Wage Law

Supreme Court To Review Stock Forfeiture Case

The Supreme Court has granted a petition for review in Schachter v. Citigroup, Inc. (2008) 159 Cal.App.4th 10, which (temporarily) upheld the validity of a stock forfeiture plan in which participating employees who resign or are terminated for cause within a two-year vesting period forfeits the stock as well as the wages used to purchase it. We previously discussed the case in a post you can read at this link.

We've read it, but we find the twisted reasoning in section three of the opinion ("Enforcement of the Plan’s Forfeiture Provisions Does Not Violate Sections 201 or 202") to be a little Kafkaesque. Read it yourself and tell us if you disagree. You can download the full text of Schachter v. Citigroup. Inc. here in pdf or word format. One thing is for sure, the Supreme Court is taking a little extra time to consider this one. The High Court has extended its time to grant or deny review in the case to May 27, 2008.

Perhaps we weren't the only ones who saw too much of Kafka in that opinion. We would be very surprised to see the ruling upheld.

The Search for Intelligent Life in the Blogosphere

This month's edition of the California Lawyer includes a pretty good article on legal blogs (The Search for Intelligent Life in the Blogosphere). We were not among the intelligent life they found, but we enjoyed the article nonetheless.

Second District Disagrees with McCoy

Last week, we briefly discussed McCoy v. Superior Court (Kimco) (2007) 157 Cal.App.4th 225 (review denied) and its effect on the nature of waiting time penalties and the statutes of limitation that apply to them. This week, we found out about Hoffman v. Uncle P Productions, LLC (2008) 2nd Appellate District, Case Number B198477, an unpublished opinion that disagrees with McCoy's holding regarding the statute of limitations on pure waiting time penalty claims.

Section 203 provides in pertinent part:  "If an employer willfully fails to pay . . . any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; the wages shall not continue for more than 30 days. . . .  [¶]  Suit may be filed for these penalties at any time before the expiration of the statute of limitations on an action for the wages from which the penalties arise."  A claim for wages is subject to the three-year statute of limitations contained in Code of Civil Procedure section 338, subdivision (a).  (Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1102.)  Thus, section 203 provides a three-year statute of limitations for a cause of action for waiting time penalties.

Our Supreme Court came to this same conclusion when it recently explained: "When an employer fails to pay an employee who has quit or been discharged, section 203 establishes that the unpaid wages continue to accrue as a 'penalty' for up to 30 days.  Knowing that remedies constituting penalties are typically governed by a one-year statute of limitations, the Legislature expressly provided that a suit seeking to enforce the section 203 penalty would be subject to the same three-year statute of limitations as an action to recover wages.  (§ 203.)"  (Murphy v. Kenneth Cole Productions, Inc., supra, 40 Cal.4th at pp. 1108-1109.)

The trial court did not explain in its statement of decision why it concluded that the three-year statute of limitations contained in section 203 did not apply to this lawsuit.  Interestingly, however, subsequent to the trial court's ruling in this case, the Fourth District Court of Appeal in McCoy v. Superior Court (2007) 157 Cal.App.4th 225, came to a similar conclusion.  In McCoy, the plaintiff in a putative class action suit was seeking waiting time penalties under section 203.  His complaint alleged that the defendant, a "temp" agency, instead of paying its employees upon discharge or within 72 hours of resignation, paid them on the next scheduled pay day.  The Court of Appeal affirmed the trial court's ruling that the waiting time penalties were subject to a one-year statute of limitations under Code of Civil Procedure section 340, subdivision (a).

The McCoy Court determined that the statute of limitations language contained in section 203 was ambiguous, and so resorted to extrinsic aids to discern its meaning.  It then concluded that the Legislature meant for the three-year limitations period specified in section 203 for continuing wage claims to apply when such claims are brought with the underlying wage claim, but not when they are not accompanied by a wage claim.  We cannot concur in this analysis.

Section 203 specifically states:  "Suit may be filed for these penalties at any time before the expiration of the statute of limitations on an action for the wages from which the penalties arise."  There is nothing the slightest bit ambiguous or uncertain about those words.  The McCoy Court acknowledged the Supreme Court's statement in Murphy v. Kenneth Cole Production, Inc. that "'. . . the Legislature expressly provided that a suit seeking to enforce the section 203 penalty would be subject to the same three-year statute of limitations as an action to recover wages.  [Citation.]'  (Murphy v. Kenneth Cole Productions, Inc., supra, 40 Cal.4th at pp. 1108-1109)."  (McCoy, supra, at p. 233.)  The Court of Appeal declared, however, that the statement was dicta, since the Court was not interpreting section 203, and that it provided no authority for a three-year limitations period for penalty-only claims, because the Murphy Court "does not purport to distinguish between an action where both wages and a waiting time penalty are sought as opposed to one for penalties only, as is the case here."  (McCoy, supra, 157 Cal.App.4th at p. 233.)  However, the statute of limitations for an action does not customarily change depending upon whether or not additional claims are included in the complaint.  Indeed, McCoy cites no authority at all for its application of a different statute of limitations based on its distinction between penalty-only claims and penalty-plus-wage claims, an interpretation of section 203 which disregards the express words contained in the statute and infers the Legislature's true meaning.

In sum, we find persuasive the Supreme Court's pronouncement of the statute of limitations for waiting time penalties in Murphy, notwithstanding the fact that the Court was not directly considering section 203, but analogizing to it in order to resolve the issue before it involving the statute of limitations for section 226.7 claims ["hour of pay" remedy for meal and rest period violations].  We conclude that, under the clear and unambiguous terms of the statute, a three-year limitations period applies to section 203 claims for waiting time penalties.  Plaintiffs' causes of action for those penalties were therefore timely. (our emphasis).

A request for publication was filed yesterday. For now, you can review Hoffman here in pdf or word format.

Bufil v. Dollar Financial

Most California casewatchers are focusing their attention this week on In re Marriage Cases. Wage and hour lawyers, however, are also busy talking about Bufil v. Dollar Financial Group, Inc. (2008) __ Cal.App.4th __.

Do you remember Alvarez v. May Department Stores Co. (2006) 143 Cal.App.4th 1223, the case that held collateral estoppel could apply to prevent future class actions once a court, any court, denies certification of a class? Well, what if the certification motion was denied because the group was too big and its putative members were too different to warrant certifying a class. Can you file a new class action and seek to pursue a smaller class, chosen from within the larger class that was denied certification? San Francisco Judge Peter Busch thought you could not. The Court of Appeal in Bufil suggests that you can and perhaps should.

On the heels of the denial of class certification against employer and respondent Dollar Financial Group, Inc. (Dollar), in a suit alleging violation of meal and rest break labor laws, appellant Caren Bufil pursued class certification in a new suit which significantly narrowed the class definition. Relying on the doctrine of collateral estoppel, the trial court granted judgment on the pleadings in favor of Dollar. Also relying on this doctrine as well as traditional concerns relevant to the issue of certification, the court denied Bufil’s motion for class certification. We reverse.

The trial court's two errors were (i) applying collateral estoppel to the earlier certification denial in another case and (ii) assuming that each class member would have to testify about their own understanding about meal period waivers.

Here the trial court denied the motion for class certification on the same basis it granted judgment on the pleadings—that is, on collateral estoppel grounds. Continuing, the court additionally indicated that liability as to the class involved substantial and numerous individual factual questions, giving, as the sole example, each employee’s understanding of his or her rights under the meal plan. Elaborating, the court explained: “Similar to the class in Nguyen, employees would have to individually testify as to their perceptions of their rights in signing or refusing to execute the meal agreement without suffering adverse consequences. These issues apply to both the rest period and meal period components of the class, thus the individual issues predominate over Plaintiff’s [claim that common issues predominate].” Finally, the court held that Bufil did not prove the existence of an ascertainable class of employees who purportedly missed off-duty rest periods.

The meal period waiver issue is one we often see. Trial courts don't seem to buy it, but defendants always argue that you can't litigate meal period claims as a class because they will be forced to frogmarch every single class member into court to cross-examine them to determine whether their intent to waive a meal period was the same as every other employees' intent. Bufil busts this myth.

The court made an erroneous assumption that each class member would need to testify as to his or her understanding of the meal period waiver. This was an issue in Chin/Nguyen but it is irrelevant to Bufil’s lawsuit. Bufil’s theory is that the two circumstances—single employee on duty or providing training—do not come within the “nature of the work” exception set forth in Wage Order No. 4-2001, so as to permit an “on-duty” meal period. This is a legal question concerning the liability of Dollar to each putative class member. Bufil is not concerned with whether a given employee signed a meal period waiver, does not assert that anyone was forced to sign anything, and does not attack the execution of the agreements or the intent and understanding of the parties regarding the same. Her position is that either the putative class employees were denied an off-duty meal for an improper purpose, or they were not. Under Bufil’s structuring of the case, the court could identify the class from Dollar’s records and determine liability as a matter of law. In this case Bufil proposes a class that on its face attempts to correct flaws identified in the Chin/Nguyen lawsuit resulting in denial of certification. The trial court here erred in ruling that the class proposed by Bufil involved “the same class problems involving liability” as were implicated in Chin/Nguyen, and thus erroneously concluded that issue preclusion should bar her quest for class certification. (See OShana v. Coca-Cola Bottling Co. (N.D. Ill. 2005) 225 F.R.D. 575, 579.)

The court also pointed out that one could ascertain a class of rest period claimants even though there are no records kept for the rest periods.

Arguing that the proposed class was not ascertainable as to rest period claims, Dollar states there are no records identifying whether any employee missed a rest period and it has no obligation to maintain such records. There is no disagreement on these points, but they are not pertinent to the issue of ascertainability because Bufil has defined a class precisely identified by Dollar records.

We loved this language:

Dollar does not notify its employees that they are authorized and permitted to take a 10 consecutive minute off-duty rest break every four hours. Nor does Dollar instruct supervisory personnel to take steps to provide employees with the opportunity to take the required rest breaks. The onus is on the employer to clearly communicate the authorization and permission to its employees. (citing Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949, 963.)

The myth that class actions are not superior ways to adjudicate wage and hour claims is also busted.

The trial court made a passing, perfunctory reference to superiority in its order denying class certification, finding that plaintiffs did not establish that the class action is a superior method for resolving the litigation. Courts regularly certify class actions to resolve wage and hour claims. (See Pressler v. Donald L. Bren Co. (1982) 32 Cal.3d 831, 837; see also Sav-On, supra, 34 Cal.4th at p. 340; Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 579-580; Earley v. Superior Court (2000) 79 Cal.App.4th 1420, 1423.) In this arena the class action mechanism allows claims of many individuals to be resolved at the same time, eliminates the possibility of repetitious litigation and affords small claimants with a method of obtaining redress for claims which otherwise would be too insignificant to warrant individual litigation. (Sav-On, supra, 34 Cal.4th at p. 340.)

Bufil was originally issued in April as an unpublished opinion, but the California Employment Lawyers Association prevailed Tuesday in a request to have the opinion published. You can download the full text of the opinion here in pdf or word format.

Audio Conference on FLSA Overtime Rules: Critical Issues in Employee Classification

Don't have time to attend MCLE seminars? One alternative is to attend audio conferences. National Constitution Center Audio Conferences is offering a 60-minute audio conference next month on the subject of "FLSA Overtime Rules: Critical Issues in Employee Classification." The conference will take place tomorrow, Thursday, May 15, 2008 10:00-11:00 a.m. PDT. The cost of the conference is $199 (plus $65 if you are taking the course for MCLE credits, apparently good in all states but Kansas and Ohio). You can register and get more information at http://www.constitutionconferences.com/main.asp?G=1&E=1371. Their web page describes the conference in more detail, but here's their hook:

As more practitioners are finding themselves in the wage and hour arena, it is important that we keep apprised of recent developments and changes in the law. This 60-minute audio conference will provide you and your staff with the knowledge you need to comply with the overtime regulations – including the tests to apply to properly classify your employees and determine who does and doesn’t qualify for overtime.

We've never tried these conferences, and they aren't giving us a dime (or anything else, for that matter) for mentioning them here, so if anyone gives them a try, please leave a comment and let us know what you thought. They offer a guarantee of "a full refund if not satisfied from now until 7 days after the event."

DLSE's View on What it Means to "Authorize and Permit"

IWC Wage Order 14, which governs hours and working conditions for farm workers, requires employers to "authorize and permit" employees to take meal periods and rest periods. This "authorize and permit" language appears in most other wage orders as to rest periods, but not meal periods. The language is in stark contrast to the meal period language of other wage orders ("no employer shall employ any person for a work period of more than five (5) hours without a meal period of not less than 30 minutes"), for which the DLSE policy is set forth in section 45.2.1 of the DLSE enforcement policy and interpretations manual.

A February 2007 DLSE memo defines the meaning of the phrase "authorize and permit" in the meal period requirement of Wage Order 14. Lupe Almaraz, who retired last year as Deputy Chief of DLSE, issued a memo to DLSE staff regarding the meal period requirement under Wage Order 14. It states that an employer must

"authorize the worker to take a meal period and not dissuade or deny the worker the opportunity for the entitled meal period..."

In essence, in DLSE enforcement actions, this shifts the burden to employees to prove not only that he or she was not permitted to take a meal period, but that the employer affirmatively dissuaded or denied the meal period. It leaves open to interpretation whether the employer is liable for meal periods that could not be taken simply because the workload does not leave any opportunity to take the break without the employee failing to perform necessary job duties. The memo is an "underground regulation" which the courts need not follow, but nonetheless is appearing more frequently in state court law and motion in support of employers' motions regarding pleadings, discovery, certification and summary adjudication.

At some point in the next month or two, we might get a ruling from the Fourth District Court of Appeal in the Brinker case, which is set for argument this afternoon, as to what it means to "provide" a meal period or "authorize and permit" a meal period or rest period.

Carrying a Briefcase Does Not Translate into a Compensable Commute under the FLSA

Under the Fair Labor Standards Act, time spent commuting to and from the workplace is generally not compensable. Under the Portal-to-Portal Act, the FLSA excludes from compensable time all of the time spent "traveling to and from the actual place of performance of the principal activity" of employment. There are various exceptions, generally arising when an employee's commute is substantially changed for the benefit of the employer. However, the fact that an employee carries its employer's documents to and from work does not invoke such an exception, and employees who carry a briefcase during their commute are not entitled to be paid a wage for their commute time, even if that means lugging 20 pounds worth of documents home each night, according to a recent Second Circuit opinion.

Plaintiffs-appellants Rajkumar Singh, Thomas S. Matthews, Vivek N. Patil, Trushant Shah, Faramarz Robeny and Fredo Joseph (collectively the "plaintiffs") appeal from a June 2, 2006 judgment of the United States District Court for the Southern District of New York (Castel, J.), granting summary judgment to defendant-appellee City of New York (the "City") and denying the plaintiffs' cross-motion for summary judgment. The plaintiffs are fire alarm inspectors employed by the City who assert that they must be compensated under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., for their commuting time because the City requires them to carry inspection documents during their commutes. We hold that carrying inspection documents while commuting is not work under the FLSA except to the extent that it increases the duration of a commute. Because the record shows that such an increase in commuting time is de minimis as a matter of law, we AFFIRM the district court’s judgment that none of the plaintiffs’ commuting time is compensable under the FLSA.
...
In the commuting context, we believe that the appropriate application of the predominant benefit test is whether an employer's restrictions hinder the employees' ability to use their commuting time as they otherwise would have had there been no work-related restrictions.

Singh v. City of New York (2nd Cir. 2008) __ F.3d __ (Case No. 06-2960-cv).

Easing the Pace

Mark's on vacation this week, so the two-a-day posting we've maintained since April is going to stop. Have y'all taken your vacations yet this year? Do not eschew vacations. They are not just luxuries. They are necessities to keep you sane.

New Littler Report on Wage and Hour Compliance

Some of the best ideas for the plaintiff's bar have come from defense lawyers. The latest example: Littler Mendelson has published an interesting report entitled Total Wage and Hour Compliance: An Initiative to End the Wage and Hour Class Action War. You can download the report directly from the firm's website. It isn't just a learning tool for employers. It also provides considerable food for thought if you are representing employees, and that's all we'll say about it.

Restitution of Waiting Time Penalty Wages

Wage and hour lawyers are talking about a law and motion ruling made last week by Orange County Superior Court Judge David Velasquez, holding that waiting time penalties under Labor Code § 203 were recoverable as restitution under Business & Professions Code § 17203. In Ybarra v. Aramark Corp., No. 30-2008-00180008-CU-OE-CXC, the court treated section 203's "wages of the employee [that] shall continue as a penalty" as ordinary wages.

In similar fashion to the "additional hour of pay" [in Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1108], the instant court observes that Labor Code § 203 does not provide that the employer is "subject to" the imposition of the waiting time penalty. Rather that section states "the wages of the employee shall continue" if the employer does not pay separation wages within 72 hours of the employee's termination. The employee is not required to do anything affirmative — "take action" — in order to be entitled to the continuing right to wages. The right to the waiting time penalty is self-executing, i.e., the employee's right to payment of the waiting time penalty arises immediately upon the satisfaction of the condition precedent, late payment of the last wages due to the employee at the time of termination from employment. In that respect, because the waiting time penalty becomes immediately due and payable to the employee, the right to receive the penalty becomes a vested property right of the employee and the proper subject of restitution. (Cf. Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 178 [wages which are due but unpaid are the proper subject of restitution].)

If this is appealed, it must proceed by writ petition, but the writ will be submitted to the same appellate division that gave us McCoy v. Superior Court (2007) 157 Cal.App.4th 225 (review denied) last year. In McCoy (which we previously discussed at a post found at this link), the court ruled that the statute of limitations was one year on causes of action seeking section 203 penalties that do not arise in conjunction with the claims for the underlying wages. The McCoy court noted that its holding meant that the court didn't need to address the plaintiffs claim that the statute was four years under the alternate theory of unfair competition, which was unfortunate, because the issue has arisen in quite a few very large cases.

[Hat tip: The UCL Practitioner, which has a link to the order]