Future class action? Dancers in Los Angeles file a wage & hour suit over independent contractor classification

/

(Un)covering this story requires some care, as I don't want The Complex Litigator black-listed by content filters, hence the oblique references to follow.

It has been reported on latimes.com and abajournal.com that four dancers of the quasi-prurient-arts variety are suing nightclubs over unpaid wages and tips.  (Normal references omitted; see hyperlinks.)  The dancers are challenging their classification as independent contractors, contending that they are employees, who signed "independent contractor agreements" under duress.

Several thoughts sprang to mind when I read this story.  First, it is unclear from the reporting whether these dancers are so-called "go-go dancers" at mainstream nightclubs (the dancers you might see in clubs dancing in elevated cages as part of the effort at ambience) or are dancers at clubs of the tip-for-tat sort.  Second, this sounds suspiciously like either (1) a wage & hour class action in the works, or (2) an effort to avoid the pitfalls one encounters in wage & hour class actions by attempting to generate interest in a "mass action" of similarly situated dancers.  Either way, the press coverage of the filing will probably generate a significant number of inquiries about how to join the suit.  Third, both articles talk about how the independent contrator "agreements were signed under duress and are therefore void."  This blog has previously covered independent contractors misclassification cases, discussed previously here and here.  The terms of an independent contractor agreement are far down the list of factors examined when attempting to determine whether an employment relationship exists.  And, finally, I just wanted the chance to discuss news about dancers suing for better wages, and now I have.

Read More

Wage Law notes a recent California trend of disapproving of "claims made" settlements in wage & hour class actions

/

Although it sounds a little bit like hearsay (or maybe just protection of confidential sources), Wage Law is reporting that some Superior Court judges, particularly in the Bay Area, believe that a "claims made" class action settlement should never be approved in a wage & hour case.  (The Emerging Trend Against Claims Made Wage & Hour Settlements (June 6, 2008) wagelaw.typepad.com.)  One opinion that may be swaying the hearts and minds of judges is the 2007 Order of Judge William Alsup denying preliminary approval of a class action settlement in Kakani v. Oracle Corp.  In his initial opinion, Judge Alsup said:

“Under the settlement, all wage-and-hour rights (not just overtime) of putative class members would be completely extinguished and replaced by an exclusive claims procedure. By expressly obligating itself only on a "claims-made" approach, Oracle would pay only those who submit claims up to a total of nine million dollars less all fees and expenses. Counsel wants $2.25 million in attorney's fees and $75,000 in expenses. In addition to their own shares of the settlement, $45,000 total would be paid to the three named plaintiffs as "incentive payments." Costs of administration would also be deducted. Because it will be a "claims-made" settlement, there will be no residue. All unclaimed amounts will revert to Oracle. Counsel now desire preliminary approval under Rule 23(e) and recommend notice be sent by mail to last known addresses of 1500 or so workers granting them a brief period for filing claims -- after which all of their claims and rights would be forever barred, even as to those who never receive actual notice or submit a claim.

The description of the terms is enough to telegraph where that one was going.  But this should come as no surprise.  Judge Alsup has made the news with his high-profile policing of class action settlements, particularly in options backdating suits.  (See this blog's posts of April 27 and June 17.)

As to the substance of Wage Law's observation, that "claims made" settlements in wage & hour matters are falling into disfavor, my own observations tend to confirm that view.  A primary argument for why "claims made" settlements in wage & hour matters are undesirable stems from the policies embodied by wage & hour laws generally.  If wages were earned but not paid to each class member, then each class member should get those wages, not just those that file a claim.  A core policy of labor laws is to ensure the full payment of all wages owed for work actually performed.

However, there are circumstances (probably not present in the Oracle suit) that weigh in favor of the "claims made" approach.  For example, small classes with relatively modest individual recoveries provide the majority of their benefit in the correction of violations, not in the sums paid to class members.  In those cases, it is cost efficient to reserve a modest class fund for those individuals willing to take the small step of submitting a claim.  In cases where records do not allow for an exact calculation of monies owed to each employee, such as meal break cases where records are absent, a "claims made" approach can be described as a proxy for a declaration of damages.

California in particular faces another issue in wage & hour class actions: the population of unlawfully present aliens (they are not exactly "illegal" aliens, because if they are not citizens, then they are, by definition, aliens - and it isn't illegal to be an alien, it's just illegal to be present in the U.S. without legal permission).  Employers whose workforce consists (allegedly) of unlawfully present aliens present a problem in wage & hour class actions - the workforce, if very transitory, may be hard to locate or unwilling to come forward to participate in any settlement.  So you can easily face a situation where the wage & hour violations are pandemic but the class is hard to locate.  In that instance, a "claims made" settlement is particularly suited to resolution.  Given the usually low hourly wages of this particular employee demographic, such classes often also include the problem of a low recovery level that provides its own justification for a "claims made" settlement.

See the balance of Wage Law's post for more choice words from Judge Alsup and commentary about settlement structure.

Read More

More on Amaral v. Cintas: in wage & hour class actions, burdens of proof are appropriately shifted to employers when records are nonexistent

/

Greatsealcal100As promised in this earlier post, Amaral v. Cintas (June 11, 2008) ___ Cal.Rptr.3d ___ deserves more commentary.  By way of background, Amaral concerns a living wage ordance (LWO) passed by the City of Hayward.  The LWO requires any company contracting with the City of Hayward to pay specified hourly wages to "any individual employed by a service contractor on or under the authority of any contract for services with the City. . . ."  (Slip op., at p. 19.)  On appeal, Cintas complained that the trial court erred in shifting the burden to require Cintas to prove which of its employees worked on the City of Hayward contracts in order to limit the scope of the class, certified by the trial court and defined as "all production and stockroom workers employed by Cintas at its facilities in Union City and San Leandro between July 1, 1999 and June 30, 2003."  (Slip op., at p. 5.)  The Court of Appeal held wage & hour class actions constitute a special, limited circumstance in which the burden of proof does not rest with the party that must establish the elements of a claim or defense:

“In general, “[e]xcept as otherwise provided by law, a party has the burden of proof as to each fact the existence or nonexistence of which is essential to the claim for relief or defense that he is asserting.”  (Evid. Code, § 500.)  On occasion, however, courts may alter the normal allocation of the burden of proof.  (National Council Against Health Fraud, Inc. v. King Bio Pharmaceuticals, Inc. (2003) 107 Cal.App.4th 1336, 1346; see, e.g., Sargent Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658, 1670 [burden of proof on issue of causation will be shifted to the defendant when circumstances make it impossible for the plaintiff to prove its case].)  “ ‘In determining whether the normal allocation of the burden of proof should be altered, the courts consider a number of factors:  the knowledge of the parties concerning the particular fact, the availability of the evidence to the parties, the most desirable result in terms of public policy in the absence of proof of the particular fact, and the probability of the existence or nonexistence of the fact.’  [Citation.]”  (Lakin v. Watkins Associated Industries (1993) 6 Cal.4th 644, 660-661.)

One long-standing application of burden-shifting occurs in the wage-and-hour context when an employer’s compensation records are so incomplete or inaccurate that an employee cannot prove his or her damages.  When the United States Supreme Court addressed this problem with regard to claims under the Fair Labor Standards Act of 1938 (29 U.S.C. § 201 et seq.), it observed that the remedial nature of the statute and public policy “militate against making [the evidentiary burden] an impossible hurdle for the employee.”  (Anderson v. Mt. Clemens Pottery Co. (1946) 328 U.S. 680, 687 (Anderson).)  Considering that an employer has a statutory duty to maintain proper records of wages, hours and work conditions and is in the best position to know salient facts about the nature and amount of work performed, the court concluded it is appropriate to shift the burden of proof to the employer.  (Id. at pp. 687-688.)  Specifically, once an employee proves he or she “has in fact performed work” that was improperly compensated, and presents enough evidence to allow an inference as to the amount of this work, the burden shifts to the employer to prove the precise amount of work performed or to negate the inference drawn from the employee’s evidence.  (Ibid.)  The high court observed that applying the normal burden of proof in such circumstances would unfairly penalize an employee for the employer’s failure to keep proper records and would allow the employer to keep the benefits of the employee’s labors without paying full compensation.  (Id. at p. 687.)

Relying on Anderson, California courts have shifted the burden of proof to employers when inadequate records prevent employees from proving their claims for unpaid overtime hours (Hernandez v. Mendoza (1988) 199 Cal.App.3d 721, 726-728) and unpaid meal and rest breaks (Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949, 961-963).  Anderson’s reasoning has also been applied to permit class action plaintiffs to prove their damages for unpaid overtime by the use of statistical sampling.  (Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, 746-751.

(Slip op., at pp. 24-25.)  In wage & hour class actions, putative class member employees should use discovery tools at the earliest possible opportunity to ascertain what records do or do not exist.  This should occur before attempting certification so that the Court can be apprised (1) of the availability of common evidence to prove class claims, or (2) the absence of evidence, coupled with a discussion of the burden shift endorsed by Amaral and others.  In order to convice the trial court that a class action is superior, the plaintiff probably needs to explain the manner in which class claims would be established.  If the employer has no records of hours worked, for example, the plaintiff would show evidence of the absence of records, the type of testimony that would be offered to show unpaid hours, and the presumption and burden shift triggered by that evidence.

Read More

Attorneys in labor violation class action are awarded 1.65 multiplier--$1,199,550--plus $60,611 for fee petition expenses in winning a million dollar award in City of Hayward living wage ordinance case

/

Greatsealcal100The Court of Appeal (First Appellate District, Division Three) was presented with more than the usual mouthful of major legal issues in Amaral v. Cintas (June 11, 2008) ___ Cal.Rptr.3d ___.  The case addresses issues of constitutionality of a living wage ordinance, class action issues, wage & hour issues, unfair competition claims, interest calculations, and attorney fee multipliers in class actions...to name a few.  The introduction to the case provides an excellent preview for what lies below:

“These appeals concern the constitutionality and application of a living wage ordinance enacted by the City of Hayward (City) and incorporated into its municipal contracts.  Although Cintas  entered into such contracts with the City, it did not provide the minimum wages or benefits required by the ordinance to employees who worked in the company’s stockroom or laundry production facilities, which are located outside of Hayward.  Plaintiffs, representing a class of such employees, sued Cintas for violations of the living wage ordinance, Labor Code section 200 et seq., Business and Professions Code section 17200 and breach of contract.  The trial court rejected Cintas’s challenges to the constitutionality of the ordinance and, on cross-motions for summary judgment or summary adjudication, found that Cintas violated the ordinance, breached its contracts with the City, and violated several Labor Code provisions as well as Business and Professions Code section 17200.  The court awarded back wages and unpaid benefits, imposed penalties for the Labor Code violations pursuant to the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.), and awarded plaintiffs statutory attorneys’ fees and costs.  Cintas challenges nearly every aspect of these rulings on appeal.  In separate cross-appeals, plaintiffs dispute the trial court’s finding that Cintas’s conduct was not “willful,” challenge the court’s calculation of penalties, and claim they are entitled to recover additional costs.

(Slip op., at pp. 1-2.)

This case is worth several posts, but one item in particular, the analysis of retroactivity of the Labor Code Private Attorneys General Act (PAGA), is worth a first mention.  Analyzing whether PAGA applied retroactively, the Court first noted that PAGA did not increase Cintas's liability, since the Labor Commissioner could have recovered the same penalties previously.  Continuing, the Court said:

“It does not matter that Cintas’s wrongful conduct occurred before PAGA was enacted because the legal consequences of this conduct remained the same.  “A statute is retroactive if it substantially changes the legal effect of past events.  [Citations.]  A statute does not operate retroactively merely because some of the facts or conditions upon which its application depends came into existence prior to its enactment.  [Citations.]”  (Kizer v. Hanna (1989) 48 Cal.3d 1, 7-8.)  Nor does it matter that Cintas may have expected to be held accountable for penalties to the Labor Commissioner instead of to plaintiff class members.  “A statute does not operate ‘retrospectively’ merely because it is applied in a case arising from conduct antedating the statute’s enactment [citation] or upsets expectations based in prior law.  Rather, the court must ask whether the new provision attaches new legal consequences to events completed before its enactment.”  (Landgraf v. USI Film Products, supra, 511 U.S. at pp. 269-270, fn. omitted.)  Because PAGA did not increase Cintas’s liability for Labor Code penalties, its application in this case was not retroactive.  (See Myers v. Philip Morris Companies, Inc., supra, 28 Cal.4th at p. 839 [defining a retroactive statute as one that operates to increase a party’s liability for past conduct].)

(Slip op., at p. 36.)

Brace yourselves for the PAGA explosion...

Read More

The Borello “right to control” employment test saves Nimrod

/

Greatsealcal100Once again, a California Court of Appeal has relied upon S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 [256 Cal.Rptr. 543] to articulate the test for employment.  In Caso, et al. v. Nimrod Productions, Inc., et al. (June 4, 2008) ___ Cal.Rptr.3d ___, the Court of Appeal (Second Appellate District, Division Seven) evaluated the interesting doctrine of "special employment."  Explaining the term, the Court said:

“When an employer lends an employee to another employer and relinquishes to the borrowing employer some right of control over the employee’s activities, a “special employment relationship” arises between the borrowing employer and the employee.

(Slip op., at p. 7.)  Citing Borello and other authority, the Nimrod Court (heh) said:

““In determining whether a special employment relationship exists, the primary consideration is whether the special employer has ‘“[t]he right to control and direct the activities of the alleged employee or the manner and method in which the work is performed, whether exercised or not . . . .”’” (Kowalski, supra, 23 Cal.3d at p. 175; see Borello, supra, 48 Cal.3d at p. 350.)

(Slip op., at p. 7.)

What makes this of interest is the (perceived - my opinion) increase in class action litigation arising from the practice of misclassifying employees as independent contractors, discussed previously here.  Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1 [64 Cal.Rptr.3d 327] provides one example in this trend.  And it seems reasonable to speculate that if the economy is actually entering a significant downturn (a premise that the media repeats but I decline to accept until real data shows a major downturn), employers may attempt with greater frequency to re-classify employees as independent contractors.  Were that to happen, an increase in that type of wage & hour class action would surely follow.  However, given that the strong emphasis on Borello seems to confirm that "right to control" and not actual control is the touchstone test for finding an employment relationship, class actions challenging independent contractor classifications may not go well, on the whole, for employers.  The long term costs of that miscalculation would likely exceed the immediate savings of designating employees as independent contractors.

Read More

Court of Appeal denies a Request for Rehearing in Antelope Valley Press v. Poizner, butressing its application of the Borello “right to control” test with an extra footnote

/

Greatsealcal100On April 30, 2008, the Court of Appeal (Second Appellate District, Division 3), relying solely on S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 [256 Cal.Rptr. 543], applied the Borello employment factors test to newspaper carriers delivering the Antelope Valley Press, concluding that paper deliverypersons were employees.  (See this blog's May 12, 2008 post on Antelope Valley Press.)  Apparently Antelope Valley Press wasn't thrilled by that decision and filed a Petition for Rehearing. As is usually the case, the Court of Appeal wasn't thrilled with receiving a Brief indicating that it had done a poor job analyzing the situation, because it added a small footnote to its original decision:

“We reject AVP’s contention that the court’s analysis in JKH Enterprises is flawed. AVP asserts that JKH Enterprises did not “consider fully” the decision in Interstate Brands v. Unemployment Ins. Appeals Bd., supra, 26 Cal.3d 770, 773, 775, where the Supreme Court had affirmed the trial court’s determination that certain of the employees of Interstate Brands were not entitled to unemployment insurance benefits, and held that it was proper for the trial court to apply the independent judgment test in reviewing the evidence produced at an administrative hearing because the case affected a fundamental vested right of the employer. We note that the Supreme Court denied review in JKH Enterprises. We also note that the Interstate Brands court did not address the question whether the subject workers were employees or independent contractors. Their employee status was admitted by Interstate Brands. However, Borello did address that issue, and there the Supreme Court simply stated that “[t]he determination of employee or independent-contractor status is one of fact if dependent upon the resolution of disputed evidence or inferences, and the [administrative agency’s] decision [on that status issue] must be upheld if substantially supported.” (Borello, supra, 48 Cal.3d at p. 349, italics added.) The Borello court did not state whether the question of worker status involves or affects a fundamental vested right. As noted in footnote 13, post, the evidence in this case is disputed. Therefore, in deciding this appeal in favor of upholding the Commissioner’s decision that the carriers are employees and not independent contractors for purposes of workers’ compensation insurance, we did so by addressing the question whether that decision is substantially supported by the evidence in the administrative record.

(May 30, 2008 Order Modifying Opinion.)  The Court finished by denying the Petition for Rehearing.  You didn't see that one coming, did you?

I know that the Petition for Rehearing is often filed just to establish that every effort for review has been exhausted prior to filing a Petition for Review with the California Supreme Court.  In other words, the denial is presumed and the rehearing request is mechanical.  But if you file a Petition for Rehearing with the idea that it will actually help your client, think again.  Compared to Petitions for Writs, which are rarely granted, the odds on winning California's lottery must be better than getting a Rehearing Petition granted.

Read More

Are punitive damages available in class actions asserting statutory wage & hour violations? Savaglio v. Wal-Mart may have the answer.

/

California Punitive Damages has an intriguing post about a pending appeal that could affect punitive damage claims in wage & hour class actions.  (Cutting, Pending Appeal Will Affect Punitive Damages Claims In Wage & Hour Class Actions (May 16, 2008) calpunitives.blogspot.com.)  In an appeal to the First Appellate District, Division Four, Wal-Mart is contesting, among other things, a $115 million punitive damages award by asserting the "new right-exclusive remedy" rule:

“Among the issues that Wal-Mart has raised on appeal is whether California's "new right-exclusive remedy" rule bars the punitive damages award in this wage and hour case. Under this rule, "where a statute creates a right that did not exist at common law and provides a comprehensive and detailed remedial scheme for its enforcement, the statutory remedy is exclusive." (Rojo v. Kliger (1990) 52 Cal.3d 65, 79.) According to Wal-Mart's opening appellate brief, no California appellate cases have upheld an award of punitive damages for any statutory wage and hour claims, and at least three federal district courts have applied the "new right-exclusive remedy" rule to dismiss claims seeking punitive damages predicated on alleged wage and hour violations.

(Ibid.)  So what is the "new right-exclusive remedy" rule you ask?  Tell me about Rojo you say?  You had but to ask.

Read More

Littler Mendelson, P.C., provides educational report on how to achieve total wage & hour compliance

/

Littler Mendelson, P.C. released a wage & hour report entitled, "Total Wage and Hour Compliance: An Initiative to End the Wage and Hour Class Action War."  The abstract on the firm's website summarizes the focus of the report:

“Wage and hour class actions are rising sharply and the potential exposure is unprecedented. The number of wage and hour class actions filed in federal courts more than doubled from 2001 to 2006, and settlements are frequently in the multi-million dollar range. Absent a complete and comprehensive approach to tackling wage and hour compliance, the trend is unlikely to end. In this report, a Littler Task Force lays out seven key components to help employers reach and maintain a level of compliance that greatly reduces the likelihood and cost of litigation. By implementing these components, a systematic process can be developed to move the level of wage and hour compliance as close to "total" as is reasonably possibly, with a sensible allocation of corporate resources.

(Abstract: Total Wage and Hour Compliance: An Initiative to End the Wage and Hour Class Action War (April 2008) www.littler.com.)

The report has received quite a bit of attention around the blogosphere in a variety of contexts.  Wage Law notes that "[s]ome of the best ideas for the plaintiff's bar have come from defense lawyers. . . . It isn't just a learning tool for employers. It also provides considerable food for thought if you are represent employees . . . ."  (Walsh & Walsh, New Littler Report on Wage and Hour Compliance (May 9, 2008) wagelaw.typepad.com.)  Cal Biz Lit cites from the Littler report in a detailed article about attorney fee-shifting statutes in California.  (Nye, Attorneys' Fee Awards in California III: More Attorney Fee Shifting Statutes (May 14, 2008) www.calbizlit.com.)   California Punitive Damages also quotes from the Little report, saying, "Indeed, a recent report issued by Littler Mendelson (which specializes in labor and employment law) indicates that at least 311 wage and hour related class actions were filed in California state courts alone in the nearly six-month period between October 1, 2007, and March 28, 2008."  (Curt Cutting, Pending Appeal Will Affect Punitive Damages Claims in Wage & Hour Class Actions (May 16, 2008) calpunitives.blogspot.com.)

I have faced off against one of the report's authors, Kevin Lilly, in a wage & hour class action.  He's a sharp attorney (and a gentleman), and I have no hesitation in suggesting that you take a look at the Littler report.  In any case, I have to commend a defense-oriented firm that essentially says, "If you want to avoid wage & hour class actions, your only choice is to comply with the law 100% of the time."  If everyone would offer sage advice like that (and if the recipients would follow it), I could get into some other line of work.

Read More

Class of "technical writers" seeking overtime certified in suit against Sun Microsystems

/

In a case that may draw renewed attention to wage & hour practices at high tech businesses, Santa Clara Superior Court Judge Jack Komar certified a class comprised of "technical writers" employed by Sun Microsystems since 2002.  Plaintiff Hoenemier is challenging the company's practice of treating Hoenemier and about 300 other writers as exempt from state labor laws governing overtime and breaks.  At issue in this case is the overtime exemption applicable to "computer professionals," found at Cal. Labor Code section 515.5.  "If the company loses, it could owe 'well over $20 million' in back pay, according to Hoenemier's attorney, Aaron Kaufmann of Walnut Creek."  (Brandon Bailey, Sun overtime lawsuit a class action (May 15, 2008) www.mercurynews.com.)

Sun contends in the suit that it is an industry-wide practice to classify technical writers as exempt under section 515.5.  If the Court ultimately determines that Sun is wrong in its classification, the whole industry will face a wave of wage & hour lawsuits, given that suits for back wages remain viable, irrespective of a corrective classification going forward.

Other coverage:

Read More

Showing laudable common sense in Bufil v. Dollar Financial Group, Inc., a California Court of Appeal limits Alvarez v. May Dept. Stores Co.

/

Greatsealcal100I must confess that, of all decisions for which I may take blame or credit, Alvarez v. May Dept. Stores Co. (2006) 143 Cal.App.4th 1223 sticks in my craw as the most abhorrent and most memorable (by a slight margin).  Not that I didn't give Alvarez my all; I have no shame there.  But I lost the appeal.  Then my Petition for Review was denied by the California Supreme Court (though Justice Kennard was of the opinion that it should have been granted), and I even went so far as to file a Petition for Writ of Certiorari with the United States Supreme Court.  It was, of course, denied.  The oral argument in the Court of Appeal lasted something like 45 minutes (it went way over the allowed time), and about 40 minutes of it were non-stop questions from all three justices.  It was brutal, educational, and intensely disappointing.  Mostly disappointing.

Enter Bufil v. Dollar Financial Group, Inc. (April 17, 2008, ord. pub. May 13, 2008), issued by the First Appellate District, Division Four.  The introduction to the opinion summarizes the legal terrain:

“On the heels of the denial of class certification against employer and respondent Dollar Financial Group, Inc. (Dollar), in a suit alleging violation of meal and rest break labor laws, appellant Caren Bufil pursued class certification in a new suit which significantly narrowed the class definition. Relying on the doctrine of collateral estoppel, the trial court granted judgment on the pleadings in favor of Dollar. Also relying on this doctrine as well as traditional concerns relevant to the issue of certification, the court denied Bufil’s motion for class certification. We reverse.

(Slip op., at p. 1.) 

Read More