BREAKING NEWS: First appellate construction of Labor Code section 206.5 concludes that it doesn't mean what it seems to say

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Greatsealcal100As predicted in this post, the Fourth Appellate District, Division Three, has issued a published opinion in Chindarah et al. v. Pick Up Stix, Inc. et al (February 26, 2009).  The opinion construes Labor Code section 206.5, concluding that employer-obtained releases of wage claims in dispute were not void by operation of section 206.5.  There is some qualifying language in the opinion worth mentioning, but, that must wait for another day.

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California Supreme Court grants itself additional time to consider Petition in Brewer v. Premier Golf Properties

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Greatsealcal100On February 23, 2009, the California Supreme Court extended the time for granting or denying review in Brewer v. Premier Golf Properties (2008) 168 Cal. App. 4th 1243. The Complex Litigator’s initial post about Brewer discusses its holding that punitive damages are unavailable for violations of at least some Labor Code provisions.  The Supreme Court now has to and including April 8, 2009 to grant or deny review.

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Labor Code section 206.5 may be the focus of forthcoming opinion in Fourth Appellate District

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Greatsealcal100I’m told that the Fourth Appellate District, Division Three, has an interesting opinion on the way in the next couple of weeks. According to Wage Law via Twitter (@wagelaw), Chindarah et al. v. Pick Up Stix, Inc. et al. is going to have something interesting to say about Labor Code section 206.5. @wagelaw suggests that the decision is due this week, and the docket nominally supports that contention, noting that the decision is “due” on February 19, 2009. However, at least some of the Courts of Appeal around the state interpret the 90-day deadline on the issuance of opinions in submitted matters to mean that the case must be decided by the end of the month in which the decision is due (when the Court reports on whether it has resolved all pending matters under penalty of nonpayment of Justices’ salaries). I don’t know if this interpretation is universal across the state, but, if it applies here, the decision could issue any time before the end of the month. And don’t forget that, in rare circumstances, the Court can essentially vacate the submission and resubmit the matter if the press of other business makes issuance of an opinion by its orginal due date impossible.

Section 206.5 fascinates me.  Maybe "fascinates" is a bit strong.  In any event, there is little in the way of decisional law about this Labor Code section, which states:

“(a) An employer shall not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made. A release required or executed in violation of the provisions of this section shall be null and void as between the employer and the employee. Violation of this section by the employer is a misdemeanor.

(b) For purposes of this section, "execution of a release" includes requiring an employee, as a condition of being paid, to execute a statement of the hours he or she worked during a pay period which the employer knows to be false.

Subdivision (b) is new, so the opinion can’t address that provision. That leaves subdivision (a). In the world of wage and hour class actions, the only time I ever ran across this section was when an employer was picking off class members by making them sign a release to get an offered payment. I believed that the releases obtained were void, but I never had the opportunity to test that belief. I’m very curious to see if that is the issue that has been presented in Chindarah. Of course, there is no guarantee of publication, but, as a matter of first impression (while I wildly speculate about the issues on appeal), one has to believe that publication would be certain.

And to digress for a moment, Twitter is definitely building momentum as a source for breaking news (amongst the nonsense about what somebody has decided to eat for dinner). You can read my recent posts in the sidebar on this blog or see whose posts I am following on Twitter by going to http://twitter.com/hsleviant (@hsleviant, in Twitter-ese).  If you start by reading posts from legal news sources, you may find that you can build a customized legal news amalgamation that suits your interests very precisely.

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Cristler v. Express Messenger says more about the standard of review on appeal than it does about class actions or employee misclassification

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Greatsealcal100When does a class action go to trial? That’s not an easy question to answer. The potential recovery is a factor, but not always. Personalities involved in the litigation are a factor, but not always. The jury pool is factor, but not always. However, when the class is seeking to declare unlawful a delivery company’s classification of delivery drivers as “independent contractors,” it looks like a sure bet that the class action will go to trial.

In Christler v. Express Messenger Systems, Inc. (February 11, 2009), the Court of Appeal (Fourth Appellate District, Division One) considered challenges to a number of rulings surrounding the trial of plaintiffs’ claim that defendant misclassified its delivery drivers as “independent contractors.” While this opinion does discuss the legal standard for determining employment, the Court of Appeal limited its review, based upon what appellant presented:

“ Cristler emphasizes throughout its briefing that other cases addressing the proper classification of package delivery drivers have resulted in findings that the drivers were employees, rather than independent contractors. (See Estrada, supra, 154 Cal.4th at pp. 11-12 [reciting litany of factors that provided substantial evidence to support trial court's finding that FedEx drivers were employees, including "FedEx's control over every exquisite detail of the drivers' performance, including the color of their socks and the style of their hair"]; JKH Enterprises, Inc. v. Department of Industrial Relations (2006) 142 Cal.App.4th 1046, 1065 [listing factors that provided substantial evidence for trial court's conclusion that drivers were employees and thus "reject[ing] JKH's contention" that the evidence "dictate[d] but one conclusion here — that the drivers are independent contractors"]; Air Couriers, supra, 150 Cal.App.4th at p. 938 [same].) The simple answer to these references is that these cases concerned different circumstances presented to a different finder of fact. Indeed, even if the facts of this case were identical to those in the cases Cristler cites (and they are not), we would not be authorized to overrule the determination of the jury to achieve conformity with other cases — particularly as Cristler does not even argue that the jury's verdict is unsupported by substantial evidence.

(Slip op., at p. 8, fn. 2.) If nothing else, this certainly suggests a trend when suing delivery companies who have, as their business model, decided to classify delivery drivers as “independent contractors.”

As part of the appeal, plaintiffs contended that the trial court erred by failing to continually review the class definition to ensure that class members were not inappropriately excluded: “In the instant case, regardless of whether the trial court erred in defining the class, Cristler fails to carry its burden of establishing reversible error as there is no showing of prejudice from the trial court's assertedly erroneous rulings.” (Slip op., at p. 11.) Continuing, the Court explained: “In light of the trial court's refusal to expand the class definition, the drivers who remained in the class — those without any employees of their own and who did not deliver even an occasional package for clients other than Express Messenger — were the most likely to be characterized as Express Messenger's employees rather than as independent contractors.” (Ibid.) Losing at trial with a narrow class didn’t do much for the plaintiffs’ arguments.

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UPDATED: Lu v. Hawaiian Gardens Casino, Inc. offers a reminder that the UCL can borrow statutes that do not themselves include a private right of action

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Greatsealcal100Better late than never, a brief comment about Lu v. Hawaiian Gardens Casino, Inc. (Jan. 22, 2009) is in order. In Lu, the Second Appellate District, Division Three, considered whether dealer tip pooling in casinos (1) gives rise to a private right of action under California Labor Code section 351 and/or 450, and (2) whether those or other Labor Code sections can serve as predicates for an Unfair Competition Law claim.

After reviewing the two Labor Code sections at issue, the Lu Court concluded with little difficulty that neither section (351 or 450) created a private right of action. However, the Lu Court then noted that such Labor Code sections could nevertheless serve as predicates for the “unlawful” conduct prong under the UCL:

“Nevertheless, Lu alleged a cause of action under the UCL for violation of Labor Code sections 351 and 450. “ ‘Virtually any law -- federal, state or local -- can serve as a predicate for an action under Business and Professions Code section 17200.’ [Citation.]” (Ticconi v. Blue Shield of California Life & Health Ins. Co. (2008) 160 Cal.App.4th 528, 539; cf. Louis v. McCormick & Schmick Restaurant Corp. (C.D.Cal. 2006) 460 F.Supp.2d 1153, 1156, fn. 5; Matoff v. Brinker Restaurant Corp., supra, 439 F.Supp.2d at pp. 1037-1038.) The UCL is a proper avenue for Lu to challenge violations of these Labor Code provisions. Therefore, we turn to the substantive question of whether the tip pool procedure here violates the Labor Code sections enumerated in the complaint such as would support UCL causes of action.

(Slip op., at p. 11.) The Court then analyzed various Labor Code sections asserted in the plaintiff’s complaint, concluding that section 351 could support a UCL “unlawful” prong claim sufficient to withstand summary judgment. (Slip op., at pp. 21-23.)

UPDATE:  Just when you get around to writing a post, wouldn't you know that the Court of Appeal changes the Opinion.  A Modified Opinion issued on February 11, 2009, which slightly alters the judgment.

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California Supreme Court grants request to file over-length Opening Brief in Brinker Restaurant v. Superior Court

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As indicated on the docket, the Supreme Court granted permission for Petitioner to file an over-length Opening Brief in Brinker Restaurant v. Superior Court.  Sources indicate that the Opening Brief was in the neighborhood of 135 pages, so "over-length" may not truly communicate the magnitude of the Brief.

By all rights, between that Opening Brief and the Opposition Brief, there should be nothing left for amicus filers to discuss.  In theory, Amicus Briefs should not repeat arguments advanced in the briefing by the parties.  In practice, this rule isn't just tested, it is abused.  The Proposition 64 briefing, in particular, took great liberties.  But the Supreme Court has appeared tolerant on this point, at least as indicated by its liberal granting of permission to file Amicus Briefs.  Of course, there is no way of knowing whether such Briefs receive any meaningful consideration if they are duplicative of the parties' Briefs.  I assume the "me too" briefs are primarily intended to exert some measure of pressure on the decision, but no one would ever admit as much.

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No restitutionary recovery of Labor Code section 203 wage penalties

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Greatsealcal100Is it a wage, subject to restitution under the Unfair Competition Law, or is it a penalty, which would be considered damages for purposes of the Unfair Competition Law? In connection with California’s Labor Code, this question has arisen on several occasions in recent years, the most memorable instance being Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094. In the most recent incarnation of this issue, the Court of Appeal (First Appellate District, Division Three) examined whether “penalties” under Labor Code section 203 are recoverable via the Unfair Competition Law in Pineda v. Bank of America, N.A. (January 21, 2009)

Labor Code section 203 provides, in part, that “If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.3, 201.5, 202, and 205.5, any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefore is commenced; but the wages shall not continue for more than 30 days. . . . [¶] Suit may be filed for these penalties at any time before the expiration of the statute of limitations on an action for the wages from which the penalties arise.” In McCoy v. Superior Court (2007) 157 Cal.App.4th 225, the Court held that the extended statute of limitations set forth in section 203 applies only if the penalties are sought in connection with an action for unpaid wages. But if the action seeks only waiting time penalties under section 203, the one-year statute of limitations found in Code of Civil Procedure section 340, subdivision (a) applies. (McCoy, at p. 233.)

In Pineda, the Court of Appeal concluded that, since section 203 permitted recovery of something in excess in earned wages, it could not be considered property subject to restitution:

“ Penalties under section 203, however, are not imposed as compensation for the labor of the employee, but are triggered by the employer’s willful failure to timely pay the wages that have been earned. As the court explained in Tomlinson v. Indymac Bank, F.S.B. (C.D.Cal. 2005) 359 F.Supp.2d 891, 895, “the remedy contained in Section 203 is a penalty because Section 203 does not merely compel [the employer] to restore the status quo ante by compensating Plaintiffs for the time they worked; rather, it acts as a penalty by punishing [the employer] for willfully withholding the wages and forces [the employer] to pay Plaintiffs an additional amount. This type of payment clearly is not restitutionary, and thus cannot be recovered under the UCL.” (See also Montecino v. Spherion Corp. (C.D.Cal. 2006) 427 F.Supp.2d 965, 967 [“§ 203 payments are clearly a penalty, and thus cannot be claimed pursuant to the UCL”]; In re Wal-Mart Stores, Inc. Wage and Hour Litigation (N.D.Cal. 2007) 505 F.Supp.2d 609, 619; Murphy, supra, 40 Cal.4th at pp. 1108-1109.)

(Slip op., at pp. 1-2, footnote omitted.) Plaintiff Pineda advanced the theory that restitution was available because the penalty was a vested property interest due upon failure to timely pay wages.  The Court of Appeal rejected that theory, but complimented Plaintiff for creativity. Nice try, but no cigar.

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CORRECTION: Opening Brief submitted in Brinker Restaurant v. Superior Court

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The Opening Brief in Brinker Restaurant v. Superior Court was submitted to the Supreme Court on January 20, 2009.  Technically, it wasn't filed, since an application for permission to file an overlong brief accompanied the submission.

You can read a copy of the Opening Brief yourself here [Editor's Note: This is the Petition, not the Brief - the corrected link is below], via Acrobat.com.

CORRECTION:  Here is the correct link to the Brief.  The link above is the Petition for Review.

CORRECTION 2:  Due to a problem with the document, I am unable to post the Opening Brief at this time.  I apologize for getting your hopes up.  If I receive a corrected document in the future, I will make that available here.

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BREAKING NEWS: Review Granted in Brinkley v. Public Storage, Inc.

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Greatsealcal100As predicted by this blog and others, the Supreme Court has GRANTED review in Brinkley v. Public Storage, Inc., Sup. Ct. Case No. S168806. The matter will be held until Brinker Restaurant Corp. v. Superior Court is resolved. For the full Order of the Court, visit the docket here.  With the number of wage & hour class actions working their way through the system, it is only a matter of time before another Court of Appeal takes up some or all of the issues raised in Brinker and Brinkley, creating a Petition firestorm similar to what occurred with Proposition 64.

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Don't be crabby about it, but plaintiffs can absolutely, positively discover class member identities and contact information in California, according to Crab Addison, Inc. v. Superior Court

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Greatsealcal100The Second Appellate Division, Division Seven, has had its hands full with class action-related decisions. In this post, I listed some of the significant decisions to issue from that Division, including Puerto v. Superior Court (2008) 158 Cal.App.4th 1242 and Belaire-West Landscape, Inc. v. Superior Court (2007) 149 Cal.App.4th 554. As luck would have it, Division Seven was asked to decide yet another matter involving the right of putative class members to obtain identity and contact information for putative class members, in Crab Addison, Inc. v. Superior Court (Martinez) (December 30, 2008).

This case is of interest because it includes an extra twist on the basic issue of class member identity discovery. The Petitioner, Crab Addison, Inc. (“CAI”), contended that the trial court should have used, if anything, an “opt-in” notice because it had provided forms to each employee regarding the release of their contact information in non-specific situations to non-specific third parties:

“[CAI] argued that its employees had a heightened expectation of privacy as to their contact information based on forms they signed regarding release of their contact information. Based on this heightened expectation of privacy, CAI claimed, if the court were to consider disclosure of the employees’ contact information, it should do so subject to an “opt in” notice requirement. That is, the employees would be contacted and only those who chose to “opt in” to the lawsuit would have their contact information disclosed to Martinez.

(Slip op., at pp. 3-4.) Noted by the Court at one point in its discussion, these “releases” were not signed by employees at the time they were first hired. They were provided by CAI to its employees after the plaintiff had propounded discovery seeking the identity of the putative class members. (Slip op., at pp. 16-17.) In any event, after recapitulating its Puerto decision in great detail, the Court turned to the last question before it:

“ This brings us to the key question in this case: the effect of the release forms. CAI argues that these forms gave their employees a heightened expectation of privacy in their contact information, requiring that the contact information be given greater protection and making an “opt in” notice procedure proper. We are unconvinced by this argument.

(Slip op., at p. 13.) To answer that question, the Court relied heavily upon the policy pronouncements in Gentry v. Superior Court (2007) 42 Cal.4th 443.

“ Gentry highlights the importance placed on the rights of employees to bring class action lawsuits to enforce their statutory rights to overtime pay. So high is the importance of these rights that courts may invalidate contractual provisions that infringe upon them.

Gentry also highlights the dangers of placing in the employer’s hands the responsibility for notifying employees of the pending litigation and requiring employees to opt in to the litigation. Current employees may decline to opt in to the litigation for fear of retaliation by their employer. This in turn could immunize the employer from liability for violation of statutory wage and overtime requirements. This would violate the public policy protecting employee rights.

(Slip op., at pp. 15-16.)  The Court essentially declared release forms like that used by CAI unconscionable.  Finally, the Court compared the circumstances before it to the facts in Alch v. Superior Court (2008) 165 Cal.App.4th 1412, review denied October 28, 2008, noting that, if anything, the privacy intrusion in Alch was noticeably greater. (Slip op., at pp. 18-19.)

Although it probably won’t, this decision, coupled with those before it, should signal to defendants that the issue of discoverability of class member identity and contact information is settled. Instead, it is more likely that we will see experiments with variations of the Release form used in this case to see if there is any way to thread the needle and force an “opt-in” notice procedure.

A thorough discussion of this decision can also be found at the UCL Pracitioner.

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