California Supreme Court Agrees To Clarify Suitable Seating Law

By Michael Kun

We have written several times in this blog about California’s unusual – and unusually vague – “suitable seating” law, which requires some employers to provide some employees with suitable seating if the nature of their work reasonably permits it.  The previously obscure law has become the subject of numerous class actions in California.  And parties and the courts have struggled to interpret a vague law that has little legislative history and even less interpretive case law. 

As we wrote most recently in January, the Ninth Circuit essentially threw up its hands and asked the California Supreme Court to clarify whether the term “nature of the work” refers to individual tasks that an employee performs during the day, or whether it should be read “holistically” to cover a full range of duties. It also asked the California Supreme Court to clarify whether an employer's business judgment should be considered in determining whether the nature of the work “reasonably permits” the use of a seat, as well as the physical layout of the workplace and the employee’s physical characteristics.  Finally, it asked the California Supreme Court to clarify whether the employee must prove what would constitute a “suitable seat” to prevail.

After some speculation that the California Supreme Court might decline to answer these questions, it has now agreed to do so.

While the briefing and argument process will take time, employers in California should finally have much-needed guidance on this obscure law, allowing them to alter their practices as necessary and avoid these class actions. 

As for those “suitable seating” class actions already pending, one would expect that many of them will be stayed until the California Supreme Court renders its decision.

California District Court Confirms That Employees Need Not Be Paid For De Minimis Time

by Michael Kun

We have written frequently in this blog about the great many wage-hour class actions filed against employers doing business in California.   Those lawsuits often allege that a class of employees performed work off-the-clock, and that the employees are not only entitled to compensation for that time, but to a slew of penalties that often dwarf the amount of alleged damages. 

Depending on the nature of an employer’s business, a plaintiff might allege that employees were not paid for the couple minutes it might take to “boot up” a computer in the morning, or for waiting to punch in their time cards.  Or a plaintiff might contend that an employer has a time-rounding policy that somehow shortchanges employees by a minute or two of pay each day.

In defending these cases, employers often argue that not only must individualized inquiries be conducted to determine whether, when and how long an employee allegedly worked off-the-clock, but whether the employee was engaged in personal activities during some or all of that time.  Those are issues that go to whether a class should be certified.

On the merits, employers often argue that such time is non-compensable in any event as de minimis time – time that is so small that it need not be compensated.

The de minimis doctrine has been recognized by the United States Supreme Court for decades, and a variety of decisions have held that as much as 10 minutes per day is de minimis, non-compensable time. 

In a decision that is likely to be cited by employers defending against off-the-clock class action claims in California, United States District Court Judge Gary Feess has granted summary judgment to Starbucks in a class action lawsuit alleging that employees were entitled to be compensated for the minute or two that they may have spent locking up or engaged in other activities after they punched out.  Relying upon the de minimis doctrine, Judge Feess held that such time is not compensable as a matter of law.

The decision is, of course, a positive development for employers who have been besieged by wage-hour class actions in California.  While one would hope that plaintiffs’ counsel would refrain in the future from filing suit seeking compensation for such small amounts of time, the decision should bolster employers’ efforts to obtain the same result that Starbucks obtained – a confirmation that they are not required to pay employees for every moment those employees are on their premises. 

California "Daily Overtime" Inapplicable Under Collective Bargaining Agreement

By Aaron Olsen and Michael Kun

In California, employers typically must pay overtime to non-exempt employees at a rate of one and one-half times their regular rates of pay not only when those employees work more than 40 hours in a week, but also when they work more than eight hours in a day.  That requirement is known as “daily overtime.”  (And employers must pay “double time” when non-exempt employees work more than 12 hours in a day.  But that is a different issue, for a different day.)

In a new decision issued on January 22, 2014, the California Court of Appeal has just confirmed an important exemption to “daily overtime” where employees are covered by collective bargaining agreements, awarding summary judgment to the employer and shutting down the plaintiffs’ attempt to read the exemption in a manner that would negate it.

A section of the California Labor Code – Labor Code 514 – provides an exemption from “daily overtime” for employees covered by a collective bargaining agreement whereby they receive at least 30% more than the state minimum wage and premium pay for “overtime.”  Not “daily overtime,” but “overtime.”  The plaintiffs nevertheless argued that employees covered by a qualified collective bargaining agreement must still receive some amount of premium compensation for “daily overtime.”

The California Court of Appeals summarily rejected this argument, explaining that employees covered by qualified collective bargaining agreements are not entitled to premium pay for “daily overtime,” but are only entitled to premium pay for “overtime,” as defined by the employer and union.  There, the employer and union had defined “overtime” as time worked beyond 40 hours in a week or 12 hours in a day.  And that, the Court concluded, was all the “overtime” the plaintiffs could get. 

The confirmation of this important exemption – and the ability of an employer and union to define “overtime” for the purposes of Labor Code section 514 -- is a welcome development for employers who face claims like those brought by the plaintiffs.  Barring California Supreme Court review and reversal, it would seem to shut down the argument to negate the exemption in future cases, including class actions. 

California Opens The Door, Slightly, To Wage Deductions At Termination

by Shane Sagheb

For years, employers in California have been cautioned about deducting debts from employees’ final paychecks. On January 9, 2014, the Ninth Circuit Court of Appeals issued an unpublished opinion in Ward v. Costco Wholesale Corp., No. 11-56757 (9th Cir. Jan. 9, 2014), holding that under certain limited circumstances, such deductions do not run afoul of federal law or the California Labor Code. In light of the fact that this decision is not published and no state court opinion has adopted its holding, however, employers should remain cautious about making such deductions.

During their employment with Costco, the plaintiffs in Ward signed an agreement authorizing the company to deduct from their final paychecks, upon separation of employment, any balance due on their company-issued credit card. When Costco deducted unpaid credit card balances from the plaintiffs’ final paychecks, applying those balances against their accrued vacation and sick pay, the plaintiffs sued, alleging violations of the Fair Labor Standards Act (“FLSA”) and the California Labor Code. 

The trial court rejected the plaintiffs’ claims following a bench trial, and the Ninth Circuit affirmed. With respect to the FLSA claims, the court observed that federal law did not require employers to pay accrued vacation and sick pay upon discharge and thus evaluated whether such deductions violated federal overtime and minimum wage requirements. It concluded that because the amount of the deductions exceeded the employees’ accrued vacation and sick pay, “the district court correctly found that the credit card deductions did not effect a violation of the overtime and minimum wage requirements.”

The court also concluded that the plaintiffs in Ward failed to prove a violation of California Labor Code Sections 201 or 203, which require the payment of all earned wages at termination. The Ninth Circuit relied on and analogized the decision in Schachter v. Citigroup, Inc., 47 Cal. 3d 610 (2009), in which the California Supreme Court enforced vesting and forfeiture provisions contained in an incentive plan. The incentive compensation plan in Schachter provided employees with shares of restricted company stock at a reduced price in lieu of a portion of their annual salaries. The plan included vesting requirements and provided that the employees would forfeit any such stock, as well as the cash compensation they directed to be paid in the form of stock, if their employment ended before the entitlement to the stock vested. The Court in Schachter held that the forfeiture provision was enforceable, at least as to employees who were discharged with cause or who resigned, because the rights under the incentive plan had not yet vested and, therefore, had not been earned.

Without analyzing the differences between the incentive plan in Schachter and the credit card expense agreement before it, the Ninth Circuit in Ward simply paraphrased Schachter as follows: “Having elected to receive some of [their] compensation in the form of [credit card balances], … [Plaintiffs] cannot now assert that [they] should have been paid in cash that portion of [their] compensation [that Plaintiffs] elected to receive [in the form of credit card balances].” Thus, the court equated the credit card balance agreement and incentive plan and concluded that “Costco did ‘not run afoul of the Labor Code because no earned, unpaid wages remain outstanding upon termination according to the terms of” Plaintiffs’ agreements with Costco” (quoting Schachter).

State courts in California are not obligated to abide by the conclusion reached by the Ninth Circuit in Ward. Moreover, it is unclear from the Ninth Circuit’s opinion in Ward why the court concluded that the credit card agreement signed by the plaintiff in that case was analogous to the vesting and forfeiture provisions in the incentive plan at issue in Schachter. Employers thus are well-advised to continue to proceed with caution when considering whether to make deductions from employees’ final paychecks. 

Clarification of California's "Suitable Seating" Requirements May - Or May Not -- Be Forthcoming

by Michael Kun

We have previously written in this blog about California’s unique “suitable seating” law, which requires some employers to “provide” “suitable seating” to some employees where “the nature of the work reasonably permits the use of seats.”

The use of multiple sets of quotation marks in the previous sentence should give readers a good idea about just how little guidance employers have about the obscure law.

The law was originally intended to provide some comfort to individuals working on production lines and performing similar tasks. Few lawsuits were ever filed alleging violations of the law until a published California Court of Appeal decision about “suitable seating” awakened the plaintiffs’ bar to yet another ground for them to file class action lawsuits against California employers.

Not unexpectedly, that has led to the filing of a great many class actions in recent years alleging that employers in a wide variety of businesses had failed to provide suitable seating.

Plaintiffs in these class actions often seek tens of millions of dollars in connection with the alleged violation of the suitable seating law, even where no one ever requested a seat or where the jobs are ones that are typically performed by individuals while standing.

And those cases have invariably involved disputes regarding which employers and employees are covered by the law, what the “nature of the work” is, whether the nature of the work “reasonably” permits setaing, and what it means to “provide” suitable seating – as well as what “suitable seating” even means.

The Ninth Circuit has now essentially thrown up its hands. In two “suitable seating” cases before it -- Kilby v. CVS Pharmacy, Inc. and Henderson v. JPMorgan Chase Bank NA– the Court has asked the California Supreme Court to clarify the law.

Specifically, the Ninth Circuit has asked the California Supreme Court to clarify whether the term “nature of the work” refers to individual tasks that an employee performs during the day, or whether it should be read “holistically” to cover a full range of duties.

It has also asked the California Supreme Court to clarify whether an employer's business judgment should be considered in determining whether the nature of the work “reasonably permits” the use of a seat, as well as the physical layout of the workplace and the employee’s physical characteristics.

Finally, it has asked the California Supreme Court to clarify whether the employee must prove what would constitute a “suitable seat” to prevail.

Should the California Supreme Court agree to the Ninth Circuit’s request to clarify these issues, employers in California may finally have much-needed guidance on this obscure law, allowing them to alter their practices as necessary and avoid these class actions.

Should the California Supreme Court decline the Ninth Circuit’s request, the confusion and ambiguity about this law will likely continue, as will the filing of class actions alleging that employers have not complied with it.

New California Law Requires Employers to Provide "Cool-Down Recovery Periods"

By Alka N. Ramchandani & Michael D. Thompson

In recent years, Cal-OSHA has taken an aggressive stance against exposing employees to potential heat illness, often citing employers and proposing significant penalties for failing to provide to employees who work in high heat conditions with adequate drinking water, shade, training, and/or cool-down periods. Furthermore, as noted by the California Supreme Court in Brinker v. Superior Court, monetary remedies for the denial of meal and rest breaks “engendered a wave of wage and hour class action litigation” when added to the California Labor Code more than a decade ago.   

The California Legislature has brought these two trends together by  amending California Labor Code Section 226.7 to include penalties for employers’ failing to provide “Cool Down Recovery Periods” (“CDRPs”) to prevent heat exhaustion or stroke. The requirement to provide CDRPs kicks in January 1, 2014, after which California employers will be required to pay a wage premium for failing to provide CDRPs to employees.  This premium pay is akin to the premium pay already required for violations of California’s meal period and rest break laws. The amendment is sure to trigger substantial litigation in California, and cross over into Cal/OSHA enforcement as well.

California’s Heat Illness Prevention Statute  

 

 California employers have long been aware of California’s Heat Illness Prevention statute, Title 8 Section 3395(d), which obligates employers to provide training and access to adequate drinking water for employees who work outdoors when the temperature exceeds 85 degrees F. Pursuant to the Heat Illness statute, employers have also been required to maintain one or more shaded areas, with either open-air ventilation, forced ventilation, or forced cooling, and employers are required to allow employee access and encourage employees to access these shaded or cooled areas for cool down periods of no less than five minutes or as employees feel the need to do so.

 

Although heat illness has been an enforcement focus across the country, Cal-OSHA is the only OSHA scheme that has its own Heat Illness specific standard. While federal OSHA has increased its use of the General Duty Clause to cite heat illness issues, Cal-OSHA has led the way in this enforcement space.

California Labor Code Section 226.7

Pursuant to California Labor Code section 226.7, employers are already required to pay a penalty of one hour of pay for any failure to provide a non-exempt employee with a meal period and an additional hour of pay for any failure to provide a non-exempt employee with a rest break. This law has produced numerous class action lawsuits throughout California. Under the recent CDRP amendment, any failure to provide a cool down recovery period will obligate the employer to pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that a recovery period is not provided. Employers now face more than just serious citations under Section 3395(d), but also cited or sued by employees (or classes of employees) for failure to provide CDRPs pursuant to California Labor Code Section 226.7.

Pursuant to this statute, California employers have suffered through a barrage of wage and hour single plaintiff and class action lawsuits related to California’s meal and rest break requirements under Section 226.7. This recent history has shown that compliance with these work-free periods is difficult, and demonstrating compliance is even more so. More importantly, the potential penalties and civil judgments are extremely high. 

The Amended Statute

Section 226.7 provides in pertinent part:

If an employer fails to provide an employee a meal or rest or recovery period in accordance with a state law, including, but not limited to, an applicable statute or applicable regulation, standard, or order of the Industrial Welfare Commission, the Occupational Safety and Health Standards Board, or the Division of Occupational Safety and Health, the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest or recovery period is not provided.

Section 226.7 also states that “‘recovery period’ means a cooldown period afforded an employee to prevent heat illness.” 

In addition to the added penalties, the Legislature has required work-free CDRPs, stating:

An employer shall not require an employee to work during a meal or rest or recovery period mandated pursuant to an applicable statute, or applicable regulation, standard, or order of the Industrial Welfare Commission, the Occupational Safety and Health Standards Board, or the Division of Occupational Safety and Health.

The statute therefore converts what had simply been a period in which employees can cool down (whether working or not) to work-free periods pursuant to Section 226.7. The Legislature reasoned that a 2007 survey identified that more than 70% of workers “voluntarily” worked through rest periods to avoid losing money and that this bill extends existing rest period protections to any applicable statute, regulation, or order by the Appeal or Standards Boards. 

One interesting distinction between Section 3395(d) (Cal-OSHA’s Heat Illness Standard) and Section 226.7 (the new CDRP legislation), is that the Heat Illness rule applies only to employees who are working in high heat conditions. The new CDRP legislation does not identify specific working conditions that would trigger the requirement to provide a CDRP. Employees working in air conditioned offices, therefore, may also be entitled to CDRPs if their employment puts them at risk for heat illness.

Conclusion

So what can employers do to protect themselves? It is important for California employers to review their Heat Illness Prevention Plans, notify employees of the company’s policy requiring work-free recovery periodsand conduct diligent and comprehensive training to ensure employees understand their obligations. Employers also need to develop CDRPs Plans, and carefully instruct employees to take CDRPs, as needed. Your plan should also specifically state that the employee is relieved of all work during the five-minute CDRP. Supervisors should be trained to allow employees to take work-free CDRPs as needed, and to enforce the Plan effectively. Finally, employers should develop procedures for documentation of CDRPs.

New California Law Limiting When Prevailing Employers Can Recover Attorney's Fees In Wage-Hour Cases Is Bound To Lead To Even More Meritless Lawsuits

By Michael Kun

A California plaintiff who prevails in a wage-hour lawsuit generally may recover his or her attorney’s fees.  The same is so for employers -- but only for the next few months. 

A new statute will take effect in January 2014 that will change whether and how an employer who prevails in such a case may recover its fees.  In a state already overrun with wage-hour lawsuits with questionable merit, that new statute seems to ensure that even more meritless wage-hour lawsuits will be filed by plaintiffs’ counsel who count on the in terrorem effect of those lawsuits to force employers to settle such claims – and who pocket 40% of what they recover. 

Governor Jerry Brown has signed into law a bill that raises the standard for a prevailing employer to recover fees when they prevail in wage-hour actions.  Effective January 2014, an employer must meet a higher standard than an employee to recover fees.   It must not only prevail in the lawsuit, but it must establish that the lawsuit was brought in “bad faith.”  

While the authors of the bill contended that it was needed to correct an injustice that discouraged workers from pursuing such claims, one has to wonder whether those legislators could identify a single California employee who did not pursue a valid wage-hour claim because of the fear of paying attorney’s fees.  The California courts have been overrun with wage-hour lawsuits.  There is little, if anything, to suggest that employees have been deterred from filing these lawsuits.  If anything, they have been greatly encouraged to do so, and plaintiffs’ counsel sometimes file these suits with little effort to determine if they have any merit beforehand.  Indeed, it is not unusual for an employee not to even meet his or her attorney before the attorney files a wage-hour suit, or for that attorney to file a wage-hour class action with minimal, if any, investigation. 

In this way, the new statute seems to be aimed to benefit the plaintiffs’ bar, not employees.  Until now, the only thing that prevented plaintiffs’ counsel from filing a meritless wage-hour action was the possibility that the employer would be able to recover its attorney’s fees.  Now, knowing that an employer is only going to be able to recover fees in meritless cases if it can establish that it was brought in “bad faith,” there is every reason to expect the filing of even more meritless wage-hour actions. 

              

Michael Kun quoted regarding California wage-hour class actions

Michael Kun, chair of EBG’s wage-hour practice group, was recently quoted by California Lawyer magazine regarding the impact of the California Supreme Court’s decision in Brinker v. Superior Court on California wage-hour class actions.

Wage-Hour Class Actions Could Be On The Decline In California, But That Does Not Mean It Is Time For Employers To Celebrate

 By Michael Kun

Recently, there have been a number of reports indicating that federal wage-hour lawsuits under the Fair Labor Standards Act increased by 10% in 2012, after smaller increases in the preceding years.

What about California, though?

While I am not aware of anyone who has compiled the figures to determine whether the number of California wage-hour cases has risen or fallen in the past year or so, from where I sit it certainly seems like there has been some decline in the number of wage-hour cases filed in California.  And, if not, we can probably expect that in the years to come.

There are a number of reasons for that. 

First, the California Supreme Court’s decision in Brinker v. Superior Court will generally make it more difficult for plaintiffs to prevail on meal and rest period class actions unless and employer has a policy that is facially unlawful.  For the better part of a decade, plaintiffs’ counsel were filing meal period class actions and arguing that employers had an obligation to “ensure” that their employees actually took those meal periods.  As the California Supreme Court had not spoken on the issue yet, plaintiffs’ counsel invariably used that argument to negotiate classwide settlements – and sometimes very large ones at that.  But now that the Supreme Court has clarified that employers are not obligated to police their workforces to “ensure” that employees actually take meal periods, that leverage is gone.  That will make meal and rest period class actions less attractive to plaintiffs’ counsel.  And if they are less attractive, the number of filings will decline. 

Second, if Brinker did not already do it, the California Supreme Court’s decision in Kirby v. Immoos Fire Protection will make meal and rest period claims even less popular with plaintiffs’ counsel in California.  Simply put, that case holds that neither side can recover its attorney’s fees on meal and rest period claims.  We have already heard from plaintiffs’ counsel that they are no longer interested in pursuing those claims for that reason. 

Third, ever since Dukes v. Wal-Mart was published by the U.S. Supreme Court, we heard from plaintiffs’ counsel that it somehow did not apply to wage-hour cases or was limited to cases involving large geographic areas.  The fact that the Supreme Court vacated the decision in Wang v. Chinese Daily News and ordered the Ninth Circuit to review it under Dukes -- and the fact that the Ninth Circuit has now sent Chinese Daily News back to the district court with instructions to apply Dukes -- would seem to make very clear that Dukes in fact is applicable to wage-hour class actions.  And it would seem to make very clear that Dukes is not limited to cases involving large geographic areas because Chinese Daily News involves a single facility.  Without providing a complete analysis of Dukes, which you can find anywhere and everywhere on the Internet, it is safe to say that Dukes makes it more difficult than ever for plaintiffs to obtain class certification in federal court.  And, logically, that would result in a decrease in the number of cases filed, at least in federal court.

Fourth, we should not forget the U.S. Supreme Court’s decision in Comcast v. Behrend.  To oversimplify more than a bit, Comcast essentially holds that a class should not be certified if individualized damage analyses must be conducted.  While it is not a wage-hour case, the Comcast decision is being applied already in wage-hour cases.  And except in very unusual cases, employers in federal courts should have excellent arguments that wage-hour cases require individualized damage analyses.  Even if one were to assume a large group of persons was misclassified as exempt, did they all work the same hours?  Probably not.  Even if one were to assume that a large group of employees worked off-the-clock, did they do so for the same amounts of time?  Probably not.  Was some of the off-the-clock time de minimus, just a minute or two?  Probably.  Like DukesComcast should lead to fewer wage-hour classes being certified.  And, logically, that would result in a decrease in the number of cases being filed, at least in federal court. 

Those are just a few of the developments that should make wage-hour class actions less appealing to plaintiffs’ lawyers in California and result in fewer of those cases being filed.  Before employers celebrate the end of wage-hour class actions in California or the in terrorem effect that often led them to agree to large settlements, they should be mindful that the plaintiffs’ bar has a tremendous self-preservation instinct.  They aren’t going to walk away from what has long been a cash cow for them.  What employers and their counsel are going to start hearing is this: “If I don’t get a class certified, I’ll just file a couple hundred individual lawsuits.  Now, how about we talk about that big classwide settlement again?”  

With No Guaranteed Minimum, Employee That Received Unvarying Base Pay Was Not Exempt Under California Law

By Andrew J. Sommer

There has been a lack of clarity in California wage and hour law on how compensation must be structured to meet the “salary basis test,” particularly where an exempt employee is paid based on hours worked. However, in Negri v. Koning & Associates, the California Court of Appeal addressed this very issue and concluded that a compensation scheme based solely upon the number of hours worked, with no guaranteed minimum, is not considered a “salary” for the purpose of state overtime laws. 

Under California law, an employee exempt from overtime laws must regularly receive “a monthly salary of no less than two (2) times the state minimum wage for full time employment” that cannot be reduced except in enumerated exceptions. Most of the litigation over the so-called salary basis test has addressed when deductions may be made from the exempt employee’s compensation without undermining the exemption. 

In Koning & Associates, the plaintiff/employee was paid an hourly wage for 40 hours per week so that, in effect, he received an unvarying minimum amount of pay. Nevertheless, the Court found that, based on the employer’s admission that it never paid the employee a “guaranteed salary,” the employee did not meet the administrative exemption. 

Although the Court acknowledged based on precedent that the employer may calculate a salary based upon hours worked, it emphasized that this must be a “predetermined amount” that is not subject to reduction because of variations in the quality or quantity of work performed. 

The Court recognized that an employee may otherwise be compensated beyond the predetermined amount for extra work without losing the exemption. The key fact that the Court relied upon in concluding that the salary basis test was not met was the employer’s concession that it never paid a “guaranteed salary.”   

This case highlights the importance of California employers properly characterizing compensation paid to exempt employees to reflect that it is a predetermined amount, no matter how the “salary” is ultimately calculated.   

Ninth Circuit Rules That Employees Need Not "Request" A Seat Under California's Obscure "Suitable Seating" Law

By Michael Kun

We have written previously in this blog about California’s obscure “suitable seating” law, which requires that some employers provide “suitable seating” to some employees. 

In short, the plaintiffs’ bar recently discovered a provision buried in California’s Wage Orders requiring employers to provide “suitable seating” to employees when the nature of their jobs would reasonably permit it.  Although the provision was written to cover employees who normally worked in a seated position with equipment, machinery or other tools, employers in a variety of industries have been hit with class actions alleging that they have violated those provisions – and those cases are typically brought by a single plaintiff who was well aware that the employer expected him or her to be standing while performing the job at the time he or she applied.  Just as typically, those employees have not even requested a seat before filing suit.

Now, reversing a district court decision that dismissed a “suitable seating” class action on the grounds that there had been no request for a seat, the Ninth Circuit has held that an employee need not request a seat to be entitled to one. 

The Ninth Circuit explained that the district court had read into the Wage Orders something that was not there – a requirement that employees affirmatively request seats.  Importantly, the Ninth Circuit expressly declined to comment on whether the nature of the work would reasonably permit seats in the case at issue.  As before, it appears that will be the dispute in most “suitable seating” cases. 

Wage & Hour FAQ #1: How to Prepare for a Wage Hour Inspection

By: Kara M. Maciel

Earlier this month, we released our Wage and Hour Division Investigation Checklist for employers and have received a lot of great feedback with additional questions. Following up on that feedback, we will be regularly posting FAQs as a regular feature of our Wage & Hour Defense Blog.

In this post, we address a common issue that many employers are facing in light of increased government enforcement at the state and federal level from the Department of Labor.

QUESTION: “I am aware that my industry is being targeted by the DOL for audits and several of my competitors in the area are facing wage and hour investigations.  What should I be doing now to proactively prepare my company in the event we are next for an audit?”

ANSWER:  Even though your company may not be in the midst of an investigation, there are still several action items that you can implement to place your company is the best possible position to defend against any DOL investigation.  For example:

  • Check current 1099’s as well as all 1099’s going back several years and review the actual job duties of those persons paid as independent contractors to verify that they were not, in fact, employees.
  •  Examine all written job descriptions to ensure that they: (i) accurately reflect the work done, (ii) have been updated where necessary, and (iii) indeed justify the applicable exemptions.
  • Review time keeping systems to ensure that non-exempt employees are being paid for all work performed, including work pre- or post-shift and during meal breaks
  • Ensure that required payroll records and written policies and procedures are current, accurate, and compliant.

Training staff is another key component of protecting your company from costly wage and hour claims. Not only could all managers be familiar with the FLSA and state wage and hour laws, but all employees should understand their role in proper record keeping and overtime. Key managers and personnel should be aware of the DOL’s inspection rights and what the DOL can and cannot do while on your property.

Finally, developing a response team with legal counsel is critical to being prepared if an inspection official knocks on your door unannounced. The response team should be armed with information and protocols so they know how to address the DOL’s subpoenas, questions, document requests, and other investigative demands.

In subsequent FAQs, we will discuss in more detail who should participate in a response team and what information they need to have in the event of an unscheduled DOL audit. But, in the meantime, regular internal reviews and audits of your wage and hour practices and documentation is key to protecting against costly exposure from a government investigation.

* * * * * * * * * *

Be sure to check out our Wage and Hour Division Investigation Checklist for more helpful tips and advice about preparing for and managing a Wage Hour Inspection.

 

The First "Suitable Seating" Trial In California Results In A Victory For The Employer - And Guidance For Plaintiffs For Future Cases

By Michael Kun

As we have written before in this space,  the latest wave of class actions in California is one alleging that employers have not complied with obscure requirements requiring the provision of “suitable seating” to employees – and that employees are entitled to significant penalties as a result.

The “suitable seating” provisions are buried so deep in Wage Orders that most plaintiffs’ attorneys were not even aware of them until recently.  Importantly, they do not require all employers to provide seats to all employees.  Instead, they provide that employers shall provide “suitable seats when the nature of the work reasonably permits the use of seats.” 

Because the “suitable seating” provisions were so obscure, there is scant case law or other analysis for employers to refer to in determining whether, when and how to provide seats to particular employees.  Among other things, the most important phrases in the provisions – “suitable seats” and “nature of the work” – are nowhere defined.  While those terms would seem to suggest that an employer’s goals and expectations must be taken into consideration – including efficiency, effectiveness and the image the employer wishes to project – plaintiffs’ counsel have not unexpectedly argued that such issues are irrelevant.  They have argued that if a job can be done while seated, a seat must be provided. 

The first “suitable seating” case has gone to finally gone to trial in United States District Court for the Northern District of California.  The decision issued after a bench trial in Garvey v. Kmart Corporation is a victory for Kmart Corporation on claims that it unlawfully failed to provide seats to its cashiers at one of its California stores.  The decision sheds some light on the scope and meaning of the “suitable seating” provisions.  But it also may provide some guidance to plaintiffs’ counsel on arguments to make in future cases. 

Addressing the “suitable seating” issue at Kmart’s Tulare, California store, the court rejected plaintiffs’ counsel’s arguments that Kmart was required to redesign its cashier and bagging areas in order to provide seats.  Importantly, the court recognized that Kmart has a “genuine customer-service rationale for requiring its cashiers to stand”:  “Kmart has every right to be concerned with efficiency – and the appearance of efficiency – of its checkout service.”  That concern is one likely shared by many employers. 

In reaching its decision, the court expressed concern not only about safety, but also about the cashiers’ ability to project a “ready-to-assist attitude”: “Each time the cashier were to rise or sit, the adjustment exercise itself would telegraph a message to those in line, namely a message that the convenience of employees comes first.”  The court further explained:  “In order to avoid inconveniencing a seated cashier, moreover, customers might themselves feel obligated to move larger and bulkier merchandise along the counter, a task Kmart wants its cashiers to do in the interest of good customer service.” 

While recognizing that image, customer service and efficiency goals must all be taken into consideration in determining whether seating must be provided, the court then appeared to provide some guidance to plaintiffs.  The court addressed the possibility that these issues could be addressed through the use of “lean-stools.”  Acknowledging that the use of “lean-stools” had not been developed at trial, the court invited arguments about them at the trial of “suitable seating” claims for the next Kmart store.  Thus, while expressly refusing to decide whether Kmart employees should have been provide “lean-stools,” the court may have provided plaintiffs’ counsel with an important argument to make in future trials.

And, as a result, employers in California – particularly in the hospitality and retail industries – should now be expected to address whether they could or should be providing “lean-stools” to employees whom they expect to stand during their jobs. 

Clarification of California's Obscure "Suitable Seating" Requirement Should Be Forthcoming In Two Pending Cases

By Michael Kun

Employers with operations in California have become aware in recent years of an obscure provision in California Wage Orders that requires “suitable seating” for some employees.  Not surprisingly, many became aware of this provision through the great many class action lawsuits filed by plaintiffs’ counsel who also just discovered the provision.  The law on this issue is scant.  However, at least two pending cases should clarify whether and when employers must provide seats – a case against Bank of America that is currently before the Ninth Circuit Court of Appeal, and a case against K-Mart that is now being tried in the United States District Court for the Northern District of California.

The wave of representative and class action lawsuits alleging that employers failed to provide suitable seating in violation of Labor Code § 1198 and Wage Orders was triggered by the Court of Appeal ruling in Bright v. 99 Cents Only Stores, 189 Cal.App.4th 1472 (2010), permitting “suitable seating” claims to proceed under California Private Attorney General Act.    

Prior to that ruling, “suitable seating” lawsuits were few and far between.   All it took was a single published opinion to let the plaintiffs’ bar know about this potential claim and to begin to seek plaintiffs to bring these claims against their employers.

Importantly, the seating provisions of the Wage Orders do not require all employers to provide seating to all employees.  Instead, the provisions state that “[a]ll working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.” 

As the former Chief Deputy Labor Commissioner explained in 1986, these seating provisions were “originally established to cover situations where the work is usually performed in a sitting position with machinery, tools or other equipment.  It was not intended to cover those positions where the duties require employees to be on their feet, such as salespersons in the mercantile industry.”

In Green v. Bank of America, the district court relied upon this opinion in dismissing a putative “suitable seating” class action with prejudice, holding that an employer need only give seats to individuals who request them – and there was no allegation in the complaint that any employee had requested a seat.  That decision is now on review before the Ninth Circuit, which presumably will determine what “provide” means in the context of the “suitable seating” requirements.  The Court may well look to the California Supreme Court’s Brinker v. Superior Court decision for guidance on that issue.  There, in the context of requirements that employers “provide” meal and rest periods to employees, the California Supreme Court determined that “provide” means that the employer make the meal and rest periods available, but need not ensure they are taken.  That would suggest that, in the “suitable seating” context, an employer must make seats available to appropriate employees, but need not ensure they take them.  That, of course, would beg the question of who is entitled to seats in the first place.

The “suitable seating” trial relating to K-Mart’s cashiers that has commenced in San Francisco – Garvey v. Kmart -- promises to look at that and other issues.  Among other things, that trial should address the impact employers’ expectations and preferences have upon whether “the nature of the work reasonably permits the use of seats.” 

Plaintiffs in “suitable seating” cases normally argue that a seat must be provided if the job “could” be done seated.  Of course, that is not what the Wage Orders state.  Many jobs “could” be done while seated.  Whether they can be done as well while seated is a different issue entirely.  (One is reminded of the famous Seinfeld episode where George Costanza insisted on getting a rocking chair for a jewelry store security guard; the guard then fell asleep as the store was robbed right in front of him.)

Among other things, employers in the hospitality and retail industries often wish to have persons in some positions standing in order to make eye contact with customers, establish a relationship with them and be in the best position to assist them.  It is too easy for customers to ignore someone who is seated, or not even notice that person.  The Kmart trial should provide some guidance as to whether such expectations and preferences are to be given weight.

These two cases should provide some much needed clarity as to whether and when seats must be provided to certain employees.  In the meantime, employers would be wise to let employees know whether and why certain jobs are expected to be performed while standing. 

More Confirmation That Time-Rounding Policies Are Permissible In California

By Michael Kun and Aaron Olsen

Following up on the California Supreme Court’s recent decision in See’s Candy v. Superior Court, a California federal court has now dismissed a time-rounding class action against H.J. Heinz Company.  And, once again, the court has relied upon the decision in our case Alonzo v. Maximus

This, of course, is more good news for employers with operations in California.  Between See’s Candy and Maximus, it will be exceedingly hard for plaintiffs to proceed with time-rounding class actions against employers who have even-handed time-rounding policies, i.e. policies that round time both up and down.

Independent Contractor Misclassification Should Remain Key Area of Concern for Employers

By Frederick Dawkins and Douglas Weiner

Earlier this month, at the ABA Labor and Employment Law Conference, Solicitor of Labor M. Patricia Smith reaffirmed that investigating independent contractors as misclassified remains a top priority of the U.S. Department of Labor’s (“DOL”) enforcement initiatives.  The DOL will continue to work with other federal and state agencies, including the IRS, to share information and jointly investigate claims of worker misclassification.  The joint enforcement effort is certainly driven by, among other things, an interest in collecting unpaid tax revenue, and could result in significant liability to employers.  

In addition to potential liability resulting from strengthened federal enforcement initiatives, in previous blog posts, we have emphasized that misclassification could become the subject of the next wave of class and collective actions, particularly in view of states enacting new legislation providing for higher penalties.  Further, the re-election of President Obama may augur the re-emergence of the Employee Misclassification Prevention Act, would require employers to keep records of all workers performing labor or services for them, and to notify each worker of their classification and exemption status.  Finally, the Affordable Care Act (“ACA”) adds yet another challenge to employee misclassifications as the reclassification of workers from independent contractors to employees could push an employer over the 50 full-time employee threshold for ACA coverage. 

The expenses of  misclassification are often significant – including calculations of unpaid overtime wages, back employment taxes, income tax withholdings, unpaid workers’ compensation and unemployment insurance premiums, contributions to Social Security and Medicare, and perhaps 401K matching and pension contributions. 

In short, over the next four years of the Obama Administration, which will continue to fund the DOL’s aggressive enforcement efforts, it is undeniable that contractor misclassification investigations will continue to increase in volume and strength.  Employers are best advised to scrutinize their own independent contractor classifications in self-audits before federal and state investigators, or perhaps even worse, plaintiffs’ class action lawyers target what had been common practices.

California Court of Appeals Confirms That Time Rounding Is Permissible

By Michael Kun and Aaron Olsen

Agreeing with the recent federal district court opinion in our case Alonzo v. MAXIMUS, Inc., 832 F.Supp.2d 1122, 1126 (2011), the California Court of Appeals has confirmed in a case against See’s Candy that California employers may round employees’ time entries so long as the employer’s rounding policy does not consistently result in a failure to pay employees for time worked.

In  Alonzo, a federal district court granted summary judgment in favor of our client MAXIMUS, Inc. on the plaintiffs’ time rounding claims.  The Alonzo Court explained that the federal standards regarding time rounding apply to employees’ time rounding challenges brought under California law.  In the case against See’s Candy , the plaintiff urged the California Court of Appeals to reject the federal court’s analysis in Alonzo.  The California Court of Appeals, however, stated, “We agree with the Alonzo court.  In the absence of controlling or conflicting California law, California courts generally look to federal regulations under the FLSA for guidance….  Assuming a rounding-over-time policy is neutral, both facially and as applied, the practice is proper under California law because its net effect is to permit employers to efficiently calculate hours worked without imposing any burden on employees.” 

Given the number of employers throughout California that have time-rounding policies, the California Court of Appeals' decision to adopt the reasoning from the federal court in  Alonzo is another welcome development for employers.  Indeed, plaintiffs’ counsel likely had a number of time rounding class actions lined up to file in the event the Court of Appeals held that time rounding policies were unlawful.  Those class action complaints have likely found their way to the recycling bin.

Waiver of California's Day of Rest

By: Marisa Ratinoff

A federal judge takes on California's day of rest statutes and finds Nordstrom did not violate the California Labor Code where the plaintiffs voluntarily worked more then six days in a row.  In Mendoza v. Nordstrom, the Central District Court played it as expected by denying the claims of two former Nordstrom employees holding that while an employer may not force an employee to work more than six consecutive days pursuant to Labor Code Sections 551 and 552, the employer will not be found liable where the employee chooses to waive his or her day of rest.   Continuing the Brinker trend of allowing employees to waive breaks without holding the employer liable, the Court recognized that while an employer must make a day of rest available, it need not ensure the employee actually takes it.

California Supreme Court To Review Class Action Waiver Issue

By Michael Kun and Aaron Olsen

To the surprise of few, the California Supreme Court has decided to review the Court of Appeal’s decision enforcing a class action waiver in Iskanian v. CLS Transportation Los Angeles, LLC. 

We wrote in detail about that decision on this blog earlier this year.  

In reaching its conclusion, the Court of Appeals relied on the April 2011 United States Supreme Court’s landmark decision in AT&T Mobility, LLC v. Concepcion.  Whether the California Supreme Court will follow Concepcion or attempt to distinguish it is impossible to predict.   Unfortunately, while they await that decision, employers may not rely on Iskanian, which has been depublished pending review.

California One Step Closer to Mandating Overtime and Meal Periods for Private Home Housekeepers and Babysitters

By:  Adam C. Abrahms

Last week Assembly Bill 889 cleared a California State Senate Committee, advancing it one step closer to becoming state law.  The bill, authored by Assemblyman Tom Ammiano (D – San Francisco), seeks to extend most of California’s strict wage and hour regulations to domestic employees working in private homes.  While the bill excludes babysitters under the age of 18, it extends California wage and hour protections to babysitters over the age of 18 as well as any other housekeeper, nanny, caregiver or other domestic worker.

Should the bill become law individual Californians and California families who employ the services of these domestic workers will be required to follow the same overbearing regulations that currently plague California’s small and large businesses.  Specifically, absent the applicability of narrow and limited exceptions, individuals/families using domestic services from babysitting to adult caregiving and transportation to housekeeping will, among other mandates, be required to:

  • Pay their domestic workers in accordance with California overtime rules including time and half for over 8 hours in a day; ·

  • Provide duty-free meal periods for domestic workers working over 5 hours in a day; ·        

  • Permit paid rest periods for domestic workers working over 3 ½ hours in a day; ·       

  • Maintain and record the actual start and end time for all work periods (including meal periods);

  • Provide detailed and regular itemized pay check statements detailing hours of work, rates of pay and deductions; and

  • Comply with certain notice posting and record keeping requirements.

 Above and beyond the regular requirements of California law, the bill imposes a new and special requirement that individuals/families employing domestic workers provide them specific food items of their worker’s choosing if meals are part of the worker’s compensation.  The bill also explicitly provides domestic workers the protections of California’s Workers Compensation System and requires individuals/families employing the services of domestic workers to comply with the applicable workers compensation laws. 

In addition to any other damages and attorney’s fees resulting from an individual/families’ failure to comply with California’s complex wage and hour laws, the bill imposes a new $50 penalty for each day an individual/family violates the bill’s mandates. 

The bill now moves onto the full California State Senate for consideration. In unrelated news, California’s unemployment rate is amongst the highest in the nation as businesses find friendlier climates in neighboring states. 

EBG's Free Wage-Hour App Has Been Updated to Include New Jersey Law And Changes In California Law

By Michael Kun

Earlier this year, we were pleased to introduce our free wage-hour app for iPhones and iPads.  The app puts federal wage-hour law, as well as that for many states, at users’ fingertips.

We have recently added New Jersey law to the app, as well as updated it to reflect changes in California law following the long awaited Brinker v. Superior Court decision clarifying meal and rest period laws.

The app may be found here:  http://itunes.apple.com/app/wage-hour-guide/id500292238?mt=8

Supreme Court Will Decide Whether an Employer Can Moot an FLSA Collective Action With an Offer of Judgment to the Plaintiff

By Amy Traub, Michael Kun, and Anna Kolontyrsky

As employers know, not only are FLSA collective actions more prevalent than ever, but they can be costly to defend or resolve.  In an attempt to bring quick closure to such cases, somedefendants have attempted to settle such claims with the individual plaintiff alone through a Rule 68 offer of judgment before a class has been conditionally certified.   

This strategy has come under attack.  And the United States Supreme Court will now determine whether it is permissible.

The United States Supreme Court has elected to review a Third Circuit decision holding that an employer could not avoid conditional class certification by offering to resolve the named plaintiff’s claims.  The case, Symczyk v. Genesis Healthcare Corp., 656 F.3d 189 (3d Cir. August 31, 2011), petition for cert. filed, ___ U.S.L.W. ___ (U.S. February 18, 2012) (No. 11-1059), is bound to have a significant impact on the litigation strategy in FLSA collective actions.

In Symczyk, the plaintiff, a registered nurse, claimed that her employer violated the FLSA when it implemented a policy that imposed an automatic meal break deduction regardless of whether workers had performed compensable work during that time.  The plaintiff sought a total of $7,500, including both her unpaid wages, as well as her attorneys’ fees, costs, and expenses of litigation.

The employer promptly served the plaintiff with a Rule 68 offer of judgment for $7,500, the full amount she could possibly recover.  Even though the offer was rejected, the employer argued that an offer to accord all relief that a plaintiff demands renders a case moot, unless the plaintiff retains some additional stake in the litigation.  Since the plaintiff had not had a chance to move for conditional certification and, consequently, no other workers had yet opted in, the district court held that the plaintiff’s claims were moot, and dismissed the suit.

The Third Circuit reversed that decision and remanded the case.  The court acknowledged that Rule 68 was designed “to encourage settlement and avoid litigation,” but noted that in the context of a collective action, “Rule 68 can be manipulated to frustrate rather than to serve these salutary ends.” Instead of mooting the action, the Third Circuit found that the “relation back” doctrine should have been employed.  Analogizing the case to a Rule 23 class action where the claims of class members relate back to the filing of the complaint even though the certification of the class occurs much later, the court noted that once a Rule 23 class has been certified, mooting a class representative's claim does not moot the entire action.  Under the “relation back” doctrine, the court ruled that the plaintiff should have been allowed to file a motion for certification of the collective action as if it had been filed at the time the suit began.  Consequently, a Rule 68 offer of judgment on her claims alone would not have mooted the claims of the other putative collective action members, if at least one other plaintiff opted in.

In its petition for certiorari to the Supreme Court, Genesis argued that a direct conflict exists between “decisions of the Fourth and Eighth Circuits (holding that settlement before certification renders a case moot) and decisions of the Third, Ninth, and Tenth Circuits (holding that certification after settlement can vitiate mootness by ‘relation back’ to the complaint).”

Genesis further argued that the “key question … is whether it makes sense to extend … [the] treatment of mootness in class actions to a context like the FLSA in which the individual plaintiff has no representative relationship to the absent parties.” 

In answering this “key question,” the Supreme Court will certainly shape the litigation strategies of plaintiffs and defendants alike in FLSA collective actions.  A ruling that an offer of full relief moots an FLSA collective action would certainly operate to lead more defendants to make Rule 68 offers at the outset of the case, as Genesis did.  It would also likely lead to plaintiffs’ counsel filing suit using multiple plaintiffs, to make this practice less enticing to defendants, or in their filing motions for conditional certification earlier to try to thwart the effects of such an offer by identifying other individuals to effectively replace the named plaintiff.   

And if the Court affirms the Third Circuit decision, one of defendants’ strategies to bring an early end to FLSA collective actions will be lost.

California Legislature Moves to Limit Non-Exempt Employee Contracts

By Adam Abrahms

Outside of California, employers frequently enter into agreements with non-exempt salaried employees that provide for a set weekly salary that includes overtime for a specific number of hours and is based on a defined regular rate of pay.  For example, an employer may agree to pay an employee as salary of $950 a week for 45 hours of work resulting in the employee being paid $20/hour for the first 40 hours and time and half ($30) for the overtime hours.  These agreements typically provide that if an employee works more than the established hours, the employee would be paid additional overtime pay for each hour worked.  If an employee works fewer the hours specified, he or she is generally still guaranteed the full weekly salary, including the built-in overtime.

Such agreements are often referred to as Belo contracts after the US Supreme Court case Walling v. Belo, 316 U.S. 624 (1942), which validated these types of non-exempt salary agreements under federal law.  Regardless of the form such agreements, they are often viewed favorably by both employers and employees as they provide both parties predictability and consistency.

Notwithstanding the federal approval of these arrangements, the California Division of Labor Standards Enforcement has long viewed Belo contracts as contrary to California law.  See  DLSE Opinion Letter 2000.09.29.  Nevertheless, some California employers (including many in the entertainment industry) continued to use these type of non-exempt salary agreements.

Last year, a California Court of Appeal upheld a similar agreement, which seemed to indicate that it would be safe for California employers to enter into what California courts have called “explicit mutual wage agreements” with their salaried non-exempt employees.  Specifically, in validating an explicit written agreement for an employee to work 66 hours a week for a fixed weekly salary of $880 (resulting in a regular rate of $11.14 and overtime rate of $16.71), the court held that “although parties may not waive overtime protections, the law permits an employer and employee to enter into an explicit mutual wage agreement” that provides a guaranteed salary and provides for at least one and on-half times the regular rate for any overtime hours.   Arechiga v. Dolores Press, 191 Cal. App. 4th 567, 573 (2011). 

California Assembly Bill 2103 authored by Assemblyman Tom Ammiano (D – San Francisco) seeks to legislatively overturn Dolores Press.  The proposed law would invalidate all explicit mutual wage agreements or Belo contracts in California and would provide that any salary paid to a non-exempt employee be considered payment only for non-overtime hours (i.e. first 8 hours in any day or 40 hours in a week).  Any hours an employee works beyond 8 in a day or 40 in a week would require additional pay at time and a half the regular rate.  Under the proposed legislation, regardless of any written agreement to the contrary, the regular rate would have to be calculated by dividing the established salary by 40.  Had the proposed legislation been in effect in the Dolores Press case, the $880 a week salary Dolores Press mutually agreed upon with its employee would have resulted in the employer having to pay a total of $1,738 a week -- or almost double the amount of the agreement.

AB 2103 cleared a major hurdle last week, passing the California Assembly by a 51-24 vote.  It now heads to the State Senate and, if it passes that body, to Governor Brown for signature.

If AB 2103 becomes law, it will become yet another explicit difference from federal law that employers in California will need to adapt to.  It may also require a restructuring of pay practices in the entertainment and other industries that frequently make use of “day rate” or “weekly rate” agreements that build in overtime.

California Supreme Court Holds That Attorney's Fees Are Not Recoverable On Meal And Rest Period Claims

By Michael Kun

Yesterday, only weeks after its long-awaited Brinker v. Superior Court decision, the California Supreme Court issued another important ruling on California meal and rest period laws. 

In Kirby v. Immoos Fire Protection, Inc., the Supreme Court ruled that neither party may recover attorney’s fees on claims involving meal and rest periods.  The Court analyzed the legislative history of the meal and rest period provisions and concluded, “We believe the most plausible inference to be drawn from history is that the Legislature intended [meal and rest period] claims to be governed by the default American rule that each side must cover its own attorney’s fees.” 

Although plaintiffs’ counsel throughout the state have tried to put a happy face on this decision, claiming a victory because plaintiffs cannot be made to pay an employer’s attorney’s fees should the employer prevail, the decision is plainly a victory for employers.  Rarely, if ever, are plaintiffs made to pay an employer’s attorney’s fees in a meal and rest period case, while employers are routinely asked to do as part of the resolution of such cases.  And as employers who have faced meal and rest period class actions know, the resolution of those cases has often turned on disputes over plaintiffs’ counsel’s fees, where it has not been unusual for plaintiffs’ counsel to seek fees that dwarf the recovery they seek for the employees themselves. 

While Kirby will have a great impact on meal and rest period cases, it is unlikely to spell the end of those cases.  Instead, employers can expect that plaintiffs’ counsel will include claims for which attorney’s fees can be recovered, such as claims for unpaid overtime or claims under the Private Attorneys General Act, and that they will later contend that most of their time was devoted to those claims, not the meal and rest period claims.

Additionally, employers should be aware that the Supreme Court all but invited the state legislature to add an attorney’s fees provision for meal and rest period violations: “it is up to the Legislature to decide whether [minimum wage law’s] one-way fee-shifting provision should be broadened to include [meal and rest period] actions.”

California Labor Commissioner Revises Wage Notice Form and Guidance

By Adam Abrahms

Last year, California passed the Wage Theft Prevention Act (AB 469) which amended several existing Labor Code sections and added several new ones. Most notably, in addition to criminalizing certain wages payment violations, the statute created a new mandate for California employers to provide each new employee a written notice upon hire containing individual information, including their regular rate of pay, overtime rates, and regular pay day. The law also required the California Division of Labor Standards Enforcement (DLSE) to prepare a template of the notice that employers could use for compliance. 

Although the new law had an effective date of January 1, 2012, the DLSE did not provide its first template with guidance until the final week of December. Its initial attempt seemed to raise more questions than provide answers, and the DLSE issued a revision within weeks. Even its second attempt, however, raised serious concerns that the notice went far beyond the requirements of the law and invited the potential for another round of class action lawsuits and employers.

Reacting to concerns raised by and on behalf of employers, the DLSE has announced revisions to both the template and the FAQ Guidance. The revisions are designed to address concerns that the prior template language could be read as evidencing an employment contract with an employee and diminishing the presumption of at-will employment. The revisions also addressed concerns related to what and how “rates of pay” must be listed, especially where employees may have multiple rates or a fluctuating regular rate of pay. Finally, the FAQs provide new guidance on the respective obligations of joint-employment situations including those involving staffing agencies.

The updated FAQ (link here) provides underlined and other notations indicating where and how the FAQ had been updated. The most helpful changes are contained in the addition of questions 16-30 at the end of the FAQ.

The new template (link here) is simplified and has removed or amended several (though not all) areas of concern. Importantly, the FAQs make it clear that employers can choose to use their own form or a modified form as long as the information from the template is included. 

Although the DLSE’s revisions are helpful and a step in the right direction, employers still must be cautious in ensuring compliance with the Wage Theft Prevention Act. The requirements of this law still contain many pitfalls that could find a well meaning employer faced with an individual lawsuit or class action despite its best efforts at compliance. We recommend employers carefully review their processes to ensure they are both in compliance with the law and have established forms and procedures designed to limit their exposure and meet their individual business needs.

California Supreme Court Issues Largely Employer-Friendly Ruling In Long-Awaited Brinker Decision

By:  Michael Kun

This morning, the California Supreme Court has just issued its long-awaited decision in the Brinker case regarding meal and period requirements.   It is largely, but not entirely, a victory for employers.  A copy of the decision is here.

A few highlights of the decision:

On rest periods, the Court confirmed the certification of a rest period class because Brinker’s written policy arguably did not comply with the law as to the second rest period in a day.  In so doing, it clarified when employees are entitled to rest periods:

·         Employees 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. (page 20)

On meal periods, the Court confirmed that meal periods need not be “ensured,” and that employers have no obligation to “police” them:

·         An employer’s duty with respect to meal breaks under both section 512, subdivision (a) and Wage Order No. 5 is an obligation to provide a meal period to its employees. 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….. On the other hand, the employer is not obligated to police meal breaks and ensure no work thereafter is performed. Bona fide relief from duty and the relinquishing of control satisfies the employer’s obligations, and work by a relieved employee during a meal break does not thereby place the employer in violation of its obligations and create liability for premium pay under Wage Order No. 5, subdivision 11(B) and Labor Code section 226.7, subdivision (b). (page 36)

The Court also rejected the plaintiffs’ argument in favor of “rolling” meal periods (i.e., the argument that an employee who takes an early meal period is entitled to another meal period within the next five hours, even if he or she works less than 10 hours):

·         We conclude 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. (page 37)

Unfortunately, confirming that meal period claims will continue to be litigated in California for years to come, the Court added the following caveat:

·         What will suffice may vary from industry to industry, and we cannot in the context of this class certification proceeding delineate the full range of approaches that in each instance might be sufficient to satisfy the law.   (page 36)

A more comprehensive analysis of the decision and its impact upon California employers – and the meal and rest period class actions that have besieged California employers – will be forthcoming. 

California District Court Holds That Motor Carrier Exemption Preempts Meal And Rest Period Claims In Trucking Industry

By Michael Kun and Aaron Olsen

Plaintiffs seeking to bring state law wage-hour class actions against employers in the trucking industry have run into a significant road block in California.  For the second time in a year, a United States District Court has held that claims based on California’s meal and rest period laws are preempted by federal law.

In Esquivel et al. v. Performance Food Group Inc., the plaintiffs claimed the defendant scheduled their delivery routes such that the plaintiffs were unable to take duty-free meal periods.  The defendant argued that the Federal Aviation Administration Authorization Act (“FAAA”) preempted California’s meal and rest period laws.  Judge Nguyen of the U.S. District Court for the Central District of California agreed with the defendant and dismissed the plaintiffs’ complaint with prejudice.  This decision comes only months after the Southern District of California’s October 2011 ruling in Dilts v. Penske Logistics, LLC, also holding that California’s meal and rest period laws are within the preemptive scope of the FAAAA.  Both courts found that the length and timing of meal and rest periods are “directly and significantly related to such things as the frequency and scheduling of transportation” such that requiring off-duty meal and rest periods at specific times would interfere with competitive market forces within the industry.

As employers with operations in California know, class actions alleging that employees missed meal or rest periods have become commonplace.  These two victories are significant ones for employers in the trucking industry.  However, the plaintiffs in both cases are seeking to appeal the decisions.  Trucking industry employers will want to monitor those appeals closely as it is always difficult to predict how the Ninth Circuit Court of Appeals will rule.    

U.S. DOL And California Team Up To Crack Down On Misclassification Of Workers As Independent Contractors

By Michael Kun

Last week, the U.S. Department of Labor’s Wage and Hour Division and the California Secretary of Labor announced that they were teaming up to crack down on employers who classify workers as independent contractors.  http://www.dol.gov/opa/media/press/whd/WHD20120257.htm

The announcement that the two groups would work together on such an initiative should not come as much of a surprise to employers.  Shortly after Hilda Solis took office as the U.S. Secretary of Labor, the Wage and Hour Division announced that it would be focusing on this issue.  And California has enacted a new statute that provides additional penalties in cases where workers are found to have been misclassified as independent contractors.  Simply put, the classification of workers as independent contractors is today’s “hot issue.”

While last week’s announcement may not be a surprise, it serves as a valuable reminder to employers that contract out services that they should review those relationships closely to ensure that workers are properly classified as independent contractors – and to make careful changes to the relationship should they not be.  Why must those changes be careful?  Because in some jurisdictions, including California, changes to practices can be construed as evidence that the past practice was unlawful.  In this way, seeking to correct a problem can lead to the very lawsuit you were seeking to avoid.

Unfortunately, there is not a single, universally accepted definition of “independent contractor.”  The IRS has one definition.  The DOL has another.  Various federal and state agencies have their own definitions, and the courts have crafted even more definitions in the tort and employment contexts. What the various definitions all have in common is the element of control.  To the extent an employer controls the manner in which a worker provides services – setting hours of work, providing the tools for the work, directing the manner in which the work is performed, or otherwise controlling the worker’s activities – those could all be indicia of an employment relationship, rather than an independent contractor relationship.  Similarly, if the worker wears the employer’s uniform, wears a badge with the employer’s name on it, or provides the worker with business cards bearing the company’s name, that could also suggest that the worker in fact is an employee, not an independent contractor.  The fact that you may call the worker an “independent contractor,” or that you have a contract using that term, ultimately means little.  It’s the actual relationship that will govern in any analysis.

Employers who have independent contractors performing the same work as their employees should be particularly concerned about these issues.  And those who reacted to the recession by laying off employees, only to bring back those same persons to perform the same job as independent contractors – without benefits, payroll withholdings and workers’ compensation – are squarely within the crosshairs of federal and state agencies.  And plaintiffs’ lawyers.

But they are not the only ones who should review their relationships with persons or companies with which they contract for the provisions of services.  Employers who contract with janitorial services -- or office management services, or catering services -- should also review those relationships, particularly if they are with companies whose funding is suspect.  If the employees of those companies don’t get paid, or don’t get paid properly, it’s not unusual for them to claim that they in fact were employed not just by that company, but you.  And if you give directions to that janitor – or office services person, or server – don’t be surprised if the DOL claims that he or she is your employee. 

California Employment Laws: What's on the Horizon

by Dena L. Narbaitz and Marisa S. Ratinoff

While everyone awaits the California Supreme Court's ruling in Brinker Restaurant Corp. v. Superior Court (Hohnbaum) – which is expected sometime in early 2012 and will determine the scope of an employer's meal and rest period obligations – employers must not lose sight of other important developments in California employment law. Below are brief summaries of some of the legislative enactments in California that will affect employers. Unless otherwise noted, these laws will take effect on January 1, 2012.

Read the full advisory online

San Francisco Minimum Wage To Exceed $10 Effective January 1, 2012

By Michael Kun

On January 1, 2012, the minimum wage for employees working in San Francisco will rise to $10.24 per hour. 

This is, to our knowledge, the first time the minimum wage in any U.S. city has ever exceeded $10 per hour.

Employers with employees in San Francisco will need to make sure that they make appropriate adjustments to their payroll systems and practices to account for the increase.

New California Laws Increase Penalties for Employee Misclassification and Wage Theft

by Michael S. Kun, Eric A. Cook, and Jennifer A. Goldman

California Governor Jerry Brown has signed two employment-related bills into law, raising the stakes for employers doing business in California. The two laws, which increase the penalties for employers that wrongly classify employees as independent contractors or engage in "wage theft," both go into effect on January 1, 2012.

Read the full advisory online

California Court of Appeal May Get An Opportunity To Rule On Constitutionality Of PAGA

by Michael Kun

As we have mentioned previously on thisblog, the latest wave of wage-hour class actions to hit California employers is based on a claim that employees were not provided "suitable seating" under an obscure provision of California's Wage Orders.  To avoid having these cases removed to federal court,and to avoid the burden of establishing the elements for class certification, many plaintiffs' counsel have taken to filing these lawsuits not as class actions, but as representative actions under California's Private Attorneys General Act ("PAGA").

PAGA -- sometimes referred to as the "Bounty Hunter Law" or the "Sue Your Boss Law" -- allows a single employee to pursue claims on behalf of all "aggrieved employees," with potential recovery of up to $100 per employee for the first violation and $200 per employee for each subsequent violation.  The potential recovery can be enormous, and a plaintiff need not certify a class.

The constitutionality of PAGA has long been a matter of concern and dispute.  We and other defense counsel often raise constitutionality defenses to PAGA claims and raise those arguments at various stages of the cases.  Unfortunately, judges rarely take interest.

Los Angeles Superior Court Judge Daniel Buckley apparently has seized on this issue and has articulated his intention to dismiss a PAGA seating case against Whole Foods Market on the grounds that PAGA is unconstitutional.  He appears to be one of the first judges, if not the first, to make such a ruling about PAGA. 

Assuming that Judge Buckley issues that ruling, it is all but certain that plaintiff's counsel will appeal.  The case will bear watching because a ruling by the Court of Appeal or, eventually, the California Supreme Court striking down PAGA on constitutionality grounds could shut down all claims under PAGA.  While that would not spell the end of wage-hour class actions, it would close off one of the avenues often relied upon by plaitniffs' counsel to increase the potential exposure in a case for settlement purposes.  And it may force plaitniffs to bring wage-hour claims as potential class actions, which would not only increase the likelihood of removal to federal court, but require plaintiffs to carry a significant burden in convincing a court to certify a class.

Oral Argument On California Meal And Rest Break Case To Be Broadcast Live

By Michael Kun

It appears that oral argument before the California Supreme Court in Brinker Restaurant Corp. v. Superior Court will be broadcast live on-line on the California Channel on November 8, 2011 at 9 a.m.   While it is unlikely this will inspire families to gather around their computers as they gathered around their radios to listen to breaking news decades ago, more than a few employers with operations in California may want to listen to this oral argument on a critical issue that affects all such employers – whether employee meal and rest breaks must be “ensured” or merely made “available.”

If the California Supreme Court rules that meal and rest breaks must be “ensured,” most employers will need to implement new policies and practices the very next day.  And most will be vulnerable to the very type of wage-hour class actions that have besieged California employers for the past decade. 

Employers Must Be Prepared To Implement New Meal And Rest Break Practice On Short Notice Now That The California Supreme Court Has Set A November 8, 2011 Hearing Date For Brinker

By Michael Kun

Some were beginning to wonder whether it would ever happen.  After more than two years, the California Supreme Court has announced a hearing date in the much-awaited Brinker v. Superior Court case -- November 8, 2011.

Unless the Court takes a detour, California employers should finally know the answer to a question that has long driven California's billion dollar wage-hour class action industry -- must an employer "ensure" that employers take meal and rest periods, or are they only required to make them "available" to employees. 

Should the Supreme Court rule that employers need only make them "available," wage-hour class actions will not grind to a halt.  Plaintiffs' counsel will merely change their allegations to allege that meal and rest breaks were not made "available."  But most employers should have valid defenses to such claims, and, perhaps just as importantly, they will not need to revise the way they operate. 

However, should the Supreme Court rule that employers must "ensure" that meal and rest breaks be taken, virtually every employer that does business in California will be vulnerable to wage-hour actions reaching back four years.   

While it is tempting to do so, employers should not sit back and merely wait for the Brinker ruling.   While employers should hope for the best, they would be wise to prepare for the worst.  Indeed, because the Brinker Court may well rule that meal and rest periods must be "ensured," employers should be prepared to implement new policies and practices the very next day.  Having those new policies and practices drawn up and ready to implement on short notice could help stave off future claims, damages and penalties.   

With any luck, those policies and practices may never be needed.

Employers in California Can Tone Down Their Celebrations about the U.S. Supreme Court Decisions In Wal-Mart and Concepcion

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.

Sullivan v. Oracle Corporation: Non-Residents Who Perform Work in California Are Governed By California Wage Hour Laws - Including Daily Overtime Rules

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. 

Victory for Employer in Meal Period Class Action

By Rhea G. Mariano and Betsy Johnson

The issue of whether California law requires employers to ensure that employees take meal periods or to merely make meal periods available is hotly contested and regularly litigated.  The issue is currently before the California Supreme Court in Brinker Restaurant v. Superior Court (review granted Oct. 22, 2008 (Brinker) and Brinkley v. Public Storage (review granted Jan. 14, 2009 (Brinkley)). 

While employers await the California Supreme Court’s decision in Brinker and Brinkley, on May 10, 2011, the California Court of Appeal, Second Appellate District Court, issued another positive decision for employers and held that employers are not required to force employees to take meal periods:  “It is an employer’s obligation to ensure that its employees are free from its control for thirty minutes, not to ensure that employees do anything particular during that time.”  Lamps Plus Overtime Cases (CA2/8 B220954 5/10/11).

In the Lamps Plus Overtime Cases, the Appellate Court upheld the lower court’s decision to deny class certification with respect to claims of failure to provide meal and rest breaks, among other claims, against Lamps Plus, Inc., et al. (“Lamps Plus”).  The Court concluded: 

Consistent with the purpose of requiring employers to provide employees with meal breaks, the Labor Code and the IWC use mandatory language precluding employers from pressuring employees to skip breaks, declining to schedule breaks, or establishing a work environment discouraging or preventing employees from taking such breaks. (See, e.g., Lab. Code, § 226.7, subd. (a) [“No employer shall require any employee to work during any meal or rest period . . .”].)  This mandatory language does not mean employers must ensure employees take meal breaks.  Rather, employers must only provide breaks, meaning, make them available. …  The language regarding rest breaks is more permissive.  An employer need only “authorize and permit” rest breaks. (Cal. Code Regs., tit. 8, § 11070, subd. 12, italics added.)

The Court also provided guidance in opposing class certification.  The Court found no evidence of a class-wide policy or practice of preventing employees from taking meal periods.  On the contrary, Lamps Plus employees were required to sign a form stating that they acknowledge that the company policy upholds the rest and meal break laws, that they will comply with the company policy, and that they will report any missed break to human resources.  Lamps Plus supervisors were authorized to take disciplinary action to enforce the policy.  The Court held that under these facts, it “does not make sense” to require an employer to pay a penalty to every employee who chooses to skip a rest and/or meal break.

The ruling in the Lamps Plus Overtime Cases is positive for employers.  However, while the California Supreme Court reviews Brinker and Brinkley, the decisions from the Court of Appeal provide helpful guidance to employers but are of limited precedential value. 

The Newest Trend in California Wage-Hour Class Actions: Claims for Inadequate Seating

By Michael Kun

Employers who do business in California are already well aware of the wage-hour class actions that have besieged employers in virtually every industry.   Class claims for misclassification of employees as exempt employees or independent contractors first began to be filed more than a decade ago, and continue to be filed on a daily basis.  Claims for alleged work off-the-clock and missed meal and rest periods by non-exempt employees generally began later, but continue to be filed at an alarming rate. 

Now we can add to those cases a new wave of California class actions, alleging that employees have been denied “suitable seating,” as required by various Industrial Welfare Commission Wage Orders.  News of two recent Court of Appeal decisions permitting such claims has spread among the plaintiffs’ bar, which is now filing such claims against retailers throughout the state.  Other industries where employees frequently are on their feet, particularly the hospitality industry, are soon to follow.

Making matters worse, the Wage Orders with which employers are expected to comply only provide generally that “all working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.”  Nowhere in the Wage Orders or elsewhere are the phrases “suitable seats,” “nature of the work” or “reasonably permits” defined. 

Much like the law regarding meal and rest periods (which continues to be uncertain as the California Supreme Court delays in issuing its long-awaited decision whether such breaks must be “ensured” or need only be “made available”), it seems inevitable that the law regarding suitable seating is going to play out in the courts, and just as inevitable that class action after class action will be filed as the law remains vague and confusing.

And those class actions will not be small ones.  Under California’s Private Attorneys General Act, each employee could recover up to $100 for the initial pay period in which there is a violation, and up to $200 for each subsequent pay period. 

Employers would be wise to get ahead of the proverbial curve on this issue, reviewing the working conditions of their employees and making seats available where possible. 

Federal Court Denies Certification Of Wage-Hour Class Action Against Joe's Crab Shack Restaurants

The United States District Court for the Northern District of California has denied certification of a class action against Joe's Crab Shack restaurants on claims that employees worked off-the-clock, were denied meal and rest breaks, and were required to purchase t-shirts to wear at work.  Because the case was handled by our EpsteinBeckerGreen colleagues Michael Kun and Aaron Olsen, we do not believe it is appropriate to comment on the decision or its implications.  If you would like to read the decision, a copy may be found here.

New Chipotle Decision Holds That California Employers Need Only Make Meal And Rest Breaks Available

By Michael Kun

Employers with operations in California continue to await a ruling from the California Supreme Court on the question of whether employers must "ensure" that meal and rest breaks are taken, or merely make them "available."

The issue has long been before the Court in the similarly-named Brinker and Brinkley cases, and will turn largely on a single question: what does the word "provide" mean.

This, of course, is much more than a minor semantic issue. The ultimate decision about what "provide" means will have a dramatic impact upon the wave of wage-hour class actions that have plagued California employers for more than a decade. A pro-employee decision -- that "provide" means "ensure" -- will surely lead to a new, massive wave of meal and rest break class actions. A pro-employer decision -- that "provide" means to make "available," and no more than that -- could slow the filing of meal and rest break class actions and reduce their value. Until some legislators in Sacramento push for new legislation that expressly states that the breaks must be "ensured," that is.

From White v. Starbucks to Brown v. FedEx, the federal courts in California have uniformly issued pro-employer decisions on this issue, holding that employers need only make these breaks "available," and need not "ensure" that employees actually take the breaks. If employees choose not to take the breaks, or take late or short breaks, there is no liability for the employer.

The uniform rulings by the federal courts have made it preferable for employers to be in federal court. While the California state courts reached the same conclusion in Brinker and Brinkley, neither case may be cited. Both cases have been depublished while the Supreme Court considers them.

The only other state court decision addressing this issue has been Cicairos v. Summit Logistics, Inc., which concluded that meal breaks in fact must be ensured. But the Court reached that conclusion in reliance upon an opinion offered by a California state agency -- an opinion that the agency has abandoned.

Without a case to cite in state court, and with many state court judges reluctant to rule on the issue while Brinker and Brinkley are pending, employers in meal and rest break class actions have been largely stymied.

Until now perhaps. On September 30, 2010, the California Court of Appeal issued an unpublished decision in Hernandez v. Chipotle Mexican Grill, Inc., B216004. Agreeing with the federal courts and distinguishing Cicaios, the court concluded that breaks need only be made "available," affirming the denial of class certification as a result.

The decision may ultimately prove to be an unimportant one. It is unpublished, which means that it can only be cited under limited circumstances. That may change as employers and management-side employment lawyers are likely to petition for its publication. Whether it is published or not, it should not surprise anyone if the plaintiffs seek certiorari and ask that the case be considered with Brinker and Brinkley, or take other procedural steps to effectively stay the decision until Brinker and Brinkley are finally decided. And, ultimately, the Supreme Court is going to have the final say.

That said, the decision does signal that the Superior Courts and the Courts of Appeal are not going to sit on their hands indefinitely, waiting for the rulings in Brinker and Brinkley before they issue their own opinions on this important question. And, in the short term at least, employers may have a decision they can cite in state court proceedings to attack the certification or merits of break claims.
 

Misclassification Class Actions Are Alive And Well In California In Light Of $7.7 Million Award

 
The other day, an attorney told me he believes that the decade-long wave of misclassification class actions in California is all but over.
 
Considering the fact that I'm currrently handling several such cases, I told him I disagreed: the wave may have crested several years ago, but it is not over.
 
We may both have been wrong. 
 
A much-publicized Ninth Circuit opinion earlier this week suggests that these cases in fact are alive and well in California, and it may serve as an impetus for the increased filing of more such actions.
 
On Tuesday, in Lynne Wang v. Chinese Daily News, Inc., the Ninth Circuit affirmed a $7.7 million award to a class of journalists writing for a Chinese language newspaper.   
 
The history of the case -- a hybrid state/FLSA action -- is truly a tortured one, and I will leave it to you to review the history in the Ninth Circuit opinion, if you are so inclined.  It involves a jury trial, a bench trial, and allegations of coerced "opt outs," most of which may be more interesting to lawyers than non-lawyers.
 
What is most important is that the Ninth Circuit concluded that journalists for the paper had been misclassified as exempt.  It concluded that their work required "intelligence, diligence and accuracy" -- not "imagination, originality or talent."  As such, they could not be properly classified as exempt under the creative professional exemption, and were entitled to unpaid overtime, premium pay for missed meal periods, and a host of statutory penalties.
 
While the misclassification of journalists may appear to be a subject of little or limited interest to employers outside that industry, the Ninth Circuit's analysis is one that is worthy of review.  It may provide a road map to plaintiffs' counsel in other cases as to what to argue where an employer has relied upon the creative professional exemption, as well as providing some suggestions as to how to attack other exemptions.  
 
The decision should serve as yet another reminder to employers to review carefully the designations of employees as exempt.   

California Supreme Court Announces Major Victory for Hospitality Employers: No Private Right of Action for Tip-Pooling Claims Under Labor Code Section 351

by Michael Kun

The California Supreme Court has announced what can only be considered a major victory for hospitality employers in California.

California Labor Code section 351 probibits employers from taking any tip that customers may leave for employees.  Many hospitality employers have long used tip-sharing policies, whereby tips left by customers are divided among those involved in service.  In recent years, those tip-pooling practices have been challenged under section 351 as part of the wave of wage-hour class actions brought against California hospitality employers.   While these class actions have proceeded, a threshold issue had not been addressed by the courts -- whether section 351 even provides a private right of action by employees. 

In a case that has been followed closely by employers in the hospitality industry, on August 9, 2010 the California Supreme Court ruled in Lu v. Hawaiian Gardens Casino, Inc. that employees do not have a private right of action to bring claims regarding their tips under California Labor Code section 351. 
 
Noting that section 351 does not itself provide for a private right of action, the court reviewed the statute's legislative history and concluded that the legislature had not intended to provide a new statutory mean to recover allegedly misappropriated tips. 
 
While the decision should bring to a end to the tip-pooling class actions filed under section 351, it will not prevent employees from bringing tip-related claims under other legal theories.  In fact, the Supreme Court itself opined that such claims might be appropriate under other theories, such as a conversion theory. 

 

California Supreme Court Expands Definition of "Employer" In Wage-Hour Cases

by Michael Kun and Aaron Olsen

Already besieged by wage-hour lawsuits, employers with operations in California may see more of these cases, or may be brought into wage-hour litigation where they might not have been before, as a result of a new decision by the California Supreme Court expanding the definition of "employer." The decision creates greater exposure to litigation for those companies that use the services of independent contractors, temporary agencies or other similar entities with whom the employer has a close relationship.

The plaintiffs in Martinez v. Combs were seasonal agricultural workers who picked strawberries for Munoz & Sons (“Munoz”). Munoz sold strawberries through a number of merchants, including Apio, Inc. (“Apio”) and Combs Distribution Co. (“Combs”). The merchants would routinely enter the strawberry fields to describe how they wanted the strawberries packaged and to check the quality of the packaged strawberries before they shipped. The merchants would point out mistakes to Munoz's foreman, as well as directly to the strawberry pickers. After the price of strawberries declined, Munoz failed to pay its strawberry pickers and subsequently declared bankruptcy. In addition to suing their employer, Plaintiffs also sued Apio and Combs for a variety of California Labor Code violations, including failure to pay a minimum wage. The central issue on appeal was whether the strawberry merchants, Apio and Combs, were considered joint employers of plaintiffs under the California Labor Code.

In order to determine whether the strawberry merchants were employers and thus liable for Labor Code violations, the Court examined various definitions of “employer.” After engaging in a lengthy review of 98 years worth of legislative history, the Court adopted the Industrial Welfare Commission’s ("IWC") broad definition of "employer." The Court held that the IWC was authorized by the legislature to define this term as it saw fit, holding that to "employ" someone means: (a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship. In adopting the IWC’s position, the Court rejected defendants’ argument that California law incorporates the “economic realities” test used in the federal Fair Labor Standards Act ("FLSA"). The “suffer or permit to work” definition is the broadest of the three definitions.

The plaintiffs argued that the strawberry merchants, Apio and Combs, “suffered or permitted” plaintiffs to work because they knew plaintiffs were working and the work benefitted the merchants. The Court rejected this argument. The court found that because Munoz, not Apio or Combs, had the power to hire and fire plaintiffs, to set their wages and hours, and to tell plaintiffs when and where to report to work, Apio and Combs did not “suffer or permit” plaintiffs to work. Likewise, although Apio and Combs had representatives in the strawberry fields that gave instructions to plaintiffs, that did not mean that they exercised control over plaintiffs. The court noted that there was no evidence to suggest that Munoz’s employees viewed the representatives of Apio or Combs to be their supervisors. Instead, plaintiffs believed that Munoz and Munoz’s foreman were their supervisors.

Although there will undoubtedly be more litigation about the definition of an employer, Martinez provides useful guidance for companies to evaluate the contracts that they have with their vendors, contractors and temporary employment agencies so that they do not unwittingly become liable for another company’s Labor Code violations. This case illustrates the fine line between conducting quality control over another company’s work product and controlling the conditions of the other company’s employees. Likewise, the case shows how companies can minimize the risk of being classified as "joint employers" if they make it clear in their contract and in practice that the other entity has the sole right to hire, pay, discipline and terminate the workers.

 

California v. FLSA: Different Tests for the "White Collar Exemptions"

By Betsy Johnson

On April 1, 2010, the Department of Labor (DOL) launched its “We Can Help” public awareness campaigned aimed at educating workers about their rights under the Fair Labor Standards Act (FLSA). The DOL set up a dedicated website for the “We Can Help” campaign (http://www.dol.gov/wecanhelp/) which provides guidance to employees who wish to file a complaint against their employers for FLSA violations.

On April 26, 2010, the DOL announced a new, enhanced, regulatory and enforcement strategy called “Plan/Prevent/Protect” (http://www.dol.gov/regulations/2010RegNarrative.htm). This new strategy is designed to promote a “safe, secure, and equitable” workplace for all employees and leverages DOL resources across the spectrum of DOL worker protection agencies, including the Wage and Hour Division, and will focus on employer compliance with the laws enforced by the DOL.

Given the spotlight placed on employee education and employer compliance by these DOL initiatives, companies are likely to see an increase in DOL and state agency enforcement proceedings and an increase in individual civil actions and class action litigation involving wage and hour claims for the foreseeable future. 

California continues to be at the forefront of the wage and hour litigation wars, and the issue of the proper classification of employees as “exempt” or “non-exempt” remains an active battleground in the state and federal courts, as well as in proceedings before the California Division of Labor Standards Enforcement (DLSE). 

It should come as no surprise to most human resource professionals and in-house counsel that California utilizes a different test for determining the “white collar” exemptions (executive, professional and administrative) than is utilized under the FLSA. However, employers who are unaware of or ignore the differences between California law and the FLSA regarding the “white collar” exemptions are exposing their companies to significant liability for unpaid overtime, “off the clock” work, meal/rest periods, uniform violations, improper deductions and record keeping violations under California law.

Under both the FLSA and California law, the employer has the burden of proving the one of the exemptions applies—establishing exempt status is an “affirmative defense” in wage/hour litigation. Walling v. General Industries Co., 330 U.S. 545, 67 S.Ct. 883 (1947).  Job titles are immaterial to a determination of exempt status. Therefore, we recommend that employers conduct an internal “audit” of the actual job functions of the employees in question before classifying them as “exempt,” under either the FLSA or California law. 

Recently, a client asked us to develop a “user friendly” comparison of the FLSA and California “white collar” exemptions. While nothing is really “user friendly” when it comes to California wage and hour law, we developed the chart below to provide some basic guidance for our client and wish to share it here.

 Important Note: Where the California statutory, regulatory or case law are more employee-favorable than the FLSA (which is most cases), the California rules will apply. 

  

   FLSA  CALIFORNIA
“Salary Basis Test”
Minimum fixed, guaranteed salary for exempt status
 

$455 per wk ($23,660/yr)

29 CFR 541.600

FLSA regulations are available at:

http://www.dol.gov/dol/allcfr/
Title_29/Part_541/toc.htm

DOL (WHD) Rulings and Interpretations are available at:

http://www.dol.gov/whd/
opinion/opinion.htm

 

$640 per wk, $2,7733.33 per mo or $33,280 per yr

California Labor Code (LC) §515 and Wage Orders

Labor Code is available at:

http://www.leginfo.ca.gov/cgi-bin/
calawquery?codesection=lab&codebody=&hits=20

Wage Orders are available at:

http://www.dir.ca.gov/iwc/
wageorderindustries.htm

 For 2010-Computer professionals must earn a minimum fixed salary of $79,587.50 per year or $37.94 per hours for all hours worked. Salary and hourly rate subject to change each year.

LC §515.5 and Wage Orders

For 2010-Physicians who are paid on an hourly basis must be paid a minimum of $69.13 per hour. Hourly rate subject to change each year.

LC §515.6 and Wage Orders
 

“Duties Test”

 

The “primary duty” of a exempt employee must fall with in the FLSA definition of exempt duties. Exempt employees must be perform exempt duties at least 50% of the time.

The FLSA uses a “qualitative” test

29 CFR 541, et seq.
 

An exempt employee must be “primarily engaged in” job duties which meet the test for the exemption. Under the CA requirement, exempt employees must perform exempt job duties (as defined by the DLSE and case law) more than 50% of the time

CA uses a “quantitative” test

Wage Orders and case law

A summary of the “duties test” for the CA exemptions is available at:

http://www.dir.ca.gov/dlse/
Manual-Instructions.htm

(See Chapters 52-54)


(NOTE: CA did not adopt the 2004 amendments to the FLSA regulations and, in some cases, still relies on the pre-2004 regulations for guidance on the executive, professional and administrative exemptions)
 

Highly- compensated employees Employees paid $100,000/yr exempt if meet streamlined duties test

No similar exemption

Cannot use in CA
 

"Safe Harbor" Provides "window of correction" for employer if improper deductions made from exempt employee paychecks

No guaranteed "safe harbor" under CA law, but should still a use it to obtain federal protection

CA has very strict rules re: permissible and impermissible salary deductions

LC §§221, 224 and Wage Orders

Recent opinion letters from DLSE are more favorable for employers on issues like furloughs and salary reductions and apportionment of paid time for partial day absences

DLSE Opinion Letters are available at:

http://www.dir.ca.gov/dlse/
DLSE_OpinionLetters.htm

 

Permissible salary deductions Now allows full-day deductions for unpaid suspension based on violation of any conduct rules, and for violations of major safety rules, and full or partial-day deductions for unpaid FMLA

No similar provision for disciplinary deductions, except for full or partial day deductions for unpaid FMLA

CA has very strict rules re: permissible and impermissible salary deductions

LC §§221, 224 and Wage Orders

Recent opinion letters from DLSE are more favorable for employers on issues like furloughs and salary reductions and apportionment of paid time for partial day absences

 DLSE Opinion Letters are available at:

http://www.dir.ca.gov/dlse/
DLSE_OpinionLetters.htm

 

California Applies Different Rules for "On-Call" Employees than the FLSA

By Betsy Johnson

A client recently asked us to provide them with a summary of the California rules paying non-exempt employees for “on-call” time. Our client requires non-exempt maintenance employees to carry cell phones and/or pagers after hours and on weekends so they can respond to requests for assistance and emergencies at the facility which operates on a 24/7 basis. The employees are required to respond to a call or page within 10-15 minutes and to be available to go to the facility immediately if necessary. The questions presented were: 1) whether these employees should be paid for the time spent carrying the cell phone or pager and 2) is there a minimum amount of pay the employees must receive if they are required to report to the facility. We thought that it would be helpful to share our thoughts here. 

 

The Fair Labor Standards Act (“FLSA”) and the federal regulations provide that “[a]s a general rule the term ‘hours worked’ will include: (a) All time during which an employee is required to be on duty or to be on the employer’s premises or at a prescribed workplace and (b) all time during which an employee is suffered or permitted to work whether or not he is required to do so.” (29 CFR §778.223).

 

There is a substantial difference between the definition of "hours worked" adopted by the California Division of Labor Standards Enforcement (“DLSE”) and that used by the Department of Labor (“DOL”) under the FLSA. Under California law, it is generally only necessary that the worker be subject to the "control of the employer" or "all the time the employee is suffered or permitted to work" in order to be entitled to pay.   These two phrases operate independently of each other, so that if time falls into either category, it must be counted as hours worked.  

 

See IWC Wage Orders, Section 2(K), Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 584 [citing to DLSE Opinion Letter (“O.L.”) 1993.03.31]. Please note, that there is a different definition for employees in the Health Care Industry and for employees who are required to reside on the employer’s premises. 

 

Standby Or Waiting Time.  Under both federal and state law, an employee who is required to remain on the employer’s place of business and respond to emergency calls is working and must be paid for all hours – even if the employee is doing nothing more than waiting for something to happen.  See Armour & Co. v. Wantock, 323 U.S. 126 (1944). However, the standby time can be paid at a different hourly rate from the regular rate paid for working time, provided that the standby rate is set before the work is performed and the standby rate is at least minimum wage ($8.00 per hour). See O.L. 2002.02.21.  For purposes of overtime computation, where two or more rates are used, California requires that the “weighted average” method for overtime calculation be utilized to determine the regular rate of pay.

 

Uncontrolled Standby. An employee who must be available to respond to a request by the employer to return to work for an emergency may be on uncontrolled standby if the employee is completely unrestricted to use his or her time for their own purposes. Such "free" standby time is not under the control of the employer and, thus, need not be paid.

 

Controlled Standby. If the employee's time is so restricted that she cannot pursue personal activities and come and go as she pleases, the employer is considered to have direction and control of the employee. The DLSE has adopted the test which the California Supreme Court announced in the case of Madera Police Officers Assn. v. City of Madera (1984) 36 Cal.3d 403, and will apply that test to determine the extent of control.

 

The Madera court applied a two-part preliminary analysis to determine whether the time was compensable. The first part of the test measures whether the restrictions placed on the employee are primarily directed toward the fulfillment of the employer's requirements and policies. Second, is the employee substantially restricted so as to be unable to attend to private pursuits? 

 

Regarding the second prong of the test, the Madera court also indicated that the trier of fact must examine the restrictions cumulatively to assess their overall effect on the worker's uncompensated time. In other words, the net impact of the restrictions must be considered. Note that the court did not hold that no restrictions as to time and space could be placed on the employee; only that the restrictions could not be substantial enough to prevent the employee from attending to private pursuits. 

 

The factors to be considered in determining whether an employee is on controlled standby are similar to the federal guidelines and include:

(1) whether there are excessive geographical restrictions on employees' movements; (2) whether the frequency of calls is unduly restrictive; (3) whether a required response time is unduly restrictive; (4) whether the on-call employee can easily trade his on-call responsibilities with another employee, and (6) the extent of personal activities engage d in during o n-call time. (O.L . 1998.12.28)

 

The simple requirement that the employee wear a cell phone, pager or beeper, standing alone, does not require that the employee be paid for all the hours the device is on. Additionally, the DLSE does not take the position that simply requiring the employee to respond to call backs is so inherently intrusive as to require a finding that the employee is under the control of the employer. Such factors as (1) geographical restrictions on employee's movements; (2) required response time; (3) the nature of the employment; and, (4) the extent the employer's policy would impact on personal activities during on-call time, must all be considered.

 

The bottom-line consideration is the amount of "control" exercised by the employer over the activities of the employee. In some cases, the employer can be said to be exercising some control over his employee at all times. For instance, the "duty of loyalty" found in Labor Code §2863 requires that employees give   preference to the business of his employer over any personal business of the employee. However, such attenuated "control" does not give rise to an obligation to pay the employee. However, once the employer exercises immediate control over the employee's activities, the employee must be compensated for this time. (O.L. 1993.03.31, 1992.01.28)

 

Response and Reporting Time Pay.  If the employee is required to respond to a call or page, all time spent by the employee answering questions or otherwise responding via phone and/or computer is compensable time and must be paid. Employees must keep accurate records of these hours worked. Under California law, only de minimus work (defined as a “minute or two” during the entire workday-not per response) does not have to be paid.

If the employee is required to report to the employer’s facility, the provisions of California’s “reporting time” rules may apply. Section 5 of each IWC Wage Order provides:

 

(A) Each workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee's usual or scheduled day's work, the employee shall be paid for half the usual or scheduled day's work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee's regular rate of pay, which shall not be less than the minimum wage.

(B) If an employee is required to report for work a second time on any one workday and is furnished less than two (2) hours of work on the second reporting, said employee shall be paid for two (2) hours at the employee's regular rate of pay, which shall not be less than the minimum wage.

(C) The foregoing reporting time pay provisions are not applicable when:

(1) Operations cannot commence or continue due to threats to employees or property; or when recommended by civil authorities; or

(2) Public utilities fail to supply electricity, water, or gas, or there is a failure in the public utilities, or sewer system; or

(3) The interruption of work is caused by an Act of God or other cause not within the employer's control

(D) This section shall not apply to an employee on paid standby who is called to perform assigned work at a time other than the employee's scheduled reporting time.

 

If the employee is on a paid standby and is called to work, the reporting time pay provisions do not apply. In order to qualify as paid standby, the hourly wage for the standby time which has been agreed to or, absent a specific agreement, at the employee's regular rate of pay must be paid.   If the employee is on unpaid standby and is called to work, the reporting time requirements kick in and a minimum of 2 hours of pay is required.

 

Employers who employ non-exempt employees in California are cautioned to review their pay practices as they relate to “on-call” time for their California employees.

A New Bill May Mean Relief is in Sight for California Employers Facing Wage-Hour Class Actions

by Michael Kun

    The California wage-hour epidemic has entered its second decade.

    While there is little on the horizon to suggest that these cases are about to come to an end, there are a few glimmers of hope now. 

    The first glimmer of hope comes from a case that has been pending before the California Supreme Court since 2008.  California employers continue to await a ruling on meal and rest breaks from the California Supreme Court in Brinker.  A ruling that breaks need only be "made available," not "ensured," may not put an end to meal and rest break class actions, but it should slow them down considerably and make it exceedingly difficult to certify a class in most cases.

    The second glimmer of hope comes from this week's Hertz decision from the United States Supreme Court, which suggests that more class actions in California will now be removable to federal court under the Class Action Fairness Act.  Foreign companies previously had difficulty removing cases in California because they often did the most business in California or had the most employees there simply because of its size. As the court explained in Arellano v. Home Depot U.S.A., Inc., 245 F.Supp.2d 1102, 1107 (S.D. Cal. 2003), “it is unlikely that Congress intended that every corporation that does more business in California than any other state should be considered a citizen of California.”  It looks like the Supreme Court agrees, and now a "nerve center" test will be used.  Employers with headquarters outside California now should be able to remove many class actions filed in California as a result. 

    Now, there is a third glimmer of hope in the form of new bill that could change the game further. 

    The key word is "could."

    In an interview I did with EmploymentLaw360 last year, I mentioned the need to reform California's class action procedures to provide more guidance to the trial courts. Too much discretion for the trial courts, and not enough guidance, has created an untenable situation in which one judge could certify a class where the judge in the very next courtroom might have denied certification, leaving employers lost and often with no recourse other than to settle in the face of uncertainty. I also mentioned the need to address a form of litigation that rewarded plaintiff's attorneys, often for doing little work and often at the expense of their own clients. http://www.law360.com/articles/123717

    I wish I could say that my comments were profound, or that someone read my comments and decided to act.  It's enough to know that someone shared my thoughts and decided to do something about it.

    California Assembly Member Audrey Strickland has introduced a bill to reform California's class action procedures based on the "lack of clear standards for certifiction and management of class actions":  http://info.sen.ca.gov/pub/09-10/bill/asm/ab_0001-0050/abx8_38_bill_20100210_introduced.html

    The bill proposes standards modeled after Rule 23 of the Federal Rules of Civil Procedure, removing "any presumption or policy in favor of class certification," and only allowing class actions to proceed where all criteria are met. 

    That change alone would be a welcome one for class action defendants in California.

    But the bill goes further.  It also proposes a system by which a defendant can propose a settlement to the court that has not been approved by plaintiff's counsel, essentially removing one of the largest obstacles to settlement -- plaintiff's counsel who hold up settlements out of self-interest.

    Sounds logical to you and me.  And sounds like something the plaintiff's bar will fight to the death.  (Feel free to insert your own joke here about class action plaintiff's lawyers taking 40% of multi-million dollar settlements, often for doing little more than showing up for a mediation, where they meet their clients for the first time.  Think that doesn't happen?  I'm handling a class action now where plaintiff's counsel met their client for the first time 2 years after the lawsuit had been filed.  And, no, you didn't misread that last sentence.)

    Will this bill get passed?

    Will it gain any traction at all?

    If it were anywhere other than California, you would have to think there was a chance, perhaps even a significant one, that the bill would become law, even with some revision.

    But it's California. 

    The plaintiff's bar, and legislators counting their votes for the next election, may not let Ms. Strickland's bill get far.  And they will make Ms. Strickland's next election hellish.  In fact, they're probably already preparing fliers explaining to voters how Ms. Strickland is trying to make it more difficult for them to get money in lawsuits. 

    Now you can insert your own joke about why California is teetering on the edge of bankruptcy.  Again.   

What's On The Wage-Hour Horizon For California Employers In 2010

 
    As 2009 winds to a close, we can look backward, we can look forward, or we can do both.
    For now, let's just look forward with an eye toward what California employers can expect in 2010 as it relates to wage-hour law.
    A warning, though:  nothing on the horizon should hearten California employers.  
 
1)  Clarification of Meal and Rest Break Obligations
    Sometime in 2010 -- likely within the first quarter -- California employers should finally receive an answer from the California Supreme Court to a lingering question about meal and rest breaks:  does the requirement to "provide" breaks require that they be "ensured," or must they merely be "made available"?
    The federal courts have reviewed this issue.  They've broken open their dictionaries and, like the dictionary that sits on my desk, have found that "provide" is defined to mean "to make available."
    The California Supreme Court is reviewing this issue in Brinker Restaurant Corp. v. Superior Court (Hohnbaum).
    Will the California Supreme Court agree with the federal courts and issue an employer-friendly decision?
    Perhaps.
    And perhaps not.
    You could lose a lot of money betting on what the California Supreme Court will do in employment cases.  (See, e.g., the Murphy v. Kenneth Cole decision, which few predicted.)
    And even if the Court concludes that employers need only make those breaks available, any celebration by employers might be short-lived.  Rest assured that a number of politicians already have proposed legislation sitting on their desks to reverse that decision and require that employers "ensure" that the breaks are taken.
    Please feel free to insert your own joke here about the justice system and politicians. 
 
2)  Continuation of the Wage-Hour Class Action Epidemic
    So, you think the wave of wage-hour class actions is about to come to an end?
    Why would you think that?
    Have plaintiffs' lawyers grown weary of negotiating multi-million dollar settlements, and pocketing 40% of those settlements?
    Of course not.
    And until they do, there is no reason to believe that the wage-hour class actions are going to cease.
    (And before someone responds by saying that this epidemic will end once employers cease violating the laws, stop.  It used to be the case that if someone saw a mistake in his paycheck, he'd walk over to human resources, have it corrected, and that would be that.  In fact, wouldn't a good lawyer looking out for his client's best interests advise him to do just that, rather than talk him into filing a class action lawsuit where it could be years before he receives that same amount?  Of course.  The real reason for the abundance of class actions is a system that rewards lawyers, often at the expense of the people they supposedly are representing.)
 
3)  Claims Based On PDAs and Laptops
    So, you'd like to know what the next wave of wage-hour claims will be?
    Simple.
    It's the PDAs that everyone carries with them.  It's the laptop computers that everyone has at home.
    It used to be the case that employees left their work at the office (or the plant, or the store) when they went home.  That was especially true of non-exempt employees.
    Now, because they are so affordable, virtually everyone has a PDA they carry with them or a laptop at home.
    Employees who respond to emails after hours, or who access the network from home to finish up a project, may be your most valuable, dedicated employees.
    But at some point someone is going to question why they aren't being paid for that time. 
    And if that time is more than de minimus, or if there is a claim that it is more than de minimus, it's not difficult to imagine a lawsuit.
    And, in particular, a class action.

 

California Labor Commissioner Allows Deductions From Exempt Employee Vacation For Partial-Day Absences

by Betsy Johnson

On November 23, 2009, the Chief Counsel of the California Division of Labor Standards Enforcement ("DLSE") issued an Opinion Letter on behalf of the Labor Commissioner, Angela Bradstreet, in which the DLSE modified its enforcement stance on the issue of making deductions from exempt employee accrued vacation to cover partial-day absences. In the Opinion Letter, the DLSE opined that there is nothing in California law that would prevent an employer from implementing a policy that provides for hour-for-hour deductions from accrued vacation leave for partial-day absences taken by exempt employees.

This change in the DLSE enforcement policy brings California law more in line with the federal Fair Labor Standards Act ("FLSA") regarding the "salary basis test" and deductions from exempt employee paid time-off accounts for partial-day absences.

Question Presented to the DLSE

The employer presented the DLSE with a series of factual scenarios in which it proposed different reductions in vacation and/or sick leave balances for full- or partial-day absences of exempt employees and asked whether the proposed reductions were permissible under California law.

The employer who sought the DLSE's guidance maintains a policy pursuant to which employees accrue vacation time to be used for absences for vacation and personal reasons, as well as for absences due to illness (when sick leave has been exhausted). The employer's policy also provides for the accrual of sick leave. The employer's vacation policy requires that employees use accrued vacation hours for illness when the employees do not have any sick leave left. In addition, employees must use all accrued vacation and sick leave before any unpaid time off is approved.

 

One of the questions presented to the DLSE was whether the employer's policy of deducting from exempt employee accrued vacation time to cover partial-day absences is consistent with the "salary basis test" for exempt employees under California law.

DLSE's Analysis

In order to qualify for an exemption from the overtime and minimum wage requirements of California law, an employee must meet both the "duties test" and the "salary basis test." For the purposes of the Opinion Letter, the DLSE assumed that the employees in question met the duties test for the "white collar" (executive, administrative and professional) exemptions described in the California Wage Orders.

At issue was whether the apportionment of accrued vacation to the partial-day absences outlined in the employer's factual scenarios violated California's salary basis test. One of the hallmarks of exempt status is the payment of a fixed, predetermined salary to employees for any day in which the employees perform any work. Improper reductions in exempt employees' salaries results in the loss of exempt status.

In one case, a California court held that the state salary basis test prohibits employers from making deductions from exempt employees' salary for a partial-day absences. See, Conley v. P.G.& E., 131 Cal.App.4th 260 (2005). However, the Conley court did allow the employer to deduct vacation time in four-hour increments to cover partial-day absences of exempt employees. In its Opinion Letter, the DLSE rejected the four-hour limitation placed on the employer's ability to deduct time from exempt employees' accrued vacation to cover partial-day absences, concluding that the holding in Conley is inconsistent with California and federal law.

The DLSE concluded that there is no state or federal regulation or law that provides for a "four or more hours" limitation for deductions from accrued vacation. The DLSE found that the applicable federal regulations and interpretations by the federal Department of Labor ("DOL") support the conclusion that an employer may reduce exempt employee vacation banks on an hour-for-hour basis to cover partial-day absences.

Specifically, the DLSE looked at 29 CFR § 541.602, which sets forth the general rule that exempt employees must be paid their pre-determined salary for any week in which they perform work and DOL opinion letters interpreting this regulation. The federal regulations also make clear that employers may not "dock" (reduce the dollar amount of exempt employees' salaries) exempt employees for taking partial days off. On the other hand, if exempt employees take partial days off, the DOL has opined that employers may apportion exempt employees' compensation for those days between regular salary, vacation pay and sick pay, so that the employees receive full pay for those days. The DLSE found that these federal guidelines are consistent with state law.

Therefore, the DLSE concluded, while it is impermissible for an employer to deduct from exempt employees' salaries for partial-day absences, employers may deduct from accrued vacation balances in connection with absences due to vacation or sickness of less than a full day under an express policy providing for such deductions without the employees losing their exempt status. The DLSE's conclusion is premised on the fact that the employer's policies provide for such deductions so that the employees are aware of how partial-day absences will be handled.

What This Means To Employers

While the DLSE Opinion Letter is not legally binding precedent in civil litigation, it should be given significant weight by the California courts. However, the Opinion Letter is binding precedent in any DLSE proceeding and signifies a favorable shift in the DLSE's enforcement policy in favor of giving employers more flexibility by allowing employers to implement vacation and sick leave policies that apportion paid time to partial-day absences of exempt employees.

Are Outside Counsel Wage and Hour Audits Discoverable?

Often, employers ask their outside labor counsel to review job descriptions or other material to provide an opinion on whether a job, or group of jobs, should be classified as exempt from overtime requirements.  Such efforts would seemingly be a classic example of a privileged attorney client communication made for the purpose of providing legal advice.

In a recent case out of California state court, however, this answer was not so clear at the trial and appellate level, who both required the employer to hand over a redacted version of such a letter in a class action overtime suit.  The employer took the case to the California Supreme Court, who rightfully  weighed in and made clear that such opinion letters are privileged and should not be subject to discovery.

This opinion is good law for a number of reasons, not the least of which is that it encourages employers to do the right thing - police themselves.  Employers should not be punished by seeking out legal advice on whether their actions are correct.  Moreover, determining the applicability of overtime exemptions can sometimes be as much art as science.    If employers are afraid to discuss these nuances with their own lawyers, how can they ever hope to achieve compliance? Hopefully, this decision will set an example and avoid meritless discovery fights that often erupt in these ever growing wage and hour class actions.

Ninth Circuit: Managers Can Be Liable For Unpaid Wages Upon Bankruptcy

by Betsy Johnson and Aaron Olsen

On July 27, 2009, the U.S. Court of Appeals for the Ninth Circuit held that a corporation's managers can be held personally liable under the Fair Labor Standards Act ("FLSA") for wages that the corporation failed to pay to employees prior to the employer's filing for bankruptcy. This opinion serves as a cautionary reminder of the risks managers potentially face when a corporation files for bankruptcy and has failed to pay its employees for all wages earned prior to the filing.

In Boucher v. Shaw, ---- F. 3d ----, 2009 WL 2217517 (9th Cir. 2009), former employees of the Castaways Hotel, Casino and Bowling Center sued three senior managers for unpaid wages under Nevada state law as well as federal law. The managers moved to dismiss the claims based on, among other grounds, the fact that the hotel had filed for bankruptcy protection. The Ninth Circuit asked the Nevada Supreme Court to address the issue of whether, under state law, the managers could be personally liable as "employers" for the unpaid wages. The Nevada Supreme Court ruled that individual managers are not "employers" under state law. However, the Ninth Circuit ruled against the managers on the federal FLSA claims and allowed the employees' claims to proceed.

Prior Ninth Circuit opinions have given the FLSA's definition of "employer" an "expansive interpretation in order to effectuate the FLSA's broad remedial purposes." Lambert v. Ackerley, 180 F. 3d 997, 1011-12 (9th Cir. 1999) (en banc) (quoting Bonnette v. California Health & Welfare Agency, 704 F. 2d 1465, 1469 (9th Cir. 1983)). Under those opinions, where an individual exercises "control over the nature and structure of the employment relationship" or "economic control" over the relationship, that individual can be held to be an "employer" within the meaning of the FLSA and thus subject to individual liability. Lambert, 180 F. 3d at 1012.

Other circuits follow a similar analysis. For instance, in Chao v. Hotel Oasis, Inc., 493 F. 3d 26, 34 (1st Cir. 2007), the court held the corporation's president was personally liable where he had ultimate control over business's day-to-day operations and was the corporate officer principally in charge of directing employment practices. Likewise, in United States Dep't of Labor v. Cole Enters., Inc., 62 F. 3d 775, 778-79 (6th Cir. 1995), the court found the president and 50 percent owner of the corporation was an "employer" under the FLSA where he ran the business, issued checks, maintained records, determined employment practices and was involved in scheduling hours, payroll and hiring employees. In Donovan v. Grim Hotel Co., 747 F. 2d 966, 971-72 (5th Cir. 1984), a corporate officer with no ownership interest was held to be an "employer" where, among other things, he began and controlled the corporations, held their purse-strings, and guided their policies, and where, "speaking pragmatically, [the corporations] were [his] and functioned for the profit of his family."

In Boucher, the three defendants were the corporation's Chairman and Chief Executive Officer, who was alleged to own 70 percent of its shares; the Chief Financial Officer, who was alleged to have had responsibility for supervision and oversight of the company's cash management; and the manager responsible for handling labor and employment matters, who was alleged to own the remaining 30 percent of the shares. As the issues came before the District Court in the form of a motion to dismiss, all of the plaintiffs' allegations were accepted as true for purposes of deciding the motion. Significantly, for the purposes of the motion to dismiss, none of the defendants challenged their status as employers under the FLSA. Instead, they argued that any authority and duty that they had to pay wages to employees under the FLSA ended when the company entered into Chapter 7 bankruptcy proceedings. The District Court agreed with this argument and granted defendants' motion to dismiss.

The issue before the Ninth Circuit was whether the corporation's bankruptcy filing affected the liability of these individual managers under the FLSA. The managers argued that the automatic stay of claims against the bankrupt provided for under the Bankruptcy Code should apply to FLSA claims made against the executives and not only to the claims asserted against the corporation. The Ninth Circuit disagreed, and explained that the purpose of the automatic stay is to protect only the debtor (i.e., the corporation), by giving it room to breathe and potentially reorganize, and to protect the creditors as a group by ensuring that no single creditor obtains payment on its claims to the detriment of others. There is no such protection for non-debtor parties, such as the managers of the corporation.

The Ninth Circuit noted that since there were no allegations that the corporation was obligated to indemnify the individual managers for legal expenses or a judgment, any liability of the defendants to the employees would not affect the corporation's bankruptcy proceedings. The Court noted, however, that if a finding of liability on the part of the managers were to affect the assets and liabilities of the corporation through indemnification obligations or a directors and officers insurance policy, then the bankruptcy protections might apply to such claims.

This opinion highlights issues that employers and senior management, including substantial shareholders in closely held corporations, ought to consider not only in the context of consideration of a possible filing for bankruptcy protection but in the ordinary course of business as well. For example, addressing such matters as the corporation's obligation to defend and indemnify key members of senior management in the structuring of employment agreements and other such arrangements may allow for the protection of executives from such personal liability notwithstanding a bankruptcy filing.

California Employers Should Not Be Celebrating New Supreme Court Decision Regarding Labor Unions

By Michael Kun and Matthew A. Goodin

California employers are celebrating a new California Supreme Court decision that effectively prevents unions from filing suit under the Labor Code Private Attorneys General Act ("PAGA") and the Unfair Competition Law ("UCL").

 There is no reason to celebrate.

What appears to be a major victory for employers is, in fact, no victory at all once one considers the practicalities of litigation.

On June 29, 2009, the same day that it issued its highly anticipated opinion in Arias v. Supreme Court, holding that employees need not bring representative actions under the PAGA as class actions, the California Supreme Court also affirmed the Court of Appeal’s decision in Amalgamated Transit Union, Local 1756, AFLCIO v. Superior Court (First Transit, Inc.). In Amalgamated Transit, the Court concluded that a labor union that had not suffered actual injury under California’s UCL and that was not an “aggrieved employee” under PAGA could not bring a representative action under either of those laws.

Cause to celebrate, right?

Wrong.

While the decision would seem to suggest that there will be fewer UCL and PAGA lawsuits because unions may not bring them, the practicalities are very different. Instead of bringing UCL or PAGA claims themselves, it would seem that unions need only find a single employee to act as the named plaintiff in such actions in order to proceed with identical claims.

Think a union is going to have difficulty finding that one person?

Think again.

As such, an apparent victory for employers may not be any victory at all.

Case Overview

California’s UCL allows a private party to bring an unfair competition action on behalf of others, but only if the person “has suffered injury in fact and has lost money or property as a result of the unfair competition.” Similarly, PAGA provides that an “aggrieved employee” may bring an action to recover civil penalties for violations of the Labor Code “on behalf of himself or herself and other current or former employees … .”

Amalgamated Transit presented the question whether a labor union that has not suffered actual injury under the UCL and is not an “aggrieved employee” under PAGA may nevertheless bring a representative action under those laws either as the assignee of employees who have suffered an actual injury and who are aggrieved employees, or as an association whose members have suffered actual injury and are aggrieved employees. The California Supreme Court has confirmed that a union may not do so.

The UCL prohibits “any unlawful, unfair or fraudulent business act or practice … .” Before 2004, the UCL allowed “any person acting for the interests of itself, its members or the general public” to seek restitution or injunctive relief against unfair acts or practices. But California voters changed the law in 2004 by passing Proposition 64. The law now requires that a representative claim seeking relief on behalf of others may be brought only by a “person who has suffered injury in fact and has lost money or property as a result of the unfair competition.”

In Amalgamated Transit, the union conceded that it did not suffer any actual injury, but instead contended that employees who had suffered an actual injury could assign their claims to the union. The Court reasoned that allowing employees to assign such claims to a labor union would defeat the entire purpose of Proposition 64, which was specifically amended to require that a person asserting an unfair competition claim must have suffered an actual injury or have lost money as a result of the alleged unfair competition.

In September 2003, California’s Legislature enacted PAGA. PAGA permits a civil action “by an aggrieved employee on behalf of himself or herself and other current or former employees” to recover civil penalties for violations of other provisions of the Labor Code. An “‘aggrieved employee’” is “any person who was employed by the alleged violator and against whom one or more of the alleged violations was [sic] committed.” Again, the union conceded that it was not an “aggrieved employee,” but argued that an aggrieved employee’s claim could be assigned to the union. The Court noted that an individual may assign a legal claim to another only when the claim arises out of a legal obligation or a violation of a property right. The court observed that PAGA does not create property rights or any other substantive rights. Rather, it is simply a procedural statute allowing an aggrieved employee to recover civil penalties for Labor Code violations that otherwise would be sought by state labor law enforcement agencies. Under existing case law, the right to recover a statutory penalty may not be assigned.

The union next argued that unions may maintain the actions as entities in their own right based on the legal concept of associational standing. Under this concept, an association, such as a labor union, may bring an action on behalf of its members when the association itself would not otherwise have standing. Associational standing exists when: (a) the association’s members would otherwise have standing to sue in their own right; (b) the interests the association seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. The Court reiterated, however, that a plaintiff has standing to bring an UCL action only if the plaintiff has suffered “injury in fact” and a plaintiff has standing to bring an action under the PAGA only if the plaintiff is an “aggrieved employee” The court concluded that associations suing under either law are not exempt from these express requirements.

Looking Ahead: What Does This Case Mean To Employers?

While many may believe Amalgamated Transit to be a major victory for employers, the practicalities may be otherwise. While unions may not bring UCL or PAGA lawsuits themselves, it may not be difficult for them to find employees willing to act as the named plaintiffs in such actions.


 

California Supreme Court Paves The Way For Even More "Bounty Hunter" Representative Actions

By Michael S. Kun and Aaron Olsen

You probably remember the scene in Jaws when Roy Scheider's character first sees the shark that he and his crew have been pursuing.

And you probably remember what he says: "We need a bigger boat."

Well, after the California Supreme Court's latest ruling, California employers may need a bigger boat.

Already besieged by wage-and-hour class actions, California employers now need to brace themselves for a new wave of representative actions under California’s Private Attorneys General Act ("PAGA") after the California Supreme Court has made it easier than ever for employees to pursue such claims.

In Arias v. Superior Court of San Joaquin County (Angelo Dairy), No. S155965 (June 29, 2009), the California Supreme Court concluded that representative actions for alleged Labor Code violations brought under PAGA, often referred to as the "Bounty Hunter" or "Sue Your Boss" law, need not be brought as class actions. Instead, a single employee may proceed with an action on behalf of all aggrieved employees without the need to comply with class action requirements. Although the Court also held that representative actions brought under California’s Unfair Competition Law ("UCL") must be brought as class actions, the ruling on the PAGA issue will likely lead to more employees and their counsel bringing PAGA lawsuits because they will not have to comply with the procedural burdens inherent in class actions.

That's right. Largely because the legislature left out a few words here or there in their haste to pass PAGA, the Supreme Court has held that employees may pursue the equivalent of a class action without having to actually get a class certified.

Making matters worse, employers could be forced to defend a series of individual actions alleging violations of the Labor Code that would be difficult to settle on a global basis. Although the California Supreme Court determined that, with respect to civil penalties, nonparty employees as well as the government are bound by the judgment in an action brought under PAGA, the Court made it clear that different plaintiffs could bring a series of individual lawsuits seeking other remedies. A proliferation of coordinated individual actions would be difficult to settle because the parties would not have the benefits of the class action settlement process. While class action settlements can oftentimes be complicated, the process is fairly well established. Class action settlements generally provide a procedure by which class members either "opt-in" to the lawsuit or "opt-out," leaving the parties with a great deal of certainty as to whom a settlement involves. That would not appear to be the case in a non-class action representative claim under PAGA.

Will the legislature step in to correct this matter?

That seems unlikely.

Will employees and their counsel start filing new PAGA lawsuits tomorrow?

Of course.

Employers need to brace themselves by auditing their employment practices even more vigilantly than they already were.

 

California Court of Appeals Overturns $87 Million Award Against Starbucks in Tip-Pooling Class Action

by Michael Kun

How quickly can $87 million go up in smoke?

Pretty darned quickly, especially if you are referring to the $87 million that was awarded to plaintiffs and their attorneys in a tip-pooling class action against Starbucks in San Diego.

In Chau v. Starbucks (CA4/1 D053491 6/2/09), Jou Chau, a former Starbucks barista, brought a class action against Starbucks challenging the Company's policy that permits certain service employees, known as shift supervisors, to share in tips that customers place in a collective tip box.
If you've ever been to a Starbucks, you know exactly where that tip box is. (And if you haven't been to a Starbucks, then you must be new to the country. Welcome.)

Chau alleged the Company's policy violates California's Unfair Competition Law, Bus. & Prof. Code, § 17200, based on a violation of Labor Code section 351. After certifying a class of current and former baristas and conducting a bench trial, the trial court found Chau had proved his claim, and awarded the class $87 million in restitution, plus interest and attorney's fees.

And now it's gone.

Up in smoke that smells vaguely like soy latte.

A California Court of Appeal has overturned the decision, ordering the trial court to enter judgment in Starbuck's favor.

The Court of Appeal concluded that applicable statutes do not prohibit Starbucks from permitting shift supervisors to share in the proceeds placed in collective tip boxes. The Court explained that the trial court's ruling was improperly based on a line of decisions that concerns an employer's authority to require that a tip given to an individual service employee must be shared with other employees. As the Court explained, the policy challenged in Chau presented the flip side of this mandatory tip-pooling practice as it concerned an employer's authority to require equitable allocation of tips placed in a collective tip box for those employees providing service to the customer.

This one can be chalked up as a major victory not just for Starbucks, but for the entire hospitality industry, which has been hit with an epidemic of wage-hour class actions in California. To those who represent employers in these matters, congratulations must go out now only to Starbucks' attorneys, but to Starbucks itself, for holding firm rather than paying an enormous settlement, as plaintiffs surely sought both before and after their trial court victory.

Now we can sit back and wait to see if the California Supreme Court wishes to hear the case, as plaintiff's counsel will certainly request.

While it's always a fool's game to bet on what the California Supreme Court might do, the early read on this case is that it is not a matter that the Supreme Court will have interest in.
 

Next Up for the California Supreme Court: Classification of Pharmaceutical Sales Representatives

by Michael Kun and Kathryn McGuigan

In recent years, the alleged misclassification of employees under California's wage and hour laws has been a hotly contested issue and the subject of a great many class actions. Faced with several appeals pending before it, the Ninth Circuit has now sought guidance from the California Supreme Court on the outside salesperson and administrative exemption tests as they apply to pharmaceutical sales representatives. Such guidance should prove invaluable to employers in the industry, and to parties to these claims.

In D’Este v. Bayer Corporation, 07-56577 (9th Cir. 2009), a pharmaceutical sales representative brought a class action lawsuit against her employer, claiming that she had been misclassified as an exempt employee and had not been paid overtime or provided meal and rest breaks in compliance with California’s wage and hour laws. The district court granted summary judgment in favor of the employer, finding that the employee was exempt under California’s outside salesperson exemption; it declined to reach the question whether she was exempt under the administrative exemption. The employee appealed to the Ninth Circuit.

 D’Este is not the only class action on appeal to the Ninth Circuit on this issue. Three other class actions on appeal before the Ninth Circuit -- and four other class actions filed in the Central District of California -- all involve the question of whether pharmaceutical sales representatives are exempt under California’s outside salesperson and administrative exemptions.

 In light of the number of actions regarding the classification of pharmaceutical sales representatives, the Ninth Circuit certified the following two questions to the California Supreme Court:

 1. Does a pharmaceutical sales representative qualify as an “outside salesperson” under Industrial Welfare Commission’s (“IWC”) Wage Orders 1-2001 and 4-2001 if the pharmaceutical sales representative spends more than half the working time away from the employer’s place of business and personally interacts with doctors and hospitals on behalf of drug companies for the purpose of increasing individual doctors’ prescriptions of specific drugs?

 2. Is a pharmaceutical sales representative involved in duties and responsibilities that meet the requirements of a person employed in an administrative capacity as defined under IWC Wage Order 4-2001?

 The Ninth Circuit will accept the California Supreme Court’s decisions on these questions.

 The California Supreme Court’s review of these questions should provide employers with a clear understanding of the application of outside salesperson and administrative exemptions from overtime and meal and rest break requirements for pharmaceutical sales representatives employed in California. The Supreme Court’s ruling will provide invaluable guidance to employers in the industry about how to classify these persons going forward, and a clearer understanding to parties already litigating this issue. Should the ruling suggest that these persons normally fall under one or both exemption, litigation of these claims by pharmaceutical sales representatives may end. Should the ruling suggest that these persons normally fall under neither exemption, a new wave of class actions could be expected.

California Employers Should Temper Their Enthusiasm About Upcoming Supreme Court Rulings

 By Michael Kun

     The wage hour class action epidemic that has plagued California employers for the last decade or so appears to have no end.

    If anyone tells you otherwise, they are not paying enough attention. 

    And if they tell you the California Supreme Court is about to put an end to the epidemic, they are mistaken about that, too. 

    The California Supreme Court couldn't put an end to it even if it wanted to, at least not with the issues now before it.  And who is to say that they want to do that anyway?

    As in recent years, employers and their counsel are awaiting several important rulings from the California Supreme Court that relate to these wage hour class actions.   

    In Brinker v. Superior Court and Brinkley v. Superior Court, the Supreme Court should finally clarify whether employers must "ensure" that meal and rest periods be taken, or merely make them "available" to employees.

    In Arias v. Superior Court, the Supreme Court should finally clarify whether claims brought under the Private Attorneys General Act ("PAGA") for alleged Labor Code violations must be brought as a class action and satisfy the requirements for class treatment, or whether an employee can represent a group of employees merely by filing suit under PAGA. 

    And in Pineda v. Superior Court, the Supreme Court should finally clarify whether California's Unfair Competition Law allows employees restitutionary recovery of "waiting time" penalties.

    More than a few commentators are predicting victories for employers in all four cases. 

    Hopefully, no one is placing any bets.  Predicting what the California Supreme Court will do is, respectfully, a fool's game. 

    At the beginning of the decade, many predicted an employer friendly ruling from the Supreme Court in Sav-On v. Superior Court, anticipating that the Supreme Court would hold that wage-hour claims were not appropriate for class treatment, killing the epidemic early.  Those predictions, of course, were wrong.  Very wrong. 

    Little more than two years ago, most commentators predicted that the Supreme Court would rule that premiums for missed meal and rest breaks were "penalties," rather than "wages," and hold that they were subject to a one-year limitations period, rather than three (or four) years.  The ruling in Murphy v. Kenneth Cole, of course, was otherwise, surprising virtually everyone.  And, unless there's a signed and dated document to prove it, anyone who tells you that he or she expected that the Supreme Court was going to rule that premiums for missed breaks were somehow "wages," not "penalties," just isn't being candid with you.   

    So, what should employers expect the Court to do in Brinker, Brinkley, Arias and Pineda?

    No predictions here.

    But, reading the cases, the applicable statutes and their legislative history would suggest that employer friendly decisions should be rendered in Brinker, Brinkley and Pineda -- and, unfortunately, an employee friendly decision in Arias (largely because of missing verbiage in the statute specifiying that PAGA claims are to be brought as class claims). 

    But there's an enormous difference between should and will.

    Based on the Supreme Court's recent history in employment cases -- particularly Sav-On and Murphy --  it would seem prudent for employers to adopt the same conservative, New England-ish approach that, until recently, fans of the Boston Red Sox favored for years-- expect the worst, and be pleasantly surprised if something better arrives. 

    That said, anyone who believes that even employer friendly decisions will put an end to the wage hour class action epidemic in California is mistaken.

    These cases make far too much money for plaintiffs' lawyers, and they are not going to walk away from them without finding ways to get around any unfavorable Supreme Court decision. 

    And getting around them may not be too difficult. 

    If, for instance, the Supreme Court rules that meal and rest periods need only be made "available," not "ensured," you can be certain that plaintiff's counsel will simply change the boilerplate allegations in their complaints to say that meal and rest periods were not made "available." 

    In the few seconds it takes to make a global change in a document, even an employer friendly Supreme Court decision could effectively be undone. 

    And in the few seconds it takes to pick up the phone, calls will be placed to legislators throughout the state demanding that the laws be rewritten to provide that breaks must be "ensured," which would completely undo that Supreme Court decision.  

    Such is the life of the employer who does business in California.

    Even a victory can be taken away.