Wage Law

Happy César Chávez Day

César Chávez's birthday isn't until tomorrow, but state courts are observing it today. Remember that, unless your case is in U.S. District Court, today is not a "court day", for those deadlines that count court days.

Trial Court Lacks Discretion to Find Wage Order 16 Unreasonable

An Orange County Superior Court ruling declaring invalid a wage order promulgated by the California Industrial Welfare Commission (IWC) has been reversed by the Fourth District Court of Appeal. In Small v. Superior Court, the trial court ruled that IWC Wage Order No. 16-2001 (wages, hours and working conditions for employees in the on-site construction industry and other occupations) was not accompanied by a sufficient statement of the basis, was not properly published, and contained an unworkable definition of “given craft,” which made the order "unreasonable, arbitrary, capricious and unfair."

The Court of Appeal found this determination to be an abuse of discretion where the Wage Order was recommended by the statutorily required two-thirds majority of wage board made up of labor and management representatives and was not found by IWC to be unsupported by substantial evidence. Upon a writ petition by the employees, supported by the IWC, the trial court has been ordered to issue a new and different order ruling (1) the statement as to the basis for Wage Order 16 is valid with regard to the items challenged; (2) whether Wage Order 16 was properly published was not within the scope of the preliminary legal issue submitted by stipulation to the court to determine, and in any event there is a presumption the IWC complied with its official duty to publish the order in the specified cities; and (3) Wage Order 16 was not unreasonable, arbitrary, capricious or unfair with respect to the definitions of “work unit” and “given craft.”

At issue is the validity of an alternative work schedule imposed by Brinderson Constructors, Inc., the defendant contractor. You can download the full text of Small here in pdf or Word format.

Mediators and Investigators

We've learned that mediator Carla Barboza, former EEOC attorney and formerly with Allred, Moroko & Goldberg, has started taken engagements with Littler Mendelson as an "independent investigator" of sexual harassment claims. Some of our readers are interested in knowing about such arrangements. Now you know.

UC Not Immune From Waiting Time Penalty Suits

Review has been denied in Sarka v. The Regents of the University of California, upholding a determination that a UCLA doctor was terminated for insubordination, rather than for advocacy on behalf of his patients. The case has been discussed at length at other employment law blogs. You can read it here in pdf or Word format. What few commentators knew about Dr. Sarka was that, in addition to his wrongful termination claim, he also brought a wage claim.

Earlier this month, the Supreme Court denied publication of a different opinion -- the Superior Court Appellate Division decision in the other Sarka v. The Regents of the University of California (Case No.  04T01682) -- in which Dr. Sarka prevailed in his effort to assert waiting time penalty claims against the Regents. The issue was whether the California Constitution, Article IX, Section 9, provided the Regents with immunity from such claims. The trial court ruled that the Regents were immune, and sustained a demurrer without leave to amend. The Appellate Division held that the Regents were not immune. You can download a pdf of the Appellate Division's opinion here. While the opinion may not be published, because the issue is truly unique to claims against the University of California, it may be of great value to litigants with similar wage claims.

Plaintiffs Cannot Invoke CAFA, Even on Cross-Complaints

Last month, the Ninth Circuit held that, for CAFA (Class Action Fairness Act) removal purposes, an amended class action cross-complaint did not “commence” a new action permitting the cross-defendant to invoke CAFA jurisdiction. Progressive West Insurance Company v. Preciado (9th Cir. 2007) __ F.3d __. The holding was interesting in two respects: first, the court found that the cross-action commenced when it was filed, not when the cross-complaint was amended, even if the amendment substantially changed the nature of the action from an individual action (not removable under CAFA) to a class action; second, the court found that CAFA only authorizes a defendant to remove the case. As a plaintiff and cross-defendant, Progressive was not authorized to remove the case under CAFA.

Added to the Blogroll

We've added to the rolls a blog which might have the single best blog name we've seen in quite some time: Gruntled Employees. So far, its wage and hour post list is just one entry long, but we don't limit the blogrolls to just wage and hour blogs, otherwise it would be, well, just us.

Unions Cannot Use Wage Assignments To Bring Representative Wage and Hour Cases

A union has standing, as assignee, to assert the claims of union members who have assigned to the union their rights to recover wages owing to them. Unions may not, however, assert claims on behalf of members who have not assigned their claims. Thus, although a laborer can sued in a representative capacity, an entity which receives a wage assignment cannot, even if the wage assignment purports to transfer the laborer's right to sue in a representative capacity on behalf of current and former employees. So said the Second District Court of Appeal in Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court. The opinion was spit 2-1, and a petition for rehearing was denied by a 2-1 margin. On the petition for rehearing, the court made the following modifications, which, for most practitioners, tell you all you need to know about the case:

(1) An individual’s assignment of a cause of action to a third party does not carry with it the individual’s statutory right to sue in a representative capacity conferred under the Labor Code Private Attorneys General Act of 2004 (Labor Code section 2699) and under the unfair competition law (Business and Professions Code section 17203).

The assignment of a cause of action, as authorized by Civil Code sections 953 and 954, is the transfer “by the owner” of “a right to recover money or other personal property” in a judicial proceeding. An individual’s statutorily conferred right to sue on behalf of others is not itself a cause of action, or any other form of property, that is owned and therefore assignable within the meaning of the Civil Code.  Accordingly, while a person may assign his own cause of action to another, the assignment does not carry with it the right to sue in a representative capacity.  Nothing in Vermont Agency of Natural Resources v. United States ex rel. Stevens (2000) 529 U.S. 765 (Vermont Agency), upon which the Unions rely, supports a contrary conclusion.

In a petition for rehearing, the Unions asserted they do not rely on the language in the employee’s assignment, which states that the employee’s assignment of his right to sue to recover wages owing to him ‘includ[es] my right to sue in a representative capacity ….’  At oral argument, counsel stated this language was ‘a mistake’ and is ‘surplusage’ because, by virtue of the assignment of the employee’s cause of action or injury, the assignee-union has all the rights the employee had, including the right to sue in a representative capacity.  We agree it does not matter whether or not the assignment by its terms purports to assign the right to sue in a representative capacity.  We disagree, however, with the Unions’ conclusion that the assignment of the employee’s cause of action effectively transfers ‘[a]ll of the rights to which the assignor may have been entitled had the assignor brought the action himself ….’  In short, the question at issue is the legal effect of the assignment of the employee’s cause of action, that is, whether or not it includes, by operation of law, the employee’s right to sue in a representative capacity.

Authorization to bring a representative suit is conferred by the Legislature, and persons authorized to bring suit have no power to assign that authorization to a third party, nor does an assignment of a cause of action include, by operation of law, the authorization to bring a representative suit.

While an employee may assign his own cause of action, the statutes defining causes of action and the law of assignment clearly demonstrate that the right to sue in a representative capacity is not a cause of action, or any other form of property right, and is therefore not assignable, either expressly or by operation of law.

Stated differently, because the assignor (the employee), although authorized by section 17203 or PAGA to bring an action on behalf of others, has no ownership interest in the causes of action owned by others, the employee necessarily has no right, expressly or by operation of law, to transfer those causes of action to a third party.

The original opinion can be viewed here in PDF or Word format, but be sure to read the modified opinion, too, which can be downloaded here. We'll be watching this one to see if review will be granted by the Supreme Court.

Rubio's Restaurants to Pay $7.5 Million to Settle Overtime Class Action

According to a SEC Form K-8 filed by Rubio's Restaurants, Inc., the company will pay $7.5 million over 36 months to settle a consolidated class action lawsuit filed in Orange County Superior Court on behalf of current and former general managers and assistant managers who were classified as exempt executive employees. One third of the settlement will be paid within 65 days after the court's final approval of the settlement and dismissal of the case; another third will be paid within 18 months; and the last third shall be paid 36 months after final approval. An additional interest charge of $337,500 will be paid with the final installment. The case, filed in 2001, was scheduled to go to trial in June 2007. The settlement is subject to approval by Orange County Superior Court Judge Thierry Colaw.

The Billion Dollar Roll of the Dice

In what one of our colleagues called a "billion dollar roll of the dice," review was granted in Miller v. Bank of America NT&SA (S149178). The case is not wage and hour related, and the holding is unlikely to develop the body of law governing class action litigation in general, but it's a popular topic of discussion around our lunch table, so we figured we'd give it a mention. Miller involved a question of whether banks can exercise self-help in withdrawing certain funds from its customers' accounts. The trial court awarded $300 million in damages and restitution, plus penalties and fees that brought the value of the award into ten figures. The Bank appealed, among other things, arguing that its conduct did not violate the underlying statutes, including the unfair competition law and the CLRA; and that federal law preempts state laws prohibiting banks from taking Social Security and other governmental benefits out of customers' accounts to pay overdraft fees. Last year, the Court of Appeal reversed the $1.3 billion award, holding that a bank can prevent (and pay itself for) an overdraft in one of its accounts by using government benefit funds in that account, distinguishing a Supreme Court decision (Kruger v. Wells Fargo Bank (1974) 11 Cal.3d 352) that had banned banks from using government benefit funded accounts to pay outside creditors.

With such a large amount of money at stake, a petition for review was certain, and now the case will be heard by the Supreme Court. The plaintiffs have a broad coalition of support, including the AARP, the National Senior Citizens Law Center, the National Consumer Law Center, the Center for Responsible Lending, the National Association for Consumer Advocates, and the State of California through the Office of the Attorney General. The defendant will have the support of every bank doing business in California, as quite a few similar actions are now pending. The Supreme Court will be greeted by many friends during the briefing of this one.

Prop 64 Cases Go Back to Courts of Appeal

It looks like all of those Proposition 64 cases in which the Supreme Court issued "grant and hold" review orders cases during the consideration of last year's Mervyn's and Downey Savings cases are being sent back to the Courts of Appeal from which they came. Dismissals and transfers were issued in those cases this week as follows:

BIVENS v. COREL CORPORATION S132695 D043407 Dismissed - to CA 4/1
BIVENS v. GALLERY CORPORATION S140396 D045557 Dismissed - to CA 4/1
COHEN v. HEALTH NET S135104 G033868 Dismissed - to CA 4/3
CONSUMER ADVOCACY GROUP v. KINTETSU ENTERPRISES S135587 B158840 Transferred after hold
HARTFORD FIRE INSURANCE v. S.C. (TURNER) S140272 A109257 Transferred after hold
LYTWYN v. FRYS ELECTRONICS S133075 D042401 Dismissed - to CA 4/1
SCHULZ v. NEOVI DATA CORPORATION S134073 G033879 Transferred after hold
SCHWARTZ v. VISA INTERNATIONAL SERVICE ASSOCIATION S138751 A105222 Dismissed - to CA 1/ THORNTON v. CAREER TRAINING CENTER S133938 D044598 Dismissed - to CA 4/1
YOUNG AMERICA CORPORATION v. S.C. (LYNCH) S141766 C049337 Transferred after hold