Court of Appeal construes Labor Code section 2810, which authorizes suits against contractors by certain employees of subcontractors

Labor Code section 2810 states that "[a] person or entity may not enter into a contract or agreement for labor or services with a construction, farm labor, garment, janitorial, or security guard contractor, where the person or entity knows or should know that the contract or agreement does not include funds sufficient to allow the contractor to comply with all applicable local, state, and federal laws or regulations governing the labor or services to be provided."   Section 2810 is a fairly new statute, and one that had not been the subject of any Court of Appeal decision.  But in Castillo v. Toll Brothers, Inc. (July 28, 2011), that changed.  I could tell you that this very exciting opportunity to read an opinion in a truly novel area of law prompted my review of the case.  But, in truth, it was just the defendant's name that caught my eye.

In any event, the trial court, dealing with summary judgment motions and lots of supplemental briefing, evidently had its hands full with a large number of arguments intersecting Labor Code section 2810.  The Court of Appeal commended the trial court's diligent efforts:

The order is a masterful synthesis of a sprawling factual record, reflecting the court's careful work with the parties over the course of several months. We recount the decision in some detail because it forms the foundation for our own ruling.

Slip op., at 6.

A key legal issue addressed in the appeal was determination of whether minimum wage or local prevailing wage sets the standard for insufficiency.  The Court also clarified that actual labor cost, and not the base wage, sets the correct standard.

As to the standard for insufficiency, the Court held that the "minimum wage" sets the standard:

Plaintiffs' position is untenable because there is no general law requiring an employer to pay its workers the average local wage for a particular skill or trade, if that average wage is higher than the legal minimum. Merely to pay less than the prevailing wage therefore violates no law. In the absence of a local, state, or federal law requiring the payment of a wage higher than the legal minimum, a contract cannot be insufficient under section 2810 merely because it does not provide sufficient funds to pay that higher wage, since section 2810 imposes nothing more than compliance with legal requirements.

Slip op., at 14.  (Note: Earlier in the opinion the Court clarified that "minimum wage" would depend upon the industry and wage order at issue in a particular case.)  While this soundbite quote seems clear enough, the opinion goes on for pages, reviewing legislative history and addressing, in detail, the contentions of the plaintiffs regarding the correct measure of sufficiency of funding.

On the second issue, the Court observed that compliance with all laws sets the standard for compliance, which requires analysis of total labor cost, not just the wage that would be paid to employees:

Because an employer is required to pay all of these costs to comply with applicable laws when employing a laborer, it is appropriate to use the total labor cost, rather than the worker‘s wage, in determining sufficiency under section 2810.

Slip op., at 7.

The second half of the opinion addresses (1) the sufficiency of evidence for summary judgement purposes on the issue of whether specific contracts were sufficiently funded, and (2) some over-reaching pre-emption arguments by Toll Brothers.  If that stuff floats your boat, this is a page turner.

Prevailing wage laws apply where a public entity provides a land rent credit to a private entity

Labor Code section 1720, subdivision (a)(1) of the Public Wage Law ("PWL") defines " 'public works'" to mean: "Construction, alteration, demolition, installation, or repair work done under contract and paid for in whole or in part out of public funds . . . ."  When public funds end up in the hands of private entities, it is not always clear whether the PWL applies.  In Hensel Phelps v. San Diego Unified Port District (July 26, 2011), the Court of Appeal (Fourth Appellate District, Division One) had no trouble following the money trail.  The Court considered whether a hotel construction project on land that the San Diego Unified Port District (the Port District) leases to the hotel owner qualified as a public work within the meaning of the PWL where the lease specified that the Port District would provide what the lease refers to as a "rent credit" in the total amount of $46.5 million during the first 11 years of the lease.  Characterizing the "rent credit" as a source of public funds flowing to the private hotel project, the Court concluded that the PWL applied:

In assessing CCCC's argument, we note that no case law exists interpreting the phrase "rents . . . that are . . . reduced, . . . waived, or forgiven" in section 1720, subdivision (b)(4). However, when interpreting a statute, "'"[t]he words of the statute should be given their ordinary and usual meaning and should be construed in their statutory context." [Citation.] If the plain, commonsense meaning of a statute's words is unambiguous, the plain meaning controls.' " (People v. King (2006) 38 Cal.4th 617, 622.) Here, we agree with CCCC that the phrase "rents . . . that are reduced" has a plain everyday meaning that is clear and unambiguous. Under a plain commonsense meaning, rent is reduced when the amount of the rental obligation is set at a certain amount by agreement or by operation of law, and a discount is given from that amount. Under a plain commonsense meaning, rents are waived or forgiven when a party agrees not to impose or demand rents.

Applying this plain commonsense meaning, we agree with CCCC that rents were reduced, waived or forgiven by the Port District. The Lease sets forth a monthly and minimum annual rent amount that OPB is obligated to pay to the Port District. The rent credit constitutes a reduction in that payment obligation. In addition, the 100 percent rent credit during the first 34 to 36 months of the Lease is not only a reduction, but also could be considered a waiver of the rent because no rent at all is due in that period.

Slip op., at 23-24.

Brown v. Ralphs Grocery Company decided, but dodges the Gentry-Concepcion issue and the NLRA prohibition on concerted activity bans

The Court of Appeal (Second Appellate District, Division Five) issued its opinion today in Brown v. Ralphs Grocery Company (July 12, 2011).  The opinion is notable for what it doesn't address.  As mentioned previously here, the Court had requested supplemental briefing on the issue of whether Concepcion dished out the Discover Bank treatment to Gentry v. Superior Court (2007) 42 Cal.4th 443.  After a few feverish days of writing an amicus brief (for CAOC) focused primarily on the fact that the National Labor Relations Act prohibits enforcement of any contract that would impede concerted activity by employees (including class actions to improve wages and working conditions), I was disappointed to see that the Court dodged the entire question, deciding the matter on the ground that a factual showing had not been made in the trial court to support the Gentry factors.  There is also a split decision discussion of how PAGA claims interact with motions to compel arbitration.

On balance, this non-opinion doesn't do much to answer the question of how Concepcion interacts with wage & hour class actions and the Gentry decision.  It will take another appellate vehicle to properly present those questions for review.

Securitas Security Services USA, Inc. v. Superior Court (Holland) tells us what ISN'T a split shift

"Split shift."  So easy to say, but surprisingly hard to define in a way that doesn't require a list of demonstrative examples and exclusions.  In Securitas Security Services USA, Inc. v. Superior Court (Holland) (July 7, 2011), the Court of Appeal (Second Appellate District, Division Three) issued an order to show cause to consider issues related to the interaction of the split shift definiion in Industrial Wage Commission‟s wage order No. 4-2001 (Cal. Code Regs., tit. 8, § 11040) and the declaration of a "workday" by an employer (security guards worked shifts beginning in one "workday" and continuing into the next).  The trial court rejected the Securitas definition of "split shift" and denied its motion for summary judgment.  The Court of Appeal disagreed with the trial court's analysis, but agreed that summary judgment could not be granted.

For reference, the Court set forth the definitions at issue:

Wage Order No. 4 defines a “split shift” as “a work schedule, which is interrupted by non-paid non-working periods established by the employer, other than bona fide rest or meal breaks.” (Cal. Code Regs., tit. 8, § 11040, subd. 2(Q).)

A “shift” is defined as “designated hours of work by an employee, with a designated beginning time and quitting time.” (Cal. Code Regs., tit. 8, § 11040, subd. 2(P).) A “workday” is defined as “any consecutive 24-hour period beginning at the same time each calendar day.” (Id., subd. 2(T); see also Lab. Code, § 500, subd. (a).)

Slip op., at 6.  Jumping to the end of the story, the Court noted that "work schedule" is not tied to the definition of "workday."  The Court went with its common sense construction of the term: "In the context of a provision establishing minimum wages to compensate employees who are required to return to work after an interruption in their 'work schedule,' we believe that a 'work schedule' simply means an employee's designated working hours or periods of work."  Slip op., at 7.  Thus, consecutive overnight shifts that overlap a definied "workday" do not create split shifts because the "shift" is a continguous block, even though it overlaps a "workday."

The Court then discussed the policies behind overtime pay, split shift premiums, meal period premiums, and the like, quoting extensively from Murphy v. Kenneth Cole Productions, Inc., 40 Cal. 4th 1094 (2007).

After all that, the Court noted that Securitas failed to prove that the plaintiffs didn't work actual split shifts at other times.

Now we know one circumstance that isn't a split shift.  We are still left, however, without complete guidance as to what qualifies as a bona fide split shift.  Can an employer give its employees an hour and a half lunch without creating a split shift?  Can it give two hour lunches?  How many hours have to elapse between the end of one work period before it is viewed as a distinct and complete "shift?"  Bonus answer: probably more than 1 and less than 24.

Sullivan v. Oracle Corporation addresses how California law applies to nonresident employees working both in and outside California

Today, the California Supreme Court issued an Opinion following its acceptance of questions about the construction of California law from the United States Court of Appeals for the Ninth Circuit.  In Sullivan v. Oracle Corporation (June 30, 2011), the Court addressed (1) whether the Labor Code's overtime provisions apply to plaintiffs' claims for compensation for work performed in this state [with the ancillary question of whether the same claims can serve as predicates for claims under California's unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.)], and (2) whether the plaintiffs' claims for overtime compensation under the federal Fair Labor Standards Act of 1938 (FLSA) (29 U.S.C. § 201 et seq.; see id., § 207(a)) for work performed in other states can serve as predicates for UCL claims.

The Court responded "yes" to the first question group, and "no" to the second.

On the first issue, the Court said:  "The California Labor Code does apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week. (See Sullivan III, supra, 557 F.3d 979, 983.)"  (Slip op., at 18.)

On the related UCL question, the Court said: "Business and Professions Code section 17200 does apply to the overtime work described in question one. (See Sullivan III, supra, 557 F.3d 979, 983.)"  Slip op., at 19.)

The full answer to the last issues was:  "Business and Professions Code section 17200 does not apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs in the circumstances of this case based solely on the employer's failure to comply with the overtime provisions of the FLSA."  (Slip op., at 23.)

The Opinion was issued by a unanimous Court.

Update on 2011-06-30 17:42 by The Complex Litigator

The post title was corrected after the initial posting.

Not too late to register for Bridgeport's Mid Year Wage & Hour Litigation Conference

Bridgeport is holding its Mid Year Wage & Hour Litigation Conference on June 3, 2011, in San Diego, California, at the Westin San Diego Hotel.  I will be speaking with Julie Trotter, of Call & Jensen, about the impact of Concepcion on the employment law practice area.  View the full program agenda here.

Concepcion has no application in many employment cases

About a week ago, on behalf of Consumer Attorneys of California ("CAOC"), I filed an amicus curiae brief in support of the plaintiff in Brown v. Ralphs Grocery Company.  In Brown, after oral argument, the Court of Appeal requested supplemental briefs on the question of whether AT&T Mobility LLC v. Concepcion (April 27, 2011) precludes the Gentry v. Superior Court (2007) 42 Cal.4th 443 defense to certain arbitration agreements.  After determining that the parties had not already addressed the issues, CAOC presented several bases for rejecting the contention that Concepcion overruled Gentry, including the fact that a bar on class actions violates the National Labor Relations Act's protection of concerted action by employees to improve their wages and working conditions.  You can view the brief viat the Spiro Moss website here.

Other attorneys at Spiro Moss contributed to the brief, including Dennis F. Moss (who conceived of the argument involving the NLRA), Gregory N. Karasik, and J. Mark Moore.  David M. Arbogast of Arbogast & Berns LLP also contributed to CAOC's brief.

Update on 2011-06-30 19:36 by The Complex Litigator

An error in the post title was corrected.

California Supreme Court activity for the week of May 16, 2011

The California Supreme Court held its (usually) weekly conference on May 18, 2011.  Notable results include:

• As has been the practice in all prior published cases on this issue, on a petition for review, review was granted, and the matter held, in Tien v. Tenet Healthcare (February 16, 2011) (affirmed the trial court's order denying class certification of meal period, rest break, and waiting time penalty claims). The opinion spent a substantial amount of time discussing the meal period compliance question under review in Brinker.

California Supreme Court activity for the week of May 9, 2011

The California Supreme Court held its (usually) weekly conference on May 11, 2011.  Notable results include:

• On a petition for review, review was granted, and the matter held, in United Parcel Service Wage And Hour Cases (February 24, 2011) (fees not available to defendant prevailing on Labor Code section 226.7 claims), covered previously on this blog here.  Review was previously granted in a case addressing this issue: Kirby v. Immoos Fire Protection, Inc. (July 27, 2010).
• On a petition for review, review was denied in Price v. Starbucks Corporation (February 17, 2011).

Supreme Court activity for the week of April 25, 2011

The California Supreme Court held its (usually) weekly conference on April 27, 2011.  Notable results include:

• On a petition for review, review was denied in Arechiga v. Dolores Press, Inc. (February 7, 2011) (construing Labor Code section 515(d)), covered previously here.
• On a petition for review, review was denied in Safaie v. Jacuzzi Whirlpool Bath, Inc. (February 22, 2011) (death knell doctrine), covered previously here.
• On a petition for review, review was denied in Kullar v. Foot Locker Retail, Inc. (January 18, 2011) (disqualification issues), covered previously here.

Overall, a rough day in the land of class actions.