Wage Law

Court Upholds LA Hotel Living Wage Ordinance

On November 22, 2006, the L.A. City Council adopted Ordinance No. 178082, entitled “Hotel Worker Living Wage Ordinance”, which set minimum wage standards for certain hotel workers employed within a particular Business Improvement District near LAX. Under the ordinance, hotels within the District that contained 50 or more guest rooms were obliged to pay at least $9.39 per hour to workers who received health benefits, and at least $10.64 per hour to workers who did not receive health benefits.

Six weeks later, opponents of the ordinance submitted a referendum petition with 103,000 signatures, which, once certified, obligated the City Council to submit the Wage Ordinance to a popular vote or repeal it. In January 2007, the City Council repealed the Wage Ordinance. However, less than a month later, they enacted a new Ordinance entitled “Airport Hospitality Enhancement Zone Ordinance,” which incorporated similar provisions to those challenged by the referendum petition, but with changes that included: implementation in phases, with delayed full implementation until January 1, 2008; exemptions for business that could show the new regulations to be significantly burdensome; and exemptions for workers who had agreed in a collective bargaining agreement to waive the requirements.

Business interests filed a petition seeking mandamus and injunctive relief against the L.A. City Council and other parties, contending that the City Council improperly approved an ordinance essentially similar to one that the City Council had repealed following respondents’ successful campaign to institute a referendum on it. The trial court granted respondents’ petition. Real party in interest Unite Here Local 11 appealed. The Court of Appeal reversed.

We conclude that the provisions of the Zone Ordinance, taken as a whole, place it squarely within the Stratham court’s characterization of a proper second ordinance: the provisions of the Zone Ordinance, on their face, are substantial, relate to items of importance, and aim at “avoiding, perhaps, the objections made to the first ordinance.” (Stratham, supra, 45 Cal.App. at p. 440.) The provisions of the Zone Ordinance directly address the objections to the Wage Ordinance by providing guaranteed tangible economic benefits to the hotels that mitigate the financial burden of the wage requirements, while limiting imposition of such requirements in other areas of the City. Accordingly, the trial court erred in granting the writ petition.

The judgment is reversed. The matter is remanded to the trial court with directions to vacate the orders enjoining appellant [city clerk] Frank Martinez from publishing the zone ordinance and granting the petition for writ of mandate, and to enter a new order denying the petition for writ of mandate. Appellants are awarded their costs on appeal.

The case is Rubalcava v. Martinez (2007) __ Cal.App.4th __. You can download the full text with exhibits in pdf or word format.

Denial of Certification Reversed in Part, Affirmed in Part, in Wage & Hour Case

A previously unpublished class certification opinion involving truck drivers with overtime, off-the-clock, meal/rest period and vacation pay claims has been ordered published in Bell v. Superior Court (H.F. Cox, Inc.) (2007) __ Cal.App.4th __.

Four employees of a petroleum transportation company sought to bring a wage and hour class action against their employer, alleging: (1) the failure to pay overtime; (2) the requirement of off-the-clock work; (3) the failure to provide meal and rest breaks; (4) the incorrect calculation of vacation pay; and (5) the failure to pay pro rata vacation pay upon termination of employment. The plaintiffs filed a motion for class certification. The trial court granted the motion in part, certifying only a class with respect to the claim for failure to pay vacation pay upon termination of employment. In all other respects, the motion was denied. Plaintiffs sought review by means of a petition for writ of mandate. We issued an order to show cause why relief should not be granted and stayed further proceedings. We now conclude the trial court erred in failing to certify a class with respect to the overtime pay and vacation pay claims. We therefore grant the writ petition and direct the trial court to vacate its order, and enter a new and different order granting certification of a class with respect to those claims.

In Bell, it was undisputed that the drivers worked over 8/40, without overtime pay. The overtime dispute centered upon whether drivers were engaged in interstate commerce and therefore exempt. In addition to discussing certification standards in the course of holding that the overtime claims should have been certified, the opinion discusses the "4 month rule" and the broad inclusive definition of "interstate commerce." With respect to off-the-clock claims, the court found that the particular facts and evidence in this case left the court with ample discretion to deny certification.

The trial court denied the motion for class certification with respect to the claim for off-the-clock work on the basis that there was no way to determine which members of the proposed class had actually worked off the clock. Given that plaintiffs themselves disagreed on when or if they had worked off the clock, the court found no common issues with respect to this claim.

On the meal/rest period claims, the trial court was within its discretion to deny certification in light of evidence that drivers were scheduled for 10 hours of work within a 12-hour period to allow for breaks; that  all terminals have break areas; that drivers testified that they took breaks, were permitted to take breaks, and saw others taking breaks; that the employer stressed to its workers the importance of breaks and allowed meal and rest breaks at the discretion of its drivers; and that drivers had seen two of the named plaintiffs taking breaks; such that there was no way of determining which drivers were permitted to take breaks and which were not, and there was no evidence of a companywide policy denying breaks.

Finally, the opinion holds that the trial court abused its discretion in denying class certification on the vacation pay claims because a common legal question predominated over any individual issues. The opinion includes some nice language about how improper it is for the trial court to conclude that class certification is not a superior means of adjudicating disputes regarding overtime pay and vacation pay simply because of the amount of money recoverable in individual actions and the availability of Berman hearings with the DLSE.

You can download the full text of Bell v. Superior Court here in pdf or word format.

Merry Christmas

We may or may not post anything of substance between now and the New Year. We hope you all have a joyful holiday season.

Holiday Closure

Riverside County Superior Court will be closed December 31.

No One Is Exempt

from the spector of wage and hour lawsuits, that is. Law.com reported last month that one of California's most successful wage and hour firms is being sued for claims arising out of an alleged profit-sharing bonus plan. The plaintiff, attorney Carolyn Burton, alleges that her former employer, The Furth Firm LLP, which tried and won a $172 million case against Wal-Mart in 2005, induced her to accept a below-market salary in exchange for profit-sharing bonuses amounting to 3 to 5 percent of the firm's annual profits, then failed to pay the bonuses. Burton now works for Glynn & Finley, LLP, a PMS spinoff, where she confirmed her compensation deal in writing, we hope. We know of several plaintiff-side firms that use such a business model. We've never heard of one giving a guaranteed profit level, however.

Senator Feinstein Likes Arbitration

Senator Feinstein on the wonderful world of arbitration:

I value arbitration as an alternative to litigation. Earlier this year, I supported an arbitration bill, the "Fair Contracts for Growers Act," when it was considered by the Senate Judiciary Committee. That bill does not mandate arbitration, but allows it to be used to resolve livestock or poultry contract disputes only if both parties consent in writing after the dispute arises.

New Ground For Denial of Certification?

It would break the company, it would give the class a windfall, and the judge doesn't like the law.

Perhaps we oversimplify, but the heart of the order denying class certification in Spikings v. Cost Plus, Inc. (C.D. Cal. May 25, 2007) 2007 U.S. Dist. LEXIS 44214, a case we saw in a year-end class action roundup, seems to come down to those three factors. In Spikings, the plaintiff filed a motion for certification under Rule 23, and the court found the superiority element required under Rule 23(b)(3) lacking.

The case was filed under the FACTA (Fair and Accurate Credit Transactions Act), alleging a violation of the rule that requires that no more than the last 5 digits of a credit card number be shown on customer receipts, and that the expiration date of the credit card not be disclosed on the receipt. 15 U.S.C. § 1681c(g). Spikings bought an item at Cost Plus on December 19, 2006, and filed her putative class action just a few hours later. Apparently, the judge thought those facts didn't pass the smell test. "[T]he superiority requirement allows the Court to exercise its considerable discretion in deciding whether or not to certify a class for a category of cases for which a class action may not be the best method.”

[C]ourts may refuse to certify class action treatment where the defendant’s liability ‘would be enormous and completely out of proportion to any harm suffered by the plaintiff.’

In these cases, certification is not denied solely because of the possible financial impact that it would have on a defendant, but based on the disproportionality of a damage award that has little relation to the harm actually suffered by the class, and on the due process concerns attendant upon such an impact. (Citations omitted.) Put simply, class action treatment may be denied where the damages would be ‘ad absurdum.’
...
Plaintiff’s class action sought to represent an estimated 3.4 million people nationwide, at $100-$1000 per violation; thus, “statutory damages alone would range from a minimum of $340 million to a maximum of $3.4 billion,” Defendant’s net worth, however, is only $316 million, Id. “Thus, an award of even the minimum statutory damages of $340 million would put Defendant out of business,” Id. Such an outcome is particularly absurd in light of plaintiff’s admission that “she did not suffer any actual damage, such as identity theft, as a result of her expiration date appearing on her credit card receipt from Defendant’s store, and there is no evidence that any customer making a purchase from Defendant’s store...suffered any actual harm due to the inclusion of the expiration date on credit card and debit card receipts.”

Since then, several other cases involving identical violations of FACTA's truncation requirement have been denied class treatment on the same ground. Serna v. Big A Drug Stores, Inc., 2007 U.S. Dist. LEXIS 82023, (C.D. California, October 9, 2007); Lopez v. KB Toys Retail, Inc. 2007 U.S. Dist. LEXIS 82025 (C.D. Cal. July 17, 2007); Najarian v. Avis Rent A Car Sys. LLC, 2007 U.S. Dist. LEXIS 59932 (C.D. Cal. June 13, 2007); Torossian v. Vitamin Shoppe Indus. 2007 U.S. Dist. LEXIS 81961 (C.D. Cal. Aug. 9, 2007); Soualian v. Int'l Coffee & Tea LLC, 2007 U.S. Dist. LEXIS 44208 (C.D. Cal. June 11, 2007).

This ground would not likely be a basis for denial of class certification in a wage and hour case, but we can envision some jurists applying it to PAGA claims.

Federal Court Closures for Holidays

All state and federal courts will be closed on Christmas and New Year's Day. In federal court, Christmas Eve and New Year's Eve schedules vary from district to district:

• The Northern District will be closed on Christmas Eve and New Year's Eve, except for the Santa Rosa Division.
• The Eastern District will be closed on Christmas Eve and New Year's Eve.
• The Central District will be closed on Christmas Eve and New Year's Eve, except for emergency filings.
• The Southern District will be open on Christmas Eve and New Year's Eve, but will close at noon each day.

We don't know of any easy way to check the holiday schedules of each Superior Court. Los Angeles looks like they plan to work.

Police Win Summary Judgment in Donning /Doffing Case

The U.S. District Court has granted a partial summary judgment motion filed by a group of police officers seeking compensation under the FLSA for time spent donning and doffing uniforms and equipment. Lemmon v. City of San Leandro, 2007 U.S. Dist. LEXIS 902.

The Portal-to-Portal Act of 1947 relieves employers from compensating employees for "activities which are preliminary or postliminary to [the] principal activity or activities." 29 U.S.C. § 254(a). The Supreme Court ruled that "activities performed either before or after the regular work shift" are compensable "if those activities are an integral and indispensable part of the principal activities for which [the] workmen are employed." Steiner v. Mitchell (1956) 350 U.S. 247, 256. In Steiner, production employees at a battery plant were required to don protective work clothes before commencing work and to shower and change back at the end of the work day. The Court held that employees should be compensated for the time spent donning and doffing their protective work clothes because the process was "integral and indispensable" to allay the dangers inherent in the principal activity of battery production. The Ninth Circuit has held that donning and doffing of both unique and non-unique protective gear are integral and indispensable to the employee's principal activities if they are: (i) necessary to the principal work performed; and (ii) done for the benefit of the employer. The standard has been applied to, among other situations, liquid-repelling sleeves, aprons and leggings used by meat workers, and "bunny suits" worns by employees working in so-called "clean rooms."

In Lemmon, the court applied the same standard to the donning and doffing of police uniforms, and found the time compensable. The decision is particularly interesting because it reaches a different conclusion than others decided earlier this year, including Judge Breyer's decision in Martin v. City of Richmond, No (N.D. Cal. Aug. 10, 2007) 2007 WL 2317590 ("police officer's uniform, in and of itself, does not assist the officer in performing his duties.") and Judge Sabraw's decision in Abbe v. City of San Diego (S.D. Cal. Nov. 9, 2007) 2007 WL 4146696 ("the relevant inquiry is not whether the uniform itself or the safety gear itself is indispensable to the job - they most certainly are - but rather, the relevant inquiry is whether the nature of the work requires the donning and doffing process to be done on the employer's premises.")

Telling Employees They Will Need to Agree to Arbitration Is Not Itself an Agreement to Arbitrate

Telling employees that they will be required to sign an arbitration agreement as a condition to employment is not enough to establish such an agreement, and the failure to produce the signed agreement is fatal to a petition to compel arbitration, according to a holding published by the Fourth District Court of Appeal in Mitri v. Arnel Management (2007) __ Cal.App.4th __. In Mitri, the plaintiffs sued their former employer and others for sexual discrimination and harassment, among other things. The defendants filed a motion to compel arbitration, asserting that the plaintiffs had each entered into a binding arbitration agreement. The trial court denied the motion based on the defendants’ failure to prove the existence of any such agreement to arbitrate. The Court of Appeal affirmed.

Arnel’s employee handbook states, “[a]s a condition of employment, all employees are required to sign an arbitration agreement” and further states, “[e]mployees will be provided a copy of their signed arbitration agreement.” Defendants have not produced evidence of signed arbitration agreements. Defendants nevertheless contend the handbook’s reference to arbitration is sufficient to force plaintiffs to arbitrate their claims. [This] argument is wholly without factual or legal merit.

The employer's evidence was an employee handbook that stated: “Any dispute arising out of employment with the Company, as allowed by law, will be settled by binding arbitration. As a condition of employment, all employees are required to sign an arbitration agreement. [¶] To ensure the expeditious and economical resolution to any controversy or dispute arising from, or in any way relating to an offer of employment or the position, work, payment or relationship, or the termination of such employment, will be on the written request by any party, be submitted to and resolved by binding arbitration. Said arbitration will be conducted by the American Arbitration Association in Orange County, California. The Company will share equitably such expenses associated with the arbitration process. The prevailing party in the arbitration shall be awarded its attorney’s fees incurred in the arbitration process and the decision of the arbitrator shall be final, 4 binding and non-appealable. [¶] Further, nothing in this policy is intended to prevent either you or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. You, as the employee and the Company each have the right to resolve any issue or dispute involving company trade secrets, invention rights, non-competition and non-solicitation by court action in lieu of arbitration. [¶] Employees will be provided a copy of their signed arbitration agreement.”

There was no “signed arbitration agreement” presented to the court.

The employees' evidence consisted of declarations in which they denied entering into an arbitration agreement or ever being asked to do so. Both admitted “signing a receipt for the Arnel Management Company’s Policy Handbook,” but each stated, “I was not asked to read, nor was I given time to read, the Arnel Management Company’s Policy Handbook and I did not know its contents.”

The court found that the parties clearly did not intend that the handbook constitute a binding agreement, and that there was no evidence that the agreement ever came to fruition.

The arbitration agreement provision [in the handbook] also states that pursuant to Arnel’s policy, “[a]s a condition of employment, all employees are required to sign an arbitration agreement.” This provision completely undermines any argument by defendants the provision in the handbook itself was intended to constitute an arbitration agreement between Arnel and its employees. ... The provision further states, “[e]mployees will be provided a copy of their signed arbitration agreement”—thus reinforcing an intent to have employees sign a separate arbitration agreement to effectuate Arnel’s policy of arbitrating employment claims. Defendants have not produced any evidence of the existence of such an arbitration agreement signed by either plaintiff.

On these facts, the court distinguished several cases finding an agreement to arbitration, including Asmus v. Pacific Bell (2000) 23 Cal.4th 1, DiGiacinto v. Ameriko-Omserv Corp. (1997) 59 Cal.App.4th 629 and Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416.

You can download the full text of Mitri v. Arnel Management here in pdf or word format.