Wage & Hour Defense Blog : Wage & Hour Lawyer & Attorney : Epstein Becker Green Law Firm : DOL Enforcement, FLSA Coverage

By Michael Kun

Understandably, employers have celebrated the U.S. Supreme Court decisions in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ---,  --- S.Ct. ---, 180 L. Ed. 2d 374 (2011) and AT&T Mobility v. Concepcion, 563 U.S. ---, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011).  At the very least, those cases would seem to suggest that the wage-hour class actions and collective actions that have besieged employers might be curtailed significantly, along with the costly settlements triggered by the in terrorem effect of such lawsuits.

California employers can stop celebrating, or at least tone down those celebrations.

Unlike other states, California law provides for a mechanism by which employees can file suit on behalf of other employees without bringing such claims as class actions – the Private Attorneys General Act (“PAGA”).  PAGA, often referred to as “The Bounty Hunter Law,” generally allows an employee to file suit against an employer on behalf of all “aggrieved employees” for alleged violations of the California Labor Code.  The potential recovery in a PAGA claim can be staggering – while the limitations period is only one year, each “aggrieved employee” can recover up to $100 for the first pay period in which a violation occurs, and up to $200 for each subsequent pay period in which a violation occurs.  PAGA also provides for the recovery of costs and attorney’s fees.

Because claims brought under PAGA are considered representative actions, not class actions, the California Supreme Court has held in Arias v. Superior Court, 46 Cal.4th 969 (2009), that a PAGA plaintiff need not have a class certified to proceed.  As such, it is not surprising that plaintiffs in California are already arguing that the tougher class certification standards set forth in Wal-Mart are inapplicable to PAGA claims.  Given Arias, it is expected that California courts will agree.

As for Concepcion, which held that arbitration provisions with class action waivers may be enforceable, plaintiff’s counsel have already begun arguing that Concepcion is inapplicable to PAGA claims.  In Brown v. Ralphs Grocery Co., a California Court of Appeal has agreed with that argument.  While that decision may well be challenged before the California Supreme Court, it only underscores how California employees have an avenue to try to avoid the impact of United States Supreme Court decisions regarding class actions – PAGA claims.

By Michael Kun and Betsy Johnson

In a much-anticipated decision, the California Supreme Court has expanded the scope of California’s complex wage-hour laws to non-resident employees who perform work in California.  While the decision leaves more than a few questions unanswered, it will require a great many employers to review their overtime and other payroll practices.  Perhaps just as importantly, it will likely open the door to lawsuits, including class actions, regarding  prior overtime and payroll practices.

The case, Sullivan v. Oracle, has had a tortured history.  In the case, several Arizona and Colorado residents who were employed as instructors by Oracle, which is headquartered in California, filed suit alleging that they were entitled to overtime under California law on those occasions when they performed services in California.   Oracle had treated the instructors as exempt employees and did not pay them overtime.  Because the issue was a novel one involving interpretation of California state laws, the federal Ninth Circuit Court of Appeal certified issues for the California State Supreme Court to decide.

As employers with operations in the state know, California law differs from the federal Fair Labor Standards Act (“FLSA”) in many ways.  Overtime exemptions under California law are analyzed differently than under the FLSA, turning not on what an individual’s “primary” duties are, but on the duties in which they are “primarily” engaged (i.e., spending more than 50% of their time).  In addition, California law provides for daily overtime for work performed by non-exempt employees beyond 8 hours in a day, and for double time for work performed beyond 12 hours in a day.  California law also requires employers to provide meal and rest breaks to non-exempt employees.

Addressing this issue for the first time, the California Supreme Court concluded that California’s overtime laws in fact apply to those non-resident employees who travel to and perform services in California.  The Court concluded that the state overtime laws make no distinctions between residents and non-residents, and explained that it would defeat the purpose of those laws if employers could simply “import unprotected workers from other states.”

The decision is limited to “California-based” employers. However, the Court did not provide a definition for this term. As such, employers based outside California should not ignore Sullivan.  There is every reason to believe that non-resident workers of employers based outside California will contend that they, too, should be covered by California’s wage-hour laws when working in the state.  And, based on the broad language in Sullivan, there is every reason to believe the California Supreme Court might agree.

What Employers Should Do Now:

Employers should review their payroll practices for exempt and non-exempt employees, to avoid running afoul of Sullivan and California wage-hour laws when sending employees to work in California.  Among other things:

• When sending employees classified as “exempt” to California, employers will want to determine whether those individuals are properly classified as “exempt” under California law and, if not, treat them as non-exempt employees during those periods of time when they are working in California 
• When sending “non-exempt” employees to California, employers will want to ensure that they treat those employees in compliance with California wage-hour laws, including providing daily overtime and complying with California meal and rest break laws
• When sending “non-exempt” employees to California, employers will also want to ensure that they are complying with California law requiring payment for travel time.  Indeed, the Sullivan decision would suggest that while “non-exempt” employees traveling to California for work will need to be compensated for their travel time in accordance with California law as soon as they reach the California border – a tricky issue, to say the least, particularly for employees traveling by air.