Another Court of Appeal holds that PAGA claims cannot be split and sent partially to arbitration

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Right now, Lawson v. ZB, N.A., review granted Mar. 21, 2018, S246711, is making its way through the California Supreme Court. The case asks whether a representative action under the Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) (‘PAGA”) seeking recovery of individualized lost wages as civil penalties under Labor Code § 558 fall within the preemptive scope of the Federal Arbitration Act (9 U.S.C. § 1 et seq.). Lawson was argued on June 5, 2019. Supplemental briefing was requested and received, and the matter was deemed submitted on June 27, 2019. That means a decision is imminent.

Today, in Mejia v. Merchants Building Maintenance, LLC (August 13, 2019), the Court of Appeal (Fourth Appellate District, Division One) another Court of Appeal came down on the side of the Courts of Appeal that have concluded that PAGA claims cannot be split so as to direct a portion to arbitration:

We agree with the conclusion of the Lawson and Zakaryan courts on this question, and conclude that a single PAGA claim seeking to recover section 558 civil penalties may not be "split" between that portion of the claim seeking an "amount sufficient to recover underpaid wages" and that portion of the claim seeking the $50 or $100 per-violation, per-pay-period assessment imposed for each wage violation. The result is that an employee bringing a PAGA claim to recover the civil penalties identified in section 558 may not be compelled to arbitrate that portion of her PAGA claim that seeks an amount sufficient to recover underpaid wages pursuant to that statute, while the rest of the claim that seeks the $50 or $100 per-pay-period per violation portion of the penalty remains in a judicial forum. We therefore affirm the trial court's order denying the MDM defendants' motion to compel arbitration in this case

Slip op., at 6.

As for reading tea leaves, the Lawson matter (perhaps to be known as the ZB matter due to a change in the name of the case), as noted above, requested supplemental briefing on this question:

If this court concludes Labor Code section 558's "amount sufficient to recover underpaid wages" is not a "civil penalty" recoverable under the Private Attorneys General Act (Lab. Code, § 2698 et seq.), should the trial court be ordered to deny ZB's motion to compel arbitration?

Lawson docket. That question suggests that at least someone on the Supreme Court is thinking about whether an aggrieved employee can recover unpaid wages at all through Labor Code § 558. There’s a curve for you.

Interesting meal and rest break questions certified by Ninth Circuit to the California Supreme Court

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This is interesting. On August 1, 2019, the Ninth Circuit certified a pair of questions to the California Supreme Court in Cole v. CRST Van Expedited, Inc. (No. 17-55606) (9th Cir. Aug. 1, 2019). Before we get ahead of ourselves, the California Supreme Court still needs to agree to take up the certified questions. They do so at an exceedingly high rate, but it isn’t a done deal…yet. So, what about those questions? The questions posed are as follows:

1.Does the absence of a formal policy regarding meal and rest breaks violate California law?

2.Does an employer’s failure to keep records for meal and rest breaks taken by its employees create a rebuttable presumption that the meal and rest breaks were not provided?

Slip op., at 4. The case arises in the context of the operation of truck drivers working for a shipping company. The discussion of the reason for the certification clarifies where the Ninth Circuit seeks guidance:

The California Supreme Court did not directly address in Brinker whether the absence of a policy providing for meal and rest breaks constitutes a violation of California labor law. However, in Duran v. U.S. Bank Nat’l Ass’n, 325 P.3d 916,933 n.28 (Cal. 2014), the California Supreme Court observed that “[i]n regard to other wage and hour claims, some courts have held that the absence of a uniform policy supports [class] certification if such a policy is required by law. We express no opinion on this question.” (emphasis in the original).

Slip op., at 11. After noting Benton and Bradley, the Court also observed the concurring comment in Brinker:

In Brinker, Justice Werdegar noted that “[i]f an employer’s records show no meal period for a given shift over five hours, a rebuttable presumption arises that the employee was not relieved of duty and no meal period was provided.” 273 P.3d at 545 (Werdegar, J., concurring).

Slip op. at 12.

If the California Supreme Court takes up the questions, I will be happy to handle action on the outcome for a 5% vig. Kidding. 10%. Still kidding.

The California Supreme Court lays down the law on "ascertainability" in Noel v. Thrifty Payless, Inc.

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I’m testing out opening sentences. The first candidate is: “The objective import of Noel v. Thrifty Payless, Inc. (July 29, 2019) is easy to ascertain.” You can see how that’s an option. It includes “objective,” as in the class definition must state the class with objective characteristics. And it drops in “ascertain,” as in this is a decision about the ascertainability requisite for certification. I like it. No second option for you.

Noel is a putative class action brought on behalf of retail purchasers of an inflatable outdoor pool sold in packaging that was allegedly misleading about the pool’s characteristics. The trial court denied the representative plaintiff’s motion for class certification on the basis that the plaintiff did not supply evidence showing how class members might be individually identified when the time came to do so. The Court of Appeal upheld the trial court, reasoning that such evidence was necessary to ensure that proper notice would be given to the class. The Supreme Court said, “Nah, brah.”

The Supreme Court reviewed the history of the “ascertainability” requisite. The first view of the requisite focuses on the nature of the definition of the class:

One view of ascertainability concentrates on the proposed class definition itself. This viewwas applied in Bartold v. Glendale Federal Bank (2000) 81Cal.App.4th 816 (Bartold), superseded by statute on another point as stated in Markowitz v. Fidelity Nat. Title Co. (2006) 142Cal.App.4th 508, 524. The Bartold court explained that “[a] class is ascertainable if it identifies a group of unnamed plaintiffs by describing a set of common characteristics sufficient to allow a member of that group to identify himself or herself as having a right to recover based on the description.” (81 Cal.App.4th at p.828.) This basic view of ascertainability has been reiterated by numerous other Courts of Appeal, including the courts in Estrada, supra, 154 Cal.App.4th at page 14 and Aguirre, supra, 234 Cal.App.4th at pages 1299 to 1300. (See also Aguirre, at p. 1300 [listing cases].) A similar formulation regards a class as ascertainable when it is defined “in terms of objective characteristics and common transactional facts” that make “the ultimate identification of class members possible when that identification becomes necessary.” (Hicks, supra, 89Cal.App.4that p.915.)

Slip op., at 21. The second formulation of the requisite was summarized as follows:

The second basic view of ascertainability entails a more exacting inquiry. One such articulationregards the ascertainabilityrequirementas calling for an examination into“(1) the class definition, (2) the size of the class and (3) the means of identifying class members.” (Miller v. Woods (1983) 148 Cal.App.3d 862, 873 (Miller); see also Noel, supra, 17 Cal.App.5th at p. 1324, Sotelo, supra, 207 Cal.App.4th at p. 648; Reyes v. Board of Supervisors (1987) 196 Cal.App.3d 1263, 1274.) Consistent with this view, it has been said that “[c]lass members are ‘ascertainable’ where they may be readily identified without unreasonable expense or time by reference to official records.” (Rose v. City of Hayward (1981) 126 Cal.App.3d 926, 932 (Rose).) On its face, the quoted language from Rose could be understood as specifying a sufficient, as opposed to a necessary, basis for finding an ascertainable class within the Miller framework. But some courts, drawing from Rose’s focus on the mechanics of identifying class members, have gone further and required a class plaintiff to make a specific factual or evidentiary showing in order to show an ascertainable class.

Slip op., at 21-22. The Court then looked at the similar divide in the federal system, focusing extensively on the Seventh Circuit’s analysis of the requisite in Mullins v. Direct Digital, LLC, 795 F.3d 654 (7th Cir. 2015). After that extensive review of competing approaches, the Supreme Court concluded that the process protection provided by an objective and clear class definition was more significant to the ascertainability requirement than the goal of notice to each class member. From that conclusion a clear rule followed:

As a rule, a representative plaintiff in a class action need not introduce evidence establishing how notice of the action will be communicated to individual class members in order to show an ascertainable class.

Slip op., at 38. The Court expressly disapproved of strict reliance upon Rose as stating the requirement for an ascertainability showing. Slip op., at 41, n. 15.

The Court observed that a trial court could consider how notice will be provided to a class as a separate inquiry into, e.g., manageability. Slip op., at 42. It emphasized, however, that notice was not an aspect of the ascertainability showing. The decision of the Court was unanimous.

Christopher Wimmer and Peter Roldan of Emergent Legal and Leslie Brueckner and Karla Gilbride of Public Justice represented the successful Plaintiff and Appellant.

Noel v. Thrifty Payless, Inc. should be decided soon, addressing whether class members must be identifiable

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In what might be a significant decision, Noel v. Thrifty Payless, Inc. was argued to the California Supreme Court on May 8, 2019. The issue presented for review is as follows: “Must a plaintiff seeking class certification under Code of Civil Procedure section 382 or the Consumer Legal Remedies Act demonstrate that records exist permitting the identification of class members?” While California appeared to have settled this question decisively many decades ago, the question arose when the First Appellate District (Division Four) opined that such identification was required. A decision may issue any time in the next couple of weeks. This is not likely to be an issue for wage and hour cases — where employer records are basically always available as a source of identification information — but is may be an issue in consumer class actions, where specific class members identification may not be possible.

It's still possible to waive enforcement of arbitration agreements according to Nunez v. Nevell Group, Inc.

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Other than the minor surprise I now experience when any motion to compel arbitration is denied, such agreements having achieved a status as super-contracts with super powers, the decision in Nunez v. Nevell Group, Inc. (pub. ord. May 28, 2019) isn’t too surprising. In Nunez, the Court of Appeal (Fourth Appellate District, Division Three) affirmed the trial court’s denial of a motion to compel arbitration on the basis of waiver, delay, and prejudice.

The Court covers two topics in its discussion of waiver that might be of use to others. First, the Court examines the idea of waiver generally. Second, the Court examines the “clear and unmistakable” standard that asks whether a CBA clearly and unmistakably waives the right to a judicial forum for the particular type of claim in question. Keep in mind that, as the Court here observed, federal and California state courts may reach slightly different conclusions regarding application of the “clear and unmistakable” waiver standard, since California Courts are not bound by federal court decisions on the subject.

FAA section 1 held to exempt some California truck drivers from FAA coverage in Nieto v. Fresno Beverage Co.

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The arbitration battle lines have somewhat diminished in their spectacular scope, but that doesn’t mean the war is entirely over. Case in point: in Nieto v. Fresno Beverage Co. (certified for publication March 22, 2019), the Court of Appeal (Fifth Appellate District) affirmed a trial court ruling that found beverage company deliver drivers to be exempt from Federal Arbitration Act (9 U.S.C. §1 et seq., the “FAA”) by operation of the exemption in Section 1 for what the Supreme Court has denominated “transportation workers.”

The case is not too long of a read, but it nevertheless does a thorough job of reviewing decisions addressing the Section 1 exemption (see pages 6-13 for the state of affairs).

There is also a quick reminder in the discussion about waiver of arguments not raised in the Opening Brief.

Kenneth H. Yoon, Stephanie E. Yasuda, and Brian G. Lee of Yoon Law and Douglas Han, Shunt Tatavos-Gharajeh, and Daniel J. Par of Justice Law Corporation represented the prevailing plaintiff on appeal.

Petition for Review of PAGA decision denied in Huff v. Securitas Security Services USA

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I previously mentioned the surprising appellate court opinion in Huff v. Securitas Security Services USA (May 23, 2018). When it was issued, I was certain that review would be requested, and I would not have been surprised if review had been granted. However, I missed the fairly quick denial of review and depublication. That denial issued on August 8, 2018. Sorry I missed that; this is a noteworthy opinion.

Inconsistent Spanish and English arbitration clauses leads to invalidation in Juarez v. Wash Depot Holdings, Inc.

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I won't hit you with too much analysis of a case right before the 4th of July holiday, but in Juarez v. Wash Depot Holdings, Inc. (July 3, 2018), the Court of Appeal (Second Appellate District, Division Six), upheld a trial court order declining to enforce an arbitration agreement.  The peculiarity that led to the result is pretty simple:

A company provides its employees with a handbook setting forth its employment policies. The handbook is written in English and Spanish. The handbook requires arbitration of employment disputes and denies an employee's right to bring an action under the California Private Attorneys General Act (PAGA). The English version states that the denial of the right to bring a PAGA action is severable if such denial is found by a court to be unenforceable. The Spanish version provides that the PAGA denial is not severable. 

Slip op., at 1.  The Court concluded that this was potentially deceitful and declined to sever the provision regarding PAGA, agreeing that the entire agreement was unenforceable.

Jack Bazerkanian of Shin Ryu Bazerkanian, LLP, and James M. Lee, Caleb H. Liang of LTL Attorneys LLP, represented the successful Plaintiff and Respondent.

Shine v. Williams-Sonoma, Inc. puts the spotlight on releases in wage and hour class actions

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See what I did there?  Shine. Spotlight.  Nevermind.  Today's wage and hour class action opinion comes to us courtesy of Shine v. Williams-Sonoma, Inc. (May 29, 2018).  In Shine, the Court of Appeal (Second Appellate District, Division Four) reviewed de novo whether a demurrer to a reporting time pay complaint was properly sustained on res judicata grounds.  Multiple bases were argued in support of the Trial Court's Order, but the Court found that the res judicata basis was sufficient alone, and did not require analysis of the other arguments.  As to res judicata, the Court said:

The Morales complaint sought recovery of unpaid wages on behalf of class members employed by Williams-Sonoma since June 24, 2009. The allegations in that case included the claims of failure to provide meal and rest periods, overtime and minimum wages, timely wages, and final paychecks to the Morales class plaintiffs.
In the present action, Mr. Shine seeks reporting-time pay for on-call shifts that were canceled in early 2013, within the period covered by the Morales settlement agreement. Because reporting-time pay is a form of wages, a claim for reporting-time pay could have been raised in the Morales action. (See Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1111–1112 [reporting-time pay, like split-shift and overtime pay, is a form of wages even though it serves a dual purpose of shaping employer behavior].) The fact that no claim for reporting-time pay was alleged in Morales does not alter our determination that the same primary right, to seek payment of wages due, was involved in both Morales and this case. (See Boeken v. Phillip Morris USA, Inc. (2010) 48 Cal.4th 788, 798–799.)

Slip op., at 7.  The Court also discussed Villacres, but, compared to Villacres, the outcome seems more obvious here when the language of the prior release is considered:

Like the Augustus release, the Bonilla settlement agreement released “all claims, demands, rights, liabilities and causes of action that were or could have been asserted (whether in tort, contract or otherwise) for violation of the Fair Labor Standards Act, the California Labor Code, the California Business and Professions Code, the Private Attorneys General Act (‘PAGA’), the applicable Industrial Welfare Commission Orders or any similar state or federal law, whether for economic damages, non-economic damages, liquidated damages, punitive damages, restitution, penalties, other monies, or other relief based on any facts, transactions, events, policies, occurrences, acts, disclosures, statements, omissions or failures to act pled in the Complaint, which are or could be the basis of claims that Defendant failed to pay wages or overtime, failed to provide meal or rest breaks or compensation in lieu thereof, failed to provide timely wages and final paychecks, committed record-keeping violations, provided noncompliant wage statements, failed to reimburse for business expenses, or engaged in unfair business practices at any time on or before the date of Preliminary Approval.” (Italics added.)

Slip op., at 12 (boldface emphasis added).

Separate from all of this, I have a concern about the Villacres holding that allows any enumerated list of released items to be treated as a "general release."  This seems to muddy the waters as to what constitutes a general release and what constitutes a specific release.  As it stands, this seems to re-define "specific release" to mean a release with an expressly enumerated scope and a "general release" to mean any release with coverage broader than what is expressly enumerated, particularly where identified by the phrase "all claims."  So you can have a "general" release of "all" wage payment claims.  Perhaps we should call "general" releases "total coverage" releases and all other releases "specific" or "itemized" coverage releases.

Respondents and Defendants were successfully represented by Melanie L. Bostwick, Randall C. Smith, Jessica R. Perry, and Allison Riechert Giese of Orrick, Herrington & Sutcliffe

The Ninth Circuit, in two separate cases, certifies wage and hour law questions to the California Supreme Court

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On May 9, 2018, a panel of the Ninth Circuit certified questions to the California Supreme Court in two different cases involving airlines.  In Ward v. United Airlines, Inc., the Court asked for review of the following two questions:

(1) Wage Order 9 exempts from its wage statement requirements an employee who has entered into a collective bargaining agreement (CBA) in accordance with the Railway Labor Act (RLA). See 8 C.C.R. § 11090(1)(E). Does the RLA exemption in Wage Order 9 bar a wage statement claim brought under California Labor Code § 226 by an employee who is covered by a CBA?
(2) Does California Labor Code § 226 apply to wage statements provided by an out-of-state employer to an employee who resides in California, receives pay in California, and pays California income tax on her wages, but who does not work principally in California or any other state?

Order, at 2-3.

In Oman v. Delta Air Lines, Inc., the Court asked for review of the following three questions:

(1) Do California Labor Code §§ 204 and 226 apply to wage payments and wage statements provided by an out-of-state employer to an employee who, in the relevant pay period, works in California only episodically and for less than a day at a time?
(2) Does California minimum wage law apply to all work performed in California for an out-of-state employer by an employee who works in California only episodically and for less than a day at a time? See Cal. Labor Code §§ 1182.12, 1194; 8 C.C.R. § 11090(4).
(3) Does the Armenta/Gonzalez bar on averaging wages apply to a pay formula that generally awards credit for all hours on duty, but which, in certain situations resulting in higher pay, does not award credit for all hours on duty? See Gonzalez v. Downtown LA Motors, LP, 155 Cal. Rptr. 3d 18, 20 (Ct. App. 2013); Armenta v. Osmose, Inc., 37 Cal. Rptr. 3d 460, 468 (Ct. App. 2005)? 

Order, at 2.

Of the two sets of questions, Delta certainly presents questions that are likely of broader applicability.