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)).

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