Wage Law

Happy Cesar Chavez Day

We're taking the day off.

FLSA Opt-In Rates

What are typical opt-in rates for FLSA collective actions? We've heard the figure 23% quite a few times, but we can't find any empirical data to support it. A December 2007 article published by the American Association for Justice reported that

Attorneys have found that the opt-in rate is usually low—less than 30 percent of the affected pool of workers.

Another article published last year by the American Bar Association reported that

Anecdotally, practitioners generally estimate that five to twenty percent of eligible plaintiffs will opt-in to a traditional opt-in case, while nearly all of the eligible employees will remain in an opt-out suit. ... [but] the low opt-in rate is not true, however, when FLSA claims are broughton behalf of a unionized workforce. Mullins v. City of New York (U.S. District Court for the Southern District of New York, Civil Action No. 1:04-cv-2979) [90% rate]; Abbey v. United States (U.S. Court of Federal Claims, Civil Action No. 07-272C) [70%].

Another article published in 2006 by defense firm Nixon Peabody LLP claimed that

Typically, the opt-in rate for these collective actions is between 15 and 30 percent.

Does anyone know of a solid empirical study that quantified the opt-in rates for collective actions over any recent period?

Writs of Attachment for Wage Claims

Many wage and hour lawyers do not know that a plaintiff with a claim for unpaid wages can apply for a right to attach order and obtain a prejudgment writ of attachment, and then levy upon the employer's assets to satisfy the eventual judgment.

In general, an unsecured claim for a certain or reasonably ascertainable sum, based upon an express or implied contract, can be secured by a right to attach order. Code of Civl Procedure § 483.010(a); Korea Water Resources Corp. v. Lee (2004) 115 Cal.App.4th 389. Even claims based upon quasi-contract qualify. "Implied contract" covers restitutionary obligations; e.g., where defendant has acquired plaintiff's property through fraud, conversion or mistake and refuses to return it. Klein v. Benaron (1967) 247 Cal.App.2d 607, 610. An attachment will lie upon an employment contract. Lewis v. Steifel (1950) 98 Cal.App.2d 648; Rose v. Pearman (1958) 163 Cal.App.2d 480, 483. Arguably, any wage claim arising out of the Labor Code can justify an attachment, because statutory obligations arise out of contract in their nature. Arcturus Manufacturing Corp. v. Rork (1962) 198 Cal.App.2d 208, 210.

However, by obtaining an attachment, the plaintiff is electing non-tort remedies for those particular claims. Because attachment lies only on contract claims, a plaintiff with alternative tort and contract claims based on the same set of facts waives the tort claim by obtaining a writ of attachment, or, to be more precise, the plaintiff is equitably estopped by virtue of having obtained an advantage by proceeding on the contract claim. Baker v. Superior Court (San Diego Best Builders, Inc.) (1983) 150 Cal.App.3d 140, 145. Hence, punitive damages cannot be recovered once a right to attach order and writ of attachment have been issued.

Don't be fooled by defense counsel who will argue that prejudgment attachment of earnings is prohibited under Code of Civl Procedure § 487.020(c). Some of our adversaries have cut and pasted language to that effect from Rutter's Practice Guide, without understanding that the prohibition applies not to an employee seeking attachment, but rather, to an employee's creditors seeking to attach the employee's wages.

In addition to the primary purpose of securing the satisfaction of an employee's inevitable judgment for unpaid wages, a prejudgment right to attach order is also a powerful settlement tool and one of the best discovery devices out there. When you serve interrogatories, the defense often begins with boilerplate frivolous objections, triggering the meet and confer process, followed by motions to compel. It can be months before you really find out what defenses are being asserted and what supports them. Apply for a right to attach order and the defense will lay their cards out on the table, all of them, in the opposition. It's better than a half dozen motions to compel.

Consequences of Misclassification

Q: Suppose the Labor Commissioner or a judge determine that my contractors should have been classified as employees, what are the consequences?
A: There are many, but these are probably the most important:

• Stop orders and penalty assessments pursuant to Labor Code § 3710.1;
• Liability for overtime premium, meal period pay, and other remedies available to employees under the Labor Code and Industrial Welfare Commission Orders;
• Exposure for tort liability for injuries suffered by employees when workers compensation insurance is not secured (Labor Code § 3706);
• Exposure for unfair business practices (Business & Professions Code § 17200);
• Tax liability and penalties;
• Criminal liability (Labor Code § 3700.5).

When in doubt, treat them as employees.

Is Your E-Mail To Your Client Not Privileged?

Apparently, there are more than a few employers who are mining their email archives to search for email communications between employees and former employees and the attorneys representing them in claims against the employer. One judge in New York issued a ruling last year that such communications are not protected by attorney-client privilege. The case is Scott v. Beth Israel Medical Center, Inc. You can read the order here. We haven't researched whether any California cases are on point. We're just passing it along.

$200M Price Tag for Wal-Mart Cheating Its Pennsylvania Workers

Remember that 2006 Philadelphia jury verdict against Wal-Mart for $78 million? Well, it's grown to $188 million now, including $49,568,541 for the Wage Payment and Collection Law (WPCL) verdict, $29,178,873.35 for the common law verdict, $62,253,000 for statutory liquidated damages, $33,813,986.24 in WPCL fees, $2,670,325.52 in wage payment and collection law expenses, $29,178,873.35 in common law nonstatutory claims, $10,163,863. in statutory interest, $11,880,589.76 in non-statutory attorney fees and $938,222.48 in nonstatutory expenses. The total cost is over $200 million, however, because Wal-Mart's defense costs included $10,048,944 in attorney fees and $7,006,982 in costs.

Don't feel too bad for Wal-Mart, though. The jury found that Wal-Mart had saved $1,031,430 by not paying their 124,506 employees for the time they worked off the clock, and another $48,258,111 by making them work instead of taking legally required breaks. And it's a pretty safe bet that the case could have been settled for less than the original savings.

Quotes on the Starbucks Judgment

California law prohibits managers and supervisors from sharing in employee gratuities. However, for years, that has happened at Starbucks coffee shops. As we mentioned yesterday, Starbucks was been found liable to 135,000 of its California baristas for more than $100 million in back tips and interest ($87 million in tips and $19 million in interst) that the coffee chain paid to shift supervisors. The parties have now put out some comments:

• Starbucks spokeswoman Valerie O'Neil said the company planned an immediate appeal of the ruling, calling it "fundamentally unfair and beyond all common sense and reason ... The decision today, in our view, represents an extreme example of an abuse of the class-action procedures in California's courts."
  
• Plaintiff Jou Chou said: "I feel vindicated ... Tips really help those receiving the lowest wages. I think Starbucks should pay shift supervisors higher wages instead of taking money from the tip pool."
  
• The coffee company also took issue with the brevity of the judge's ruling, which was only four paragraphs, saying she failed to address the unfairness to shift supervisors. "This case was filed by a single former barista and, despite Starbucks request, the interests of the shift supervisors were not represented in litigation," O'Neil said.
• Attorney Laura Ho, who tried the case for the plaintiffs, said the court's verdict follows state law. "Starbucks illegally took a huge amount of money from the tip pool to pay shift supervisors, rather than paying them out of its own pocket. The court's verdict rightfully restores that money to the baristas."

Essentially, Starbucks boosted its profits by about 1.6% annually (Starbucks earned more than $672 million on revenue of $9.4 billion during its 2007 fiscal year), by suppressing the wages of its shift supervisors and making up the difference by letting them dip their fingers into the tip jars of the employees who are entitled to the tips, as a matter of mandatory corporate policy. That sort of ripoff is exactly why class actions are permitted, because no one barista would be able to find the resources to make it feasible to challenge such a policy. The class action remedy merely allows the employees' claims, which are practically identical to one another, to be aggregated. And now the court has ordered Starbucks to pay their illegal savings back. We find that quite reasonable and have no trouble seeing how common sense permits such a fair redistribution. What strikes us as unfair is Starbucks complaining, after it failed to represent the interests of its management/supervisory employees, that those interests weren't represented.

Breaking News: Starbucks Found Liable for Over $100 Million to Baristas

San Diego County Superior Court Judge Patricia Cowett has ruled in favor of more than 100,000 Starbucks baristas and ordered the company to pay the employees more than $100 million in tip pool money that was diverted to management employees. The court had ruled last month that Starbucks's practice of paying shift supervisors from the tip pool violated California law. We previously discussed the case in a post found here. The ruling affects only California employees, and only the period October 8, 2000 to the date of trial.

If You'd Rather Use a Urine Bag Than Take a Real Bathroom Break

then Qwest might be the right fit for you, when looking for your next place of employment.

Murphy's Fee Award

This is old news, but we just heard it and thought we'd pass it along. After remittitur in Murphy v. Kenneth Cole Productions, the plaintiffs moved for $1.5 million in attorney's fees for the law professors and law students' time. San Francisco Superior Court Judge Anne Bouliane reduced the attorney's proposed hourly rates from $525 to $425 and reduced the law students' rate from $125 to $90, and applied a lodestar multiplier of 1.8. She cut 70 hours from one attorney's total, and 12 hours from lead trial counsel's total. The final bill: although it was a lot, we're betting that it was significantly less than Seyfarth Shaw charged the defendant for its work.