More thoughts on Jaimez v. DAIOHS USA, Inc.

There is quite a bit to absorb in  Jaimez v. DAIOHS USA, Inc., et al. (February 8, 2010), and I wanted to provide some further commentary.  For example, no California Court of Appeal has interpreted or provided any guidance to trial courts regarding the wage statement "injury" requirement.  Jaimez holds that: (1) "a very modest showing" will satisfy the injury requirement; (2) the filing of a lawsuit and "the difficulty and expense ... encountered in attempting to reconstruct time and pay records" may satisfy the wage statement injury requirement; (3) the "injury" requirement is distinct from "damages"; and, (4) trial courts may certify wage statement classes even without evidence of an injury arising from inaccurate wage statements. Opinion at 22-23.

Jaimez also re-affirms and clarifies key standards applicable to class certification motions, including the fact that the proper predominance analysis is comparative. Jaimez appears to be the first published California Court of Appeal decision since the issuance of Sav-On Drug Stores, Inc. v. Superior Court, 34 Cal. 4th 319 (2004) to hold that the "relevant comparison lies between the costs and benefits of adjudicating plaintiffs' claims in a class action and the costs and benefits of proceeding by numerous separate actions- not between the complexity of a class suit that must accommodate some individualized inquiries and the absence of any remedial proceeding whatsoever." Opinion at 13 (quoting Sav-On, 34 Cal. 4th at 339  n.10). This holding is a good reminder of the "relevant comparison" predominance analysis when examining whether to certify a class.

Jaimez clarifies the role of the trial court when considering issues surrounding certification of meal break classes, holding that trial courts may certify a meal break class regardless of any legal uncertainty regarding an employer's obligation to provide meal breaks. Opinion at 18-19.

Jaimez also establishes important precedent regarding meal break timing requirements.  Employers and employees continue to dispute when employees are entitled to meal breaks.  No California Court of Appeal has offered guidance on this frequently disputed issue. Jaimez holds that trial courts may certify meal break classes based on the theory that an employer failed to provide meal breaks within the first five hours of a shift.

Labor Code § 226 directs employers to provide their employees with "an accurate itemized statement in writing" showing "total hours worked" and "all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate."  When a violation occurs, "[a]n employee suffering injury as a result of a knowing and intentional failure by an employer to comply with [section 226(a)] is entitled to" specified damages. Id.  While this statutory language appears to differentiate between injury and damage, employees in California continue to face substantial resistance to the type of analysis supplied by Jaimez.

No California Court of Appeal has directly construed the wage statement "injury" requirement. Rather, only federal authorities have discussed this issue.  California employers, employees and courts continue to dispute the meaning of the wage statement injury requirement.  Jaimez now provides the first comments from a California Court of Appeal interpreting the wage statement injury requirement, assisting trial courts and litigants in the process.  On this point, Jaimez holds: "While there must be some injury in order to recover damages, a very modest showing will suffice." Opinion at 22.  Going further, Jaimez explains that '''this lawsuit, and the difficulty and expense [Jaimez has] encountered in attempting to reconstruct time and pay records,' may well be 'further evidence of the injury' he has suffered." Opinion at 22.  Adopting the federal approach to identifying injury, Jaimez explains that injury can include "the possibility of not being paid overtime, employee confusion over whether they received all wages owed them, difficulty and expense involved in reconstructing pay records, and forcing employees to make mathematical computations to analyze whether the wages paid in fact compensated them for all hours worked."  Opinion at 22.  This clearly articulated standard was missing from California jurisprudence.

Finally, with respect just to the wage statement aspects of the opinion, Jaimez holds that the absence of evidence at the certification stage of an injury arising from inaccurate wage statements does not preclude class certification because the plaintiff's theory (an erroneous wage statement form) is suitable for class treatment. Opinion at 22-23.

Despite many decisions regarding aspects of class certification, the actual application of certification standards to the facts of a particular case remains an area of substantial confusion for litigants and many trial courts.  Jaimez, citing Ghazaryan v. Diva Limousine, Ltd., 169 Cal.App.4th 1524 (2008), tacitly recognized this ongoing area of difficulty for trial courts when it said, "The trial court misapplied the criteria, focusing on the potential conflicting issues of fact or law on an individual basis, rather than evaluating 'whether the theory of recovery advanced by the plaintiff is likely to prove amenable to class treatment.'"  Opinion, at 13.

Following this general observation about the application of incorrect criteria to the certification question, the Jaimez Opinion follows with one of the more thorough discussions of how to apply correct certification criteria to the specific facts of a case, on a claim-by-claim basis, spanning some 10 pages of the Opinion.  For example, the Opinion provides concrete examples regarding the correct method for evaluating evidence submitted in support or opposition to the motion for class certification:

[H]ad the trial court focused on the correct criteria, it would have necessarily found the First Choice declarations, while identifying individual effects of policies and practices that may well call for individual damages determinations, nevertheless confirm the predominance of common legal and factual issues that make this case more amenable to class treatment.  For example:

• Eight of the First Choice Declarations admit that RSR’s regularly “forego” meal breaks and one states that he never takes a meal break; and
• The First Choice declarations also fail to state that the RSR’s were compensated with an additional hour of pay, as required by California law, when the RSR’s failed to follow their “normal” practice and/or did not receive a 30-minute uninterrupted meal period.

The First Choice declarations actually demonstrate there are numerous predominant common factual issues.  The fact that individual RSR’s may have different damages does not require denial of the class certification motion.  Furthermore, declarations from a small percentage of objectors do not bar class certification.  In sum, the trial court applied improper criteria in evaluating the merits of the First Choice declarants’ statements rather than considering whether they rebutted plaintiff’s substantial evidence that predominant factual issues (if not legal, too) make this case more amenable to class treatment than to myriad individual adjudications (Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, 743 (Bell); Richmond, supra, 29 Cal.3d at p. 475.)

Opinion at 15-16.  Opinions with this degree of practical detail about the correct method for evaluating evidence submitted in support of and in opposition to class certification are uncommon.  The rarity of such discussions about the practical mechanics of certification makes this Opinion that much more valuable for practitioners and trial courts alike.  Clarity of legal standards tends to reduce the duration and cost of litigation.

Just as important as the practical demonstration of how to assess evidence supplied by the parties on a contested certification motion is the Opinion's restatement of the correct legal test for evaluating predominance.  Since Sav-On, trial courts have continued to deny certification on the erroneous ground that a complex class action would, by necessity, require management of some individualized inquiries.  Jaimez provides a needed reminder that “'[T]he established legal standard for commonality . . . is comparative.'”  Opinion at 13, citing Sav-On.  Jaimez continues, "Specifically, '[t]he relevant comparison lies between the costs and benefits of adjudicating plaintiffs’ claims in a class action and the costs and benefits of proceeding by numerous separate actions—not between the complexity of a class suit that must accommodate some individualized inquiries and the absence of any remedial proceeding whatsoever.  [Citations.]'"  Ibid.  Though simple to state, this principle has received inconsistent application in practice.  Where a legal standard is applied inconsistently, repeated affirmations of the principle will help guide trial courts towards greater homogeneity of their analyses.   

The Supreme Court is currently considering appeals of the decisions in Brinker Restaurant Corp. v. Superior Court [previously reported at 165 Cal. App. 4th 25 (2008)] and Brinkley v. Public Storage, Inc. [previously reported at 167 Cal. App. 4th 1278 (2008)], both of which address, among other things, issues surrounding meal period requirements.  Jaimez bluntly observes that the law in this area is unsettled.  Despite this uncertainty, since Petitions for Review were granted in Brinker and Brinkley, trial courts throughout the state have routinely declined to decide matters based on existing law, proposing to stay wage & hour class actions while awaiting Supreme Court decisions that may not be issued until late 2010 or later.

Prior to publication, no California case addressed the issue of how to apply the standards for class certification to meal and rest break claims while the Brinker and Brinkley cases are pending before the California Supreme Court.  Moreover, the conflict between the court of appeal's decision in Cicairos v. Summit Logistics, Inc., 133 Cal. App. 4th 944 (2005) and a number of federal district court decisions also remains unresolved.  The Court, in Jaimez, found a way to avoid paralysis while awaiting Supreme Court decisions in Brinker and Brinkley. Jaimez held that a court "need not try to predict the outcome of the Supreme Court's review [of, in this case, Brinker and Brinkley], as we are not, at this stage, charged with adjudicating the legal or factual merits of Jaimez's causes of action."  Opinion at 19.

Jaimez makes it clear that trial courts need not stay class actions pending the outcome of the Supreme Court's proceedings in Brinker and Brinkley simply because they involve meal and rest break claims. California trial courts that are frequently being asked to deny or delay class certification of meal and rest break claims will find the Court's demonstrative application of class certification principles to meal and rest break claims helpful.

There is also a strong argument that, under California law, employees must have a 30-minute, uninterrupted meal break within the first five hours of a shift.  Labor Code § 512 say, "An employer may not employ 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 .... "  Wage orders provide: "No employer shall employ any person for a work period of more than five (5) hours without a meal period of not less than 30 minutes .... "  And the California Supreme Court said, "Pursuant to IWC wage orders, employees are entitled to an unpaid 30-minute, duty-free meal period after working for five hours .... "  Murphy v. Kenneth Cole Productions, Inc., 40 Cal. 4th 1094, 1104 (2007).

Despite these and other suggestive authority, trial courts continue to encounter employers and employees that dispute when employees are entitled to meal breaks. No California Court of Appeal has offered explicit guidance on this issue before this opinion. Jaimez found that trial courts may certify meal break classes based on the theory that an employer failed to provide meal breaks within the first five hours of a shift. See Opinion at 19 (observing that individual issues do not predominate because the First Choice's declarations "fail to establish that any of the meal breaks were: (1) uninterrupted, (2) for 30 continuous minutes, or (3) provided within the first five, hours of a shift").

There is a lot to chew on in Jaimez (much of it not all that palatable to employers).  I can't imagine that, with an opinion this comprehensive, we've heard the last about Jaimez.  There is more to read about in Jaimez (like what to do when the plaintiff is inadequate), but I am done writing about it.