Supreme Court Appears Ready to Reverse Gattuso

We've heard from a few people who attended Thursday's Supreme Court oral argument in Gattuso v. Harte-Hanks Shoppers, Inc.. Our prior comments on the case can be read here. The general consensus is that the court was not receptive to the employer's argument that it can satisfy its obligations to reimburse employee expenses simply by increasing employees' compensation generally and having employees cover their expenses out of the "higher wages." From what we've read about the issues in the case, and what we've heard about the questions and argument, we aren't expecting a split decision.

Labor Code § 2802(a) provides:

An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.

The court appears likely to hold that, to comply with this obligation by increasing compensation to cover expenses, there must be a specific allocation between expense reimbursement and other compensation; and in a dispute, the employer should be required to prove that the amount allocated to expenses exceeds the amount of actual expenses. Any other outcome would essentially permit employers to evade the legislature's objective under Section 2802 in almost any situation where the wages paid exceed the sum of an employee's expenses plus minimum wage. Harte-Hanks Shoppers, Inc.'s plan also unfairly saddled employees with additional tax obligations, since the reimbursements would have been fully taxable, but the expenses would have been subject to the two percent floor, and not available to all filers.

Comments

[TommyK]

Any more details you have as to why you believe the court was likely to reverse and be unanimous? For the most part, this court has been pretty open about what they intend to do at the hearing.

[Mr. Bean]

The Texas Crop. Harte-Hanks Shoppers were not allowed to change Calif. Labor codes.
In the case GATTUSO v. HARTE-HANKS SHOPPERS. Gattuso was not granted class action status. The case is under appeal

1. Harte-Hanks Shoppers are Violating Ca. Labor code 2802 not only the actual code but also the legislative intent California Teachers Assn. v. San Diego Community College Dist., (supra), 28 Cal. 3d 692, 698.) .

2. Labor Code section 2804 (section 2804) prohibits
waiver of the benefits of section 2802,

3. First, the trial court did not hold that an employer and employee may agree to waive the provisions of section 2802.

4. Harte-Hanks Shoppers by asking employees to bear the burden of expenses of doing business they are asking the employees to become partners not employees (Janken v. GM Hughes Electronics (1996) 46 Cal.App.4th 55, 74, fn. 2

5. Harte-Hanks a Texas Corp. Has no Calif. case history to support their claim that paying a higher commission to some employees covers expenses.

There fore Harte-Hanks Shoppers is Legally responsible for employees expenses such as Mileage.

[Kelli Johnson]

If the corporation fails to indemnify, may the employee make a claim of punitive damages against the corporation? And if so, on what grounds?