Thursday, December 13, 2012

Fourth District Concludes Brinker Compels Certification of Meal/Rest Break Claims Predicated Upon Employer’s Complete Lack of Break Policy: Bradley v. Networkers International, LLC

On December 12, 2012, the Fourth District (Division 1) reversed its prior unpublished opinion in Bradley v. Networkers International, LLC (2009 Cal. App. Unpub. LEXIS 963), which had affirmed the trial court’s denial of certification of overtime and meal/ rest break claims on behalf of a proposed class of telecommunications installers classified as independent contractors.  The case was among the bevy of “grant-and-hold” appellate decisions which review was granted by the California Supreme Court pending resolution of Brinker.  The Court’s subsequent Opinion – Bradley v. Networkers International, LLC, __ Cal.App.4th __ (2012) – contains significant analysis favorable to the plaintiff’s perspective on several issues, including the two issues discussed below.

First, the Court acknowledged that it had improperly incorporated issues pertaining to “whether” and “why” individual employees may have missed breaks (a purely damages question) into its predominance analysis, rather than focusing on whether the plaintiff’s theory of liability was amenable to common adjudication.  See Slip Opinion, at 18-19 (“In analyzing the rest break claims, the Brinker court also expressly rejected this court's reasoning that evidence showing some employees took rest breaks and other employees were offered rest breaks but declined to take them made class certification inappropriate.”).  As explained by the Court, “Brinker instructs that in ruling on the predominance issue in a certification motion, the court must focus on the plaintiff's theory of recovery and assess the nature of the legal and factual disputes likely to be presented and determine whether individual or common issues predominate.”  See Slip Opinion, at 30 (citing Brinker, 53 Cal.4th at p. 1025.).  Citing to the Second District’s analysis in Jaimez v. Daiohs USA, Inc., 181 Cal.App.4th 1286 (2010), the Court concluded that it was error to deny certification of a theory challenging a uniform company policy/practice based on employee declarations submitted by the employer attesting that breaks were received:
Reversing the trial court's order, the Jaimez court found the trial court "misapplied" the law regarding class certification by "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.' " (Jaimez, supra, 181 Cal.App.4th at p. 1299.) The court stated that "had the trial court focused on the correct criteria, it would have necessarily found the [defendant's] 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 the case more amenable to class treatment." (Id. at p. 1300.) The court further held "[t]he fact that individual [workers] may have different damages does not require denial of the class certification motion." (Id. at p. 1301.)
As in Jaimez, there were common factual and legal issues in this case regarding whether the employees were permitted to take meal and rest breaks and whether they were compensated for missed meal and rest breaks. The evidence also showed that the nature of Networkers' scheduling and work requirements made it difficult for employees to take required rest and meal breaks.  Focusing on the employees' allegations that the employer's companywide employment practices violated state law, the Jaimez court found the fact that the evidence may disclose that not all employees missed a meal or rest break does not mean that individual issues would predominate on the liability issues. (Jaimez, supra, 181 Cal.App.4th at pp. 1300-1301.) Applying the principles set forth in Brinker, we reach the same conclusion in this case.
Slip Opinion, at 32-33.

Second, the Court also acknowledged error in finding that a theory alleging an employer failed to maintain any meal and/or rest break policy was uncertifiable due to individualized issues of waiver.  As explained by the Court, Brinker made clear that an employer is legally foreclosed from asserting the defense of waiver unless and until it establishes that it complied with its minimal obligation to communicate its authorization for breaks to employees.  See Slip Opinion, at 30.  Based thereon, a theory alleging that the employer failed to meet its threshold obligation in the first instance necessarily presented a uniform issue suitable for class treatment even if some employees claimed that they always received their breaks:
On plaintiffs' class certification motion, it was undisputed that: (1) Networkers did not have a policy permitting or authorizing meal or rest breaks for the proposed class members; (2) Networkers did not know whether these workers took the required breaks; and (3) Networkers did not maintain any records reflecting when (or if) the workers took meal or rest breaks. The evidence also showed that after Networkers formally converted these workers to "employee" status, it did not implement any rest or meal break policy, or give any notification to the workers about their entitlement to take meal or rest breaks.
Under Brinker, plaintiffs' legal challenge to these uniform practices involve common factual and legal issues that are amenable to class treatment. "An employer is required to authorize and permit the amount of [rest and meal] break time[s] called for under the wage order for its industry. If it does not . . . it has violated the wage order and is liable." (Brinker, supra, 53 Cal.4th at p. 1033.) Claims alleging a "uniform policy consistently applied to a group of employees is in violation of the wage and hour laws are of the sort routinely, and properly, found suitable for class treatment." (Ibid.)
*****
Networkers argues, and we agreed in our initial opinion, that the issue of which employees had missed breaks and how many breaks were missed and whether those missed breaks were the result of Networkers' lack of a break policy was highly dependent on the testimony of each plaintiff, essentially requiring a mini-trial on each class member's case to determine the eligibility for recovery and the amount of damages to which each plaintiff would be entitled.
However, this argument conflicts with Brinker's clear holdings that for meal breaks, an employer has an obligation to relieve its employee of all duty, permit the employee to take an uninterrupted 30-minute break, and to not impede or discourage the employee from doing so. (Brinker, supra, 53 Cal.4th at p. 1040.) Similarly, an employer has an obligation to provide a rest break, and if the employer fails to do so, the employer cannot claim the employee waived the break. (Id. at p. 1033.) Under the logic of these holdings, when an employer has not authorized and not provided legally-required meal and/or rest breaks, the employer has violated the law and the fact that an employee may have actually taken a break or was able to eat food during the work day does not show that individual issues will predominate in the litigation.
Slip Opinion, at 28 and 30-31.

Tuesday, November 27, 2012

Second District Concludes Gentry Test Survives Concepcion ; Finds Class Action Waivers Unenforceable In Meal/Rest Period Actions: Franco v. Arakelian Enterprises

On November 26, 2012, the Second District (Division 1) issued an opinion in Franco v. Arakelian Enters., __ Cal.App.4th (20120) [2012 Cal. App. LEXIS 1207], revisiting its prior “class action waiver” opinion in Franco v. Athens Disposal Co., Inc., 171 Cal.App.4th 1277 (2009).  In Franco I, the Court held that the four-part test set forth in Gentry v. Superior Court, 42 Cal.4th 443 (2007) required invalidation of a class action waiver in the context of a rest and meal period action due to the exculpatory effect such application would have on unwaivable, low value statutory rights.  In this second installment, the Court considered whether Gentry (like Discover Bank) was overruled by the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011).  After engaging in a very thorough examination of U.S. Supreme Court precedent on the subject, the Court held that it was not.

Boiled to its essence, the Court held that “Gentry remains good law because, as required by Concepcion, it does not establish a categorical rule against class action waivers but, instead, sets forth several factors to be applied on a case-by-case basis to determine whether a class action waiver precludes employees from vindicating their statutory rights.”  Slip Opinion, at 3, 61.  Specifically, the Court explained that the Gentry test was rested upon the prohibition on of exculpatory agreements – a generally applicable contract defense to all contracts under CCP § 1668 (which is required to avoid FAA preemption under Concepcion) – which a court determines by applying the following test:
“[W]hen it is alleged that an employer has systematically denied proper overtime pay to a class of employees and a class action is requested notwithstanding an arbitration agreement that contains a class arbitration waiver, the trial court must consider … [1] the modest size of the potential individual recovery, [2] the potential for retaliation against members of the class, [3] the fact that absent members of the class may be ill informed about their rights, and [4] other real world obstacles to the vindication of class members‘ rights to overtime pay through individual arbitration.  If it concludes, based on these factors, that a class . . . is likely to be a significantly more effective practical means of vindicating the rights of the affected employees than individual litigation or arbitration, and finds that the disallowance of the class action will likely lead to a less comprehensive enforcement of overtime laws for the employees alleged to be affected by the employer’s violations, it must invalidate the class arbitration waiver to ensure that these employees can vindicate [their] unwaivable rights . . . .’”
Slip Opinion, at 40-41 (quoting Gentry, 42 Cal.4th at 463).

Applying this test to the meal and rest period claims at issue, the Court’s analysis turned heavily on the fact that, subsequent to Franco I, the California Supreme Court held that attorney’s fees were not recoverable as a matter of statutory right in Kirby v. Immoos Fire Protection, Inc., 53 Cal.4th 1244 (2012).  Slip Opinion, at 41-42.  As explained by the Court, this fact rendered such claims distinct from the analysis set forth in Concepcion, as it created a “means” based barrier to litigating the claim (i.e. a barrier rooted in a lack of choice), as opposed to an “incentive” based barrier (i.e. a barrier rooted in choice).  Slip Opinion, at 58-59 (“preemption under Concepcion occurs if the arbitration process would make a prevailing claimant whole, but the amount in dispute is so small that a claimant does not think it worth the effort to pursue relief; preemption does not occur under Concepcion if a claimant lacks the means to pursue a claim in arbitration because the cost of pursuing relief on an individual basis — whether in arbitration or court — exceeds the potential recovery.”).  Based thereon, the Court held that such unwaivable claims were dependent the class action mechanism, and that a class action waiver would have an impermissible exculpatory effect:
We conclude that, as established by the attorney declarations, Franco cannot pursue relief for violations of his unwaivable statutory rights to rest and meal periods unless his case can be brought as a class action. This is the type of case where the plaintiff lacks the means to vindicate his unwaivable statutory rights absent a class action. (See Coneff v. AT&T Corp., supra, 673 F.3d at p. 1159 [applying Concepcion and distinguishing between plaintiffs who lack incentive to pursue claim and those who lack means to pursue claim].) "In contrast to the facts in Concepcion, [Franco] has demonstrated that [he] would not be able to obtain representation or vindicate [his] rights on an individual basis." (Sutherland v. Ernst & Young, LLP, supra, 847 F.Supp.2d at p. 536.) "Without the possibility of recovering costs and attorney's fees, an individual plaintiff would undoubtedly have an impossible time securing legal representation . . . given the minor amount an individual plaintiff would likely recover relative to the cost of prosecution." (Kristian v. Comcast Corp., supra, 446 F.3d at p. 52.) Where, as here, an arbitration agreement operates "as a prospective waiver of a party's right to pursue statutory remedies," it will be "condemn[ed] . . . as against public policy." (Mitsubishi Motors, supra, 473 U.S. at p. 637, fn. 19.) If a "prospective litigant [cannot] effectively . . . vindicate [his or her] statutory cause of action in the arbitral forum, the [FAA] will [not] serve . . . its remedial and deterrent function." (Id. at p. 637.)
Slip Opinion, at 60.

Monday, October 22, 2012

Second District Reverses Denial of Certification of “Independent Contractor” Issue On Behalf of Newspaper Carrier Class: Ayala v. Antelope Valley Newspapers

On October 17, 2012, the Second District (Division 4) published its class certification opinion in Ayala v. Antelope Valley Newspapers, __ Cal.App.4th __(2012) [2012 Cal. App. LEXIS 1083], which overturned  an order denying class certification of “a class of newspaper home delivery carriers … alleging that AVP improperly classified the carriers as independent contractors rather than employees....”  Slip Opinion, at 2.  The trial court denied certification based on its conclusion that “there were numerous variations in how the carriers performed their jobs, and therefore common issues did not predominate.”  See id.  The Court of Appeal disagreed with this assessment, and reversed.

As explained by the Court, the trial court erred in its finding because resolution of the overarching issue of “control” was governed by a standardized “form” agreement which set forth the general duties performed by all carriers that comprised the class:
We conclude, however, that those variations do not present individual issues that preclude class certification. Instead, because all of the carriers perform the same job under virtually identical contracts, those variations simply constitute common evidence that tends to show AVP's lack of control over certain aspects of the carriers' work. Similarly, the so-called “secondary factors” that must be considered when determining the primary issue in this case—whether AVP improperly classified the carriers as independent contractors rather than employees—also may be established for the most part through common proof, since almost all of those factors relate to the type of work involved, which is common to the class. Therefore, we hold the trial court erred in finding that the independent contractor-employee issue is not amenable to class treatment.
Slip Opinion, at 2.

Significantly, the Court further reasoned that the finding of individualized inquiry was improperly predicated upon evidence denying the existence of the policies underpinning the plaintiff’s theory of liability, which the Court concluded actually served to underscore the uniformity of the question of “control” as to the class as a whole:
In denying class certification, the trial court agreed with AVP that no commonality exists regarding AVP's right to control because individualized questions predominate as to who performs the services, when and where they perform the services, and how they perform the services. Many of the court's observations (and AVP's arguments), however, actually point to conflicts in the evidence regarding AVP's right to control rather than individualized questions. For example, the court noted that AVP's home delivery manager declared that AVP does not have a policy or practice to instruct or direct carriers on how to fold and deliver their papers, and some carriers testified that they were never so instructed, but two of the plaintiffs testified that AVP had rules on folding the papers and how to deliver them. Similarly, the court noted that the home delivery manager and some carriers testified that AVP does not require carriers to bag or rubber band the newspapers, but one of the plaintiffs testified that carriers were required to bag them.
Simply put, much of AVP's evidence, upon which the trial court relied, merely contradicts plaintiffs' allegations that AVP had policies or requirements about how carriers must do their jobs. The parties do not argue that some carriers operating under the form agreements are employees while others are not. Both sides argue that AVP has policies that apply to all carriers. The difference between the parties is the content of those policies. Plaintiffs argue that the policies are ones that control the way in which the carriers accomplish their work; AVP argues the policies impose certain requirements about the result of the work but allow the carriers to determine manner and means used to accomplish that result. While there may be conflicts in the evidence regarding whether the policies plaintiffs assert exist, the issue itself is common to the class. Similarly, whether the policies that exist are ones that merely control the result, rather than control the manner and means used to accomplish that result, is an issue that is common to the class.
Slip Opinion, at 17-18.

Thus, the Court’s opinion provides additional authority for the proposition that certification cannot be avoided by an employer submitting “merits-based” evidence seeking to attack its own standardized written policies that form the basis of a plaintiff’s theory of liability.

Monday, September 24, 2012

Second District Finds Additional Exception to Death Knell Doctrine, Inches California Law Closer to Federal Rule Permitting Successive Certification Motions: Aleman v. Airtouch Cellular

On September 20, 2012, the Second District Court of Appeal (Division 2) dismissed an appeal of a trial court order denying class certification in Aleman v. Airtouch Cellular, __ Cal.App.4th __;  2012 Cal. App. LEXIS 993 (2012), concluding that appeal was premature because the order made clear that the denial was “without prejudice”, entitling plaintiffs to bring a second motion for certification:
All named plaintiffs collectively moved for class certification. They now argue that the order denying their motion constituted a death knell. We disagree. The death knell has not yet sounded. The remaining plaintiffs' ability to pursue class certification has not been terminated. Because the denial order was without prejudice, the remaining plaintiffs are free to move for class certification again. (See Chambreau v. Coughlan (1968) 263 Cal.App.2d 712, 718 [] [“The term ‘without prejudice,’ in its general adaptation, means that there is no decision of the controversy on its merits, and leaves the whole subject in litigation as much open to another application as if no suit had ever been brought.”].) The advisability of following such a course of action is left for plaintiffs and their lawyers to decide. 
Slip Opinion, at 29-31 (2012 Cal. App. LEXIS 993, 53-55).

The Court’s holding not only provides an additional exception to the “death knell” doctrine, previously discussed here and here, it also seemingly provides an exception to the “rule against successive certification motions”,  enunciated over 20 years ago in Stephen v. Enterprise Rent-A-Car, 235 Cal. App. 3d 806 (1991).  As explained in Stephen, California procedural law – unlike the Federal Rules – required an immediate appeal upon denial of certification specifically because successive motions are not permitted:
It is only in the absence of relevant state precedent that courts turn to federal law and rule 23 for guidance. []  State and federal courts parted company on the appealability issue 24 years ago in Daar v. Yellow Cab Co., supra, 67 Cal.2d 695. It follows from that split and the cases discussed above that state and federal law diverge on allowing successive motions to certify. CA(5)(5)  Like federal policy, state policy favors prompt and early class determinations. ( Massey v. Bank of America (1976) 56 Cal. App. 3d 29, 32 [] [dismissal after a nearly five-year delay].) However, to follow federal policy on renewed motions after a death-knell denial is impractical, and state policy can be administered with enough flexibility to avoid inequity. Plaintiffs lacking adequate evidence on class issues may reasonably defer moving to certify or seek a continuance to gather evidence, and trial courts should avoid ruling on the merits until satisfied that a plaintiff has had a fair opportunity to present the case for certification. Also, the right of appeal and consequent limitation on bringing renewal motions applies only to death-knell rulings, where a plaintiff has a right to immediate appellate review to correct error. Appellate courts will be sensitive to claimed abuses of discretion when reviewing such orders. 
See Stephen, 235 Cal. App. 3d at 814.

Although the Aleman Court did not discuss the rule annunciated in Stephen in its opinion, Aleman’s analysis does not necessarily conflict with Stephen’s analysis.  However, due to Stephen’s sweeping discussion of the policy underpinning the basis for the rule, I likely would err on the side of caution by filing an immediate appeal if there were any doubt as to whether the trial court actually intended to entertain a second certification motion.

Monday, August 27, 2012

Central District Certifies Misclassification Class On Behalf of Television Equipment Installers: Sibert v. TV Magic, Inc.

On August 21, 2012, Central District Judge, Hon. Dean D. Pregerson, granted class certification in Sibert v. TV Magic, Inc., 2012 U.S. Dist. LEXIS 118245 (C.D. Cal. Aug. 21, 2012), on behalf  of television equipment installers challenging the defendant’s alleged practice of classifying such individuals as exempt from overtime requirements. The opinion has a few points that are of note:

First, the Court rejected defendant’s claim that numerosity could not be satisfied based solely on the named plaintiff’s declaration testimony that “he has worked alongside at least 40 other Installers” when Defendant was unable to present competing evidence disproving such testimony:
[A]s Plaintiff correctly notes, a "court may consider evidence that may not be admissible at trial," for purposes of certifying a class. Alonzo v. Maximus, Inc., 275 F.R.D. 513, 519 (C.D. Cal. 2011) (internal quotation marks omitted); see also In re Coordinated Pretrial Proc. in Petroleum Prods. Antitrust Litig., 691 F.2d 1335, 1342 (9th Cir. 1982) ("[I]n determining whether to certify the class, the district court is bound to take the substantive allegations of the complaint as true . . . ."). The court therefore finds Plaintiff's allegations in his sworn declaration adequate at this stage…. Moreover, although Defendant questions Plaintiff's proof, Defendant does not actually dispute any of these numbers or claims. Accordingly, the court finds that Plaintiff has met Rule 23(a)'s numerosity requirement.
Sibert, 2012 U.S. Dist. LEXIS 118245, at 4-5.

Second, the Court concluded that a challenge to the element of “control” under the Borello test was sufficient to establish commonality/predominance when defendant’s own marketing to customers highlighted the company’s oversight and control over installation as a feature of the services being offered:
Although Defendant may be right that some of the secondary factual inquiries will vary by individual, the court finds that the primary factor - TV Magic's right to control the Installers -as well as most of the secondary indicia, will involve common inquiries across the proposed classes. As discussed, Plaintiff alleges that TV Magic set and paid all of the Installers hourly rates, then assigned them to work together on different job sites, but classified them all as independent contractors. Because Plaintiff bases the proposed classes on these alleged facts, the classes also exclude any installation workers contracted through third parties or categorized by TV Magic as employees. Plaintiff further alleges that he and the other Installers typically worked the same number of hours and overtime hours per week, and performed the same basic job duties: "running cables, installing monitors, and installing and configuring various pieces of broadcast equipment." (Sibert Decl. ¶ 2.) TV Magic's own website suggests other commonalities, including as to the primary "right to control" factor: "We order the equipment"; "we install the equipment in racks and run cable with an experienced crew"; "[a] project manager assures inventory control [and] supports our crews." (Tracy Decl. ¶ 9, Ex. 1.)
See Sibert, 2012 U.S. Dist. LEXIS 118245, at 9-10.

Thursday, July 19, 2012

Two Trucking Related Wage Opinions of Note: Quezada v. Con-Way Freight, Inc. and Clayton v. Knight Transp., Inc.

On July 11, 2012, Northern District Court Judge, James Ware, granted a plaintiff-side summary judgment in Quezada v. Con-Way Freight, Inc., 2012 U.S. Dist. LEXIS 98639, 21 (N.D. Cal. July 11, 2012), finding that the defendant’s practice of paying employee truck drivers on a per-mile basis, without providing additional compensation for other required non-driving tasks, violated California law.  As held by the Court, “the California Labor Code requires employees to be paid an hourly rate for all time performing tasks other than driving” [See id., at 21], because “when employees are required to perform a task that precludes them from earning piece-rate compensation, they must be directly compensated for that time.”  See id., at 19.  Significantly, in making this determination, the Court rejected the proposition that an employer can simply assert that that piece rate funds can be spread out to compensate employees for all compensable, non-piece rate tasks:
Upon review of these authorities and the language of the pertinent provisions of the Labor Code, the Court finds that California law does not allow an employer to "build in" time for non-driving tasks into a piece-rate compensation system. Although Armenta is factually distinguishable from this case in that it considered a payment system based only on hours, the Court finds that it is nonetheless applicable, and stands for the proposition that employees must be directly compensated for all time worked. n20 The well-reasoned opinions of both the Ontiveros and Cardenas courts further support this interpretation. This interpretation is also supported by the DLSE opinion letter, which expressly precludes the possibility of allowing time to go uncompensated when employees cannot earn piece-rate compensation for a given task.
See Quezada, 2012 U.S. Dist. LEXIS 98639, at 18-19.

On July 15, 2012, Eastern District Magistrate Judge, Dennis L. Beck, entered an order in Clayton v. Knight Transp., Inc., 2012 U.S. Dist. LEXIS 98459 (E.D. Cal. July 15, 2012), recommending certification of labor code claims brought on behalf of a class of individuals who failed to receive minimum wage compensation for approximately 19 hours of time spent in standardized new hire “orientation” classes.  The defendant’s effort to defeat certification by injecting a dispute as to its status as an “employer” was deemed incapable of undermining the element of predominance, as the facts underpinning plaintiff’s theory of liability and the issue of defendant’s status as an “employer” both turned on the issue of “control”, which the Court concluded could be established based on identical evidence common to the class as a whole:
The parties argue extensively about which test the Court should ultimately apply to determine whether those who attended orientation are employees. The Court need not decide the test at this point, however. Regardless of the test used, individual issues do not predominate. Defendant would have this Court believe that employment status cannot be determined on a non-individualized basis, but for the reasons discussed above, common questions of law and fact predominate.  In other words, for attendees attending classroom orientation, employment status can be determined on a group-wide basis because the relevant facts are the same for the group. Defendant exerted control over the times and places of orientation and the daily schedule, and the time spent at orientation was generally consistent. n3 Similarly, assuming attendees are employees, the consistency in time spent at orientation will allow for determination of whether the employees would be entitled to minimum wage. See eg., Ortega v. J.B. Hunt Transport, 258 F.R.D. 361 (C.D. Cal. 2009).
See Clayton, 2012 U.S. Dist. LEXIS 98459, at 17-18.

Tuesday, July 10, 2012

Northern District Concludes that Employer May Not Avoid Class Liability Because At-Issue Policies Only Withheld Overtime Compensation in Amounts Less Than $0.50: Provine v. Office Depot, Inc.

On July 6, 2012, Northern District Judge, Susan Illston, entered an order in Provine v. Office Depot, Inc., 2012 U.S. Dist. LEXIS 93881 (N.D. Cal. July 6, 2012), denying a defense summary judgment and granting certification of various wage claims arising out of a $50 bonus award drawing conducted by Office Depot at each of its California stores each month.  The plaintiff’s theory of liability alleged that the fixed amount and monthly award of the bonus rendered it non-discretionary, and thereon, a necessary component of the employee’s “regular rate” for purposes of computing overtime compensation.  What makes the Court’s opinion in this case particularly interesting is that the named Plaintiff only sustained $0.23 of unpaid overtime for the month which he was awarded the bonus, which Office Depot attempted (albeit unsuccessfully) to use as grounds for summary judgment and/or denial of certification of plaintiff’s overtime and section 203 waiting time penalty claims.

In addition to concluding that the “awards are not ‘discretionary’ under the California Labor Code because the amount of payment was known to all employees in advance” [Provine, 2012 U.S. Dist. LEXIS 93881, at 13], the Court also rejected Office Depot’s argument that the amount of overtime wages owed were de minimis as a matter of law because the amount at issue with regard to the named plaintiff was less than fifty-cents.  Id., at 13-17.  Moreover, the Court declined to rule on Office Depot’s challenge to Plaintiff’s section 203 claim on the grounds that the ratio of damages to penalty rendered the waiting time penalty claim unconstitutional.

In granting certification, the Court concluded that variations in the standards for awarding the bonus at the various Office Depot stores was immaterial to certification, as commonality / predominance of “the claims for which plaintiff seeks certification hinge on whether defendant was required to include Bravo Awards in employees' regular rate of pay to calculate overtime.”  See id., at 25-27, 29.  According to the Court, the uniformity of this question was sufficient to render class adjudication superior (notwithstanding the defendant’s various challenges based on the small value of the named plaintiff’s claim).  Id., at 33-34.

Based on the totality of the forgoing, the instant opinion stands for the general proposition that failure to pay as little as $0.23 in wages is not only sufficient to state a legally viable overtime and waiting time penalty claim, but that such small value claims may withstand challenges regarding superiority.

Tuesday, May 29, 2012

Central District Concludes Employer’s Failure to Record Meal Breaks Precludes Employer MSJ As A Matter of Law, Post-Brinker: Ricaldai v. US Investigations Servs.

On May 25, 2012, Central District Judge Dean D. Pregerson, concluded that the California Supreme Court’s decision in Brinker (discussed previously here) precluded a defense summary judgment of a plaintiff’s meal period claims where the employer failed to main records of meal breaks having been taken:
[T]he court notes its agreement with Justices Werdegar and Liu that it is the employer's burden to rebut a presumption that meal periods were not adequately provided, where the employer fails to record any meal periods. Otherwise, employers would have an incentive to ignore their recording duty, leaving employees the difficult task of proving that the employer either failed to advise them of their meal period rights, or unlawfully pressured them to waive those rights. See Brinker, 139 Cal. Rptr. 3d at 353 & n.1 (Werdegar, J., concurring) (citing Cicairos, 133 Cal. App. 4th at 961 ("[W]here the employer has failed to keep records required by statute, the consequences for such failure should fall on the employer, not the employee." (internal quotation marks omitted))). Here, as mentioned, there is no dispute that USIS failed to record any meal periods.
See Ricaldai v. US Investigations Servs., LLC, 2012 U.S. Dist. LEXIS 73279, at 14 (C.D. Cal. May 25, 2012).

In addition, summary judgment was denied on the further ground that the plaintiff was unable to access off-duty breaks.  The Court’s opinion demonstrates the extremely low “discouragement” threshold necessary to establish a barrier to breaks, post-Brinker.  Despite the fact that the plaintiff in this case worked independently, and purportedly had control over her schedule, summary judgment was denied based on evidence that plaintiff was “implicitly trained” to take on-duty meal breaks and precluded from using time for her own purposes: 
However, even if the burden of proof were on Ricaldai, the court would still find a genuine issue of material fact….   
Ricaldai offers evidence that she was implicitly trained to take working lunches, expressly told that personal errands were prohibited without prior authorization, specifically directed to fill her entire day in each geographic area with job duties, and correspondingly discouraged from taking any time off. Viewing this evidence in the light most favorable to Ricaldai, a rational trier of fact could conclude that USIS pressured her to take working lunches instead of duty-free meal periods, in violation of California meal period law under Brinker.
Contrary to USIS' argument, it does not change the summary judgment analysis that USIS exerted no direct control over Ricaldai during her work day and allowed for overtime, and that Ricaldai therefore admitted at deposition that she technically could have scheduled her work day to incorporate a duty-free meal period while still completing her tasks. As discussed, there is sufficient evidence that, viewed in the light most favorable to Ricaldai, USIS nonetheless unlawfully discouraged Ricaldai from scheduling a meal period during her workday.
Ricaldai v. US Investigations Servs., LLC, 2012 U.S. Dist. LEXIS 73279, at 17-18.

Thursday, May 10, 2012

Two New Arbitration Decisions of Note: Samaniego v. Empire Today LLC and O'Brien v. Am. Express Co.

In Samaniego v. Empire Today LLC, 2012 Cal. App. LEXIS 540 (April 5, 2012), the First District (Division Three) upheld a trial court order which declined to enforce arbitration of class-wide wage claims based on a finding of unconscionability under the Armendariz test.  The Court’s decision builds on a growing list of circumstances satisfying the Armendariz factors which may be relied upon to overcome enforcement of an arbitration provision in the employment context.

With regard to the first element, the Court concluded that the evidence “amply” supported a finding of procedural unconscionability, as (1) employees “were told that they were ‘required’ to sign these documents, including the agreement, if they wanted to work for Empire” [See id., at 10], (2) “Empire failed to provide plaintiffs with a copy of the relevant arbitration rules”  [See id., at 11 (concluding that “[n]umerous cases have held that the failure to provide a copy of the arbitration rules to which the employee would be bound, supported a finding of procedural unconscionability.”)], and (3) the language of the arbitration provision was buried at the end of an 11 page document that was “neither flagged by individual headings nor required to be initialed by the subcontractor.” See id., at 12.
  • [Note: In Morvant v. P.F. Chang's China Bistro, Inc., 2012 U.S. Dist. LEXIS 63985 (N.D. Cal. May 7, 2012), Northern District Court Judge, Yvonne Gonzalez Rogers, concluded that continued employment – standing alone – does not prove acceptance of the terms of the Arbitration Agreement.  Rather, “[a]n employee's continued employment has been found to constitute implied acceptance of the changed terms of employment where the employee was informed that his or her continued employment would constitute acceptance of those changed terms.”  See Morvant, 2012 U.S. Dist. LEXIS 63985, at 8.]
With regard to substantive unconscionability, the Court concluded that the agreement was rendered one sided by terms that (1) unilaterally shifted fees only for the employer [which the Court noted was unlawful in the wage context], and (2) limited the statute of limitations of wage claims to 6 months.  As to the later issue, the Court refused to extend authority approving of this practice into the wage context, finding that an arbitration provision cannot be used as a means to undermine statutory rights:
[Empire] supports its argument only with authority for the general proposition that a contractual provision that unilaterally shortens a limitations period to six months, taken alone, does not necessarily render an adhesion contract substantively unconscionable. (See Soltani v. Western & Southern Life Ins. Co. (9th Cir. 2001) 258 F.3d 1038, 1043 [citing California cases].) The import of such a clause is quite different in the context of the statutory wage and hour claims asserted here.  The Labor Code provides the bases for the class claims, and it affords employees three or four years to assert them. (See Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1283 []; Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107, 117 [].)  Where, as in this case, arbitration provisions undermine statutory protections, courts have readily found unconscionability. (Nyulassy, supra, at p. 1283; Martinez, supra, at p. 117; Wherry v. Award, Inc. (2011) 192 Cal.App.4th 1242, 1249 [] (Wherry).) As noted in Armendariz, supra, “an arbitration agreement cannot be made to serve as a vehicle for the waiver of statutory rights created by the FEHA.” (24 Cal.4th at p. 101.)
See Samaniego, 2012 Cal. App. LEXIS 540, at 14.

In the second opinion – O'Brien v. Am. Express Co., 2012 U.S. Dist. LEXIS 64553 (S.D. Cal. May 8, 2012) – Southern District Magistrate Judge, Bernard G. Skomal, concluded that “under California law, Plaintiff may obtain limited discovery to make the argument that the arbitration agreement is unconscionable.”  See O'Brien, 2012 U.S. Dist. LEXIS 64553, at 11. As reasoned by the Court, “Concepcion … reaffirmed that the FAA ‘permits agreements to arbitrate to be invalidated by 'generally applicable contract defenses, such as fraud, duress, or unconscionability…’” and “[b]ased on these available defenses to the validity of an arbitration agreement, courts have permitted parties opposing a motion to compel arbitration to take discovery on the unconscionability of an arbitration provision, including ones with class action waivers, post-Concepcion.”  See id., at 7-9 (collecting cases). 

Post-Concepcion, engaging in discovery prior to opposing a motion to compel arbitration is becoming increaringly more important (if not essential) in the wage and hour context.  This was recently highlighted in the Second District’s decision in Kinecta Alternative Financial Solutions, Inc. v. Superior Court, __ Cal.App.4th __ (2012) – previously discussed here.  In that opinion, the Court held that an “AT&T Mobility LLC v. Concepcion … did not overrule Gentry”, but explained that an employee is “required to establish that the arbitration provision invalidly prohibited arbitration of class claims by making a factual showing of the four factors showing that class arbitration is likely to be a significantly more effective practical means of vindicating employees' rights than individual arbitration.”  Making such a showing in most cases would require discovery.

Wednesday, May 2, 2012

Southern District Finds Waiver Argument Unpersuasive Post-Brinker; Certifies Meal and Rest Period Claims On Behalf of “Piece Rate” Workers: Schulz v. Qualxserv

On April 26, 2012, Southern District Court Judge, Hon. Anthony J. Battaglia, certified a swath of wage and hour claims on behalf of computer repair “field service technicians” who were paid by way of a piece-rate compensation.  See Schulz v. Qualxserv, LLC, 2012 U.S. Dist. LEXIS 58561, 1-2 (S.D. Cal. Apr. 26, 2012).  The Court’s opinion contains excellent discussion on various issues, many unique to alleged wage violations occurring in the context of fixed piece-rate compensation (as opposed to an hourly compensation).  Moreover, the Court’s opinion would seem to be the first district court opinion addressing the impact of Brinker Restaurant Corp. v. Superior Court [discussed previously here, here and here] on the certification of meal and rest period claims.

Here, the plaintiffs sought certification on the grounds that liability could be commonly established based on the employer’s failure to maintain a policy affirmatively relieving employees for meal and rest periods, coupled with a systematic failure to record meal periods.  [The employer apparently did not maintain detailed break policies or record meal breaks because employees were paid by project and free to determine their own breaks.  See Schulz, 2012 U.S. Dist. LEXIS 58561, 12].  The employer opposed certification – citing to Brown v. Fed. Express Corp., 249 F.R.D. 580, 585-87 (C.D. Cal. 2008) – on the grounds that plaintiffs had failed to provide “evidence that it ‘deprived’ technicians of meal or rest breaks as a general policy and, therefore, highly individual questions predominate over any common issue.”  See Schulz, 2012 U.S. Dist. LEXIS 58561, at 22.

Significantly, the Court rejected the defense argument based on Brinker’s finding that an employer must first establish it maintained a policy of actually relieving employees of duty (and control) for legally compliant meal/rest period before leaping to the question of waiver [this is discussed more thoroughly in a previous post, here (at paragraph 2)].  As the Court explained, the standard articulated in Brinker provides “that ‘an employer's obligation is to relieve its employees of all duty with the employee thereafter [being] at liberty to use the meal period for whatever purpose he or she desires….’” See Schulz, 2012 U.S. Dist. LEXIS 58561, at 22-23 (quoting Brinker, at page 8).  In granting certification, the Court reasoned that “common questions [predominated] under this standard because Plaintiffs' challenge the Defendants' common corporate policy of failing to relieve the technicians of all work during the rest and meal breaks.”  See id., at 23-24.  Thus, as the plaintiff’s theory of liability was focused on the legal adequacy of the employer’s policy itself, issues of pertaining to waiver were not implicated and certification was appropriate.

In addition to the forgoing, the Court also rejected the employer’s argument based on the fact “Plaintiff's meal break claim is … based on Defendants' alleged failure to comply with Wage Order No. 4-2001, which requires the employer to ‘record’ unpaid meal periods.”  See id., at 24.  As previously discussed here (at paragraph 4), Brinker precludes an employer who fails to record meal breaks from benefitting from its misconduct by claiming individualized issue of waiver must now prelude class-wide adjudication. 

In all, the Court’s analysis signifies a fairly dramatic departure from the pre-Brinker treatment of waiver as a defense to certification.

[As an aside, the fact pattern in this case raises other interesting questions.  For example, an employer who pays employees on a piece rate basis presumably cannot simply assume by default that employees took meal breaks, as such a policy would impermissibly compensates employees who work through their breaks the exact same amount as those employees take breaks.  At a minimum, employees must receive compensation for all hours worked, even if the employee waived his or her break.  Similarly, would an employee ever receive a "paid" rest period (as required by the Wage Orders) absent a separate piece-rate dedicated solely to rest break pay?  Absent such a policy, employees are technically only paid for the piece-rate tasks performed and would necessarily receive the same compensation regardless of whether an off-duty rest break was ever authorized (resulting in the employer extracting 20 minutes of “free work” from the employee).  See Murphy v. Kenneth Cole Productions, Inc., 40 Cal. 4th 1094, 1104 (2007) (“If denied two paid rest periods in an eight-hour workday, an employee essentially performs 20 minutes of ‘free’ work, i.e., the employee receives the same amount of compensation for working through the rest periods that the employee would have received had he or she been permitted to take the rest periods.”). ]

Monday, April 30, 2012

California Supreme Court Splits the Baby on Fee Issue: Kirby v. Immoos Fire Protection, Inc

On April 30, 2012, the California Supreme Court issued its ruling in Kirby v. Immoos Fire Protection, Inc, __ Cal. 4th __ (2012), concluding that neither section 1194 nor section 218.5 authorizes an award of attorney’s fees to a party that prevails on a section 226.7 claim:
We granted review to consider when, if ever, a party who prevails on a section 226.7 action for an alleged failure to provide rest breaks may be awarded attorney’s fees. We conclude, in light of the relevant statutory language and legislative history, that neither section 1194 nor section 218.5 authorizes an award of attorney’s fees to a party that prevails on a section 226.7 claim. We accordingly reverse the judgment of the Court of Appeal on this claim and affirm the judgment on plaintiffs‟ other claims.
Slip Opinion, at 2.

As held by the Court, “the most plausible inference to be drawn from [the relevant legislative] history is that the Legislature intended section 226.7 claims to be governed by the default American rule that each side must cover its own attorney’s fees.”  See id., at 17. 

IMPORTANT NOTE: It is important to highlight that the Court’s ruling will not preclude the recovery of attorneys fees by plaintiff’s counsel pursuing break claims on a class-wide basis.  Although “[t]he general rule is that a party is entitled to an award of attorney fees if there is specific authorization therefor by statute or private agreement…[,][t]here are… three well-established equitable exceptions to the general rule, known as the common fund, substantial benefit, and private attorney general theories.”  See Consumers Lobby Against Monopolies v. Public Utilities Com., 25 Cal. 3d 891, 906 (1979) (citing Serrano v. Priest, 20 Cal. 3d 25 (1977)).  Any of these doctrines may be asserted by a prevailing plaintiff in the class context to justify an award of fees. 

Thus, as the Court of Appeal's opinion (which upheld an award of attorney's fees to the employer)  stood to forclose employees from even attempting to bring a break claim in the first instance (due to the chilling impact of having to pay the employer's attorneys fees), the Kirby decision is unquestionably a positive ruling for employees.

Friday, April 27, 2012

California Supreme Court to Issue Ruling in Kirby v. Immoos Fire Protection, Inc. on Monday (April 30, 2012)

The statement on the California Supreme Court Website is as follows:

04/27/2012 Notice of forthcoming opinion posted To be filed on Monday, April 30, 2012 at 10 a.m.

As previously discussed here, the issue on review in Kirby pertains to whether meal and rest period claims are governed by Labor Code 218.5’s two-way fee shifting provisions, rather than the one way fee shifting of Section 1194.

Second District (Division 3) Declines to Weigh-in on Gentry Issue: Kinecta Alternative Financial Solutions, Inc. v. Superior Court

On April 25, 2012, the Second District (Division 3) issued an opinion concluding that a trial court erred by denying a motion to dismiss class allegations from the plaintiff’s complaint (filed concurrently with a motion to compel arbitration) when the  at issue arbitration provision neither authorized nor prohibited class arbitration.  See Kinecta Alternative Financial Solutions, Inc. v. Superior Court, 2012 Cal. App. LEXIS 487 (2012).  In making this ruling, however, the Court left open the possibility that the Gentry framework continued to survive the U.S. Supreme Court’s ruling in Concepcion [as was concluded by its sister Division in Brown v. Ralphs Grocery Co., 197 Cal.App.4th 489, 498 (2011) previously discussed in posts here and here].  As was explained by the Court, satisfaction of the Gentry factors could potentially render an arbitration agreement unenforceable in the employment context, but such a determination could not be made here because the plaintiffs had not submitted any supporting evidence:
A question exists about whether Gentry survived the overruling of Discover Bank in Concepcion, but it is not one we need to decide. (Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489, 498 [128 Cal. Rptr. 3d 854].) Gentry decided a different issue from Discover Bank. In contrast to the unconscionability analysis in Discover Bank, the rule in Gentry concerns “the effect of a class action waiver on unwaivable statutory rights regardless of unconscionability.” (Arguelles-Romero v. Superior Court (2010) 184 Cal.App.4th 825, 836 [109 Cal. Rptr. 3d 289] (Arguelles-Romero).) Specifically, Gentry addresses whether a class arbitration “is a significantly more effective practical means of vindicating unwaivable statutory rights[.]” (Arguelles-Romero, at p. 841.) Discover Bank and Gentry established two different tests of whether to enforce a class arbitration waiver, which should be considered separately. (Arguelles-Romero, at pp. 836–837.) Since it has not been expressly abrogated or overruled, Gentry appears to remain the binding law in California. (Brown v. Ralphs Grocery Co., at pp. 498, 505.) 
*******
Even if Gentry has not been overruled, in opposing Kinecta's motion to compel arbitration and to dismiss class claims, Malone had to provide evidence of the four Gentry factors. Plaintiff has the burden of establishing that the arbitration provision (here, limiting arbitration to bilateral arbitration) is invalid by making a factual showing of the four Gentry factors. (Brown v. Ralphs Grocery Co., supra, 197 Cal.App.4th at p. 497.) The record shows that Malone provided no evidence as to any of the four Gentry factors required to support a trial court's determination that the arbitration should proceed as a class action arbitration. Thus there is no evidence, and no substantial evidence, that plaintiff had established a factual basis that would require a declaration that the arbitration agreement was unenforceable. (Ibid.)
Because there are no grounds to declare the arbitration agreement unenforceable and because the arbitration provision contained no agreement to classwide arbitration, Kinecta  argues that Concepcion and Stolt-Nielsen require reversal of the order denying its request to dismiss class claims from Malone's complaint. We agree.
See Kinecta, 2012 Cal. App. LEXIS 487, at 17-20

Friday, April 20, 2012

Unpacking The Brinker Court’s Analysis Of Certification Issues Particular to Meal and Rest Period Claims: Brinker Restaurant Corp. v. Superior Court

As promised, this final post will examine the Brinker Court’s meal and rest break certification analysis (previous posts are located here and here).  As demonstrated below, the common thread running throughout the Court’s opinion centered largely on the Court of Appeal’s finding that individualized issues relating to waiver rendered certification of meal and rest period claims inappropriate.
With regard to rest periods, the Court’s analysis was fairly straight forward.  The Court held that because the plaintiffs’ theory of liability was predicated on breaks not being authorized or permitted in the first instance, reversal of the trial court’s certification order based on issues relating to class members having waived their breaks was an abuse of discretion:
In reversing class certification, the Court of Appeal concluded that because rest breaks can be waived—as all parties agree—“any showing on a class basis that plaintiffs or other members of the proposed class missed rest breaks or took shortened rest breaks would not necessarily establish, without further individualized proof, that Brinker violated” the Labor Code and Wage Order No. 5. This was error. An employer is required to authorize and permit the amount of rest break time called for under the wage order for its industry. If it does not—if, for example, it adopts a uniform policy authorizing and permitting only one rest break for employees working a seven-hour shift when two are required—it has violated the wage order and is liable. No issue of waiver ever arises for a rest break that was required by law but never authorized; if a break is not authorized, an employee has no opportunity to decline to take it. As Hohnbaum pleaded and presented substantial evidence of a uniform rest break policy authorizing breaks only for each full four hours worked, the trial court’s certification of a rest break subclass should not have been disturbed.
Slip Opinion, at 25-26 (emphasis added).

Thus, the Brinker opinion confirms that the issue of waiver is irrelevant to theories of liability alleging that employees were deprived access to a legally compliant break in the first instance (this would seem to be a matter of common sense, as you cannot waive what you never had).

With regard to meal periods, the Brinker Court went one step further.  Although the Court rendered no formal opinion as to whether the trial court erred in certifying a class [id., at 51 (“we need not decide whether or not the trial court erred…. we consider it the prudent course to remand the question of meal subclass certification to the trial court for reconsideration in light of the clarification of the law we have provided.”)], Justice Werdegar’s concurring opinion makes clear that the Court did not accept the premise that individualized issues relating to waiver render a claim uncertifiable, per se:
In returning the case for reconsideration, the opinion of the court does not endorse Brinker’s argument, accepted by the Court of Appeal, that the question why a meal period was missed renders meal period claims categorically uncertifiable. Nor could it, for such a per se bar would be inconsistent with the law governing reporting obligations and our historic endorsement of a variety of methods that render collective actions judicially manageable.
Concurring Opinion (Werdegar, J.), at 1 (emphasis in original).

Here, significant emphasis was placed on the employer’s obligation to record meal breaks relative to an employer asserting the defense of waiver.  Specifically, Justice Werdegar highlighted that when an employer fails to record a meal break, a “presumption arises that the employee was not relieved of duty and no meal period was provided” [id., at 1], and thereafter, “[a]n employer’s assertion that it did relieve the employee of duty, but the employee waived the opportunity to have a work-free break, … is an affirmative defense, and thus the burden is on the employer, as the party asserting waiver, to plead and prove it.”  See id., at 2.

This statement of presumption and burden is material to certification, as it precludes the automatic categorization of all missed meal periods as implicating an individualized issue of waiver.  To establish the presence of individualized issues, an employer seemingly must now affirmatively introduce evidence for each individual employee to place the presumption in dispute as to that employee.  In turn, this forecloses a court from making a generalized, freewheeling assumption from a handful of employee declarations that individualized issues relating to waiver will predominate as to the entire class.  Such an interpretation is consistent with Justice Werdegar’s discussion, which noted that the employer cannot be permitted to reap a reward for failing to record breaks.  See id., at 2 fn. 1 (“[t]o place the burden elsewhere would offer an employer an incentive to avoid its recording duty and a potential windfall from the failure to record meal periods.”).

In addition – as discussed in the final paragraph of my previous post – an employer’s invocation of a generalized waiver defense in the break context is properly construed as a damages issue.  See Concurring Opinion (Werdegar, J.), at 3 (“For purposes of class action manageability, a defense that hinges liability vel non on consideration of numerous intricately detailed factual questions, … is different from a defense that raises only one or a few questions and that operates not to extinguish the defendant’s liability but only to diminish the amount of a given plaintiff’s recovery.”) (emphasis added).

Finally, it is important to highlight that the elements of waiver – which requires an employer evidence that the right to breaks was both known and voluntarily released [Waller v. Truck Ins. Exchange, Inc., 11 Cal. 4th 1, 31 (1995) (“waiver is the intentional relinquishment of a known right after knowledge of the facts”)] – in many cases may lend themselves to issues that are common to the class.  By way of example, an employer that fails to communicate any break policies to its employees will necessarily be legally foreclosed from subsequently seeking to invoke a waiver defense.  See e.g. Concurring Opinion, at 2 fn. 1 (“the burden is on the employer to show that the agricultural employee had been advised of his or her legal right to take a meal period and has knowingly and voluntarily decided not to take the meal period.”); See also Bufil v. Dollar Financial Corp., 162 Cal. App. 4th 1193, 1199 (2008) (“Dollar does not notify its employees that they are authorized and permitted to take a 10-consecutive-minute off-duty rest break …. The onus is on the employer to clearly communicate the authorization and permission to its employees.”).

Saturday, April 14, 2012

Unpacking The Brinker Court’s Class Certification Analysis: Brinker Restaurant Corp. v. Superior Court

As I indicated in my prior post (located here), the real value of the Brinker opinion, at least from the plaintiff’s perspective, lays in the Court’s certification analysis.  The Court’s analysis in this regard has two components which track the two separate grounds on which the Court of Appeal reversed the trial court’s certification order: “First, the Court of Appeal held the trial court committed error per se by ruling on certification without first resolving legal disputes over the scope of Brinker’s duties to provide meal and rest periods.”  See Slip Opinion, at 10.  “Second, it held that any court, upon resolving those disputes, could only have concluded certification was inappropriate.”  See id.  This Blog Post will examine the first of these issues, which is focused on aspects of the element of predominance in general.  I will explore the second issue set – which involves certification issues particular to meal and rest period claims – in a subsequent post (contained here).

With regard to this first issue, “[t]he trial court [had] concluded it could certify a class without resolving disputes over the scope of Brinker’s duty to provide breaks because common questions would predominate even if Brinker’s legal positions were correct.” See Slip Opinion, at 10.  The Court of Appeal deemed this an abuse of discretion, concluding that “the trial court ‘was required to determine the elements of plaintiffs’ claims’ because the court ‘could not determine whether individual or common issues predominate in this case, and thus whether a class action was proper, without first determining this threshold issue.’” See id.

On this issue, the Brinker Court found the Court of Appeal’s absolute position to itself be an abuse of discretion, concluding that “[w]hile … trial courts must resolve any legal or factual issues that are necessary to a determination whether class certification is proper, the Court of Appeal went too far by intimating that a trial court must as a threshold matter always resolve any party disputes over the elements of a claim.”  See id. (emphasis in original).  As explained by the Court, “[a] class certification motion is not a license for a free-floating inquiry into the validity of the complaint’s allegations” [Id., at 11], and in fact, “[s]uch inquiries are closely circumscribed.”  See Id., at 12.  Such inquiry, according to the Court, “must ‘be limited to those aspects of the merits that affect the decisions essential ’ to class certification” [See Id., at 12-13 (emphasis added)], and even then, “a court generally should eschew resolution of such issues unless necessary.”  See id., at 13 (emphasis added).

At this point, it is important to again highlight (as discussed in my prior post) that the Brinker Court deemed a threshold legal determination of the elements of plaintiffs’ break claims unnecessary to the predominance analysis in the Brinker case, and that it was engaging in review of such issues only because the parties had requested the Court to address the substantive merits.  See id., at 2, 15 and 26. Thus, the Brinker opinion not only serves to establish that a trial court is not per se obligated to make threshold merits based determinations at the certification stage when the proper interpretation of the legal elements are in dispute, it also serves as an important instructive tool in delineating the boundaries of when such threshold resolution of the legal merits is permissible.

Although the Brinker Court recognized that the issue of “whether common or individual questions predominate will often depend upon resolution of issues closely tied to the merits” [Slip Opinion, at 12], the Court also reiterated that a court’s analysis in this regard must “hinge[] on ‘whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment.’”  See id., at 8 (emphasis added).  This is a critical component of the Brinker Court’s opinion, as the Court of Appeal was deemed to have gone astray by failing to acknowledge the theory of liability put forward by plaintiffs (which significantly was substantiated by a uniform company policy and turned on resolution of a common issue of law):
We observe in closing that, contrary to the Court of Appeal’s conclusion, the certifiability of a rest break subclass in this case is not dependent upon resolution of threshold legal disputes over the scope of the employer’s rest break duties. The theory of liability—that Brinker has a uniform policy, and that that policy, measured against wage order requirements, allegedly violates the law—is by its nature a common question eminently suited for class treatment.  
Slip Opinion, at 26.

It is important to underscore that disregard of the plaintiff’s theory of liability is a common certification error in the wage and hour context, spurred in many instances by an employer’s strategic practice of using employee declaration testimony to distract the court’s focus away from the uniform employment policies on which the theory of liability is based:
  • United Steel, Paper & Forestry, Rubber, Mfg. Energy v. ConocoPhillips Co., 593 F.3d 802, 808 (9th Cir. Cal. 2010) (“the district court treated plaintiffs' actual legal theory as all but beside the point, holding that because ‘there can be no assurances that [plaintiffs] w[ould] prevail on this theory,’ [] the … predominance inquiry would instead focus on the question whether plaintiffs ‘actually missed meal breaks,’ an admittedly individualized inquiry.”)
  • Bufil v. Dollar Financial Group, Inc., 162 Cal. App. 4th 1193, 1203-04 (2008) (“The court made an erroneous assumption that each class member would need to testify as to his or her understanding of the meal period waiver.  This … issue ... is irrelevant to Bufil's lawsuit.  Bufil’s theory is that the two circumstances – single employee on duty or providing training – do not come within the ‘nature of the work’ exception set forth in Wage Order No. 4-2001, so as to permit an ‘on-duty’ meal period.  This is a legal question concerning the liability of Dollar to each putative class member.”)
  • Jaimez v. Daiohs USA, Inc., 181 Cal. App. 4th 1286, 1303-1304 (Cal. App. 2d Dist. 2010) (“The First Choice declarations do not constitute substantial evidence that individual inquiries predominate the meal breaks claim” as “First Choice's practices are the predominant common factual issues on the meal and rest break claims.”)
  • Ghazaryan v. Diva Limousine, Ltd., 169 Cal. App. 4th 1524, 1531, 1536-37 (2008)  (“Although individual testimony may be relevant to determine whether these policies unduly restrict the ability of drivers as a whole to utilize their on-call time for personal purposes, the legal question to be resolved is not an individual one.  To the contrary, the common legal question remains the overall impact of Diva’s policies on its drivers, not whether any one driver, through the incidental convenience of having a home or gym nearby to spend his or her gap time, successfully finds a way to utilize that time for his or her own purposes.”)
The Brinker opinion confronts this issue by prescribing an analytical framework which expressly confines the court’s predominance analysis to issues presented by the plaintiff’s theory of liability:
We summarize the governing principles.  Presented with a class certification motion, a trial court must examine the plaintiff’s theory of recovery, assess the nature of the legal and factual disputes likely to be presented, and decide whether individual or common issues predominate. To the extent the propriety of certification depends upon disputed threshold legal or factual questions, a court may, and indeed must, resolve them. Out of respect for the problems arising from one-way intervention, however, a court generally should eschew resolution of such issues unless necessary. (See Fireside Bank v. Superior Court, supra, 40 Cal.4th at p. 1074; Schleicher v. Wendt, supra, 618 F.3d at p. 685.)
Slip Opinion, at 12 (emphasis added).

Thus, the Court’s decision provides important guidance on the element of predominance by not only limiting when a merits based determination can occur, it expressly confines that inquiry to the issues raised by the plaintiff’s theory of liability put forward for certification.

In addition to the forgoing, the Brinker opinion also contains a second significant component – bolstered by Justice Werdegar’s concurring opinion – which draws into question the reach of the First District’s recent opinion in Duran v. United States Bank National Assn., 203 Cal. App. 4th 212 (2012) disapproving the use of representative/sampling evidence in establishing class-wide liability (an opinion which I discussed previously, here).  This component is found within the clause of the Court’s rule analysis stating that a court “must determine whether the elements necessary to establish liability are susceptible of common proof or, if not, whether there are ways to manage effectively proof of any elements that may require individualized evidence.”  See Slip Opinion, at 12 (citing Sav-On Drug Stores, Inc. v. Superior Court, 34 Cal. 4th 319, 334 (2004)).  This statement plainly communicates that an inability to establish liability entirely by way of common proof is not the end of a court’s predominance inquiry.  Indeed, closer examination of the portion of the Sav-On opinion cited states that “[i]ndividual issues do not render class certification inappropriate so long as such issues may effectively be managed.”  See Sav-On, 34 Cal. 4th at 334.

While the Brinker opinion itself does not expand upon this issue further, Justice Werdegar’s concurring opinion does, giving specific instruction to the lower courts (1) reiterating that small value claims are generally dependent on the class action mechanism to secure vindication of substantive rights, and (2) advising that representative testimony, surveys, and statistical analysis all are available as tools to render manageable determinations of the extent of liability:
[W]e have encouraged the use of a variety of methods to enable individual claims that might otherwise go unpursued to be vindicated, and to avoid windfalls to defendants that harm many in small amounts rather than a few in large amounts. (See Sav-On Drug Stores, Inc. v. Superior Court, supra, 34 Cal.4th at pp. 339-340; Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 714-715.) Representative testimony, surveys, and statistical analysis all are available as tools to render manageable determinations of the extent of liability. (See, e.g., Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, 749-755 [upholding as consistent with due process the use of surveys and statistical analysis to measure a defendant’s aggregate liability under the IWC’s wage orders]; Dilts v. Penske Logistics, LLC (S.D.Cal. 2010) 267 F.R.D. 625, 638 [certifying a meal break subclass because liability could be established through employer records and representative testimony, and class damages could be established through statistical sampling and selective direct evidence]; see generally Sav-On, at p. 333 & fn. 6).) “[S]tatistical inference offers a means of vindicating the policy underlying the Industrial Welfare Commission’s wage orders without clogging the courts or deterring small claimants with the cost of litigation.” (Bell, at p. 751.)
Given these settled principles, Brinker has not shown the defense it raises, waiver, would render a certified class categorically unmanageable.
Concurring Opinion (Werdegar, J.), at 4.

While Justice Werdegar’s discussion does not necessarily sanction unbridled use of representative/sampling evidence, it unquestionably does sanction such use as a means of managing “defenses” to a plaintiff’s theory of liability.  More importantly, however, Justice Werdegar highlights that a court must distinguish between defenses that “operate[] not to extinguish the defendant’s liability but only to diminish the amount of a given plaintiff’s recovery” (i.e. a distinction encompassing individualized instances of waiver, which employers typically assert in the meal/rest break context to fragment the issues and defeat certification):
While individual issues arising from an affirmative defense can in some cases support denial of certification, they pose no per se bar (see, e.g., Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 334-338; Weinstat v. Dentsply Internat., Inc. (2010) 180 Cal.App.4th 1213, 1235). Instead, whether in a given case affirmative defenses should lead a court to approve or reject certification will hinge on the manageability of any individual issues. (See Sav-On, at p. 334.)
For purposes of class action manageability, a defense that hinges liability vel non on consideration of numerous intricately detailed factual questions, as is sometimes the case in misclassification suits, is different from a defense that raises only one or a few questions and that operates not to extinguish the defendant’s liability but only to diminish the amount of a given plaintiff’s recovery.
Concurring Opinion (Werdegar, J.), at 3.

Thursday, April 12, 2012

Unpacking The Brinker Court’s Construction Of California’s Meal and Rest Break Provisions

Having had some time to digest the Court’s opinion, the most surprising aspect (at least in my mind), is that the Court’s opinion is largely non-surprising.  Rather than engaging in a broad analysis of the meaning of the Wage Order’s various meal and rest break provisions, the Court has strictly limited its analysis to only those issues necessary to resolve the certification questions in the case at hand. In this regard, the real value of the Brinker opinion, at least from the plaintiff’s perspective, appears to lay in the Court’s certification analysis, which unquestionably disposes of the common belief held by many in the defense bar that meal and rest period claims are “hopelessly uncertifiable.”  Due to the number of issues in play, today’s post will be limited to the Court’s analysis relating to the construction of the meal and rest break provisions, with subsequent posts addressing the Court’s analysis regarding certification.

Meal Period Requirements: With regard to meal periods, the Court concluded that “[a]n employer’s duty ... under both section 512, subdivision (a) and Wage Order No. 5 is an obligation to provide a meal period to its employees” [Slip Opinion, at 36 (emphasis added)], which the Court concluded “is satisfied if the employee (1) has at least 30 minutes uninterrupted, (2) is free to leave the premises, and (3) is relieved of all duty for the entire period.”  See Slip Opinion, at 30; id., at 36 (“The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so.”).

Importantly, the Court’s finding in this regard has a direct correlation to the fact the Wage Order’s definition of “hours worked” provides for two independent standards: one based on “control” and the other on being “suffered or permitted to work...” See 8 CCR 11050(2)(K) (“‘Hours worked’ means the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work….”); see also Morillion v. Royal Packing Co., 22 Cal. 4th 575, 582 (2000) (“While cases interpreting the phrase ‘hours worked’ have not thoroughly examined the definition's scope or defined the relationship between the two clauses, they nonetheless support the view that the ‘suffered or permitted to work’ clause in Wage Order No. 14-80 does not limit the ‘control’ clause under the definition of ‘hours worked.’”).  Ironically, the Court reasoned that this dual standard is what precluded a construction saddling an employer with an obligation to “ensure” employees in fact have ceased all duties, as doing so would require an employer to assert control over the employee:
Indeed, the obligation to ensure employees do no work may in some instances be inconsistent with the fundamental employer obligations associated with a meal break: to relieve the employee of all duty and relinquish any employer control over the employee and how he or she spends the time. (See Morillion v. Royal Packing Co., supra, 22 Cal.4th at pp. 584-585 [explaining that voluntary work may occur while not subject to an employer’s control, and its cessation may require the reassertion of employer control].)
Slip Opinion, at 33-34.

In addition, the Court also makes clear that an employer’s obligation cannot be met by merely enacting a lawful meal break policy, as the employee must also be free of barriers which impede or discourage the taking of breaks:
[A]n employer may not undermine a formal policy of providing meal breaks by pressuring employees to perform their duties in ways that omit breaks. (Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949, 962-963; see also Jaimez v. Daiohs USA, Inc., supra, 181 Cal.App.4th at pp. 1304-1305 [proof of common scheduling policy that made taking breaks extremely difficult would show violation]; Dilts v. Penske Logistics, LLC (S.D.Cal. 2010) 267 F.R.D. 625, 638 [indicating informal anti-meal-break policy “enforced through ‘ridicule’ or ‘reprimand’ ” would be illegal].) The wage orders and governing statute do not countenance an employer’s exerting coercion against the taking of, creating incentives to forego, or otherwise encouraging the skipping of legally protected breaks.
Slip Opinion, at 36.

Finally, with regard to the issue of timing, the Court rejected a “rolling” 5 hour construction, concluding “that, absent waiver, section 512 requires a first meal period no later than the end of an employee’s fifth hour of work, and a second meal period no later than the end of an employee’s 10th hour of work.”  See Slip Opinion, at 37; id., at 50 (“we conclude that Wage Order No. 5 imposes no meal timing requirements beyond those in section 512.”).

Thus, as for meal periods, the Court’s decision appears to essentially track the status quo in terms of an employer’s meal break obligations.

Rest Period Obligations: With regard to rest periods, it is important to highlight that the Court’s analysis regarding the scope of an employer’s duty did not examine the issue of what constituted a legally compliant rest break, but rather, was expressly confined to two limited issues: (1) the amount of rest period time required, and (2) when rest periods must be provided.  See Slip Opinion, at 17-18 (“Preliminary to its assessment of the trial court’s certification of a rest period subclass, the Court of Appeal addressed two threshold legal questions: the amount of rest time that must be authorized, and the timing of any rest periods. We consider these same two questions.”).

[Note: The Court’s refusal to venture beyond these two very limited questions appears to derive from the fact that the Court viewed the Court of Appeal’s foray into these issues in the context of a certification motion to itself be an abuse of discretion.  See Slip Opinion, at 26 (“contrary to the Court of Appeal’s conclusion, the certifiability of a rest break subclass in this case is not dependent upon resolution of threshold legal disputes over the scope of the employer’s rest break duties.”).  As such, the Court did not resolve the looming question of whether, and to what extent, a rest period must permit employees to be relieved of duty and/or control.  From a logical perspective, one would think that an employee must, at a minimum, be relieved of all duty, not only because that is the very concept of a break, but also because the premise that an employee has received a rest break while continuing to be subjected to duty would render the Wage Order’s rest period requirements completely meaningless.  Indeed, if that were the law, an employee’s entire shift would constitute one continuous rest break.]

With regard the amount of rest period time required, the Court harmonized the three sentences comprising Section 12(A) of the Wage Order to conclude that “[e]mployees are entitled to 10 minutes’ rest for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on.”  See Slip Opinion, at 20.

As for when rest periods must be provided, the Court rejected a construction that would impose on employers “a legal duty to permit their employees a rest period before any meal period.” See Slip Opinion, at 22.  As reasoned by the Court, “[n]either text nor logic dictates an order for these, nor does anything in the policies underlying the wage and hour laws compel the conclusion that a rest break at the two-hour mark and a meal break at the four-hour mark of such a shift is lawful, while the reverse, a meal break at the two-hour mark and a rest break at the four-hour mark, is per se illegal.”  See Slip Opinion, at 23.  According to the Court, “[t]he only constraint on timing is that rest breaks must fall in the middle of work periods ‘insofar as practicable’” and thereon, “[e]mployers are thus subject to a duty to make a good faith effort to authorize and permit rest breaks in the middle of each work period, but may deviate from that preferred course where practical considerations render it infeasible.”  See Slip Opinion, at 22.  Yet, the Court left open the question that an employer may nonetheless violate the Wage Order by failing to make a good faith effort to authorize and permit rest breaks in the middle of each work period, concluding that “[a]t the certification stage, we have no occasion to decide, and express no opinion on, what considerations might be legally sufficient to justify such a departure.”  See id.

Thus, as for rest periods, the Court’s decision appears to leave many important questions unresolved.  As these questions, in the Court’s view, are not necessarily pertinent to the certification question, such issues will live on to debate for the immediate future.

California Supreme Court Reverses Court of Appeal, in Part: Brinker Restaurant Corp. v. Superior Court

The California Supreme Court has finally ruled, issuing a 63 page opinion that addresses questions pertaining to both certification and the construction of California meal/rest break laws.  The Court’s overarching ruling, as set forth in the introduction of the opinion, is as follows:
On the ultimate question of class certification, we review the trial court’s ruling for abuse of discretion. In light of the substantial evidence submitted by plaintiffs of defendants’ uniform policy, we conclude the trial court properly certified a rest break subclass. On the question of meal break subclass certification, we remand to the trial court for reconsideration. With respect to the third contested subclass, covering allegations that employees were required to work “off-the-clock,” no evidence of common policies or means of proof was supplied, and the trial court therefore erred in certifying a subclass. Accordingly, because the Court of Appeal rejected certification of all three subclasses, we will affirm in part, reverse in part, and remand for further proceedings.
See Slip Opinion, at 2. 

I am working on reviewing and unpacking the Court’s analysis, and will have a more detailed review shortly.

Wednesday, April 11, 2012

California Supreme Court to Issue Ruling in Brinker Restaurant v. Superior Court Tomorrow (April 12, 2012):

Just posted on the California Supreme Court website (here):

04/11/2012 Notice of forthcoming opinion posted To be filed on Thursday, April 12, 2012 at 10 a.m.

Wednesday, March 28, 2012

Northern District Certifies Overtime Class Based on Failure to Incorporate Bonus Pay Into Hourly Overtime Rate: Chavez v. Lumber Liquidators

On March 26, 2012, United States District Court Judge, Samuel Conti, granted class certification against Lumber Liquidators, in part, on the theory that the defendant had failed to take bonus pay into account in calculating the overtime rate for California non-exempt employees.  See Chavez v. Lumber Liquidators, 2012 U.S. Dist. LEXIS 40984 (N.D. Cal. Mar. 26, 2012).  As reasoned by the Court, class-wide adjudication of the plaintiff's overtime claim was appropriate based solely on evidence that the defendant utilized a standardized calculation methodology that did not consider sales related bonus pay:
Zaldivar's claims are typical of the 130 non-exempt employees' claims because all were subject to the common pay practices of LLI. Zaldivar has stated that he regularly worked more than forty hours per week and that he received $12,282.87 in sales bonuses that were not incorporated in his regular rate of pay for the purposes of calculating his overtime rate. Zaldivar Decl. ¶¶ 4-5. LLI objects that Zaldivar has failed to prove that his overtime was ever calculated incorrectly. Opp'n at 25. Plaintiffs respond that LLI has failed to produce adequately detailed records and LLI's argument is not relevant to whether class certification is appropriate. Reply at 10. The Court concludes that the evidence presented by Plaintiffs is sufficient for the purposes of class certification. At this stage, it is enough that Plaintiffs have shown that LLI had a uniform practice for calculating overtime pay, that LLI's uniform practice did not account for bonuses and other non-discretionary pay, and that Zaldivar received $12,282.87 in bonuses and claims to have worked more than forty hours per week on several occasions. "In determining the propriety of a class action, the question is not whether the plaintiff[s] . . . have stated a cause of action or will prevail on the merits, but rather whether the requirements of Rule 23 are met[.]" United Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv. Workers Int'l Union v. ConocoPhillips Co., 593 F.3d 802, 808 (9th Cir. 2010) (quoting Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-78 (1974)).
See Chavez, 2012 U.S. Dist. LEXIS 40984, at 18-19.

Monday, March 26, 2012

California Supreme Court To Review Concepcion's Impact On The Armendariz Balancing Test: Sanchez v. Valencia Holding Co. LLC

On March 21, 2012, the California Supreme Court granted review of the Second District’s decision in Sanchez v. Valencia Holding Co., LLC, 201 Cal. App. 4th 74 (2011) – previously discussed here – which upheld a denial of a motion to compel arbitration in a proposed CLRA class action.   Although the trial court had denied the defendant’s motion on the grounds that the class action waiver was unenforceable because it violated statutory rights under the CLRA, the Court of Appeal did not affirm the trial court’s order on these grounds, finding instead that the arbitration agreement as a whole was unconscionable under the Armendariz balancing test (which the Court concluded continues to survive notwithstanding Concepcion).  The California Supreme Court appears to be poised to evaluate this proposition, stating the issue on review is as follows:
Petition for review after the Court of Appeal affirmed an order denying a petition to compel arbitration. This case includes the following issue: Does the Federal Arbitration Act (9 U.S.C. § 2), as interpreted in AT&T Mobility LLC v. Concepcion (2011) 563 U. S. __, 131 S.Ct. 1740, preempt state law rules invalidating mandatory arbitration provisions in a consumer contract as procedurally and substantively unconscionable?

Monday, March 12, 2012

Southern District Declines to Enforce Class Action Waiver Secured After Filing of Lawsuit: Balasanyan v. Nordstrom, Inc.

On March 8, 2012, Southern District Court Judge, Jeffrey T. Miller, denied an employer’s motion to compel individual arbitration based on an arbitration agreement that was amended to include a class action waiver provision two months after the proposed class action complaint was filed.  See Balasanyan v. Nordstrom, Inc., 2012 U.S. Dist. LEXIS 30809 (S.D. Cal. Mar. 8, 2012).  In denying the motion, the Court reasoned that the employer’s efforts to revise the agreement – post filing of the lawsuit – was an improper communication with the class because it improperly sought to dissuade participation in a pending action:
While Wang dealt with improper attempts to persuade employees to opt out of a class action suit, the district court's power also extends to other communications that would affect participation in the lawsuit, such as the arbitration agreement at issue here. One case, for example, invalidated an arbitration agreement in part because institution of the agreement after the case had been filed constituted an improper communication with putative class members. In re Currency Conversion Fee Antitrust Litigation, 361 F.Supp.2d 237 (S.D.N.Y. 2005) (amended on other grounds). The plaintiffs in that case were Visa and MasterCard cardholders who sued various banks for alleged illegal charges based on foreign currency exchanges. Several of the banks mailed letters to their cardholders purporting to add an arbitration clause to the cardholder agreements after the litigation had begun, but did not inform the cardholders about the litigation in the notices. The court first noted that trial courts have authority over defendants' communications with class members under Fed. R. Civ. P. 23(d), id. at 252, and emphasized that a court must protect the interest of putative class members by preventing misleading communications, perhaps even disallowing communications if they attempt to "undermine Rule 23 by encouraging class members not to join the suit." Id. (citation omitted). The court found that because this type of communication had the potential for coercion, given that the cardholders had no other source of information concerning the litigation and they depended on defendants for their credit needs, the actions were improper. In conclusion, the court held "that [the arbitration clauses in question] may not be enforced because Chase and Citibank added them, without notice, after this litigation commenced." Id. at 254. See also Williams v. Securitas, 2011 U.S. Dist. LEXIS 75502 (E.D. Pa. 2011) (invalidating arbitration agreement imposed on defendant's employees during pendency of litigation because it was likely to confuse putative class members about whether agreement required them to opt out).
See Balasanyan, 2012 U.S. Dist. LEXIS 30809, at 7-9.

Significantly, the Court rejected the employer’s efforts to couch the communication as constituting an “employment communication” (as opposed to a “class communication”), and refused to find an exemption to the forgoing authorities based on the fact the lawsuit was not even mentioned in the communication with the class.  The Court found that the employer’s failure to mention the pending lawsuit when soliciting the revised agreement only served to enhance the deceptive/coercive nature of the communication:
Nordstrom states that "the August DRA cannot possibly constitute a misleading communication about the litigation" because the lawsuit was never mentioned in the agreement. Def. Reply at 10. Of course, by advocating a bright line rule that would focus on whether a communication specifically mentions the lawsuit, Nordstrom misses the point. One purpose of the court's control over class communication is to prevent improper contacts that could jeopardize the rights of the class members—abdicating that responsibility simply because a defendant does not specifically mention the litigation would defy common sense, as exemplified in In re Currency Conversion, 361 F.Supp.3d 237. n2 To allow defendants to induce putative class members into forfeiting their rights by making them an offer and failing to disclose the existence of litigation would create an incentive to engage in misleading behavior.
See Balasanyan, 2012 U.S. Dist. LEXIS 30809, at 9-10.

Thursday, March 1, 2012

Fourth District Concludes Unpaid Wages Are A Component of PAGA Penalties Under Section 558: Thurman v. Bayshore Traffic

On February 27, 2012, the Fourth District (Division 1) issued an opinion in Thurman v. Bayshore Traffic etc., __ Ca.App.4th __ (2012) concluding that “unpaid wages” were a proper component of the PAGA penalty provided for under Labor Code Section 558.  That statute expressly states that the $50/$100 liquidated penalty amount is “in addition to an amount sufficient to recover underpaid wages” [Cal. Lab. Code § 558(a)(1)-(2)], and proscribes that the “[w]ages recovered pursuant to this section shall be paid to the affected employee.”  See Cal. Lab. Code § 558(a)(3).  The Court’s holding on this point was as follows:
We disagree that section 558 provides for a civil penalty of $50 or $100 only, and that it clearly excludes underpaid wages from the civil penalty. In our view, the language of section 558, subdivision (a), is more reasonably construed as providing a civil penalty that consists of both the $50 or $100 penalty amount and any underpaid wages, with the underpaid wages going entirely to the affected employee or employees as an express exception to the general rule that civil penalties recovered in a PAGA action are distributed 75 percent to the Labor and Workforce Development Agency (LWDA) and 25 percent to the aggrieved employees (§ 2699, subd. (i)).
See Slip Opinion, at 42-44 (emphasis in original).

In addition to the forgoing, the Court’s opinion also has some interesting discussion relating to the construction of the Wage Orders.

First, the Court concluded that the Wage Orders do not provide a “direct” private right of action, but rather, require an “enabling statute” that provides a right of action for violation of a Wage Order:
Only the Legislature, through enactment of a statute, can create a private right of action to directly enforce an administrative regulation, such as a wage order. (See e.g., 47 U.S.C. § 227(b)(3)(A) of the Telephone Consumer Protection Act [specifically authorizing a private right of action "based on a violation of this subsection or the regulations prescribed under this subsection . . . ."].) The IWC has not created, and has no power to create, a private right of action for violation of a wage order, and we are aware of no statute that creates a private right of action for a violation of an IWC wage order when the violation at issue is not also a violation of the Labor Code. Absent statutory authorization, there is no right of action under the PAGA to enforce an IWC wage order.
See Slip Opinion, at 23-24.

In support of this construction, the Court noted that the California Supreme Court concluded in Martinez v. Combs, 49 Cal. 4th 35 (2010) that “...‘an employee who sues to recover unpaid minimum wages under section 1194 actually sues to enforce the applicable wage order.’”  See Slip Opinion, at 27 fn. 20 (citing Martinez, 49 Cal. 4th at 62).

Second, the Court rejected the proposition that such enabling provisions are to be narrowly interpreted, noting that “[s]tatutes governing conditions of employment are to be construed broadly in favor of protecting employees.”  See id., at 56.  Here, the defendants had claimed that the plaintiff was not entitled to collect PAGA penalties relating to rest periods under Section 558 – which by its terms applies to violations of “a section of this chapter or any provision regulating hours and days of work in any order of the Industrial Welfare Commission” – because (1) sections 500 through 558 of the Labor Code do not include a statute that requires an employer to provide rest periods, and (2) Section 12 of the Wage Order purportedly is not an order “regulating hours and days of work.”  See Slip Opinion, at 56.  In rejecting this argument, the Court reasoned that “defendants attribute undue significance to the headings used in the IWC work orders” [See id., at 56], and disregard the broad language of section 558 which “indicates that the Legislature did not intend to limit the application of the civil penalty under section 558 to provisions in IWC order sections entitled ‘Hours and Days of Work’; rather, the language suggests that the penalties were intended to apply to any provision in any order that regulates work hours.”  See id. (emphasis in original).

Both of the above points provide important foundational insight into the operation our wage and hour laws, and likely will be addressed by the California Supreme Court in relatively short order when it decides whether Section 1194 or section 218.5 applies to a cause of action alleging meal and rest period violations in awarding attorney's fees (Kirby v. Immoos Fire Protection (Case No. S185827)).