Rest break and wage statement claims denied certification; Court appears to confuse PAGA requirements with other civil claims

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United States District Court Judge Susan Illston (Northern District of California) denied certification in a suit by security guards alleging, among other things, failure to provide adequate rest breaks and failure to provide adequate wage statements.  Temple v. Guardsmark LLC, 2011 WL 723611 (N.D.Cal. Feb 22, 2011).  The rest break analysis was not particularly controversial.  The Order suggests that the defendant had a facially lawful policy and a large number of declarants supporting its practices.  The Court also agreed with defendant's observation that "even if plaintiffs have isolated one general question of whether the narrow California-specific policy displaced the general, national always-on-duty [policy], that question does not have a common answer."  Slip op., at 6.

The problematic portion of the Opinion concerns the wage statement claim.  There is no mention anywhere that the wage statement claim is purely derivative of a PAGA claim.  But the Court seems to impose an administrative exhaustion claim on Labor Code section 226:

California Labor Code Section 226(a) requires wage statements to show “all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee.” California law also requires that employees be paid double their regular rate of pay for every hour worked over twelve hours in a single day. Cal. Labor Code § 510. Finally, California requires that an “aggrieved employee or representative ... give written notice by certified mail to the Labor and Workforce Development Agency and the employer of the specific provisions of this code alleged to have been violated, including the facts and theories to support the alleged violation,” before bringing a civil action based on violation of Section 226(a) of the Labor Code.  Cal. Labor Code §§ 2699.3, 2699.5.

Slip op., at 7.  It is settled law in California that PAGA did not displace any civil actions that could have been brought prior to its passage.  And there is no reason to conclude that PAGA requires LWDA exhaustion for anything other than PAGA claims.  It is unclear from the Order why this issue is discussed in this way.  It may be that the plaintiff attempted to circumvent a statute of limitations issue by claiming that a PAGA claim for other violations gave sufficient notice of the wage statement claim to permit relation back to the filing of an earlier complaint.  Whatever the case, the Order is dangerously unclear and incorrectly suggests an exhaustion requirement under 226 that does not exist.

Oral argument scheduled in Sullivan et al. v. Oracle Corporation et al.

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On Wednesday, April 6, 2011, the California Supreme Court will hear argument in the matter of Sullivan, et al. v. Oracle Corporation, et al.  On February 17, 2009, the matter was certfied to the California Supreme Court by the Ninth Circuit.  Justice Roger Boren, from the Second Appellate District, Division Two, was assigne as justice pro tempore.  The questions certified to the California Supreme Court are:

First, does the California Labor Code 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?

Second, does § 17200 apply to the overtime work described in question one?

Third, does § 17200 apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs in the circumstances of this case if the employer failed to comply with the overtime provisions of the FLSA?

As a side note, the argument calendar also shows that Brinker is not on the April agenda.  Do I hear May anyone?  And by "May," you all know I mean May 2012, right?

Seymore v. Metson Marine, Inc. offers guidance on 7th day overtime, on call work

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Plaintiffs worked consecutive 14-day “hitches” on Metson's ships, providing emergency clean up of oil spills and other hazardous chemical spills off the California coast.  This arrangement gave rise to questions about how Metson calculated pay for the seventh consecutive workday in a week and compensation for employees when on call.  In Seymore v. Metson Marine, Inc. (February 28, 2011), the Court of Appeal (First Appellate District, Division Three) reversed an order granting summary judgment in favor of Metson.

On the seventh day of overtime issue, Metson set the start time of the workweek so that employees only worked one "workweek" of seven consecutive days in the 14-day hitch.  On an issue of first impression, the Court rejected that manipulation:

Metson's attempt to evade the requirements of sections 500 and 510 is no different from the method struck down in the Wal-Mart case. Under the plain language of section 510, plaintiffs are entitled to premium pay “on the seventh day of work in any one workweek” and according to section 500, a workweek is defined to mean “any seven consecutive days, starting with the same calendar day each week.” The clear intent of this statute is to provide premium pay for employees who are required to work a seventh consecutive day in a “fixed and regularly” occurring workweek. Metson's attempt to circumvent this requirement cannot be condoned. (Huntington Memorial Hospital v. Superior Court (2005) 131 Cal.App.4th 893, 910 [“The bottom line is this: An employer may not engage in a subterfuge or artifice designed to evade the overtime laws”].)

Slip op., at 5.  The Court found a DLSE memorandum on the issue to be in potential conflict with the statutory language and disregarded it.

Turning to whether Metson's control was sufficient to establish an obligation to pay for on-call time, the Court reviewed the evidence de novo, finding one fact in particular to be the key determinant, the obligation to sleep on Metson's premises:

Metson cites a number of cases in which courts have concluded that on-call employees able to engage in such personal activities and subject to even shorter response time requirements were not entitled to compensation. (See Gomez, supra, 173 Cal.App.4th 508 [30-minute telephone response time]; Dinges v. Sacred Heart St. Mary’s Hosps. (7th Cir. 1999) 164 F.3d 1056 [7-minute response time]; Bright v. Houston Northwest Medical Center Survivor, Inc. (5th Cir. 1991) 934 F.2d 671 [20-minute response time].) However, there is one critical difference between each of those cases and the present situation —in none of those cases was the employee required to sleep at the employer's premises. In Bright, the court observed that the situation there was “wholly different” from cases in which employees were required to serve their on-call time at the employer's premises because “Bright did not have to remain on or about his employer's place of business, or some location designated by his employer, but was free to be at his home or at any place or places he chose, without advising his employer, subject only to the restrictions that he be reachable by beeper, not be intoxicated, and be able to arrive at the hospital in 'approximately' twenty minutes.” (934 F.2d at p. 676.)

Slip op., at 10.  (As an aside, I find it amusing that two cases I handled, one on the prevailing side and one on the losing side, factored into the Court's discussion of this on-call issue.  Glad I didn't completely screw it up for the plaintiffs here.)  In any event, after an extended discussion of how California parallels but does not exactly follow FLSA precedent surrounding this issue, the Court then spent a moment discussing the fact that, in California, an employer may agree with an employee to designate eight sleeping hours as uncompensated time when an employee works a 24-hour shift.  The Court concluded by suggesting that Metson's arguments about the need for revised exceptions to current wage orders (or a new wage order) were worthy of consideration but did not provide a basis for the Court to disregard existing law.

United Parcel Service Wage And Hour Cases holds that a defendant cannot recover fees after prevailing on Labor Code section 226.7 claims

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In Kirby v. Immoos Fire Protection, Inc. (July 27, 2010), the Court of Appeal (Third Appellate District) held that a prevailing defendant could recover fees when it prevailed against a plaintiff asserting claims arising under Labor Code section 226.7 (meal and rest periods).  The Supreme Court then granted review.  The answering brief is currently due in that matter on March 21, 2011.   Today, the inscrutable Second Appellate District (Division Eight) held, in United Parcel Service Wage And Hour Cases (February 24, 2011), that fees were not available to a prevailing defendant in such actions.  In its analysis, the Court said:

Nothing in the legislative history suggests the Legislature meant the reciprocal fee recovery provisions of Labor Code section 218.5 to apply in an action for violation of the section 226.7 mandate that employers provide meal and rest breaks for certain nonexempt employees. The statutory remedy of section 226.7, providing compensation for missed breaks, was first enacted in 2000 in response to poor employer compliance with the meal and rest break requirements. (Murphy, supra, 40 Cal.4th at pp. 1105-1106; Stats. 2000, ch. 876, § 7, p. 6509.) Before 2000, the only remedy available to an aggrieved employee was injunctive relief to prevent future abuse. (Murphy, at p. 1105.)

The 2000 amendment providing a pay remedy bears sufficient hallmarks of a penalty designed to shape employer behavior, and is sufficiently distinct from the customary types of bargained-for wages recognized under the law, that we cannot conclude the Legislature intended a claim under Labor Code section 226.7 to be interpreted as a claim for “nonpayment of wages” within the meaning of section 218.5. The section 226.7 pay remedy for missed meal and rest breaks was enacted 14 years after the Legislature enacted the reciprocal fee recovery provisions of section 218.5. It is therefore not reasonable to assume that when the Legislature enacted section 218.5 in 1986 to provide for recovery of prevailing party fees in claims for nonpayment of wages and benefits, it intended that provision to permit a prevailing employer-defendant to recover fees from an employee raising a claim for denial of breaks -- a claim which at that time only supported injunctive relief.

Construing the entire statutory scheme with a view toward protecting employees, as we must, we find that a claim for remedial compensation under Labor Code section 226.7 does not trigger the reciprocal fee recovery provisions of section 218.5. Since none of the claims on which UPS prevailed permit the recovery of attorney fees, the award of statutory fees to UPS was in error.

Slip op., at 14.

Considering the current state of Kirby, it seems like this decision will be citable law for about 90 days, give or take a week here or there.  If a Petition for Review wasn't granted, we'd certainly have a good idea about how a part of Kirby will be decided.

UPS v. Superior Court holds that Labor Code section 226.7 allows for 2 premium payments per workday

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Today the Second Appellate District, Division Eight, giveth and taketh away.  In the first of two opinions issued by that Court today, the Court considered, in UPS v. Superior Court (February 16, 2011), whether Labor Code section 226.7 "authorizes one premium payment per work day regardless of the number or type of break periods that were not provided, or two premium payments per work day – one for failure to provide a meal period and another for failure to provide a rest period."  Slip op., at 2.  The Court concluded that section 226.7 allows up to two premium payments per work day.  In reaching that holding, the Court discussed with approval the statutory analysis and review of legislative history undertaken by the one federal court to exmaine the issue.  See, Marlo v. United Parcel Service, Inc. (C.D. Cal. May 5, 2009, CV 03-04336 DDP).

I must apologize for the reduced post frequency to start out this year.  Between a long overdue vacation, a bit of a lull in appellate decisions of note, and an impending move, I've been a bit short on blogging time.  My life is currently compressing into stacks of moving boxes and won't rehydrate until late March.  Thank you for your patience and for reading.

Wait for Brinker continues

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The California Supreme Court released its oral argument calendar for March 8th and 9th.  Still no sign of Brinker.  But it was a great excuse to use the Brinker 2009/2010/2011 news alert icon.

Arechiga v. Dolores Press, Inc. provides controversial construction of Labor Code section 515

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Labor Code section 515, subdivision (d) provides: "For the purpose of computing the overtime rate of compensation required to be paid to a nonexempt full-time salaried employee, the employee's regular hourly rate shall be 1/40th of the employee's weekly salary."  In Arechiga v. Dolores Press, Inc. (February 7, 2011), the Court of Appeal (Second Appellate District, Division Eight) considered whether section 515(d) effectively eliminated "explicit mutual wage agreements" for non-exempt employees.  The Court concluded that section 515(d) did not void such agreements, rejected the DLSE's conclusion on that issue, and affirmed a questionable interpretation of section 515 that will allow employers to circumvent California overtime laws and use a system more like that available under federal law.

Plaintiff and employer entered into a written agreement that plaintiff would receive a salary of $880.00 a week as a janitor.  Plaintiff worked 66 hours per week (11 hours per day, six days per week).  Upon termination, plaintiff sought unpaid overtime.  The trial court found that plaintiff's regular hourly wage was $11.14 and his overtime wage was $16.71.  The trial court credited some testimony that this hourly wage was communicated to plaintiff and found that plaintiff was adequately paid.  The trial court also found that all elements of an explicit mutual wage agreement were satisfied.  Note: acording to authority from before the enactment of section 515, an explicit mutual wage agreement “requires an agreement which specifies the basic hourly rate of compensation upon which the guaranteed salary is based before the work is performed, and the employee must be paid at least one and one-half times the agreedupon rate for hours in excess of forty.”  Ghory v. Al-Lahham, 209 Cal. App. 3d 1487, 1491 (1989).

The Court of Appeal agreed with the trial court's application of the explicit mutual wage agreement doctrine, saying "Arechiga cites no case law supporting his assertion that Labor Code section 515, subdivision (d) abolished explicit mutual wage agreements."  Slip op., at 7.  Immediately thereafter, in a footnote, the Court said, "Appellant's reliance on the Enforcement Policies and Interpretations Manual of the Division of Labor Standards Enforcement is unavailing because regulators did not properly adopt it, making it non-binding on courts."  Slip op., at 7, n. 5.  The Manual states:

In the past, California law has been construed to allow the employer and the employee to enter into an explicit mutual wage agreement which, if it met certain conditions, would permit an employer to pay a salary to a non-exempt employee that provided compensation for hours in excess of 40 in a workweek. (See, Ghory v. Al-Lahham[, supra,] 209 Cal.App.3d 1487[]). Such an agreement (backing in the regular rate) is no longer allowed as a result of the specific language adopted by the Legislature at Labor Code § 515(d). To determine the regular hour rate of pay for a non-exempt salaried employee, one must divide the weekly salary paid by no more than forty hours.

Slip op., at 7, n. 5, quoting Manual.  The Court relied, instead, on jury instruction citing to a pre-section 515 opinion and federal court opinions about California law (which, incidentally, are entitled to as little deference as the DLSE, and probably less, given that the DLSE's expertise in the area is entitled to some consideration).  In other words, the Court criticized plaintiff's lack of "authority" to support the proposition that explicit mutual wage agreements for non-exempt employees are now invalid, but the Court identified no controllling authority to controvert the plain language of section 515(d).

Most of the remainder of the opinion deals with various evidentiary rulings at trial.  Those don't concern me for purposes of this post.  What does trouble me is the potential for decisions like this to offer judicial roadmaps for how to "back in a regular rate" and avoid what, in my view, is a clear and unambiguous statutory provision.  Under this construction, employers could, after the fact, claim that an employee was "shown" a basic hourly wage.  So long as that alleged hourly wage was above the minimum wage, the employer could justfy, ex post facto, any salary that equaled the reverse engineered wage and overtime calculation.  Section 515 is inconsistent with cases decided prior to its enactment.

Courts shouldn't be legislating, whether they agree with the policy goals of the legislation or not.  It's not like the Court was asked to consider a constitutional challenge to a law or something.  All it had to do was decide whether a trial court correctly applied a simple statute to some facts.  The Court blew it.

Your first taste of Brinker in 2011, compliments of Hernandez v. Chipotle

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On January 26, 2011, the Supreme Court held a weekly conference.  Of particular note was the "GRANTED and Held" Order in the matter of Hernandez v. Chipotle Mexican Grill, Inc.  Hernandez was striking for how vehemently it ignored Jaimez when it chose to follow the most anti-employee decisions of various federal courts and then enunciate a meal period standard that is the functional equivalent of the standard applicable to rest breaks.  See prior blog post here.  Maybe it means nothing at all other than the Supreme Court doesn't want published meal period cases floating around while Brinker is pending.  Or maybe the Supreme Court is close to the finish line on Brinker and views Hernandez as inconsistent with its intended holdings.

Order from In re Wal-Mart Stores, Inc. Wage and Hour Litigation highlights need to support incentive award requests with detailed facts when the requested award is substantial

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Untited States District Court Judge Saundra B. Armstrong (Northern District of California) granted in part and denied in part the unopposed motion of plaintiffs for an award of incentive payments and attorney's fees.  In re Wal-Mart Stores, Inc. Wage and Hour Litigation, 2011 WL 31266 (N.D.Cal. Jan. 05, 2011).  Counsel requested 33.3% of the maximum settlement amount of $86 million.  The Court agreed that a departure from the 25% benchmark in the Ninth Circuit was appropriate but not to that degree.  The Court awarded a fee equal to 27% of the maximum settlement amount.

On the requested enhancement awards, the Court said:

Upon review of the record in this case, the Court finds that Plaintiffs are entitled to a reasonable incentive payment. However, the Court finds the requested award of $25,000 per named Plaintiff to be excessive, in view of the nature of their assistance in this case.  First, the Court notes that the named Plaintiffs have not indicated in their declarations the total number of hours they spent on this litigation. Rather, they generally explain that they were deposed, responded to written discovery, and assisted and met with counsel. Second, in arguing that $25,000 is an appropriate award, Plaintiffs cite to cases that are clearly distinguishable. For instance, in Brotherton v. Cleveland, 141 F.Supp.2d 907 (S.D.Ohio 2001), the court awarded $50,000 to a single named plaintiff, finding that “she has spent approximately 800 hours working on this litigation.” Id. at 914. By contrast, here, there is no evidence that the named Plaintiffs' involvement reached anywhere near this level.

Slip op., at 4.  The Court awarded $5,000 to each plaintiff.

District Court (N.D. Cal.) denies motion for class certification in wage & hour suit against Crab Addison, Inc.

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United States District Court Judge Phyllis J. Hamilton (Northern District of California) denied plaintiff's motion to certify a class action against the famous defendant, Crab Addison, Inc. (which was responsible for the state appellate decision regarding class member contact information).  Washington v. Joe's Crab Shack, 2010 WL 5396041 (N.D. Cal. Dec. 23, 2010).  The order suggests that the defendant opposed every aspect of certification, even challenging the adequacy of class counsel, which isn't a major issue in most certification motions:

Crab Addison also asserts that plaintiff's counsel are not adequate, claiming that they “neglected” the case and repeatedly missed critical deadlines. The court finds, however, that plaintiff's counsel are experienced in class actions, including employment-related class actions. The record submitted by Crab Addison does not support a finding that plaintiff's counsel do not satisfy the requirements of Rule 23(a)(4).

Slip op, at 8.  Instead, the Court focused on the predominance requisite, finding that individualized issues predominated.