Wage Law

Minimum Wage Headed Down in California?

The hard working U.S. House of Representatives worked through the weekend to pass a bill to cut the minimum wage for tipped workers while eliminating the estate tax on large estates. The Estate Tax and Extension of Tax Relief Act of 2006, H.R. 5970, passed the House on July 29. It raises the minimum wage for most employees in states that do not have higher minimum wages under state law, from $5.15 per hour now, to $5.85 an hour, beginning on January 1, 2007, then $6.55 an hour beginning June 1, 2008 and peaking at $7.25 an hour beginning June 1, 2009.

However, in states with higher minimum wages that do not include tips in the calculation (Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington), the bill means a pay cut for tipped workers, because the bill actually contains a provision that bars states from enforcing laws that require a higher minimum wage for tipped employees.

How? The federal minimum wage law currently allows employers to pay as little as $2.13 an hour, leaving tipped workers to rely on customer tips to make up the rest of the $5.15 per hour minimum wage. California requires employers to pay tipped employees the same $6.75 that everyone else gets, because it excludes tips from the minimum wage calculation. H.R. 5970 prohibits states that do so from enforcing any higher minimum wage standards with respect to tipped employees making more than $30 a month in tips. Such a law would be unprecedented. Congress has never before placed a ceiling, rather than a floor, on minimum wage rates. Here is the actual language from the bill:

1. SEC. 402. TIPPED WAGE FAIRNESS.

Section 3(m) of the Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)) is amended—

(1) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively;

(2) by striking `Wage' paid to any employee' and inserting `(1) `Wage' paid to any employee';

(3) in subparagraph (B) (as so redesignated), by inserting before the period the following:

Provided, That the tips shall not be included as part of the wage paid to an employee to the extent that they are excluded therefrom under the terms of a bona fide collective bargaining agreement applicable to the particular employee'; and

(4) by adding at the end of the following:

(2) Notwithstanding any other provision of this Act, any State or political subdivision of a State which on or after the date of enactment of the Estate Tax and Extension of Tax Relief Act of 2006 excludes all of a tipped employee's tips from being considered as wages in determining if such tipped employee has been paid the applicable minimum wage rate, may not establish or enforce the minimum wage rate provisions of such law, ordinance, regulation, or order in such State or political subdivision thereof with respect to tipped employees unless such law, ordinance, regulation, or order is revised or amended to permit such employee to be paid a wage by the employee's employer in an amount not less than an amount equal to—

(A) the cash wage paid such employee which is required under such law, ordinance, regulation, or order on the date of enactment of the Estate Tax and Extension of Tax Relief Act of 2006; and

(B) an additional amount on account of tips received by such employee which amount is equal to the difference between the cash wage described in subparagraph (A) and the minimum wage rate in effect under such law, ordinance, regulation, or order, or the minimum wage rate in effect under section 6(a), whichever is higher.'

If this bill becomes law, California workers who earn tips will lose most of their non-tip compensation unless the legislature amends California law to include some portion of tips in its minimum wage calculations. If the legislature wants to maintain the status quo, it could avoid most of the impact of the act by including the first penny of a person's tips in the minimum wage calculations, as the act only affects a minimum wage statute that "excludes all of a tipped employee's tips from being considered as wages..." Of course, the generosity that the California Restaurant Association has shown to the current administration in California makes it unlikely that such an amendment would be signed by anyone other than Phil Angelides.

PAGA Exhaustion Still Not Required For Non-PAGA Cases

In spite of clear authority under the Caliber Bodyworks (134 Cal.App.4th 365) decision, defense lawyers continue to argue that plaintiffs cannot file suit for remedies such as waiting time penalties, meal and rest period pay, and other claims under Labor Code §§ 203, 226, 226.7, etc. Every so often, a trial court agrees. To our knowledge, no appellate court has ever agreed.

Yesterday, in an unpublished opinion, yet another Court of Appeal (addressing a trial court ruling that was issued pre-Caliber Bodyworks) upheld an employee's right of private action, without any regard for or compliance with the Labor Code Private Attorneys General Act of 2004 (PAGA), to seek damages and statutory penalties for those various Labor Code violations. Dunlap v. Superior Court (Bank of America) (2nd District, Div. 3, 7/27/2006, Case No. B185247)

After a motion to strike was granted by Los Angeles County Superior Court Judge Judith Chirlin, Dunlap filed a petition for writ of mandate, seeking the issuance of a writ directing the trial court to vacate its order granting the motion to strike and to enter a new order denying the motion. The Court of Appeal granted the writ.

Plaintiff Omar Dunlap, a former employee of defendant Bank of America, N.A. (“Bank”), seeks a writ of mandate directing the trial court to vacate its order granting the Bank’s motion to strike certain portions of Dunlap’s first amended class action complaint and to enter an order denying the motion to strike. The essential issue presented is whether the trial court properly struck Dunlap’s claims for statutory penalties on the ground he failed to exhaust his administrative remedies in accordance with the Labor Code Private Attorneys General Act of 2004 (PAG Act) (Lab. Code, § 2698 et seq.). Dunlap’s second through fifth causes of action, which are at issue herein, did not seek any penalties which previously were recoverable only by the Labor and Workforce Development Agency (LWDA). The only penalties being sought therein were various statutory penalties, which penalties already were recoverable by employees under the Labor Code prior to the adoption of the PAG Act. Therefore, Dunlap was not required to comply with the PAG Act’s administrative prerequisites to filing suit before pursuing statutory penalties in said causes of action. Accordingly, the trial court erred in granting the motion to strike. We grant the relief requested.

The decision took quite some time to reach, as far as writ proceedings go. The petition for writ of mandate was filed on August 19, 2005; the case was argued on January 18, 2006; and the opinion was issued on July 27, 2006. Govern yourselves accordingly if you are before this panel, as they noted in April that "[d]ue to the press of other court business and the complexity of the issue in this case, a brief additional amount of time is needed to complete and file the opinion in this matter." You can download the opinion here in pdf or Word format.

Albertson's Class Action Certified

Albertson's wasn't able to enjoy its victory in Dunbar v. Albertson's for very long. On the same day (July 20) that the Court of Appeals upheld a denial of certification in an Alameda County class action, San Diego Superior Court Judge Linda Quinn granted a motion for class certification in a meal and rest period, and off-the-clock work case for hourly front-end store managers (Wilcox v. Albertson's, Inc., San Diego County Superior Court case no. GIC833922).

The primary claim in the case is that the employees (current and former hourly key-carrier employees of Albertson’s, Inc. within the state of California, including service operations manager, assistant service operations manager, fifth person key carrier, fourth person key carrier, third person key carrier, service supervisor, front end manager, assistant front end manager, and front end clerks) are required to remain on-duty during rest and meal periods. Under Sav-On, the same broad discretion that doomed the appeal in Dunbar will likely preserve the certification order in Wilcox. Congratulations to Michael D. Singer and Eva K. Wojtalewski of Cohelan & Khoury, who represent the class.

Review Denied: Jones v. Gregory

In Jones v. Gregory (March 14, 2006, G030347) the Fourth District Court of Appeal affirmed that there is no liability as an "employer" for officers and directors whose companies fail to pay wages, unless there is an allegation that the person was the entity, or that the entity was an alter ego of the person. This morning, the California Supreme Court denied a petition for review, effectively putting to rest any notion that officers and directors have personal liability for unpaid wage claims unless those officers and directors are also liable, generally, for the debts of their corporation.

Guitar Center Settlement Approved

Our settlement in a wage and hour class action on behalf of the hourly workers at California Guitar Center stores has been granted final approval at a fairness hearing before Los Angeles County Superior Court judge James Dunn yesterday morning. Payments will be made to eligible class members within a few weeks, provided that they submitted their claims forms on or before July 3, 2006. Any class members with questions should contact us by telephone or email. Do not post questions by leaving a message in the comments.

Prop 64 Applies to Existing Cases

MThis morning, the California Supreme Court held that the provisions of Proposition 64 do apply retroactively to existing cases (Californians for Disability Rights v. Mervyn's LLC) but that plaintiffs have the right to bring a motion to amend to substitute a new plaintiff, within the permissible scope of Code of Civil Procedure § 473 (Branick v. Downey Savings & Loan). The court announced no new law concerning the relation-back doctrine, and instead suggested that on remand, should plaintiffs file a motion to amend, trial courts should decide the motions by applying the established rules governing the relation back of amended complaints as stated in Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 408-409 ( “The relation-back doctrine requires that the amended complaint must (1) rest on the same general set of facts, (2) involve the same injury, and (3) refer to the same instrumentality, as the original one.”)

We know better than to think that our analysis would be any better or more detailed than Kimberly A. Kralowec's, who writes The UCL Practitioner. We are certain that she will have a lot to say about these landmark decisions sometime today, so check out her blog.

You can download the opinion in the Mervyn's case here in pdf or Word format, and the opinion in the DSL case here in pdf or Word format.

Review Denied in Best Buy

In March, we wrote a post about Best Buy Stores v. Superior Court, wherein the 4th District Court of Appeal upheld an Orange County Superior Court order authorizing discovery in a class action case to locate a suitable class representative in cases where the existing class representative has been found to be unsuitable or, in this case, while the court is in the process of determining the suitability of the putative class representative. Last week, the Supreme Court denied review of Best Buy. Though it is a consumer case, some of the language in that opinion should be kept handy on the desktop of every wage and hour class action lawyer.

Albertson's Cert Denial Upheld

The Court of Appeal has affirmed an Alameda County Superior Court order denying certification in a misclassification claim brought on behalf of 900 Albertson's grocery managers, Dunbar v. Albertson's Inc.

Plaintiff Maurice Dunbar, a grocery manager for defendant Albertson's, Inc., seeks overtime compensation and other relief on the theory that defendant erroneously classified him as an executive employee exempt from the overtime wage laws. He appeals from the order denying his motion for certification of a class of defendant's grocery managers to pursue these same claims. He contends that the order must be reversed because the court failed to apply proper criteria, and neglected to perform necessary analysis, in deciding whether common questions were predominant in the case. We find no error in the court's determination of the matter and affirm the order.

The opinion is unpublished, but makes for interesting reading and, of course, reenforces the emerging rule that certification is within the trial judge's very broad discretion.

[Further comment] As one colleague pointed out today, this language provides very clear advice to the moving party in a certification motion:

It is not sufficient, in any event, simply to mention a procedural tool; the party seeking class certification must explain how the procedure will effectively manage the issues in question, and plaintiff has failed to do so here. (See Block v. Major League Baseball (1998) 65 Cal.App.4th 538, 545 [court not required to consider subclasses when not given “a concrete proposal describing how such subclasses would be defined, how they would be administered, or how they would help the court deal with the complexities inherent in the proposed class”]; see generally Sav-On Drug Stores, Inc. v. Superior Court, supra, 34 Cal.4th at p. 326 [party seeking certification bears burden of establishing predominance of common questions]; Frieman v. San Rafael Rock Quarry, Inc., supra, 116 Cal.App.4th at p. 34 [moving party bears burden of demonstrating that substantial benefits will result from class certification].)

At the same time, this language may prove quite persuasive in overcoming the old objection seeking to exclude ANY "merits-based" discovery.

That Other Case Related To Murphy

If you checked the status of Murphy v. Kenneth Cole Productions, in addition to noting that the respondent has requested and received an extension to file its brief, you may have noticed that there is now a fourth related case. The fourth related case is Chalecki v. State Farm Mutual Automobile Insurance Co., a Los Angeles case in which the trial court (Judge Anthony J. Mohr) appears to have ruled that meal and rest period pay is an hour of penalties. The employee filed a writ petition, which received a "postcard denial" from the Second District Court of Appeal on April 4, 2006. Shortly thereafter, the employee filed a petition for review, which was granted on May 24.

Petition for review GRANTED. Further action in this matter is deferred pending consideration and disposition of a related issue in Murphy v. Kenneth Cole Productions Inc., S140308 (see Cal. Rules of Court, rule 28.2(d)(2)), or pending further order of the court. Submission of additional briefing, pursuant to California Rules of Court, rule 29.1, is deferred pending further order of the court. Votes: George, C.J., Kennard, Baxter, Werdegar, Chin, Moreno, and Corrigan, JJ.

Although we know this is meaningless, we were pleased to read that the remittitur is expected by September.

The Superior Court case docket looks interesting. There are almost 50 plaintiff in intervention, and there is something called a defense "Motion to Determine Threshold Legal Issue re the Tolling of the Statute of Limitations" pending. Our curiousity is piqued.

Both Candidates Lead Race For Governor

Depending upon who you ask and who they polled, Phil Angelides either leads the California gubernatorial race by a 46% to 44% margin, or he trails badly, 37% to 44%.