existed in the first place. Take, for example,a failed start-up that generates no income and thus finds itself unable to pay its employees. Because the business accounts are empty, there would not be any identifiable monies for the employer to convert. No one would dispute that the start-up is indebted to its employees. But only in the realm of fiction could a court conclude that the business, by failing to earn the money needed to pay wages, has somehow converted that nonexistent money to its own use.

Slip op., at 15. The majority expressed some concern about the consequences of layering tort liability over what has traditionally been a species of contract recovery:

But a conversion claim is an awfully blunt tool for deterring intentional misconduct of this variety.As noted,conversion is a strict liability tort. It does not require bad faith, knowledge, or even negligence; it requires only that the defendant have intentionally done the act depriving the plaintiff of his or her rightful possession. (Moore, supra, 51 Cal.3d at p. 144, fn. 38; Poggi, supra, 167 Cal. at p.375.) For that reason, conversion liability for unpaid wages would not only reach those who act in bad faith, but also those who make good-faith mistakes—for example, an employer who fails to pay the correct amount in wages because of a glitch in the payroll system or a clerical error. We see no sufficient justification for layering tort liability on top of the extensive existing remedies demanding that this sort of error promptly be fixed.

Slip op., at 25.

I won’t go into great detail on the dissent, but it is pointed, and is well-encapsulated by this passage, which rejects the notion that wage payment recovery is best handled under contract theories:

In California, unpaid wages are not merely contractual obligations to pay a sum. This is because, as we long ago observed, “wages are not ordinary debts.” (In re Trombley (1948) 31 Cal.2d 801, 809, italics added.)

Slip op., Dissent of Cuellar, at 3. This comment is also interesting: “For some time, plaintiffs in wage cases have routinely included a claim for conversion.” Slip op., Dissent of Cuellar, at 7. It is a somewhat feisty dissent. I like it for the conviction. In closing, the dissent observes that it seems illusory to treat theft of stocks as a conversion but deny similar treatment to wages owed.

I’m not 100% settled on where I come down on these competing arguments, but, for purposes of California law, the majority defines where things stand.

Another Court of Appeal holds that PAGA claims cannot be split and sent partially to arbitration

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Right now, Lawson v. ZB, N.A., review granted Mar. 21, 2018, S246711, is making its way through the California Supreme Court. The case asks whether a representative action under the Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) (‘PAGA”) seeking recovery of individualized lost wages as civil penalties under Labor Code § 558 fall within the preemptive scope of the Federal Arbitration Act (9 U.S.C. § 1 et seq.). Lawson was argued on June 5, 2019. Supplemental briefing was requested and received, and the matter was deemed submitted on June 27, 2019. That means a decision is imminent.

Today, in Mejia v. Merchants Building Maintenance, LLC (August 13, 2019), the Court of Appeal (Fourth Appellate District, Division One) another Court of Appeal came down on the side of the Courts of Appeal that have concluded that PAGA claims cannot be split so as to direct a portion to arbitration:

We agree with the conclusion of the Lawson and Zakaryan courts on this question, and conclude that a single PAGA claim seeking to recover section 558 civil penalties may not be "split" between that portion of the claim seeking an "amount sufficient to recover underpaid wages" and that portion of the claim seeking the $50 or $100 per-violation, per-pay-period assessment imposed for each wage violation. The result is that an employee bringing a PAGA claim to recover the civil penalties identified in section 558 may not be compelled to arbitrate that portion of her PAGA claim that seeks an amount sufficient to recover underpaid wages pursuant to that statute, while the rest of the claim that seeks the $50 or $100 per-pay-period per violation portion of the penalty remains in a judicial forum. We therefore affirm the trial court's order denying the MDM defendants' motion to compel arbitration in this case

Slip op., at 6.

As for reading tea leaves, the Lawson matter (perhaps to be known as the ZB matter due to a change in the name of the case), as noted above, requested supplemental briefing on this question:

If this court concludes Labor Code section 558's "amount sufficient to recover underpaid wages" is not a "civil penalty" recoverable under the Private Attorneys General Act (Lab. Code, § 2698 et seq.), should the trial court be ordered to deny ZB's motion to compel arbitration?

Lawson docket. That question suggests that at least someone on the Supreme Court is thinking about whether an aggrieved employee can recover unpaid wages at all through Labor Code § 558. There’s a curve for you.

Interesting meal and rest break questions certified by Ninth Circuit to the California Supreme Court

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This is interesting. On August 1, 2019, the Ninth Circuit certified a pair of questions to the California Supreme Court in Cole v. CRST Van Expedited, Inc. (No. 17-55606) (9th Cir. Aug. 1, 2019). Before we get ahead of ourselves, the California Supreme Court still needs to agree to take up the certified questions. They do so at an exceedingly high rate, but it isn’t a done deal…yet. So, what about those questions? The questions posed are as follows:

1.Does the absence of a formal policy regarding meal and rest breaks violate California law?

2.Does an employer’s failure to keep records for meal and rest breaks taken by its employees create a rebuttable presumption that the meal and rest breaks were not provided?

Slip op., at 4. The case arises in the context of the operation of truck drivers working for a shipping company. The discussion of the reason for the certification clarifies where the Ninth Circuit seeks guidance:

The California Supreme Court did not directly address in Brinker whether the absence of a policy providing for meal and rest breaks constitutes a violation of California labor law. However, in Duran v. U.S. Bank Nat’l Ass’n, 325 P.3d 916,933 n.28 (Cal. 2014), the California Supreme Court observed that “[i]n regard to other wage and hour claims, some courts have held that the absence of a uniform policy supports [class] certification if such a policy is required by law. We express no opinion on this question.” (emphasis in the original).

Slip op., at 11. After noting Benton and Bradley, the Court also observed the concurring comment in Brinker:

In Brinker, Justice Werdegar noted that “[i]f an employer’s records show no meal period for a given shift over five hours, a rebuttable presumption arises that the employee was not relieved of duty and no meal period was provided.” 273 P.3d at 545 (Werdegar, J., concurring).

Slip op. at 12.

If the California Supreme Court takes up the questions, I will be happy to handle action on the outcome for a 5% vig. Kidding. 10%. Still kidding.

The Class Re-Action Podcast is finally back, with Episode 20

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We finally got around to getting Episode 20 of the Class Re-Action Podcast out. Fly! Be free! We are tweaking the format a bit to see if it helps with publication frequency. First, shows will be shorter - in the 20-30 minute range. Second, “special guests” will be, well, special. We aren’t going to hold off on publishing a show because invited guests are too busy to record. We promise to try to publish consistently, rain or shine. Mostly shine, we hope.