Bright v. 99¢ Only Stores holds that PAGA penalties are available for certain wage order violations

Employer:  Give it to me straight, Doc, is it serious?

Defense Counsel:  You'll need to sit down for this one.

Employer:  Okay.  Wait, there aren't any chairs here.

Defense Counsel:  I know!  Get it?  No chairs?  Now don't be like that....

I'm delaying the reporting just to build the suspense.  You have been wondering whether violations of Wage Order No. 7, subdivision 14 are violations of Labor Code § 1198, and here I am writing my first play.  But your wait is over.  In Bright v. 99¢ ONLY STORES, the Court of Appeal (Second Appellate District, Division Five) held that (1) violations of Wage Order No. 7, subdivision 14 are violations of section 1198; and (2) civil penalties under section 2699, subdivision (f) are available despite the fact that Commission wage order No. 7-2001 has its own penalty provision.

This action arises from a claim for civil penalties under the Private Attorneys General Act of 2004 ("PAGA") for violation of the suitable seating order of the Commission.  Commission Wage Order No. 7, subdivision 14, provides, in part: Wage Order No. 7, subdivision 14 provides: “(A) All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats. [¶] (B) When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.”  Slip op., at 2, n. 2.  This requirement is sometimes known as the suitable seating requirement.  The trial court sustained the defendant's demurrer on the grounds that (1) failure to provide sufficient seating is not a condition “prohibited” by Wage Order No. 7, subdivision 14, and (2) even if it were, civil penalties are not recoverable under section 2699, subdivision (f), because Commission Wage Order No. 7-2001 contains its own civil penalty provision.

The Court of Appeal concluded that the issues raised in the appeal were matters of first impression.  On an issue of first impression, the Court began with the statute at issue:

We begin by examining the statutory and administrative scheme, starting with section 1198, which provides: “The maximum hours of work and the standard conditions of labor fixed by the commission shall be the maximum hours of work and the standard conditions of labor for employees. The employment of any employee for longer hours than those fixed by the order or under conditions of labor prohibited by the order is unlawful.”

Slip op., at 5.  The Court then held that, under the plain meaning of section 1198, suitable seating is a "standard condition of labor fixed by the commission."  Slip op., at 6.  The Court rejected defendant's argument that because the seating language was not expressed in prohibitory language, it was merely a suggestion.

Employer:  What about chairs that give off electric shocks at random intervals so nobody wants to sit in them?

Defense Counsel:  No.  Wait.  Yes, if that's what you want to do, but only after you augment your retainer.  Significantly.

Turning to the second question, the Court of Appeal quickly concluded that, because the suitable seating requirement did not have its own penalty provision, it is governed by section 2699, subdivision (f) of PAGA.  The Court noted that the penalty set forth in subdivision 20 is expressly described as a cumulative remedy, rendering it nonexclusive.

Employer:  I had a nightmare.  It was horrible.

Defense Counsel:  Tell  me about it.

Employer:  It was dark.  There was a sound.  It was like nothing I have ever heard before.  I think it was the sound of drool from a million plaintiff's attorneys splattering on the floor.

Defense Counsel:  It was no dream!

Employer:  Aaaaahhh!!!!..........

California Supreme Court activity for the week of November 8, 2010

The California Supreme Court held its (usually) weekly conference on November 10, 2010. Notable results include:

• On a Petition for Review, review was denied in Walnut Producers v. Diamond Foods (August 16, 2010), discussed briefly on this blog here.  [Arbitration agreement with class arbitration ban not unconscionable]
• On a Petition for Review, with an associated request to depublish, review and depublication were both denied in Gutierrez v. Commerce Club (August 23, 2010), discussed on this blog here.  [Reversal of Order sustaining demurrer to class allegations]

Despite pending Brinker case, Hernandez v. Chipotle Mexican Grill, Inc. declares that standard for rest break applies to meal periods

In case you hadn't heard, Brinker Restaurant v. Superior Court (Hohnbaum) is pending before the California Supreme Court.  Jaimez v. DAIOHS USA, Inc., 181 Cal. App. 4th 1286 (2010), rev. denied (2010) held that certification of meal period claims was appropriate because, among other reasons, that unsettled meal period standard was also a classwide issue.  But in an unexpected twist, the Court of Appeal (Second Appellate District, Division Eight), in Hernandez v. Chipotle Mexican Grill, Inc., decided that, rather than recommending to the trial court that it certify the meal period claim and await Brinker, it would just tell us what that standard is right now.  And, according to the Hernandez Court, the meal period standard is the same standard that applies to rest breaks:

Hernandez admits employers must provide, i.e., authorize and permit, employees to take rest breaks, but contends a different standard applies to meal breaks and thus, the trial court‟s legal analysis was faulty. This contention is not persuasive. “The California Supreme Court has described the interest protected by meal break provisions, stating that „[a]n employee forced to forgo his or her meal period . . . has been deprived of the right to be free of the employer‟s control during the meal period.‟ Murphy v. Kenneth Cole Prods., Inc., 40 Cal.4th 1094, 1104 (2007). It is an employer's obligation to ensure that its employees are free from its control for thirty minutes, not to ensure that the employees do any particular thing during that time. Indeed, in characterizing violations of California meal period obligations in Murphy, the California Supreme Court repeatedly described it as an obligation not to force employees to work through breaks. [Citation.]” (Brown v. Federal Express Corp. (C.D.Cal. 2008) 249 F.R.D. 580, 585, fn. omitted.)

Slip op., at 11, emphasis in original.  The Court affirmatively adopts some of the specious arguments from district courts, including the notion that it would be too hard for employees to actually make employees take breaks:

Hernandez's position also is not practical. “Requiring enforcement of meal breaks would place an undue burden on employers whose employees are numerous or who . . . do not appear to remain in contact with the employer during the day. See White v. Starbucks Corp., 497 F.Supp.2d 1080, 1088-89 (N.D.Cal.2007).

Slip op., at 13.  That argument is insulting.  Evidently an employer can control when employees come and go.  That's not too hard.  But they can't decide whether people work during other parts of the day.  Whatever standard is ultimately declared by the California Supreme Court, arguments like this cheapen the discussion.

Elsewhere in the opinion, the Court opines that it is perfectly fine to assess merits during certification.  It's a brave new world here in California.

Amended Order and Class Notice in Adoma v. University of Phoenix

While I don't regularly post Orders from federal cases I mention, I do so here by special request.  In University of Phoenix, Inc., the District Court (Eastern District of California, Judge Karlton presiding) issued an Order on October 15, 2010, approving in part and modifying in part a proposed Class Notice.  On October 20, 2010, the Court issued an amended Order.  The Amended Order and attached Notice are available through the Acrobat.com links below:

• Amended Order
• Notice

California Supreme Court activity for the week of October 18, 2010

The California Supreme Court held its (usually) weekly conference on October 20, 2010. Notable results include: 

• On a Petition for Review, review was denied in Morgan v. United Retail (July 13, 2010) [obligations under Labor Code section 226], covered previously here.
• On a Petition for Review, review was granted in Aryeh v. Cannon Business Solutions (June 22, 2010).  In Aryeh, the plaintiff argued that a continuing violation theory applied to his UCL claim, extending the period during which he could bring a claim.  The Court of Appeal rejected that argument. 

California Supreme Court activity for the week of October 11, 2010

The California Supreme Court held its (usually) weekly conference on October 13, 2010.  Notable results include:

• On a Petition for Review, a grant and hold was issued in Faulkinbury v. Boyd & Associates, Inc. (June 24, 2010), covered previously here.

I previously wrote that the opinion in Faulkinbury offered nothing interesting in my opinion.  The Court of Appeal simply repeated the refrain that the trial court has fairly broad discretion when ruling on a motion for class certification.  However, after Wednesday, Faulkinbury just got more interesting.  The Supreme Court issued its grant and hold pending...wait for it...the outcome in Brinker.  One might surmise that the standard applied by the trial court in Faulkinbury may be materially affected by the outcome of Brinker.  That's interesting.  It suggests that the Supreme Court is thinking about how the certification process will be impacted by its ruling in Brinker.  In fact, the Supreme Court may already have some tentative thoughts about the likelihood of that occurring.  After all, since the trial court denied certification of a meal period claim in Faulkinbury, one could suppose that the Supreme Court is leaning towards a decision in Brinker that would change that result.

Curious about Pineda v. Bank of America? See how it went for yourself.

Yesterday the California Supreme Court heard oral argument in Pineda v. Bank of America.  Here is a portion of the Court's official extended summary of the case:

Pineda filed suit against Bank of America, alleging a violation of Labor Code section 203, on October 22, 2007 — more than a year after his injury. The Supreme Court is asked to decide whether his suit was timely filed. Pineda argues that a three-year statute of limitations applies to actions under section 203, relying on the following language: “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.” Defendant Bank of America disagrees, interpreting the same language to apply only when a plaintiff sues for both unpaid wages and section 203 penalties. Because Bank of America paid Pineda his final wages, albeit late, and Pineda now seeks only section 203 penalties, Bank of America reasons that a one-year statute of limitations applies and Pineda’s suit is barred as untimely.

The case was argued as part of an educational outreach session.  The Court heard argument in the Court of Appeal Courthouse in Fresno. Hundreds of students from all 9 counties in the Fifth Appellate District were given the opportunity to see the Supreme Court in operation.

You can view the oral argument at The California Channel.  Jump to about the 7:30 mark in the video to find the start of the matter.

Update on 2010-10-06 20:40 by The Complex Litigator

In my haste to publish, I left out one important detail.  My colleague, Greg Karasik, argued the case for Plaintiff Pineda.

Chinese Wang decision is big news

Wrong, but necessary somehow.  A little later than promised, but Wang v. Chinese Daily News, Inc. (9th Cir. Sept. 27, 2010) has too much going on not to receive some additional attention.  At the outset, Wang was a basic wage & hour case.  The plaintiffs alleged that employees were made to work in excess of eight hours per day and/or forty hours per week. They alleged that they were wrongfully denied overtime compensation, meal and rest breaks, accurate and itemized wage statements, and penalties for wages due but not promptly paid at termination.  The subsequent procedural twists and turns were anything but standard.  But despite the many moving parts in the decision, the Ninth Circuit summarized the case in a few sentences:

The district court certified the FLSA claim as a collective action. It certified the state-law claims as a class action under Rule 23(b)(2) and, alternatively, under Rule 23(b)(3). In the state-law class action, it provided for notice and opt out, but subsequently invalidated the opt outs. It granted partial summary judgment to plaintiffs; held jury and bench trials; entered judgment for plaintiffs; awarded attorney’s fees to plaintiffs; and conducted a new opt-out process. CDN appeals, challenging aspects of each of these rulings, as well as the jury’s verdict.

Slip op., at 16393.  After the trial court certified a narrowed class under Rule 23(b)(2) (finding that injunctive relief was on "equal footing" with monetary relief), the trial court approved a notice that authorized class members to opt into the FLSA action and out of the state law-based class action.  The notice precipitated the first major upheaval in the case:

Forms were mailed to 187 individuals, and notice was posted and forms made available at CDN’s Monterey Park facility. Plaintiffs received back about 155 opt-out forms, including 18 from individuals not on the original list of class members.  Plaintiffs filed a motion to invalidate the opt outs, for curative notice, and to restrict CDN’s communication with class members. On June 7, 2006, the court granted the motion, finding that “the opt out period was rife with instances of coercive conduct, including threats to employees’ jobs, termination of an employee supporting the litigation, the posting of signs urging individuals not to tear the company apart, and the abnormally high rate of opt outs.” Wang v. Chinese Daily News, Inc., 236 F.R.D. 485, 491 (C.D. Cal. 2006). The district court deferred any future opt-out procedure until after the trial on the merits.

Slip op., at 16395.  Facing cross-motions for summary judgment, the trial court then ruled that news reporters were not exempt professionals.  Next, the matter proceeded to a trial.  The defendant contended that only the FLSA claims should be tried and that UCL claims were pre-empted by the FLSA, but the trial court elected to retain supplemental jurisdiction, rejected the pre-emption argument and tried the state law claims as well.

The Court of Appeal first tacked the exemption analysis.  After examining decisions from other Circuits, the Court concluded that the reporters did not satisfy the creative professionals exemption.

Although the evidence submitted revealed disputes over how to characterize CDN’s journalists, we agree with the district court that, even when viewing the facts in the light most favorable to CDN, the reporters do not satisfy the criteria for the creative professional exemption.

Slip op., at 16400.  Next, the Court examined whether the trial court had applied the correct criteria for determining whether certification under Rule 23(b)(2) was appropriate.  The Court concluded that, although the matter was decided prior to Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571 (9th Cir. 2010) (en banc), the trial court applied essentially identical standards and correctly decided the issue.

The Court then turned to the invalidation of opt-outs.  The Court first held that a trial court's authority to regulate class communications and the notice process implicitly confers that power to take corrective action when that process has been tainted.  The Court then considered whether the evidence submitted was sufficient to support the trial court's decision.  The Court noted in particular the evidence submitted by a class action notice company regarding normal opt-out rates:

Finally, plaintiffs submitted a declaration from the president of a class action notice company explaining that ordinarily opt-out rates do not exceed one percent. In this case, the district court found that current employees opted out at a 90 percent rate, whereas former employees opted out at a 25 percent rate.

Slip op., at 16407.  After concluding that the decision to invalidate the opt-outs was supported, the Court examined whether deferring a new opt-out period until after the trial was appropriate.  Again the Court noted the trial court's broad discretion to regulate the notice process: "The ordinary procedure is to give notice at the time of class certification. But the rule does not mandate notice at any particular time. See Fed. R. Civ. P. 23(c)(2)."  Slip op., at 16408.  The Court then affirmed the trial court's conclusion that it was necessary to delay a new notice and opt-out process in order to avoid the taint imposed during the initial process.

Finally, after observing that the evidence supported the jury verdict regarding meal periods under either the "provide" or "ensure" standards currently up for review by the California Supreme Court, the Court ended its Opinion by explicitly holding what most courts in the Ninth Circuit had already concluded: the FLSA does not preempt state law claims like the UCL.

District Court decertifies class of customer service representative employed by Safety-Kleen Systems, Inc.

United States District Court Judge Phyllis J. Hamilton (Northern District of California) granted Defendant Safety-Kleen Systems, Inc.'s motion to decertify a class of "customer service representatives."  Wamboldt v. Safety-Kleen Systems, Inc., 2010 WL 3743925 (N.D. Cal. Sept. 20, 2010).  The CSRs had duties extending well beyond what one might expect from the job title, including customer sales, client collections, and various telephone responsibilities, as well as on-site servicing of equipment, transportation of hazardous waste, and driving of company vehicles in order to perform customer service calls.  The hazardous waste transportation and the occasional use of large vehicles (in excess of 30,000 lbs. gross vehicle weight) were the primary culprits underlying the motion to decertify.

Breaking News: Ninth Circuit issue two class action opinions addressing novel issues in the Ninth Circuit

After a bit of a lull on the class action front, the Ninth Circuit had a busy morning.  Two major opinions on class action issues were just issued by Ninth Circuit panels, and both opinions are sure to generate a good deal of discussion.  Both address areas of unsettled law among various federal courts.  The first is of interest to wage & hour practitioners and the second addresses the argument that large statutory damage awards defeat "superiority" of the class action procedure:

• Wang v. Chinese Daily News, Inc. (9th Cir. Sept. 27, 2010) is something of a kitchen sink of class action issues.  Among other things, the Ninth Circuit affirmed (1) the concurrent prosecution of a FLSA opt-in collective action and a Rule 23 opt-out class action, (2) the invalidation of Rule 23 opt-outs due to coercion, (3) the decision to conduct a corrective opt-out process after the trial, and (4) certification under Rule 23(b)(2).  The Court also held that the UCL was not preempted by the FLSA.
• Bateman v. American Multi-Cinema, Inc. (9th Cir. Sept. 27, 2010) concerned the singular issue of a class certification denial on superiority grounds.  The Ninth Circuit concluded that none of the three grounds relied upon by the district court — the disproportionality between the potential statutory liability and the actual harm suffered, the enormity of the potential damages, or AMC’s good faith compliance — justified the denial of class certification on superiority grounds.

Both opinions are substantial, and I will try to give both an extended treatment this evening.  Full disclosure: Greg Karasik of Spiro Moss represents Plaintiff Bateman.