Wage Law

Managing Class Action Litigation: A Pocket Guide for Judges

You can download or read this interesting publication for free at:

http://www.fjc.gov/public/pdf.nsf/lookup/classgde.pdf/$file/classgde.pdf

[Hat Tip: The UCL Practitioner]

Issues on Review Stated in Review Granted in Amalgamated Transit Union

Last week, the Supreme Court granted review in Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (2007) 148 Cal.App.4th 39 (holding that 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 under PAGA or the Unfair Competition Law at Business and Professions Code § 17203). The court has now posted an official summary of issues on review:

(1) Does a worker’s assignment to the worker’s union of a cause of action for meal and rest period violations carry with it the worker’s right to sue in a representative capacity under the Labor Code Private Attorneys General Act of 2004 (Labor Code § 2698 et seq.) or the Unfair Competition Law (Business & Professions Code § 17200 et seq.)?

(2) Does Business and Professions Code section 17203, as amended by Proposition 64, which provides that representative claims may be brought only if the injured claimant “complies with Section 382 of the Code of Civil Procedure,” require that private representative claims meet the procedural requirements applicable to class action lawsuits?

The second issue is a particularly interesting one, and has the potential for much wider implications than the first issue.

LMRA Does Not Preempt California Wage and Hour Laws

In Burnside v. Kiewit Pacific Corporation (9th Cir. 2007) ___ F.3d ___ (June 20, 2007, Case No. 0457134), a group of construction workers filed suit in San Diego County Superior Court, alleging that Kiewit never compensated them for time they spent traveling from designated meeting sites to their jobsites and from those jobsites back to the designated meeting sites; Kiewit required them to undertake this round trip daily; and they were not allowed to get to the jobsites on their own. Because the workers were subject to a collective bargaining agreement, Kiewit removed the case to U.S. District Court, where Judge Marilyn Huff ruled that their wage and hour claims, brought under state law, were preempted by section 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185(a) (which governs suits between employers and collective bargaining units and members).

On appeal, the Ninth Circuit reversed, holding that such claims are not preempted because the claims are based on rights conferred by state law, independent of the collective bargaining agreements, and can be resolved without interpreting the agreements, and thus were not preempted by LMRA § 301. In light of this decision, the trial court's summary judgment, based upon a failure to exhaust administrative rights, and failure to file suit within six months under the LMRA, 29 U.S.C. § 160(b), was granted in error. Writing for a unanimous court, Justice Marsha Berzon went on to explain that this case falls under the rule set forth in Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 578.

The California Supreme Court has recognized an employee’s state law right to be compensated for time spent traveling from a designated meeting point to the jobsite and from the jobsite back to the meeting point, when the employer requires this travel. See Morillion v. Royal Packing Co., 22 Cal. 4th 575, 578 (2000) (applying a wage order that covers agricultural employees). Moreover, post-Morillion, the state’s Industrial Welfare Commission (“IWC”) adopted a regulation, known as California Industrial Commission Wage Order 16-2001, that applies this right to the employees in this appeal. See CAL. CODE REGS. tit. 8, § 11160. As a result, because the right to be compensated for employer-mandated travel exists as a matter of state law, independent of the CBAs, on this initial basis at least the employees’ claims are not preempted.

In short, a unionized employee cannot be deprived of the full protections afforded by state law simply by virtue of the fact that her union has entered into a CBA. The court also rejected Kiewit's arguments that the claims are nevertheless preempted by section 301 because they “substantially depend on” an interpretation of the terms of the CBAs; and that the claims are primarily claims for overtime wages, not compensation for compulsory travel time, and thus preempted by section 301 Firestone v. Southern California Gas Co. (9th Cir. 2000) 219 F.3d 1063, where the overtime premium was determined by interpreting a CBA.

Contrary to some news stories and summaries we've read elsewhere, the Ninth Circuit did not hold that the employees were entitled to any pay. The factual inquiry as to liability (did they require such off-the-clock travel) and damages (how many times and for how many hours) will be made, on remand, in state court.

Are Meal and Rest Period Payments Part of One's Pay Rate for OT Purposes?

One of the things we discussed at last week's wage & hour seminar in Costa Mesa was the long list of questions that remain unanswered after Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094. Here's one we hadn't mentioned before:

Must meal and rest period premium wages be included in the "regular rate of pay" upon which overtime is calculated?

The DLSE originally said that such pay should not be included in the regular rate of pay, and most practitioners considered the question answered. However, with the way the Supreme Court analyzed the wage-penalty issue, some people think the answer is no longer so clear, and an argument can be made that such pay increases an employee's regular rate of pay for the purpose of calculating the correct overtime rate. We haven't seen any briefs arguing the point, and we haven't briefed the issue ourselves, but the point seems well worth raising.

The FLSA and Supplemental Jurisdiction

The Class Action Fairness Act has undoubtedly resulted in a larger number of wage and hour class actions being sent to U.S. District Court. So many, in fact, that some lawyers have started filing their class actions in District Court to begin with, denying the defense the opportunity to choose a (perceived) better forum for the employer, particularly if they believe that there could be a nationwide FLSA claim included in the complaint. Some now do so whether or not their class action meets the subject matter jurisdictional requirements under CAFA, assuming that, once it has jurisdiction over the case as a federal (FLSA) question, the District Court will exercise supplemental jurisdiction over all related wage and hour claims arising under state law. That assumption isn't always correct.

In one recent case filed in U.S. District Court in Connecticut, a group of employees alleged that their employer failed to pay overtime required under both the FLSA and Connecticut law. Neary v. Metropolitan Prop. & Cas. Ins. Co. (D. Conn. 2007) 472 F.Supp.2d 247, 248. Their fourth and fifth causes of action sought sought remedies for alleged violations of state wage and hour laws "in each state in which each plaintiff worked." The defendant filed a motion to dismiss, arguing that the court needn't and shouldn't exercise its discretion to here both an opt-in FLSA collective action and an opt-out class action based upon state law. The District Court agreed, finding that an irreconcilable conflict existed between the state law class procedures and the FLSA collective action procedures, such that it would be better for the court and the litigants if the court declined to exercise supplemental jurisdiction over the state wage and hour class action.

The rationale expressed by the court in Neary won't apply to every mixed FLSA and state law case. It certainly would not apply if the court already had jurisdiction over state law claims under CAFA, and its persuasive value might not be as powerful in cases involving just one state's wage and hour laws, because the court based its ruling in part on the unusual circumstances presented where “the proposed class ... involves not just one state's wage and hour statute in addition to FLSA claims, but potentially involves claimed violations of fifty states' wage and hour statutes, each with potential novelties ... and complexities."

There have been numerous cases, before and since, in which the trial court invoked supplemental jurisdiction over state law (opt-in) wage and hour class actions filed along with FLSA claims (e.g., Cryer v. Intersolutions (D. D.C.) Case No. 06-2032, April 20, 2007), but the possibility that a motion to dismiss will be granted must be considered when the class action plaintiff is deciding which forum to choose.

Down With Frivolous Lawsuits! (and By "Frivolous" I Mean Those Other Guys' Lawsuits)

This is way off topic, so we'll throw it in for an out-of-the-ordinary weekend post.

Suppose an old man is trying to up to or walk down from a dais to the floor in an area of some facility like, say, the Yale Club. Suppose further that there is an arguably inadequate handrail, or even no handrail, and he stumbles and falls, injuring himself. What should he do? Let it go? Sue for negligence, seeking medical expenses only? Sue for medical expenses, income and reasonable compensation for pain and suffering? Or does he make a federal case out of it, literally, and seek not just medical expenses and general damages, but a million dollars in damages, plus a heaping dollop of punitive damages on top of it, plus attorney's fees and interest, even though state law doesn't permit fees and interest (and of course, a jury trial is a must). Which path is best? Which, if any, should the system permit? For two interesting and divergent viewpoints on this hypothetical, check with two prominent American judges: Robert Bork in 2002, and Robert Bork in 2007.

In 2002, in the Harvard Journal of Law & Public Policy, Judge Bork decried the harm that frivolous claims and excessive punitive damage awards brought to our justice system.

State tort law today is different in kind from the state tort law known to the generation of the Framers. The present tort system poses dangers to interstate commerce not unlike those faced under the Articles of Confederation. Even if Congress would not, in 1789, have had the power to displace state tort law, the nature of the problem has changed so dramatically as to bring the problem within the scope of the power granted to Congress. Accordingly, proposals, such as placing limits or caps on punitive damages, or eliminating joint or strict liability, which may once have been clearly understood as beyond Congress's power, may now be constitutionally appropriate.

In 2007, Judge Bork takes a slightly different approach, perhaps because he now is the plaintiff in our hypothetical. You can read the complaint, filed on his behalf by the law firm of Gibson, Dunn & Crutcher, LLP (which almost certainly would rather be defending this lawsuit, but for the prominence of the plaintiff), at this Wall Street Journal link. Bork now believes that the lack a handrail suitable for someone of his age and frailty is evidence of gross negligence, justifying a seven figure verdict that includes punitive damages to punish, deter and make an example of the Yale Club.

We aren't passing judgment on his claims. They may very well have merit (well, except for the fees and interest, which NY PI attorneys tell us he can't get). But we are struck by the irony. It reinforces our belief that most tort reformers are just lucky folks who have never needed the legal system to save them from injustice. Their secret message? "Do as I say, not as I will do when I need to."

Meanwhile, over at Overlawyered, Ted Frank has this to say:

I sympathize with Judge Bork's serious injuries, but it's beyond me what his lawyers are thinking in asking for punitive damages. And if any danger is open and obvious such that there is an assumption of the risk, surely the absence of stairs to reach a lectern on a dais is—especially if the dais is of the "unreasonable" height that the complaint alleges it to be.

Robert Bork is to tort reform what Ted Haggard is to family values. In a 1995 opinion piece in the Washington Times, Bork criticized the expensive, capricious and unpredictable justice system:

"Today's merchant enters the marketplace with trepidation -- anticipating from the civil justice system the treatment that his ancestors experienced with the Barbary pirates."

But now, he's one of the pirates. All he needed was a hand up to the ship. And at the time of the accident, all he needed was a hand up. According to the New York Times, he went on to deliver the speech after he had fallen. The subject is a popular one around the blogosphere.

• Bork: Tort Reform for Thee But Not for Me (Booman Tribune)
• Leading Conservative Activist Seeks Punitive Damages (American Constitution Society)
• The Urgent Need for Tort Reform (Grasping Reality With Both Hands)
• Lawsuit of the Day: Robert Bork Hearts Plaintiffs? (Above The Law)
• The Fall of Bork (Reason Magazine - Brian Doherty)
• Is Bork's Trip and Fall a Misstep? (New York Times Opinionater - Tobin Harshaw)
• Legal Funnies (Alas, A Blog)
• Advocate for tort reform sues for over $1M (Bring it on!)
• When Tort Reformers Slip And Fall (Mother Jones)

[We'd give credit to other bloggers for finding the quotes, but frankly, we saw so many of them writing about this subject that we can no longer recall where we saw any of it first.]

Justices: Are You Serious?

It looks like the principles of Fireside Bank v. Superior Court (Gonzalez) (2006) 40 Cal.4th 1069, will doom the novel theory advanced in Ortiz v. Lyon Management Group, Inc., where the defendant won a summary judgment motion, before hearing a certification motion, and then asked the court to go back and certify the case. In the appeal, the defendant argued that the trial court abused its discretion by refusing to certify the case, after entry of the summary judgment order. The defendant claimed that the court should have forced the plaintiff to serve as an unwilling class representative on a doomed claim, and should have ordered publication and service of a notice to class members informing them that: (i) there was a class action pending; (ii) they already lost; and (iii) they were not going to be permitted to opt out of it.

At today's oral argument, the first question directed to the appellant came from Justice Ikola, who asked (and we admittedly paraphrase here) whether the appellant could direct the court to any case in which any court had ever done anything remotely similar to what the defendant asked of the court in this case. This question seemed to set the tone for the rest of the appellant's argument.

If you check the case docket, you may notice quite a few friends of the court submitting papers in favor of Lyon Management Group, Inc. Upon closer examination, you will note that they submitted their amicus papers in support of Lyon Management as a respondent, on the underlying creditor issue that was at stake in the summary judgment motion. As appellant, on its appeal seeking retroactive certification by a prevailing party after determination of the merits, Lyon Management seems to be without any friends.

We leave the argument wondering not whether the appeal will be denied, but whether the cross-appeal will reinstate the case. On the appeal, we also wonder whether the court will find that there can be no after-the-fact certification; or merely that there can be no after-the-fact involuntary no-opt-out class; or merely that the trial court was within its discretion to deny certification. If the cross-appeal succeeds, it is possible that the opinion will be an unpublished reversal. If the cross-appeal fails, an interesting published opinion seems more likely.

Can a Defendant Move to Certify After It Wins The Case?

In April, the Supreme Court reiterated the well-settled rule that class certification cannot follow a substantial determination on the merits. In Fireside Bank v. Superior Court (Gonzalez) (2006) 40 Cal.4th 1069, the court held that a trial court never depart from the preferred practice of deciding whether to certify a class action before adjudicating any class claims on the merits. Generally, this rule comes up only when plaintiffs win some preliminary ruling, like a judgment on the pleadings, or summary adjudication, and they then move to certify the class, given the class a notice that tells them that they might as well join, since they already won.

Ortiz v. Lyon Management Group, Inc. presents the opposite. Here, a defendant won a summary judgment motion, then decided to file its own motion to certify the class. The trial court denied the motion.

DEFENDANT’S TO CERTIFY CLASS – DENIED The issues presented in this Motion are of first impression to this Court. Although novel, they can be resolved on the basis of one legal principle, waiver. Neither Defendant or Plaintiff has cited any case where a Defendant was allowed to bring a motion for class certification after there had been a final adjudication of the merits of the case. Defendant’s citation of the Frazier and Lowry cases is not helpful, as both of those cases involved a class that was certified prior to the adjudication of the merits. The case of Colwell Co. v. Superior Court (1975) 50 Cal.App.3rd 32 and Civil Service Employees Insurance Company v. Superior Court (1978) 33 Cal.3rd 362 are controlling here. They hold that a defendant who fails to object to the adjudication of the merits of the Plaintiff’s claim prior to the class certification mechanism being fully implemented, waives the right to object and cannot thereafter seek a judgment which is binding on the absent class members. By bringing its Motion for Summary Judgment to determine liability prior to the determination of class certification, Defendant waived its right to have a judgment binding on absent class members.

The case is now on appeal. The appellant is, amazingly enough, the defendant. The plaintiff filed a cross-appeal challenging the summary judgment. Oral argument is tomorrow, Friday, June 22, 2007 at 9:00 a.m. at the Fourth District Court of Appeal in Santa Ana. Justices O’Leary, Fybel and Ikola will hear the matter. We want to see it, but we will be late, or might miss it completely.

Review Granted in Amalgamated Transit Union

If you just found out about us at Bridgeport Continuing Education's seminar on wage and hour litigation, welcome, and thank you for attending. I (Mike) presented an hour on Recent Developments in California Wage and Hour Litigation and distributed a set of materials that Mark and I put together last week. We hope you enjoyed the materials and presentation.

Disregard, however, the mention we made in the section on PAGA and Private Rights of Action, about Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (2007) 148 Cal.App.4th 39 (holding that 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 under PAGA or the Unfair Competition Law at Business and Professions Code § 17203). Today, the Supreme Court issued an order granting review of Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court. It is no longer good law. It was perfectly good when we handed out the materials. Six hours later, not so much. Like we said, it's an area of law that is constantly changing. We previously discussed Amalgamated Transit Union at the post linked here. The underlying decision came on a 2-1 vote, as did the decision to deny rehearing. All seven justices voted in favor of granting review.

Courts Find Couriers to be Employees, Not Independent Contractors

Last month, after requests by, among others CELA and the State Labor Commissioner, the Third District Court of Appeal ordered published a previously unpublished opinion upholding a trial court determination that a group of couriers were misclassified as independent contractors and should have been classified as employees. In Air Couriers International v. Employment Development Department (2007) 150 Cal.App.4th 923, the plaintiff company filed a complaint for a refund against the EDD to recover employment taxes it paid for the drivers, claiming that they were independent contractors.

Among the factors that the employer argued in favor of independent contractor status:

• Drivers serviced numerous customers; fewer than one percent performed services for only one customer.
• Drivers worked flexible schedules.
• Individual drivers determined their own schedules and decided when and how long to work.
• Some drivers, by choice, worked long hours.
• Drivers took breaks, and they alone determined the frequency and duration of the breaks.
• Many drivers worked other jobs while driving for the employer, which made no effort to prevent drivers from working other jobs, including delivering for other companies.
• Drivers were not required to accept each and every job. To the contrary, drivers rejected jobs for a variety of reasons and were not required to provide reasons for doing so.
• Drivers who rejected jobs did not suffer adverse consequences; they continued to receive assignments.
• Drivers were paid by the job, with mileage factored into the job rate.
• Drivers were paid biweekly based on handwritten and computer manifests.
• Drivers got no sick leave, paid vacation, or medical insurance.
• Many jobs were paid under a flat rate, based on the number of miles driven.
• Drivers negotiated higher rates on some jobs for a variety of reasons, including “after hours” charges, premiums for long drives, amounts added for “deadhead miles,” and weekend charges.
• There were no negative repercussions for negotiating rates.
• Drivers with superior skills made more money.
• Drivers got no formal training.
• Drivers supplied their own vehicles, supplies, and equipment.
• Drivers used their own cellular phones, and some provided their own business cards.
• They did not require drivers to wear uniforms, and most did not, although some drivers wore uniforms to expedite access to buildings and airports.
• Drivers were not required to wear identification badges, although some drivers used identification badges to gain access to airports and high security buildings.
• Drivers got IRS 1099 forms, and reported the income earned from driving on their individual tax returns and deducted expenses incurred.

Nonetheless, the trial court found the drivers to be employees, and even though the EDD failed to comply with the requirement that it provide the Court of Appeal with an accurate summary of the evidence, complete with page citations, that supports the trial court’s judgment, the Court of Appeal found that the trial court’s judgment was supported by ample evidence.

The EDD presented testimony from several drivers and an auditor from Franchise Tax Board, that, among other things:

• Many drivers never signed a Contract.
• Most did not turn down jobs relayed to them by the dispatchers.
• Drivers were terminated if they proved unreliable.
• New drivers began by driving with more experienced drivers, and there was a training video provided.
• Uniforms were available for drivers; were useful for identification and prevented drivers from working for other employers while uniformed.
• Many drivers worked for lengthy tenures.
• Some add the company to their automobile insurance or obtain workers’ compensation insurance.
• Most did not obtain a business license or solicit other delivery customers.
• The employer provided some drives with pagers.
• Every job involved a deadline.
• Drivers did not advertise.

The court determined that the drivers performed an integral and entirely essential aspect of the business. The employer provided forms to the drivers, encouraged them to wear uniforms, and provided identification badges and vehicle placards. The customers serviced by the drivers were not customers of the drivers. Therefore, the company retained all necessary control over the drivers, negating its claim that the drivers operated as independent contractors.

The determination was upheld. The “most important factor is the right to control the manner and means of accomplishing the result desired [but] other factors to be taken into consideration are (a) whether or not the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee.”

Here, the company's failure to control the actual routes and speeds drivers chose when making deliveries denoted no lack of control. The simplicity of the work made detailed supervision, or control, unnecessary. Drivers testified they worked a regular schedule, consistent with employee status and reflect employer control. As a practical matter, drivers did not turn down jobs. They were not engaged in a separate profession or operating an independent business. The company required only a car and insurance; drivers made no major investments in equipment or materials. The drivers' contract did not control. Most did not recall signing a contract, and the terms of the contract were never enforced by the company. The drivers never had the contract explained to them and did not understand it. The trial court considered the Contracts and all other indicia relating to the employment relationship between the company and the drivers and found that the drivers were properly classified as employees.

You can download the full text of Air Couriers International here in pdf or word format. A request to depublish has been filed.