Castillo v. Glenair, Inc. examines a novel joint employer question

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The term "joint employer" is used to identify the wide variety of situations where one worker is controlled in frequently different ways by two employers.  Staffing agency relationships with client companies are a commonly cited example.  In Castillo v. Glenair, Inc., the Court of Appeal (Second Appellate District, Division Two), tackled a novel question:

In a joint employer arrangement, can a class of workers bring a lawsuit against a staffing company, settle that lawsuit, and then bring identical claims against the company where they had been placed to work.

Slip op, at 2.  The Court's answer was succinct: "We answer no."  (Slip op., at 2.)

Before you get the wrong idea, this is not the situation you might have first imagined.  One firm did not sue a staffing agency, settle, and then bring the identical set of claims against the client company of the staffing agency.  Rather, the staffing company class action was running in parallel before another trial court and made it to the settlement finish line first.  (Slip op., at 2.)  There are many procedural niceties to this that don't matter.  What matters is that the first suit (known as the "Gomez" action), settled on a classwide basis, with a broad release of claims against the staffing company and its agents.  The Court in this matter concluded that Glenair was an agent of CGA with respect to CGA's payment of wages to its employees who performed work at Glenair.

While the reasoning of the Court is guided, in part, by a number of factual stipulations of the parties regarding the relationship between Glenair and the staffing company GCA, the core issue for purposes of res judicata application of the Gomez settlement hinged on whether Glenair was either a party in the Gomez settlement or in privity with a party.  The Court found that Glenair was both in privity with CGA as to the Gomez settlement and a released party in the Gomez settlement.

After reviewing developments in the law of privity, the Court said:

With this in mind, it is clear Glenair and GCA are in privity for present purposes. The subject matter of this litigation is the same as the subject matter of the Gomez litigation—namely, both cases involve the same wage and hour causes of action arising from the same work performed by the same GCA employees (the Castillos) at GCA’s client company Glenair. Based on the undisputed facts, it is apparent Glenair and GCA share the same relationship to the Castillos’ claims here. Both Glenair and GCA were involved in and responsible for payment of the Castillos’ wages. Glenair was authorized by GCA and responsible for recording, reviewing and transmitting the Castillos’ time records to GCA. GCA paid the Castillos based on those time records. And, by virtue of the Gomez settlement, the Castillos were compensated for any errors made in the payment of their wages. Thus, with respect to the Castillos’ wage and hour causes of action, the interests of Glenair and GCA are so intertwined as to put Glenair and GCA in the same relationship to the litigation here. Accordingly, we conclude they are in privity for purposes of the instant litigation.

(Slip op., at 23.)  The Court emphasized that this should not be construed as a finding that Glenair and GCA are in privity for all purposes (e.g., a tort claim for an on-premises injury).  The Court also found that Glenair was an agent of CGA based on facts that could not be reasonably construed any other way:

Glenair was an agent of GCA for the purpose of collecting, reviewing, and providing GCA’s employee time records to GCA so that GCA could properly pay its employees. The evidence is undisputed that GCA authorized Glenair to collect, review, and transmit GCA employee time records to GCA. Thus, Glenair was authorized to represent, and did represent, GCA in its dealings with third parties, specifically GCA’s payment of wages to its employees placed at Glenair. (Civ. Code, § 2295; Borders Online, supra, at p. 1189; see also Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, 788 [in concluding the plaintiff employee’s claims must be arbitrated, court considered “alleged joint employers” staffing company and its client company “agents of each other in their dealings with” the plaintiff].)

(Slip op., at 26.) The Court rebuffed the plaintiffs' argument that there was no evidence of the requisite control necessary to support the agency conclusion:

Here, GCA authorized Glenair to perform certain timekeeping-related tasks on behalf of GCA and the only reasonable inference is that GCA required Glenair to perform those tasks. Had Glenair failed to perform those timekeeping tasks, GCA would not have been able to pay its employees.

(Slip op., at 27.)  This raises a question in my mind.  Many large staffing companies install their own timekeeping systems in the workplaces of large clients.  If the staffing company collects its own time records, or its employees report time themselves, does this vitiate the agency analysis in this decision?

The decision also includes an extended discussion of procedural rules governing summary judgment, if that floats your boat.

Respondent was successfully represented by Jesse A. Cripps, Sarah Zenewicz and Elizabeth A. Dooley of Gibson, Dunn & Crutcher, 

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The Class Re-Action podcast is back in business with new Episode 16, how available anywhere digital technology is!  We discuss Alvarado v. Dart Container with attorneys who argued the case before the California Supreme Court.  Listen loud!  Listen often!

California Supreme Court agreed to hear certified question about employer exit searches in Frlekin v. Apple

The California Supreme Court has agreed to weigh in on the issue of whether time spent on security searches is compensable.  Here is the Court's description of the issue:

Frlekin v. Apple, Inc., S243805. (9th Cir. No. 15-17382; ___ F.3d ___, 2017 WL 3723235; Northern District of California; Nos. C 13-03451 WHA, No. C 13-03775 WHA, C 13-04727 WHA.) Request under California Rules of Court rule 8.548, that this court decide a question of California law presented in a matter pending in the United States Court of Appeals for the Ninth Circuit. The question presented is: “Is time spent on the employer’s premises waiting for, and undergoing, required exit searches of packages or bags voluntarily brought to work purely for personal convenience by employees compensable as ‘hours worked’ within the meaning of California Industrial Welfare Commission Wage Order No. 7?”

Justice Chin was recused and did not participate in the decision.  Between this and other issues currently before the California Supreme Court, we will see more changes in wage and hour litigation in the next few years.

Briefs on the merits are available in Troester v. Starbucks

Briefing on the merits is complete in Troester v. Starbucks Corporation (S234969).  The California Supreme Court granted the Ninth Circuit's request to decide an issue of California law.  The issue, taken from the California Supreme Court's Case Summary page is:

Request under California Rules of Court, rule 8.548, that this court decide a question of California law presented in a matter pending in the United States Court of Appeals for the Ninth Circuit. The question presented is: Does the federal Fair Labor Standard Act's de minimis doctrine, as stated in Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 692 (1946) and Lindow v. United States, 738 F.2d 1057, 1063 (9th Cir. 1984), apply to claims for unpaid wages under California Labor Code sections 510, 1194, and 1197?

If you are interested, I've made the Briefs available here.  A new sidebar link will also get you there.

A rest break says what? Vaquero v. Stoneledge Furniture LLC holds that commission-only pay employees must be paid separately for rest periods.

California is the wage and hour gift that keeps on giving.  And if you thought every wage and hour question must have been answered by now....well....the naivete is charming.  A few weeks ago, in Vaquero v. Stoneledge Furniture LLC (February 28, 2017), the Court of Appeal (Second Appellate District, Division Seven) tackled two new questions related to rest breaks:

Are employees paid on commission entitled to separate compensation for rest periods mandated by state law? If so, do employers who keep track of hours worked, including rest periods, violate this requirement by paying employees a guaranteed minimum hourly rate as an advance on commissions earned in later pay periods? 

Slip op., at 2.  And how do you think the Court answered these questions?  Everyone should pass this test; it's still California we're talking about.  The Court said yes to both questions.

The facts are important to the outcome, since this result would not apply to every commission plan.  The defendant had two different plans in operation during the class period. The first was described as follows:

After a training period during which new employees received $12.01 per hour, Stoneledge paid sales associates on a commission basis. If a sales associate failed to earn “Minimum Pay” of at least $12.01 per hour in commissions in any pay period, Stoneledge paid the 3 associate a “draw” against “future Advanced Commissions.” The commission agreement explained: “The amount of the draw will be deducted from future Advanced Commissions, but an employee will always receive at least $12.01 per hour for every hour worked.”

Slip op., at 2-3.  Later, the plan was changed:

Effective March 30, 2014, Stoneledge implemented a new commission agreement that pays sales associates a base hourly wage of $10 “for all hours worked.” In addition, sales associates can earn various types of incentive payments based on a percentage of sales. Under the new agreement, no portion of a sales associate’s base pay is deducted from or credited against incentive payments.

Slip op., at 4.  The Court began its analysis by exhaustively setting forth the rest break requirement, the nature of Wage Orders, and the policies underlying California wage and hour laws, beginning with a citation to Augustus.  Next, the Court examined whether Wage Order 7 requires separate compensation for rest breaks:

The plain language of Wage Order No. 7 requires employers to count “rest period time” as “hours worked for which there shall be no deduction from wages.” (Cal. Code Regs. tit. 8, § 11070, subd. 12(A), italics added.) In Bluford v. Safeway Stores, Inc. (2013) 216 Cal.App.4th 864 the court interpreted this 12 language to require employers to “separately compensate[ ]” employees for rest periods where the employer uses an “activity based compensation system” that does not directly compensate for rest periods. (Id. at p. 872.)

Slip op., at 11-12.  After a thorough examination, the Court agreed that the approach in Bluford was correct:

We agree with Bluford that Wage Order No. 7 requires employers to separately compensate employees for rest periods if an employer’s compensation plan does not already include a minimum hourly wage for such time. (See Gonzales, supra, 215 Cal.App.4th at pp. 48-49 [concluding that the identical language in Wage Order No. 4 requires employers to separately pay piecerate workers for nonproductive time].) All of the federal courts that have considered this issue of California law have reached a similar conclusion and have held employers must separately compensate employees paid by the piece for nonproductive work hours.

Slip op., at 14.  The Court then concluded that the same result applies to commission-pay employees:

The plain language of Wage Order No. 7 covers employees paid by commission. (See Cal. Code Regs. tit. 8, § 11070, subd. 1 [applying to “all persons employed in the mercantile industry whether paid on a time, piece rate, commission, or other basis”]; id. at § 11070, subd. 2(O) [“wages” includes “amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation”].) Where, as here, the language of a wage order is unambiguous, it is dispositive. (Brinker, supra, 53 Cal.4th at p. 1028; see also Gonzales, supra, 215 Cal.App.4th at p. 49 [the wage order “does not allow any variance in its application based on the manner of compensation”].)

Slip op., at 15.  The Court explained that commission pay systems and piece rate systems were essentially identical in their treatment of rest breaks:

The commission agreement used by Stoneledge during the class period is analytically indistinguishable from a piece-rate system in that neither allows employees to earn wages during rest periods. Indeed, the purpose of a rest period is to rest, not to work.

Slip op., at 16.  After reaching its conclusion, the Court then spent the balance of its discussion disposing of various arguments by the defendant.  In one example, the Court rejected that a guaranteed base drawn against future commissions did not pay for rest periods:

For sales associates whose commissions did not exceed the minimum rate in a given week, the company clawed back (by deducting from future paychecks) wages advanced to compensate 23 employees for hours worked, including rest periods. The advances or draws against future commissions were not compensation for rest periods because they were not compensation at all. At best they were interest-free loans. Stoneledge cites no authority for the proposition that a loan for time spent resting is compensation for a rest period. To the contrary, taking back money paid to the employee effectively reduces either rest period compensation or the contractual commission rate, both of which violate California law. (See § 221 [prohibiting employers from collecting or receiving from an employee “any part of wages theretofore paid by said employer”]; § 222 [prohibiting employers from withholding any part of a wage agreed upon]; § 223 [prohibiting employers from “secretly pay[ing] a lower wage while purporting to pay the wage designated by statute or by contract”]; cf. Armenta, supra, 135 Cal.App.4th at p. 323 [averaging wages across pay periods to satisfy minimum wage requirements “effectively reduces [employees’] contractual hourly rate”].)

Slip op., at 22-23.  The Court then went through mathematical examples to show that the system in place earlier in the class period did compensate employees differently depending upon whether they took rest breaks or not.  If you are paid exclusively on commission, expect to see your compensation system get a tweak in the near future.

California Supreme Court rejects "on duty" or "on call" rest breaks in Augustus v. ABM Security Services, Inc.

The California Supreme Court dropped a pretty big opinion in the wage and hour world today, reversing the Court of Appeal in Augustus v. ABM Security Services, Inc. (Dec. 22, 2016).  The Supreme Court specifically waded into the topic of rest breaks, and, specifically, whether an "on call" or "on duty" rest break is ever sufficient.  Here's the summary:

We granted review to address two related issues: whether employers are required to permit their employees to take off-duty rest periods under Labor Code section 226.7 and Industrial Welfare Commission (IWC) wage order No. 4-2001 (Cal. Code Regs., tit. 8, § 11040 (Wage Order 4)), and whether employers may require their employees to remain "on call" during rest periods. What we conclude is that state law prohibits on-duty and on-call rest periods. During required rest periods, employers must relieve their employees of all duties and relinquish any control over how employees spend their break time. (See Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1038-1039 (Brinker).)

Slip op., at 1.  While this decision won't directly impact most wage and hour cases, given that it is fairly specific to the sort of job circumstances encountered by employees like security guards, it will put a little bit of weight on the scale when rest break claims are up for settlement or certification.

If I can, I will write more about this decision later, but, for now, the first paragraph pretty much summarizes the result.

Roxborough, Pomerance, Nye & Adreani, Drew E. Pomerance, Michael B Adreani, Marina N. Vitek; The Ehrlich Law Firm, Jeffrey Isaac Ehrlich; Initiative Legal Group, Monica Balderrama, G. Arthur Meneses; Scott Cole & Associates, Scott Edward Cole, Matthew R. Bainer; Law Offices of Alvin L Pittman and Alvin L. Pittman were listed as counsel for Plaintiffs and Respondents.  Mr. Pomerance argued for Plaintiff.  Well done, Drew!

Lubin v. The Wackenhut Corporation tackles Wal-mart Stores, Inc. v. Dukes, Brinker, and decertification

This opinion is like Christmas and Hanukkah, sitting in an Easter Basket filled with Valentine's Day treats.  And I overlooked it for two weeks!  In Lubin v. The Wackenhut Corporation, the Court of Appeal (Second Appellate District, Division Four) gets deep into the wage and hour weeds in 50-page opinion that is overflowing with interesting bits.  Here's the summary of how the matter ended up before the Court of Appeal:

Appellants Nivida Lubin, Sylvia M. Maresca, and Kevin Denton (together plaintiffs) filed this action on behalf of themselves and similarly situated persons, alleging defendant and respondent The Wackenhut Corporation (Wackenhut) violated California labor laws by failing to provide employees with off-duty meal and rest breaks and by providing inadequate wage statements. The trial court initially granted plaintiffs’ motion for class certification. However, as the case approached trial, the United States Supreme Court reversed a grant of class certification in Wal-Mart Stores, Inc. v. Dukes (2011) 564 U.S. 338 (Wal-Mart). Relying on Wal-Mart, Wackenhut moved for decertification. The trial court granted the motion. 

Slip op., at 2.

I don't have time to try and summarize this monster opinion at the moment, but it is a must read.  The Court spends a lot of time explaining why Wal-Mart is not applicable to wage and hour certification questions, notes that the Supreme Court, which decided Wal-Mart, held this year in Tyson Foods, Inc. v. Bouaphakeo, ___ U.S. ___, ___, 136 S.Ct. 1036, 1048 (2016) that statistical evidence is appropriately used in class actions, spends a substantial amount of time applying Brinker and the cases that followed to explain that variations in rates of missed meal and rest breaks, when certified based on an unlawful policy or procedure, is a damages issue, not a predominance question, and lots, lots, more!

Weinberg, Roger & Rosenfeld, Emily P. Rich, Theodore Franklin, Manuel A. Boigues; Posner & Rosen, Howard Z. Rosen, Jason C. Marsili, Brianna M. Primozic; James R. Hawkings, James R. Hawkings, and Gregory E. Mauro, represented the successful Plaintiffs and Appellants on appeal.

Morris v. Ernst & Young, LLP update

For those of you who recognized that the Ninth Circuit got it 100% right when it found in Morris v. Ernst & Young, LLP (9th Cir. Aug. 22, 2016) that an arbitration agreement that precludes collective actions violates rights protected by the NLRA, you may wish to know where things stand with that case on further appeal.  Right now, Morris is before the U.S. Supreme Court on a Petition for Writ of Certiorari.  Here is the Docket report:

  • Sep 8 2016:  Petition for a writ of certiorari filed. (Response due October 11, 2016)
  • Sep 21 2016:  Consent to the filing of amicus curiae briefs, in support of either party or of neither party, received from counsel for petitioners.
  • Sep 29 2016:  Consent to the filing of amicus curiae briefs, in support of either party or of neither party, received from counsel for respondents
  • Oct 3 2016: Brief amici curiae of National Association of Manufacturers, et al. filed. VIDED.
  • Oct 3 2016: Brief amicus curiae of Chamber of Commerce of the United States filed.
  • Oct 6 2016: Order extending time to file response to petition to and including November 14, 2016.
  • Oct 7 2016: Brief amicus curiae of International Association of Defense Counsel filed.
  • Oct 10 2016: Brief amicus curiae of Atlantic Legal Foundation filed.
  • Oct 11 2016: Brief amicus curiae of The Employers Group filed.
  • Oct 11 2016: Brief amicus curiae of The Retail Litigation Center, Inc. filed.
  • Oct 11 2016: Brief amicus curiae of The Business Roundtable filed.
  • Oct 11 2016: Brief amicus curiae of New England Legal Foundation filed.
  • Nov 15 2016: Order further extending time to file response to petition to and including November 21, 2016.
  • Nov 21 2016: Brief of respondents Stephen Morris, et al. in opposition filed.

Just look at those busy amicus filers.  I bet all those employers are telling the Supreme Court that the world would end in fire and death if they couldn't block class actions for wage and hour violations with arbitration agreements that employees have to sign to work.

Ninth Circuit begins to define scope of Mazza in Ruiz Torres v. Mercer Canyons Inc.

In Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), the Ninth Circuit Rule 23 predominance was defeated where many (or even most) class members “were never exposed to the allegedly misleading advertisements” (666 F.3d at 597) because the defendant subjected only a small segment of an expansive class of car buyers to misleading material as part of a “very limited” advertising campaign (id. at 595).  This decision raised questions about how federal courts in the Ninth Circuit would actually evaluate UCL claims when faced with reconciling In re Tobacco II and Mazza.  In Ruiz Torres v. Mercer Canyons Inc. (9th Cir. Aug. 31, 2016), a wage & hour suit in which the District Court certified a class, the Ninth Circuit analyzed Mazza in a manner demonstrating that it may be constrained in its application moving forward.

Read More

Ninth Circuit examines arbitration and PAGA claims in Mohamed v. Uber Technologies, Inc.

The Ninth Circuit tackles a complicated set of arbitration issues in Mohamed v. Uber Technologies, Inc. (9th Cir. Sept. 7, 2016).  Among other things, the panel held that the District Court erred when it decided the question of arbitrability, since the question of arbitrability was delegated under the agreement to an arbitrator.  But the panel agreed that the defendants could not compel arbitration of the PAGA claim asserted in the case, severing that claim for further proceedings in before the trial court.  Finally, the panel agreed that a separate defendant not party to the arbitration agreement could not assert a right to enforce the agreement as an agent of Uber.