a California-centric collection of comments and resources about complex litigation and class action practice
Although it shouldn't come as a surprise, a Petition for Review in Brinker Restaurant Corporation, et al. v. Hohnbaum, et al (July 22, 2008) was filed with the Supreme Court on August 29, 2008. The Supreme Court docket is available for viewing here.
According to anecdotal accounts collected by a reporter for the Houston Chronicle, at least some class action attorneys practicing in the area of wage & hour law have reportedly turned away problematic clients or those with non-viable claims. (L.M. Sixel, Employment lawyers know no-go cases when they see them (August 27, 2008) www.chron.com.) I know that this may be viewed as a shocking (and unsubstantiated) development, but my experience is that this actually happens. Perhaps I'm just filled with a bit too much sarcasm tonight, or maybe I was possessed of some peculiar wave of partisanship in advance of attending CAALA's annual convention. In any case, I hope to do a bit of "live blogging" from CAALA if I can find some useful sessions, so check back on Friday in particular to see if anything interesting is going on here.
In its ongoing effort to reduce any chance for physical activity associated with the practice of law, the State Bar's Labor & Employment Law Section is offering a Teleseminar on everyone's favorite wage & hour decision, Brinker Restaurant Corporation v. Superior Court. The seminar, entitled Brinker: the End of California Meal and Rest Break Litigation -- or Only the Beginning?, will include speakers William Sailer and Miles Locker, who argued Brinker as amicus for the respective sides.
You need to act quickly to participate. The particulars can be found at the link above, but the basics are as follows:
"[T]he dirty little secret among employers and HR departments is that classifying employees as exempt—even if it means breaking the law—is in their best interest provided, of course, that they don't get caught." It's an observation that goes unsaid most of the time, but a recent article on cio.com airs that dirty laundry just a bit. (Meredith Levinson, Fair Labor Standards Act: Six Things Tech Workers Need to Know (August 11, 2008) www.cio.com.)
The article quotes Jahan Sagafi, a partner with Lieff Cabraser Heimann & Bernstein, who explains the strong incentive for employers to misclassify workers. Observing that (1) governmental enforcement entities have little ability to heavily enforce wage & hour laws, and (2) employers can profit by breaking the law, even when caught, Sagafi concludes that wage & hour violations are inevitable. The profit incentive is worth a few addition comments.
One counter-argument to the profit incentive is that employers will lose any profit in litigation costs and wage payments. There are several reasons why this couter-argument does not supply a sound basis for discounting the strong incentive on employers to cross the line in wage & hour practices.
First, small employers and very large employers have different incentive sets that may very well result in the same behavior, a fact that we can at least anecdotally observe. Large employers can essentially cheat with enough employees that, even if ultimately caught and sued, the settlement of the suit, combined with the costs of litigation, can still be much lower that the unpaid wages at the 100% level. In this instance, cheating on wage & hour compliance is actually a rational course of conduct; it is a profit center as compard to conservative, fully legal conduct.
Small employers, on the other hand, could face a scenario where the costs of litigation eradicate any savings from wage & hour compliance cheating. Nevertheless, a rationally acting small employer would be aware that enforcement occurs far less than 100% of the time. Thus, the expected value of wage & hour cheating remains positive unless, in varying degrees, the following is true: (1) the chance of getting caught approaches 100%, (2) the payment in litigation approaches the full amount of unpaid wages owed, and (3) the cost of litigation plus the compromised amount of unpaid wages is higher than the full amount of wages owed.
Small employers face an addtional incentive to cheat that is often attenuated in large employers - the greater difficulty in maintaining operating capital. Thus, small employers may avoid full wage & hour compliance partly out of necessity. Growing organizations often operate on the edge of the financial cliff. A misclassified group of employees could be difference success and failure. To be clear, I don't defend wage & hour violations as a means of sustaining an employer in tough times. Rather, I think that there is a troubling lack of honesty about the fact that, so long as it is profitable, employers will not fully comply with wage & hour laws.
The next time you hear that plaintiffs' lawyers are to blame for wage & hour class actions, consider the possibility that employers ought to shoulder a significant portion of the blame.
Yesterday's Daily Journal (Wednesday, August 6, 2008) includes my article entitled "A Bad Meal Deal: ‘Brinker’ Gets the Incentive Question Wrong," in the Forum column. Once again, thank you, Daily Journal. Online access is by subscription only, so no link to the article is provided here. The article focuses on the incomplete discussion of economic incentives that are used as a basis for justifying the outcome in Brinker.
In a post entitled Bradstreet Riles Labor Unions. High Court Ahead?, Legal Pad, a legal news blog, reported on the strong reaction from labor unions to Bradstreet's memo declaring Brinker to be "binding precedent." The Complex Litigator's scoop on the response to Bradstreet's memo was featured prominently in Legal Pad's reporting.
For what it's worth, in a recent survey of more than 2,000 legal, ethics, and HR professionals, "60 percent of respondents reported that either their employees were not accurately reporting all hours worked, or they didn't know if they were. Additionally, more than 40 percent of respondents were not confident that their employees even knew how to file a wage and hour complaint . . . ." (August 5, 2008 Press Release.) The catch to this study is that it was conducted by ELT, a company that provides online wage & hour/employment law compliance training. But while there is at least a bias on the part of ELT, given its line of work, its conclusion is anecdotally supported by the comparatively high percentage of wage & hour class action filings (as against all other types).
These days, it seems as if the Ninth Circuit and its District Courts aren't operating from the same play book. As has been discussed repeatedly in connection with Brinker Restaurant Corporation, et al. v. Hohnbaum, et al (July 22, 2008), District Courts have repeatedly made news with their decisions undermining wage & hour class actions. In Brown v. Federal Express Corp., (C.D.Cal. 2008) ___ F.R.D. ___ [2008 WL 906517], a district court concluded that a claim of meal period violations was not amenable to class treatment because the court would be "mired in over 5000 mini-trials" to determine if such breaks were provided. Another District Court opinion (White v. Starbucks Corp., 497 F.Supp.2d 1080 (N.D. Cal. 2007)) refused to hold that employers must ensure that their employees take meal breaks. The White v. Starbucks Corp. court guessed that the California Supreme Court, if deciding the issue, would require only that an employer offer meal breaks, without forcing workers to take those breaks.
Instead of joining with the district court, the Ninth Circuit has pushed in the opposite direction. For example, in an unpublished opinion, the Ninth Circuit reversed a substantial portion of a District Court order denying class certification in a wage and hour class action entitled Sepulveda v. Wal-Mart Stores, Inc. Recently, the Ninth Circuit went a step further. In Parra v. Bashas', Inc. (9th Cir. July 29, 2008) ___ F.3d ___, the Ninth Circuit made history (in the Circuit), when it reversed a denial of class certification in a wage & hour class action where the denial of certification was predicated on lack of commonality:
“Although this circuit has, up to now, never reversed a district court finding that commonality was lacking in an employment suit, other circuits have. See, e.g., Forbush v. J.C. Penny Co., 994 F.2d 1101, 1106 (5th Cir. 1993); Cox v. Am. Cast Iron Pipe Co., 784 F.2d 1546, 1557 (11th Cir. 1986); Paxton v. Union Nat’l Bank, 688 F.2d 552, 561 (8th Cir. 1982).
(Slip op., at p. 9641.) It's only a matter of time before all of this wage & hour employment law matter and anti-matter collide and destroy the planet.
[Via UCL Practitioner and Alaska Employement Law]
UPDATE: The problem with the title of this post has been corrected.
UPDATE 2: An astute reader points out that I was a bit sloppy with my labels in this post. The case involves employment law claims (discrimination issues), which do not fall into the subset of employment law claims referred to as "wage & hour" cases. As a very general proposition, many of the policies that govern "wage & hour" cases govern all employement law cases. However, there are special policy considerations that govern matters like discrimination cases such that the distinction between "employment law" and "wage & hour" is not necessarily irrelevant. I actually appreciate the correction because I strive for accuracy.
On July 30, 2008, this blog reported that the DLSE had already updated its enforcement materials in response to Brinker Restaurant Corporation, et al. v. Hohnbaum, et al (July 22, 2008). The information now coming to light is significantly more troubling than a simple revision of DLSE enforcement materials. In a July 25, 2008 Memorandum entitled Binding Court Ruling on Meal and Rest Period Requirements, Angela Bradstreet, the Labor Commissioner, described Brinker as a “binding court ruling,” without noting that Brinker is one of two decisions that interpret regulations governing meal breaks (the other being Cicairos v Summit Logistics, Inc. (2005) 133 Cal App.4th 949, which still stands as valid authority).
The California Labor Federation was none too pleased with the July 25, 2008 Memorandum. In strongly-worded correspondence of July 30, 2008, the California Labor Federation took Ms. Bradstreet to task for what it persuasively described as a biased, pro-employer approach from the very regulatory body charged with enforcing employee-protective laws and regulations. And by fortunate happenstance, I've stumbled across a copy of that correspondence (with attachments):
The correspondence can also be downloaded in pdf format here. The letter is definitely worth reading.
Because of the significance of this issue, I intend to set this post so that, for at least the next week, it appears as the first post on The Complex Litigator (assuming nothing else demands top billing in that time). So be sure to check below to see new posts.
Yesterday, the California Supreme Court denied review in Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193. Other commentators noted this denial as significant because Bufil contains language that appears to conflict with Brinker Restaurant Corp., et al. v. Hohnbaum, et al. (2008) ___ Cal.App.4th ___. (See, e.g., Wage Law.) While I find the Brinker connection of great interest, I find this denial most significant because it let stand a rather significant reduction in the impact of Alvarez v. May Dept. Stores Co. (2006) 143 Cal.App.4th 1223. My initial post on Bufil discusses the Alvarez connection in painful detail.
The Complex Litigator reports on developments in related areas of class action and complex litigation. It is a resource for legal professionals to use as a tool for examining different viewpoints related to changing legal precedent. H. Scott Leviant is the editor-in-chief and primary author of The Complex Litigator.
