Wage Law

Supreme Court Limits Free Speech Rights of Public Workers

Yesterday, the U.S. Supreme Court held, in Garcetti v. Ceballos, that government employees do not have unfettered free speech rights when discussing government business. The case makes it for more difficult for government employees to bring retaliation lawsuits when they are fired or suffer other adverse employment actions after engaging in whistleblowing against for public entites. Justice Kennedy wrote, for the majority, that the First Amendment does not protect "every statement a public employee makes in the course of doing his or her job." The decision was a 5-4 majority, with Justice Alito casting the swing vote. The case had been reargued following Sandra Day O'Connor's departure from the court.

In Ceballos, the Los Angeles County District Attorney's office appealed an appellate ruling in favor of a prosecutor who wrote a memo questioning whether a deputy sheriff had lied in an affidavit. Ceballos was later demoted, and claimed that the demotion was payback for his exposure of the lie.

The ruling is of some interest to wage and hour lawyers in California because it could have an effect upon the plight of Miles Locker, who was fired by the Labor Commissioner for expressing opinions that were politically unpopular among the new Schwarzenegger appointees. Locker's case can be factually distinguished from Ceballos, however, and some commentary in the dissent might give Locker's attorney's some further hope, where Justice Stevens wrote that "[t]he notion that there is a categorical difference between speaking as a citizen and speaking in the course of one's employment is quite wrong." Locker's speech occurred in his capacity as a private citizen.

Prop 64 Cases To Be Argued

Tomorrow, the California Supreme Court Case will hear oral argument in Californians for Disability Rights v. Mervyns LLC (Case No. S131798). The Supreme Court granted a petition for review after the Court of Appeal denied a motion to dismiss an appeal from the judgment in a civil action. This case presents the following issue:

Do the provisions of Proposition 64 (Gen. Elec. (Nov. 2, 2004)) that limit standing to bring an action under the Unfair Competition Law (Bus. & Prof. Code, section 17200 et seq.) to "any person who has suffered injury in fact and has lost money or property as a result of such unfair competition" (Bus. & Prof. Code, section 17204, as amended) apply to actions pending when the provisions of the proposition became effective on November 3, 2004?

There are numerous companion cases:

S132443  BENSON v. KWIKSET CORPORATION 
S132695  BIVENS v. COREL CORPORATION 
S133075  LYTWYN v. FRYS ELECTRONICS 
S133938  THORNTON v. CAREER TRAINING CENTER 
S134073  SCHULZ v. NEOVI DATA CORPORATION 
S135104  COHEN v. HEALTH NET 
S135587  CONSUMER ADVOCACY GROUP v. KINTETSU ENTERPRISES 
S138751  SCHWARTZ v. VISA INTERNATIONAL SERVICE ASSOCIATION 
S140272  HARTFORD FIRE INSURANCE v. S.C. (TURNER) 
S140396  BIVENS v. GALLERY CORPORATION 

On the same calendar, the Supreme Court will hear Branick v. Downey Savings & Loan Assn., which will answer the followup question:

If the standing limitations of Proposition 64 apply to actions under the Unfair Competition Law that were pending on November 3, 2004, may a plaintiff amend his or her complaint to substitute in or add a party that satisfies the standing requirements of Business and Professions Code section 17204, as amended, and does such an amended complaint relate back to the initial complaint for statute of limitations purposes?

This, too, has many companion cases, some of which overlap.

S133938  THORNTON v. CAREER TRAINING CENTER 
S134073  SCHULZ v. NEOVI DATA CORPORATION 
S135104  COHEN v. HEALTH NET 
S135587  CONSUMER ADVOCACY GROUP v. KINTETSU ENTERPRISES 
S138751  SCHWARTZ v. VISA INTERNATIONAL SERVICE ASSOCIATION 
S140272  HARTFORD FIRE INSURANCE v. S.C. (TURNER) 
S140396  BIVENS v. GALLERY CORPORATION 
S141766  YOUNG AMERICA CORPORATION v. S.C. (LYNCH) 

Oral argument will be May 31, 2006, at 9:00 a.m. in the Supreme Court's San Francisco courtroom. I am sure The UCL Practitioner will have plenty to say about the hearings.

A New Blawg

We've found another California law related blawg; this one focusing on the actions of the California Supreme Court. It's called scocblog, by attorney Dylan B. Carp. It proclaims itself to be The first and only weblog devoted to the Supreme Court of California.

We have no reason to doubt that it is precisely that, though we wonder how one really knows. There are other blogs that proclaim themselves to be The First Legal Weblog Dedicated To California Employment Law or The first and only weblog on California’s Unfair Competition Law. It makes us wonder if we are, indeed, the First and Only Weblog Devoted to California Wage and Hour Law. We might be missing out on a little self-promotion.

Enjoy the long weekend.

Don't Forget to Sue The Bonding Company

A recent Court of Appeal ruling in a case called Violante v. Communities Southwest Development and Construction Co. holds that employees on public works projects who claim prevailing wage violations may not sue the prime contractor directly for claims arising under Labor Code § 1774, and must limit those claims to causes of action alleged against their own employer.

Our review of the statutory scheme governing prevailing wages finds no private right of action for enforcement by a subcontractor’s employee against other parties than the subcontractor. In addition, we reject plaintiffs’ theories of recovery based on principles of third-party breach of contract and unfair competition.

In Violante, three construction workers on a public works project in Yucaipa filed a class action lawsuit over a subcontractor's failure to pay prevailing wages. They sought to bring claims against the general contractor, including causes of action for statutory violation of Labor Code § 1774, breach of contract, and unfair business practices. The general contractor filed a demurrer to these three causes of action. The trial court sustained the demurrer without leave to amend. Two other causes of action against other defendants, for conversion and on a payment bond, were not subject to the same challenges. The Court of Appeal affirmed, based entirely upon its interpretation of the Labor Code.

Some defense firms are proclaiming that workers no longer have any remedy against general contractors for subcontractor wage violations. We don't quite agree. While a statutory claim under the Labor Code might not apply, one need not necessarily rely upon the solvency of a worker's employer, who might have been cheating on prevailing wages because it was not solvent enough to make payroll in the first place. A timely filed stop notice or Civil Code § 3247 payment bond claim (both of which are causes of action which can properly include the general contractor) can be asserted directly by workers who perform labor on a public work of improvement. The value of the stop notice and bond claims is, under those circumstances, not less than the minimum required prevailing wage. If there are enough funds still held by the public agency funding the project, or if there is a solvent bond surety on the project, as the law requires, those workers can still get paid.

In Violante, there is a payment bond claim, which apparently survived the pleading stage. If so, the general contractor is not out of the woods yet, because it undoubtedly will be required to indemnify the payment bond surety if the plaintiffs prevail against the bond. Battle? Yes. War? You can't tell by reading the opinion. But you can try. You can download the full text of Violante here in pdf or MS Word format.

Oral Argument in L'Oreal

Next week, the California Supreme Court will hear oral argument in the Smith v. L'Oreal USA, Inc. case (No. S129476). The case, wherein the Supreme Court granted a petition for review after the Court of Appeal denied a petition for writ of mandate, presents the following issue:

Where an employee's employment terminates upon the completion of an agreed-upon period of employment or a specific task, has the employee been "discharged" within the meaning of Labor Code section 201 such that "the wages earned and unpaid at the time of discharge are due and payable immediately"?

The employee and petitioner Amanza Smith was a model hired by L'Oreal USA, Inc. as a hair model for a one-day hair show for an agreed-upon wage of $500 for the day. Smith was not paid on the date of her assignment, and received her pay two months later. L'Oreal argued that she was an independent contractor, and that, in any event, the end of a fixed term of employment is not a "discharge" triggering waiting time penalties under Labor Code section 203.

Oral argument will be May 30, 2006, at 1:00 p.m. in the Supreme Court's San Francisco courtroom.

The Status of Pioneer Electronics

With the recent publication of the Tien case, we decided to check up on the progress of Pioneer Electronics (USA), Inc. v. Superior Court (2005) 128 Cal.App.4th 246, which is currently under review by the California Supreme Court. Pioneer Electronics dealt with the requisite notice and opportunity to assert a consumer's privacy right accompanying a precertification communication to members of a putative class in a consumer case. The court of appeal held that a trial court must take reasonable steps to assure that the consumer receives actual notice of his or her right to grant or withhold consent of the release of personal information, and that consent for such release be by the consumer's positive act, rather than by mere failure to respond.

It is a matter of great concern to employment class action lawyers. So what's the latest? The case is fully briefed, including a large number of amicus briefs, and the parties are awaiting notice of oral argument being set. Maybe we will get a ruling before the end of the year.

24 Hour Fitness Pays $38 Million to Settle Overtime Class Action

We couldn't comment on this one earlier because of a confidentiality provision in a document, the nature of which we are not permitted to discuss, but it appears that the 24 Hour Fitness class action settlement is now a matter of public record. On January 27, 2006, the United States District Court granted final approval to a $38 million settlement on behalf of almost 50,000 workers employed at 24 Hour Fitness locations in California. The case involved manager overtime pay, off-the-clock work, meal and rest period claims, improper commission deductions, and uniform violations.

The settlement resolved seven class action lawsuits filed against 24 Hour Fitness. The plaintiffs' class was represented by Rene Barge of the law firm Spiro, Moss, Barness, Harrison & Barge LLP, Gregory G. Petersen of Castle, Petersen & Krause LLP; James M. Trush of the Trush Law Office; Greg K. Hafif of the Law Offices of Herbert Hafif, APC; and the Law Offices of Larry A. Sackey. A smaller class action remains pending.

Be Careful What You Wish For

The UC Davis Business Law Journal published an interesting article this month entitled "Unintended Consequences - How the Passage of Ballot Proposition 64 May Increase the Number of Successful Wage and Hour Class Actions in California. The article discusses, among other things, how Prop 64 might end up allowing forcing plaintiff's attorneys into applying the easier certification standards under FRCP Rule 23(b)(1) and 23(b)(2) rather than the traditional 23(b)(3) standards. Author H. Scott Leviant writes:

The UCL supplies the tool for certifying wage and hour claims under the less stringent (b)(1) and/or (b)(2) standards. Class actions seeking monetary damages must, in most circumstances, be certified under the 23(b)(3) standard. [fn] However, the damage issue does not arise under the UCL since claims asserting a violation of the UCL arise only in equity.

The idea has us contemplating class action litigation in some cases which we otherwise would have quickly assumed to be a case that would be best brought as an individual claim. In that regard, Prop 64 might be viewed in hindsight as a dismal failure at achieving both its nominal goal and its true goal.

While it is clear that neither Prop 64 nor any other law will, in the short term, deter a small number of foolish people from filing a small number of frivolous lawsuits, the true failure of Prop 64 may be measured by its failure to achieve what proponents of the measure really wanted: a reduction in the amount of meritorious lawsuits redressing large-scale violations of law that otherwise might not have worked as class actions.

[Hat tip to The UCL Practitioner]

Ventura Becomes The Latest City With Living Wage Standards

Workers employed by companies who do business with the City of Ventura will earn at least $12.50 an hour  (or $9.75 per hour with medical benefits) under a new ordinance passed this week by the Ventura City Council in a unanimous vote. Employees of non-profit agencies are excluded from the new law, as are workers employed by firms with city contracts worth less than $25,000.

The ordinance was passed as a result of an agreement between workers' advocated and the Ventura Chamber of Commerce, which apparently feared stronger measures that might have been enacted by voters under a local ballot initiative supported by the Ventura County Living Wage Coalition. Ventura is the fourth agency in Ventura County to pass such measures, following Port Hueneme, Oxanrd and the County of Ventura. According to an Associated Press report, there are approximately 100 cities and local governments with living wage requirements, most of which are in California.

Privacy Rights of Class Members Upheld

The discoverability of class member communications has been further clarified by an opinion published Monday by the Second District Court of Appeal. In Tien v. Superior Court, the plaintiffs filed a wage and hour class action against Tenet Healthcare over meal and rest break violations and failure to pay overtime. The plaintiffs had served written discovery demands seeking the identity of all putative class members, numbering about 50,000. Tenet Healthcare objected, and the parties agreed to a compromise in which the following letter would be sent to 3,300 randomly selected class members:

To Whom It May Concern:

This letter is to advise you that a lawsuit has been filed on behalf of certain current and former employees of healthcare facilities owned by subsidiaries of Tenet Healthcare Corporation in California.  The lawsuit involves claims that non-exempt employees of Tenet hospitals at times were not provided meal periods and/or rest breaks and were not compensated for those missed meal periods and/or rest breaks.  Further, the lawsuit also involves a claim that the hourly employees regular rate of pay was not properly calculated, thus resulting in improperly calculated overtime.

The lawsuit mentioned above has been filed as a potential class action.  As a current or former employee of a Tenet hospital, you may be a member of a potential class.  If you would like more information please call the Law Firm of Joseph Antonelli at [...-....].

You are not required to call anyone regarding this lawsuit unless you personally wish to do so.  If you do elect to call, please be assured that doing so will not have any negative effect on your employment with any Tenet-related facility.

Tenet Healthcare did not provide 3,300 names to the plaintiffs or their lawyers. Instead, it provided mailing labels to a third party administrator for the mailing. Tenet Healthcare knew, therefore, who received notices. It then decided that it would also like to know who, among the 3,300, had responded to the mailing by contacting the lawyers. To find out, Tenet Healthcare served discovery demands seeking the names of all class members who responded.

The plaintiffs refused to comply, objecting on the grounds of attorney-client privilege, work product doctrine, and privacy rights of the class members, and filing a motion for a protective order to keep the identities of the responding class members secret. In their motion, the plaintiffs revealed that 81 class members had contacting the plaintiffs' lawyers (apparently the total rose to 82 shortly thereafter), and of those, 46 had requested legal representation. Most of those wanted their identities withheld from their employer however, fearing retribution in the workplace.

The trial court denied the motion for protective order, but the court stayed its order for an additional 30 days to allow counsel time to seek appellate review. Plaintiffs appealed by filing a writ petition in the Second District Court of Appeal.

The appellate court reversed, holding that the attorney-client privilege and attorney work product doctrine did not protect the putative class members' identities, but that the class members' privacy rights did. Specifically, the court held that "the privacy rights of the class members who contacted plaintiffs’ counsel outweigh any interest Tenet may have in learning their identity." The court offered three powerful reasons why Tenet's need for discovery was less compelling than the employees' right to privacy:

First, it appears that most, if not all, of the class members who contacted plaintiffs’ counsel did so in response to the neutral letter. That letter did not ask recipients to contact plaintiffs’ counsel if they had any relevant information. It merely advised recipients they could contact Joseph Antonelli (whose status as counsel in the case was not even mentioned in the letter) if they “would like more information.” Second, Tenet knows the identity of all class members, including the approximately 3,300 who received the neutral letter. It is free to contact class members to determine if they have any information they wish to share. Third, because Tenet should know how it compensated its employees and whether it provided them with meal and rest breaks, Tenet should be aware of most of the relevant facts in the case.

On the other hand, the employees had a compelling right to keep the fact of their responses and inquiries confidential:

The degree to which the identity of a client entails sensitive personal information may vary depending on the context. One of the more sensitive contexts is the employment context. Employees may be reluctant to engage in any act their employer may perceive as adversarial for fear of retaliation. Therefore, if employees feel their employer will be informed whenever they contact an attorney suing the employer, many would be deterred from exercising their right to consult counsel.

In sum, the court held that the trial court's refusal to enter a protective order constituted an abuse of discretion, in that "the privacy rights of the class members who contacted plaintiffs’ counsel outweigh Tenet’s need for the discovery. For this reason, the trial court should have granted plaintiffs’ motion for a protective order."

In a footnote, the Court of Appeal offered this parting advice to litigants:

In the future, parties who agree to the technique utilized by the parties in this case would be well-advised to make clear in their stipulation or in the letter to class members whether, and under what circumstances, a class member’s contact with plaintiffs’ counsel may be disclosed to the defendant.

We would add this: Class counsel should still include the work product doctrine and attorney-client privilege (which were not upheld here, but could still have merit upon different facts) in their objections to such discovery requests, but it is crucial to always include the employees' right of privacy as a further objection. Failure to do so after Tien could be malpractice.

You can download the full text of Tien here in pdf or Word format.