Wage Law

Big Business Lied To Voters About Consumer Protection Lawsuits

The Foundation for Taxpayer and Consumer Rights recently issued this press release. It is enlightening. Voters were lead to believe that Proposition 64 was all about helping small business owners avoid extortionist "shakedown" lawsuits from unethical attorneys.

Never mind, for a moment, that the shakedown lawsuit movement was brief and ended badly for the shakedown artists, such as the Trevor Law Group (none of whom are still practicing attorneys). Focus, instead, on who was really behind the proposition, what they hoped to do, and whom it will affect. As Deep Throat used to say, "Follow the money."

The most interesting set of facts in the press release pertain to some of the pending cases that Prop 64 donors are hoping to win under the new law. Hrere are eight of the more interesting ones, the amounts donated, and the allegations of the suits:

1.  Privacy Rights Clearinghouse v Albertsons (California Grocers Association donated $352,000) Defendant illegally gave patients' medical data to drug makers.

2.  Consumer Advocates v. DaimlerChrysler (Alliance of Automobile Manufacturers donated $1,500,000) Defendant broke more than a dozen provisions of California Lemon Law.

3.  Krumme v Mercury (donated $50,000) Defendant's private insurance brokers falsely claimed to be independent agents for customers, but were really on Mercury's payroll.

4.  Diaz v Fresno Dodge (donated $9,800) Defendant car dealer concealed financing fees from buyers.

5.  California Consumer Health Care Council v Aetna ($25,000) Defendant insurance company falsely told medical malpractice victims they had waived their right to jury trial.

6.  Utility Consumers' Action Network v SBC, UCAN v Cingular Wireless, Woods v Cingular Wireless (gave $35,000) Defendant wireless providers accused of deceptive advertising regarding international calling rates; charging international rates for domestic calls; and unilaterally changing contract terms.

7.  Jones v Citigroup (gave $100,000) Defendant bank concealed charges to credit card customers.

8.  Goodwin v Anheuser-Busch / Miller Brewing Co. (gave $125,000) Defendant beer sellers marketed products to minors.

These corporate defendants, accused of significant breaches of the public trust and/or safety, raised more money than the side looking out for the individuals. As a result, the pro-64 sides' lies were ineffectively rebutted. People thought they were voting to stop unethical lawyers from ripping off the good hard-working people in the small business community. Instead, they gave big corporate interests, crooked car dealerships and other lawbreaker the equivalent of a get-out-of-jail free card.

The next time a client comes to me and says "I just want to make sure that they can't do this to anyone else, ever again," I will have to tell that client that the law doesn't do that any more. The people voted against it.

DLSE "Reacts" To Westside Concrete Decision

The DLSE has just issued a memorandum to its staff concerning the November 9, 2004 decision in Westside Concrete Company, Inc. v. Department of Industrial Relations (2004) 123 Cal.App.4th 1317.

This is to advise all DLSE staff of the above-referenced recent decision in the Court of Appeals, where the court reversed a lower court opinion that held that an opinion letter on meal periods was not an underground regulation. It set forth criteria for deciding which specific, narrow letters might be exempt, and which broader, general letters would not. DLSE is not appealing the case, and reviewed all current opinion letters issued by the Division of Labor Standards Enforcement (DLSE) dealing with the application of Industrial Welfare Commission (IWC) orders governing meal periods.

If you would like to read Westside Concrete for yourself, you can view or download a copy of the opinion in pdf format or in Microsoft Word format.

The decision was little more than a reinforcement of existing law, and the DLSE should not be surprised. The Westside Concrete decision reminds the DLSE that it is vested with the authority to promulgate necessary “regulations and rules of practice and procedure.” Labor Code § 98.8. But that, in adopting and enforcing such regulations, it is subject to the requirements of the APA. California School of Culinary Arts v. Lujan (2003) 112 Cal.App.4th 16, 25. The “regulations” subject to the APA are broadly defined to include “every rule, regulation, order, or standard of general application or the amendment, supplement, or revision of any such rule, regulation, order, or standard adopted by any state agency to implement, interpret, or make specific the law enforced or administered by it, or to govern its procedure.” Government Code § 11342.600. Regulations are subject to the APA if the agency intends its rule to apply generally, rather than in a specific case; and if the rule implements, interprets, or makes specific the law enforced or administered by the agency, or governs the agency’s procedure. (citing Tidewater Marine, 14 Cal.4th at p. 571) Agencies remain free to “provide private parties with advice letters, which are not subject to the rulemaking provisions of the APA. Thus, DLSE opinion letters are not subject to the rulemaking provisions of the APA. However, such opinion letters are not an expression of regulatory decision-making, and are clearly not binding on a court.

The most interesting part of the dispute -- whether the DLSE had the right, in October 2000, to impose liability on the part of employers who denied meal and rest breaks to their workers -- was disregarded by the court. The court held that, because the action was one for prospective declaratory relief, that issue was rendered moot by the legislature's adoption of Labor Code § 226.7, effective January 1, 2001. This observation lead to one of the better chunks of dicta published this year:

Irrespective of the IWC’s authority to promulgate the meal period provision penalty, the Legislature has now spoken and made its position very clear: employees entitled under IWC Wage Orders to uninterrupted meal and rest periods must be afforded those breaks; employers who fail to provide them do so at their financial peril.

In [supposed] reaction to this decision, the DLSE has withdrawn four opinion letters:

• Letter of April 2, 2001, dealing with Meal and Rest Period Requirements for Ready-Mix Drivers Working Under the Terms of a Collective Bargaining Agreement
• Letter of June 14, 2002, dealing with Meal Period Requirements
• Letter of June 11, 2003, dealing with Meal and Rest Period Requirements
• Letter of November 3, 2003, dealing with Meal and Rest Period Requirements for Employees Working Alone With No Other Employees at the Work Site

Instead, the DLSE is seeking to implement new meal and rest period regulations more in line with Governor Schwarzenegger's pro-business agenda. The new regulations can be read here.

Strangely, the DLSE has not responded to Westside Concrete by withdrawing any other opinion letters....

The First Published Prop 64 Case?

One of the hottest questions among California employment litigators is whether the passage of Proposition 64 will affect unfair competition claims brought under Business & Professions Code § 17200 cases which were already pending on election night.

The 4th District Court of Appeal is currently pondering this issue in Consumer Advocates v. Daimlerchrysler Corporation et al. (Case No. G029811) This appeal has been pending since October 2001, and oral argument was heard in October 2004. However, in light of the election results, on November 8, 2004, the court made the following order:

On the court’s own motion, and for good cause, the previous order submitting this case is hereby vacated. It appears to the court the issues involved in this appeal may be affected by the provisions of Proposition 64 adopted on November 2, 2004, and effective November 3, 2004. (Cal. Const., art. II & 10.) The parties are invited to address the following issues: (1) are the causes of action asserted in the complaint, or any of them, barred by the provisions of Proposition 64; and (2) if so, should Proposition 64 be applied to pending cases? The briefs shall be informal letter form and shall be filed no later than December 3, 2004. Upon filing of the supplemental letter briefs, the matter will be resubmitted for the time allowed by law.

Since that order, the court has been bombarded with requests for permission to file amicus briefs. Each request has been denied. The court has scheduled March 14, 2005 as the date for issuance of its opinion. However, there is a strong likelihood that the opinion will be out sooner.

Orange County Ruling on Prop 64 Retroactivity

Orange County Superior Court Judge Jonathan Cannon has sustained a demurrer, with leave to amend, based upon newly enacted Prop 64. Judge Cannon's analysis was as follows:

Generally, unless the Legislature has indicated intention otherwise, new statutes operate prospectively, not retrospectively. Evanelatos v. Superior Court (1988) 44 Cal.3d 1188. Both parties agree there is no such expressed intent contained in Prop. 64. However, if a newly enacted statute merely changes the procedures to be used in the conduct of existing litigation, its application is not considered retrospective. "[W]hat is determinative is the effect that application of the statute would have on substantive rights and liabilities." Moore v. State Bd. of Control (2003) 112 Cal.App.4th 371. Here, Prop. 64 does not impose new, additional or different liabilities based on past conduct. Nor does it deprive the Defendant of any substantive defense to the action. It simply withdraws the authority for a private citizen to prosecute a claim under § 17200 if he or she has not personally suffered any damage from the alleged practice. The action may still be prosecuted, but the Plaintiff must have proper standing.

RULING: The Demurrer is sustained with twenty (20) days leave to amend.

This opinion differs from one issued by on December 15, 2004, by Judge Peter J. Polos, also on the Orange County Superior Court. Neither judge's ruling constitutes judicial precedent. Trial court decisions may not be cited as authority and it is improper to cite to a trial court opinion in an unrelated case unless the reference is part of a published compilation of authorities cited for "persuasive value" where there is no appellate authority. Santa Ana Hosp. Med. Ctr. v. Belshe (1997) 56 Cal.App.4th 819, 831.

Judge Cannon sits on the Complex Litigation Panel of the Orange County Superior Court. Unfortunately, of the five judges on that panel, only three make their tentative rulings available online and one of them -- Judge Robert Jameson -- is retiring next month. There are many matters of interest to the wage and hour practitioner for which there is no appellate guidance (i.e., whether meal and rest period pay is a wage or a penalty) whatsoever. In such matters, it is useful to know how the trial courts are viewing these issues. So far, very few Riverside County or Los Angeles County courtrooms make their tentative rulings available online. Many departments in Sacramento publish tentative rulings online. Other courts, such as the San Diego Superior Court, make their tentative rulings available only if you know the case number for the matter you are watching.

Does anyone (other than Kimberly) know of other courts which publish tentative rulings for their law and motion calendars? If so, let us know.

The Computer Professional Exemption

The exemption pay rate for computer professionals in California is going up this weekend.

Many computer professionals believe that they are exempt from overtime pay just because they are on a salary. That belief is usually misguided. Programmers are rarely [correctly] classified as exempt professionals or administrators, because few computer programmers meet the definitions of the wage order exemptions. There are three commonly applied exemptions for salaried workers:

(i) The administrative exemption: this applies to employees who perform work "directly related to management policies or general business operations of the employer." Even if you meet this description, you are no exempt if you are a "production employee" -- one whose primary duty is producing the goods or services that the business exists to produce.

(ii) The executive or "managerial" exemption: this applies to employees "whose duties and responsibilities involve the management of the enterprise." There are a number of tests, all of which must be met, for an employee to qualify for this exemption, e.g., the employee must have the power to hire and fire (or have significant input into hiring and firing) and must supervise two or more subordinates.

(iii) The professional exemption:  this generally applies to licensed professions, such as lawyers, accountants, doctors and similar occupations.

Very, very few computer workers fall into any of these three exemptions. Thus, if you are a software engineer who spends a majority of time doing software-related work, such as writing code, debugging and similar tasks, if you work long hours for a fixed salary, your employer might owe you a significant amount of back overtime.

The same is not necessarily true of employees in the computer software field who are paid by the hour. Software professionals can be exempt from overtime pay if they are paid by the hour, and they earn more than $44.63 per hour. This rate increases to $45.84 per hour on January 1, 2005. The software professional exemption is different from most of the other exemptions, because it requires that the employee receive pay for every hour -- overtime or otherwise -- that the employee works. The exemption merely excuses the employer from paying the overtime premium rate of time-and-a-half.

Do you have a case? If you work in California and spend most of your time programming software, and you do not get paid for more than 40 hours per week, or 8 hours per day, you probably have a case. If you would like to have your situation reviewed to see if you have a claim, drop us an email and we would be happy to give you a free evaluation.

Auto Club Agrees to Pay $19.5 Million To Misclassified and Underpaid Sales Agents

A federal judge in Santa Ana recently approved a $19.5 million settlement of class action overtime claims brought by 1300 insurance sales agents who worked for Automobile Club of Southern California. The agents had been misclassified as outside sales staff, were denied overtime pay and had to buy gifts to promote sales. The case was filed in 1999, and settled only after five years of litigation, including a short trial in 2002. In addition to paying to settle overtime and gift expense claims, the Auto Club agreed to reclassify its agents as non-exempt employees entitled to overtime. Eligible workers will receive an average of $70 per week.

Except within the mercantile industry, which primarily means retail sales staff, a commissioned sales employee is usually entitled to overtime pay, meal and rest breaks and all of the other protections afforded any other class of worker. Even in the mercantile industry, sales staff are entitled to meal and rest breaks. If you would like to have your situation reviewed to see if you have a claim, drop us an email and we would be happy to give you a free evaluation.

Court Certifies Cintas Living Wage Case as a Class Action

Alameda County Superior Court Judge Steven Brick has certified a class of about 240 local workers in a case against Cintas Corp. for violations of the City of Hayward's living-wage law. Cintas used to provide the city of Hayward with uniform laundry services. If the class prevails, Cintas, the nation's largest uniform provider, would be required to pay a significant award of back pay.

Companies that do business with public entities often have an obligation to meet "prevailing wage" or "living wage" standards that exceed state and federal minimum wages. Certain municipalities also have a living wage minimum enforceable against employers of a certain size. If you work for a public works contractor, or for a business that transacts with the City of Hayward, you might be entitled to significantly more than the minimum wage. Drop us an email and we would be happy to give you a free evaluation.

California Supreme Court Case Reinforces Doubt Over Administration's Right To Recharacterize Break Pay As Penalties

Although the California Office of Administrative Law has withdrawn the proposed emergency regulation to rework and reclassify the right to breaks and the remedies for denial of breaks, it continues to proceed with an attempt to pass the proposed regulation in ordinary course. However, a California Supreme Court case handed down yesterday casts serious doubt upon the legitimacy of the Office's efforts.

In City of Long Beach v. Department of Industrial Relations (Dec. 20, 2004), the Supreme Court reviewed interpretive language in Cal. Code Regs., tit. 8, § 16001(c). The court commented that it would "give the Department's interpretation great weight,", but that the courts, not the agency, bears the ultimate responsibility for construing statutes. "When an administrative agency construes a statute in adopting a regulation or formulating a policy, the court will respect the agency interpretation as one of several interpretive tools that may be helpful. In the end, however, '[the court] must . . . independently judge the text of the statute.' " (citing Agnew v. State Bd. of Equalization (1999) 21 Cal.4th 310, 322, and Yamaha Corp. of America v. State Board of Equalization (1998) 19 Cal.4th 1, 7-8.)

In light of the fact that the proposed meal and rest break regulation proposes to construe language in Labor Code § 226.7 and Labor Code § 512, the Supreme Court's timely decision in City of Long Beach should be a reminder to the Office of Administrative Law that its proposal is over-reaching and inappropriate. If there is to be a change in law, it should be made via legislation or judicial precedent only.

Withdrawn: Proposed Emergency Regulations To Gut Break Laws Shelved as Emergency Measure

Deputy Secretary Mike Prosio has confirmed that the DLSE has withdrawn the proposed emergency meal and rest break regulation. The proposal will now proceed on the regular regulation track, which requires a 45 day comment period and three public hearings. The Office of Administrative Law received more comments on this than any proposed emergency regulation in its history.

Southern California Grocery Store Janitors Settle Class Action For $22.4 Million

Southern California grocery chains Albertsons, Ralphs and Vons have agreed to pay $22.4 million to settle a class-action lawsuit filed by janitors who were illegally misclassified as independent contractors so that their employers could avoid complying with California wage and hour laws. The scheme called for the janitors to be characterized as "subcontractors" for Building One Service Solutions, a now-bankrupt janitorial service that "rented" the workers, mostly poor hispanic men, to the stores. The janitors did not provide their own tools, and worked on a schedule under the direct supervision of store managers. In every respect, they were treated as employees, except when it came time for things such as overtime pay, breaks and other rights that employees have, but independent contractors don't.

The money will be among more than 2,000 janitors who were employed from 1994 to 2001. Each worker will receive up to $9,300, depending on where they worked and for how long.

The misclassification of independent contractors is a common way for employers to avoid paying overtime, employer's share of payroll taxes, and unemployment benefits, as well as to avoid giving meal and rest periods to their workers. If you work as an independent contractor in the State of California and would like to have your situation reviewed to see if you have a claim, drop us an email and we would be happy to give you a free evaluation.