Majority of California Supreme Court Justices conclude that the California Pay Scale Manual issued by CalHR controls over Wage Orders for public employees

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Some wage and hour decisions have broad implications. Others, no so much. Here, in Stoetzl v. Department of Human Resources (July 1, 2019), the California Supreme Court issued a decision that falls decidedly into the later category. Stoetzl concerns a trial on the issue of unpaid wages for what the Court calls “entry-exit walk time” and “duty-integrated walk time.” Sounds like we are about to get a decision about a California equivalent to preliminary and post-liminary time, right? Not so much. Stoetzl is really about whether the relevant Wage Order (Wage Order 4) or the California Pay Scale Manual issued by CalHR (read about CalHR here) controls pay obligations for “entry-exit walk time” and “duty-integrated walk time” for represented and unrepresented state employees working in prisons.

Don’t get the wrong idea. Stoetzl might impact lots of employees; California has a metric <BLEEP> ton of employees. But that’s really the only group impacted by this decision, since the tension arises as a result of the conflict between the Pay Scale Manual’s express adoption of FLSA provisions and the Wage Order’s use of California’s differing and more protective standards. On top of all that, the represented state employees are bound by a collective bargaining agreement that controls certain pay obligations.

If you want to find something of broader note in Stoetzl, it again demonstrates that less protective FLSA provisions do no displace more protective California laws and regulations unless there is an express statement of an intent to do so. Here, in this 5-2 decision, a majority of the Court concluded that the Legislature properly empowered CalHR to define state employee pay provisions, and CalHR chose to expressly adopt FLSA rules that governed such things as walk time.

The minority opinion, written by Justice Liu, with Justice Cuellar concurring, found particular fault with the majority’s discussion of the minimum wage pay issue for the unrepresented class of employees.

Ninth Circuit concludes that the Dynamex "ABC test" applies retroactively

I missed this little nugget when it came out last month, but it’s worth noting regardless because it may move the needle in existing cases. In Vazquez, et al. v. Jan-Pro Franchising International, Inc. (9th Cir. May 2, 2009), the Ninth Circuit considered whether Dynamex Ops. W. Inc. v. Superior Court, 416 P.3d 1 (Cal. 2018) applied to a District Court decision that pre-dated Dynamex.

On that point, the Court agreed that the default rule of retroactive application of judicial decisions should apply after a thorough analysis of the limited bases for an exception to that default rule:

Given the strong presumption of retroactivity, the emphasis in Dynamex on its holding as a clarification rather than as a departure from established law, and the lack of any indication that California courts are likely to hold that Dynamex applies only prospectively, we see no basis to do so either.

Slip op., at 26. The Court then considered whether due process considerations could preclude retroactive application and held that such considerations did not:

Applying Dynamex retroactively is neither arbitrary nor irrational. The Dynamex court explained that “wage orders are the type of remedial legislation that must be liberally construed in a manner that services its remedial purpose.” 416 P.3d at 32. Moreover, Dynamex made clear that California wage orders serve multiple purposes. One is to compensate workers and ensure they can provide for themselves and their families. Id. But second, wage orders accord benefits to entire industries by “ensuring that . . . responsible companies are not hurt by unfair competition from competitor businesses that utilize substandard employment practices.” Id. And finally, wage orders benefit society at large. Without them, “the public will often be left to assume responsibility for the ill effects to workers and their families resulting from substandard wages or unhealthy and unsafe working conditions.” Id. It is with these purposes in mind that the California Supreme Court embraced the ABC test and found it to be “faithful” to the history of California’s employment classification law “and to the fundamental purpose of the wage orders.” Id. at 40.

Slip op., at 27-28.

The balance of the Opinion examined the merits of the case, providing significant guidance to the District Court on remand.

Separate from the content of the Opinion, I am impressed by the formatting of the Opinion. The Opinion contains a hyper-linked table of contents that improves navigation through the long decision. Because I was curious about the formatting, I did a quick spot check of recent opinions and could not find a similarly formatted document. This makes me wonder why this is not standard. I note that Judge Block, of the Eastern District of New York (sitting by designation) authored the opinion. If you happen to know why the formatting of this Opinion is so good, leave a comment.

The prevailing plaintiffs were represented by Shannon Liss-Riordan of Lichten & Liss-Riordan P.C., Boston, Massachusetts.

Labor Code section 218.5 controls contractual attorney fee provisions when wage and contract claims are intertwined

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This is a little nugget for the wage & hour set. In a matter of first impression, the Court of Appeal (Fourth Appellate District, Division Three), in Dane-Elec Corp. v. Bodokh (May 24, 2019) considered the effect of Labor Code section 218.5 on a prevailing party employer’s right to recover contract-based attorney fees from an employee where the employer successfully defended against a wage claim, found not to have been brought in bad faith, when the wage claim was inextricably intertwined with a contract claim for which the employer would otherwise be contractually entitled to recover attorney fees.

The Court described Labor Code section 218.5 as follows:

Labor Code section 218.5 is a fee-shifting statute in actions for nonpayment of wages. The first sentence of section 218.5(a) states: “In any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, the court shall award reasonable attorney’s fees and costs to the prevailing party if any party to the action requests attorney’s fees and costs upon the initiation of the action.”There is a significant limitation if the prevailing party is not an employee. The second sentence of section 218.5 (a) states: “However, if the prevailing party in the court action is not an employee, attorney’s fees and costs shall be awarded pursuant to this section only if the court finds that the employee brought the court action in bad faith.”

Slip op., at 15. The issue in the case arose because the wage claim and a contract claim were inexplicably intertwined. The Court resolved the question after looking at apportionment rules and the purpose of similar fee-shifting statutes, such as the Cartwright Act. The Court observed that while section 218.5 isn’t exactly a one-way fee shifting statute, the bad faith requirement effectively renders it a one-way fee-shifting statute that favors employees.

Check out the September 12, 2018 edition of the Daily Journal for a pithy comment on Troester

As in full of pith. With a young attorney in my firm, Lilit Ter-Astvatsatryan, we wrote an opinion column for the Daily Journal, published on September 12, 2018 and entitled Unaccounted Time: Reading the tea leaves of Troester. Wait, something is wrong with that. If Lilit is a young attorney, then I am old. So let’s start again…

With a colleague at my firm, Lilit Ter-Astvatsatryan, we wrote an opinion column for the Daily Journal, published on September 12, 2018 and entitled Unaccounted Time: Reading the tea leaves of Troester. Much better.

I congratulate Lilit on her first foray into craven and shameless self-promotion.