In Voris v. Lampert, the California Supreme Court finally provides the definitive answer to the question of whether wages can be recovered via a conversion tort claim

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I recall that in the early 2000’s it was common to see a conversion claim for relief included in a wage & hour complaint, on the theory that the wages owed and unpaid were property of the employee. When this was challenged by demurrer, I observed that the demurrer was successful well over half the time, but there wasn’t a definitive appellate ruling on point. The demurrers that worked would usually focus on the argument that a conversion tort for money had to specifically identify the precise amount in question (essentially, identify the specific cash in question).

Today, in Boris v. Lampert (August 15, 2019) the California Supreme Court answers a question I long ago quit wondering about: whether a conversion claim is cognizable for unpaid wages. In a split 5-2 decision, the Supreme Court said it was not.

The conversion of specific sums of money guided the majority’s analysis:

The employee’s claim is not that the employer has wrongfully exercised dominion over a specifically identifiable pot of money that already belongs to the employee—in other words, the sort of wrong that conversion is designed to remedy. Rather, the employee’s claim is that the employer failed to reach into its own funds to satisfy its debt. Indeed, in some cases of wage nonpayment, the monies out of which employees would be paid may never have existed in the first place. Take, for example,a failed start-up that generates no income and thus finds itself unable to pay its employees. Because the business accounts are empty, there would not be any identifiable monies for the employer to convert. No one would dispute that the start-up is indebted to its employees. But only in the realm of fiction could a court conclude that the business, by failing to earn the money needed to pay wages, has somehow converted that nonexistent money to its own use.

Slip op., at 15. The majority expressed some concern about the consequences of layering tort liability over what has traditionally been a species of contract recovery:

But a conversion claim is an awfully blunt tool for deterring intentional misconduct of this variety.As noted,conversion is a strict liability tort. It does not require bad faith, knowledge, or even negligence; it requires only that the defendant have intentionally done the act depriving the plaintiff of his or her rightful possession. (Moore, supra, 51 Cal.3d at p. 144, fn. 38; Poggi, supra, 167 Cal. at p.375.) For that reason, conversion liability for unpaid wages would not only reach those who act in bad faith, but also those who make good-faith mistakes—for example, an employer who fails to pay the correct amount in wages because of a glitch in the payroll system or a clerical error. We see no sufficient justification for layering tort liability on top of the extensive existing remedies demanding that this sort of error promptly be fixed.

Slip op., at 25.

I won’t go into great detail on the dissent, but it is pointed, and is well-encapsulated by this passage, which rejects the notion that wage payment recovery is best handled under contract theories:

In California, unpaid wages are not merely contractual obligations to pay a sum. This is because, as we long ago observed, “wages are not ordinary debts.” (In re Trombley (1948) 31 Cal.2d 801, 809, italics added.)

Slip op., Dissent of Cuellar, at 3. This comment is also interesting: “For some time, plaintiffs in wage cases have routinely included a claim for conversion.” Slip op., Dissent of Cuellar, at 7. It is a somewhat feisty dissent. I like it for the conviction. In closing, the dissent observes that it seems illusory to treat theft of stocks as a conversion but deny similar treatment to wages owed.

I’m not 100% settled on where I come down on these competing arguments, but, for purposes of California law, the majority defines where things stand.

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.

How long do "on-duty" meal periods have to be? 30 minutes.

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This really feels like the setup for a bad joke that only employment lawyers in California would get. Question: How long does an “on-duty” meal period have to be? Answer: 30 minutes. Follow-up: But….it’s “on-duty.” Put your hand down. I’m not calling on you. In L’Chaim House, Inc. v. Division of Labor Standards Enforcement (July 31, 2019), the Court of Appeal (First Appellate District, Division One), the Court was called upon to review a wage and hour citation by the DLSE. The Court summarized, “On appeal, L’Chaim claims that under the applicable Industrial Welfare Commission (IWC) wage order, it may require its employees to work “on-duty” meal periods that, unlike periods when employees are ‘relieved of all duty,’ do not need to be at least 30 minutes long.” (Slip op., at 1.)

The Court’s discussion was more interesting than you might think, since the Court necessarily had to explain the difference between on-duty and off-duty meal periods, and what events can transform one into the other. This led to the Court’s rejection of the appellant’s position:

What L’Chaim misunderstands is that an on-duty meal period is not the functional equivalent of no meal period at all. On-duty meal periods are an intermediate category requiring more of employees than off-duty meal periods but less of employees than their normal work. Recognizing this, the trial court stated that even if L’Chaim’s employees were not entitled to “an uninterrupted meal period,” they “may at least be afforded 30[] minutes of limited duty enabling them to eat their meal in relative peace.” L’Chaim attacks the notion that its “employees may be given ‘limited duty’ while on a meal break” as creating “several absurd consequences.” According to L’Chaim, because employees do not clock out for on-duty meal periods, there is no way to track the length of those periods. In addition, “the creation of a new ‘limited duty’ requirement to [Wage Order No. 5, subdivision 11(E)] would force employers to delineate which tasks an employee is expected to perform during his or her on-duty meal period,” which L’Chaim claims “would be difficult and even potentially dangerous for the residents.”

But any such practical challenges are inherent in providing “on-duty meal periods” at all, not just periods of a particular length. Moreover, the question presented here is whether an on-duty meal period must be at least 30 minutes long, not how courts might evaluate the adequacy of the period under different factual scenarios. Thus, while we do not address what constitutes an acceptable on-duty meal period in the context of this case, what we can say is that employees of 24-hour residential care facilities for seniors are unambiguously entitled to “on-duty meal periods” under subdivision 11(E). L’Chaim’s interpretation would effectively read that requirement out of Wage Order No. 5.

Slip op., at 5. If this still doesn’t convince you, the Court made one final observation that seems pretty solid:

Finally, even if any doubt remained, we agree with the DLSE that section 512 compels the same conclusion. Under that statute, which L’Chaim does not address in its briefing, an employer is prohibited from “employ[ing] an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than 30 minutes,” unless the employee works no more than six hours in a day and agrees to waive the meal period. (§ 512, subd. (a).) Although section 512 contains exceptions for workers in several industries, none of them apply here. And although the IWC has broad authority to “adopt or amend working condition orders with respect to . . . meal periods . . . for any workers in California consistent with the health and welfare of those workers,” at all relevant times—including when subdivision 11(E) was added to Wage Order No. 5—that authority has been specifically limited “as provided in Section 512.”

Slip op., at 7. The Wage Orders cannot negate Labor Code provisions. The balance of the decision is worth a quick read if you practice in this area.

The Ninth Circuit is interested in learning whether the California Supreme Court thinks Dynamex applies retroactively

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Here’s a tiny little nugget of interest. Today, in Vazquez v. Jan-Pro Franchising International, Inc. (9th Cir. July 22, 2019), the Ninth Circuit issued an Order granting a Petition for Panel Rehearing. That’s not the interesting part. The stated plan to certify a question to the California Supreme Court is, however, interesting:

The opinion in the above-captioned matter filed on May 2, 2019, and published at 923 F.3d 575, is WITHDRAWN. A revised disposition and an order certifying to the California Supreme Court the question of whether Dynamex Ops. W. Inc. v. Superior Court, 416 P.3d 1 (Cal. 2018), applies retroactively will be filed in due course.

Order, at 2. Do you feel like it never stops? That there is never a moment when you can say, “This is the wage and hour law of California.”? I do.

Hot Tip: Read the Daily Journal tomorrow...

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I have it on good authority from an inside source that some wage and hour guru will express pithy commentary in the Daily Journal’s July 2, 2019 edition.

UPDATE: Turns out my sources were correct. Be sure to read the column Where Troester Stops Not Even Troester Knows.

Majority of California Supreme Court Justices conclude that the California Pay Scale Manual issued by CalHR controls over Wage Orders for public employees

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Some wage and hour decisions have broad implications. Others, no so much. Here, in Stoetzl v. Department of Human Resources (July 1, 2019), the California Supreme Court issued a decision that falls decidedly into the later category. Stoetzl concerns a trial on the issue of unpaid wages for what the Court calls “entry-exit walk time” and “duty-integrated walk time.” Sounds like we are about to get a decision about a California equivalent to preliminary and post-liminary time, right? Not so much. Stoetzl is really about whether the relevant Wage Order (Wage Order 4) or the California Pay Scale Manual issued by CalHR (read about CalHR here) controls pay obligations for “entry-exit walk time” and “duty-integrated walk time” for represented and unrepresented state employees working in prisons.

Don’t get the wrong idea. Stoetzl might impact lots of employees; California has a metric <BLEEP> ton of employees. But that’s really the only group impacted by this decision, since the tension arises as a result of the conflict between the Pay Scale Manual’s express adoption of FLSA provisions and the Wage Order’s use of California’s differing and more protective standards. On top of all that, the represented state employees are bound by a collective bargaining agreement that controls certain pay obligations.

If you want to find something of broader note in Stoetzl, it again demonstrates that less protective FLSA provisions do no displace more protective California laws and regulations unless there is an express statement of an intent to do so. Here, in this 5-2 decision, a majority of the Court concluded that the Legislature properly empowered CalHR to define state employee pay provisions, and CalHR chose to expressly adopt FLSA rules that governed such things as walk time.

The minority opinion, written by Justice Liu, with Justice Cuellar concurring, found particular fault with the majority’s discussion of the minimum wage pay issue for the unrepresented class of employees.

Ninth Circuit concludes that the Dynamex "ABC test" applies retroactively

I missed this little nugget when it came out last month, but it’s worth noting regardless because it may move the needle in existing cases. In Vazquez, et al. v. Jan-Pro Franchising International, Inc. (9th Cir. May 2, 2009), the Ninth Circuit considered whether Dynamex Ops. W. Inc. v. Superior Court, 416 P.3d 1 (Cal. 2018) applied to a District Court decision that pre-dated Dynamex.

On that point, the Court agreed that the default rule of retroactive application of judicial decisions should apply after a thorough analysis of the limited bases for an exception to that default rule:

Given the strong presumption of retroactivity, the emphasis in Dynamex on its holding as a clarification rather than as a departure from established law, and the lack of any indication that California courts are likely to hold that Dynamex applies only prospectively, we see no basis to do so either.

Slip op., at 26. The Court then considered whether due process considerations could preclude retroactive application and held that such considerations did not:

Applying Dynamex retroactively is neither arbitrary nor irrational. The Dynamex court explained that “wage orders are the type of remedial legislation that must be liberally construed in a manner that services its remedial purpose.” 416 P.3d at 32. Moreover, Dynamex made clear that California wage orders serve multiple purposes. One is to compensate workers and ensure they can provide for themselves and their families. Id. But second, wage orders accord benefits to entire industries by “ensuring that . . . responsible companies are not hurt by unfair competition from competitor businesses that utilize substandard employment practices.” Id. And finally, wage orders benefit society at large. Without them, “the public will often be left to assume responsibility for the ill effects to workers and their families resulting from substandard wages or unhealthy and unsafe working conditions.” Id. It is with these purposes in mind that the California Supreme Court embraced the ABC test and found it to be “faithful” to the history of California’s employment classification law “and to the fundamental purpose of the wage orders.” Id. at 40.

Slip op., at 27-28.

The balance of the Opinion examined the merits of the case, providing significant guidance to the District Court on remand.

Separate from the content of the Opinion, I am impressed by the formatting of the Opinion. The Opinion contains a hyper-linked table of contents that improves navigation through the long decision. Because I was curious about the formatting, I did a quick spot check of recent opinions and could not find a similarly formatted document. This makes me wonder why this is not standard. I note that Judge Block, of the Eastern District of New York (sitting by designation) authored the opinion. If you happen to know why the formatting of this Opinion is so good, leave a comment.

The prevailing plaintiffs were represented by Shannon Liss-Riordan of Lichten & Liss-Riordan P.C., Boston, Massachusetts.

In Melendez v. S.F. Baseball Associates LLC, the California Supreme Court provides a good review of LMRA premption

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I know. I know. There is no such thing as a “good” review of LMRA preemption. Or any form of preemption come to think of it. You’re right. Don’t read this case. But if you MUST read a case about LMRA preemption, or want a solid backgrounder on it, you could do worse than Melendez v. S.F. Baseball Associates LLC (April 25, 2019), in which the California Supreme Court clearly discusses the two-stage test for determining whether LMRA preemption under Section 301 applies:

  • Does the claim arise solely from independent state law, or is it based on the collective bargaining agreement (CBA)?

  • To resolve the merits of the claim, is it necessary to “interpret” a CBA’s terms, or merely “reference” a CBA?

This really is a straightforward discussion of the issue. If you are dealing with this issue for the first time, it is a good place to start.

The prevailing plaintiffs were represented by Dennis F. Moss, of Moss Bollinger (Dennis F. Moss arguing) and Sahag Majarian II.

Petition for Rehearing Denied in Troester v. Starbucks; Minimal change to Opinion

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The California Supreme Court denied the Petition for Rehearing in Troester v. Starbucks, making a tiny change to the Opinion.  Here is the change, which was made to the last paragraph:

Old version:

We hold that the relevant California statutes and wage order have not incorporated the de minimis doctrine found in the FLSA. We further conclude that although California has a de minimis rule that is a background principle of state law, the rule is not applicable here. The relevant statutes and wage order do not allow employers **834 to require employees to routinely work for minutes off-the-clock without compensation. We leave open whether there are wage claims involving employee activities that are so irregular or brief in duration that it would not be reasonable to require employers to compensate employees for the time spent on them.

New version:

We hold that the relevant California statutes and wage order have not incorporated the de minimis doctrine found in the FLSA.  We further conclude that although California has a de minimis rule that is a background principle of state law, the rule is not applicable to the regularly reoccurring activities that are principally at issue here.  The relevant statutes and wage order do not allow employers to require employees to routinely work for minutes off the clock without compensation.  We leave open whether there are wage claims involving employee activities that are so irregular or brief in duration that employers may not be reasonably required to compensate employees for the time spent on them.

So that makes this Opinion final final.  Can't wait until its final final final.  Or even final final final final.

Episode 19 of the Class Re-Action Podcast is Now Available

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Join us on Episode 19 for a lively discussion of potential implications from the recent Troester v. Starbucks decision from the California Supreme Court.  Listen as I attempt to control the crowd cheering for me.