Wage Law

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]

New Oral Argument Set in Brinker

The second round of oral argument in Brinker Restaurant Corporation v. Hohnbaum is now set for May 13, 2008, before the Fourth District Court of Appeal, Division One, in San Diego. The latest developments:

Petitioner Brinker Restaurant corporation's request for leave to file a supplemental brief filed April 22, 2008, is GRANTED. The supplemental brief is deemed filed this date. Real parties in interest shall have seven days from the date of this order to file a supplemental reply brief addressing the issues raised in the supplemental brief. Real parties in interest Adam Hornbaum, Illya Haasf, Romeo Osorio, Amanda June Rader, and Santana Alvarado's motion and requests for judicial notice, filed on December 17, 2007 and April 22, 2008, are GRANTED in part and DENIED in part. Real parties in interest's motion requesting we take judicial notice of the depositions of plaintiffs' experts Jon A Krosnick and Harold S. Javitz is denied. Real parties in interest's request we take judicial notice of a February 16, 1999 Division of Labor Standards Enforcement (DLSE) Opinion Letter, a September 17, 2001 DLSE Opinion Letter, Industrial Welfare Commission Wage Order 5-76, a June 14, 2002 DLSE Opinion Letter and excerpts from the DLSE Enforcement Policies and Interpretations Manual is denied as unnecessary as these are items that we are entitled (but not required) to rely upon as authority, without having to formally take judicial notice. The denial as unnecessary of real parties in interest's request we take judicial notice of these items should not be construed as meaning this court will not consider them in ruling of the petition for writ of mandate in this matter. Real parties in interest's request we take judicial notice of the August 28, 2000 Senate Floor Bill Analysis and September 9, 2000 Assembly Floor Bill Analysis for Assembly Bill No. 2509 is granted.

Since then, several letters were written to the court informing the panel about the depublication of Bell v. Superior Court (H.F. Cox, Inc.), and the petitioner has filed a supplemental brief concerning the Brown v. Federal Express Corp. case.

We've been following the case closely, and have discussed it in several prior posts, including here and here.

Ninth Circuit Reverses Denial Of Class Cert. in Wal-Mart Assistant Manager Case

In a short, unpublished opinion, the Ninth Circuit has reversed a significant portion of District Court order denying class certification in a wage and hour class action against Wal-Mart. In Sepulveda v. Wal-Mart Stores, Inc., a group of assistant managers asserting various wage and hour claims (overtime and meal and rest period pay) brought a putative class action against against the retailer. The District Court denied the plaintiffs' motion for class certification in Sepulveda v. Wal-Mart Stores, Inc. (C.D.Cal. 2006) 237 F.R.D. 229, because the claims for monetary relief in the class action complaint were not incidental (failing the requirements for certification under Rule 23(b)(2)) and the duties of assistant managers were not susceptible to collective proof (failing the requirements for certification under Rule 23(b)(3)). On appeal, the Ninth Circuit held:

Plaintiffs, current and former Assistant Managers of Defendant, Wal-Mart Stores, Inc., appeal the district court’s order denying their motion for class certification. We have jurisdiction under 28 U.S.C. § 1292(e) and Federal Rule of Civil Procedure 23(f).

The district court misapplied Ninth Circuit precedent when, relying on its conclusion that Plaintiffs’ claims for monetary relief were non-incidental, it denied class certification under Federal Rule of Civil Procedure 23(b)(2). See Molski v. Gleich, 318 F.3d 937, 949–50 (9th Cir. 2003) (refusing to adopt the incidental damages approach set forth by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998)). The district court must focus on the intent of the Plaintiffs in bringing suit. Id. at 950. We therefore hold that the district court abused its discretion in denying class certification. See Sw. Voter Registration Educ. Project v. Shelley, 344 F.3d 914, 918 (9th Cir. 2003) (en banc) (per curiam). On remand the district court shall reconsider class certification under Federal Rule of Civil Procedure 23(b)(2), and, in the alternative, also reconsider using Rule 23(c)(4) to certify specific issues under the Rule 23(b)(2) standard. See Society for Individual Rights, Inc. v. Hampton, 528 F.2d 905, 906 (9th Cir. 1975). In reconsidering these issues, the district court may find the California Supreme Court’s decision in Gentry v. Superior Court, 42 Cal. 4th 443, 457–59, 462, 464–65 (2007), instructive.

The district court did not abuse its discretion in denying class certification under Federal Rule of Civil Procedure 23(b)(3), and we therefore affirm that portion of its order. Each party shall bear its own costs on appeal.

We previously discussed the case in a January 2007 post that can be found at this link, where we observed:

The appeal is noteworthy because, unlike several other pending appeals in similar cases, this is a discretionary, interlocutory appeal, rather than a standard, post-judgment appeal. The standard for allowing such an appeal is extremely high, and the fact that the Ninth Circuit allowed the appeal suggests that the District Court’s decision to deny certification will be reversed.

The result was very close to what we expected.

There Will Not Be a Prachasaisoradej II

The Supreme Court published a case last year regarding the interplay between company expenses and losses and the payment of profit-sharing bonuses to employees. Prachasaisoradej v. Ralphs Grocery Company, Inc. (2007) 42 Cal.4th 217. We previously discussed the case in a post found at this link. A few months later, the court entered an order awarding $275,000 in attorney's fees to Ralphs Grocery. Prachasaisoradej appealed. The Supreme Court denied review. End of story.

Another U.S. District Court Rejects Cicairos Regarding Employers' Meal Period Obligations

A second U.S. District Court judge has decided not to follow the holding in Cicairos v. Summit Logistics (2005) 133 Cal.App.4th 949, endorsing the DLSE's interpretation of California regarding what it means to "provide" employees with meal breaks, instead following another District Court ruling (White v. Starbucks (N.D. Cal. 2007) 497 F.Supp.2d 1080). As a result, Judge Dale Fischer denied certification in Brown v. Federal Express Corporation (C.D. Cal. 2008) 2008 WL 906517, 2008 U.S. Dist. LEXIS 17125, a putative class action brought on behalf of a subclass of drivers who alleged that they were denied meal and rest breaks. The plaintiffs asserted that FedEx had an affirmative obligation to ensure that employees took meal breaks. Judge Fischer held that FedEx's duty to "provide" meal periods merely meant to make meal periods available to employees. "It does not suggest any obligation to ensure that employees take advantage of what is made available to them."

In the absence of California Supreme Court precedent, this Court must apply the rule it believes the court would adopt under the circumstances. ... The court does not believe that the California Supreme Court would adopt the enforcement rule advocated by Plaintiffs.

Consequently, the court determined that, applying this standard, to prevail, the plaintiffs would have to prove that FedEx forced them to forego the meal breaks, a burden which, to meet, would cause the trial to focus on individualized issues, making class action treatment inappropriate.

The decision has no precedential value, as unpublished federal decisions are unciteable in U.S. District Court, and California trial courts are bound to follow Cicairos v. Summit Logistics under the principle of stare decisis.

Public Entities Are Permitted to Retain Counsel on Contingent Fee Basis

Public entities are permitted to enter into contingency-fee agreements with outside counsel. County of Santa Clara v. Superior Court (Atlantic Richfield Co.) (2008) __ Cal.App.4th __. A Santa Clara County Superior Court judge had previously ruled that such arrangements were "antithetical to the standard of neutrality that an attorney representing the government must meet when prosecuting a public nuisance abatement action." The decision was based upon a 1985 case, Clancy v. Superior Court (1985) 39 Cal.3d 740, in which the California Supreme Court called the contingent fee agreement between a city government and a private attorney in a lawsuit against an adult bookstore “inappropriate under the circumstances.”

Federal government agencies will continue to avoid such arrangements, under an executive order signed by President Bush barring the federal government from entering contingent-fee arrangements to compensate lawyers or witnesses. If you are interested in this kind of work, you can download the opinion here in pdf or word format.

Court Must Review Class Action Settlement, Even If Judge Has Drafted MSJ Order

When parties to a class action notify the District Court that they have reached a settlement, the court is required to review and approve or disapprove the settlement under Rule 23(e)(2)'s preliminary approval process, even if the court has taken dispositive motions under submission, and even if the court has already drafted an order or memorandum of decision. In re: Syncor Erisa Litigation, Pilkington v. Cardinal Health, Inc. (9th Cir. 2008) __ F.3d __ (February 19, 2008). Thus, Judge R. Gary Klausner abused his discretion by granting the defendant's pending summary judgment motion rather than permitting the parties to file a motion for preliminary approval of the settlement.

the requirement that the district court approve a class action settlement does not affect the binding nature of the parties’ agreement. See Collins v. Thompson, 679 F.2d 168, 172 (9th Cir. 1982) (“Judicial approval of a [class action settlement] is clearly a condition subsequent, and should not affect the legality of the formation of the proposed [settlement] as between the negotiating parties.”) At the time of the settlement, Defendants knew they had dispositive motions pending and chose the certainty of settlement rather than the gamble of a ruling on their motions. Thus, Defendants chose to forego the chance that the district court would grant summary judgment in their favor. Because the parties bound themselves to a settlement agreement subject only to court approval (which they had agreed to seek) and gave the required notice of the agreement, the district court should not have (1) filed its order granting the motions for summary judgment and (2) entered final judgments against the Class.
...
That the district court had already drafted a summary judgment order is not justification for refusing to approve an otherwise enforceable settlement agreement between the parties.

In a second holding of less interest to wage and hour lawyers and litigants, the Ninth Circuit added that there were triable issues of material fact and the court should not have granted the summary judgment motion anyhow.

More on That Starbucks Verdict

Starbucks is not planning to pay its California baristas back for tips they shared with shift supervisors, nor to obey a San Diego Superior Court order to stop the practice. In a voicemail message to employees last week, Chief Executive Howard Schultz said the ruling "would take away the right of shift supervisors to receive the tips they earn for providing superior customer service" and the company executives "strongly believe that this ruling is extremely unfair and beyond reason."

We already discussed our take on the ruling last month. For the perspective of an employer-side blog, check out Entertaining Employment Law.

Meanwhile, some workers and lawyers in Massachusetts heard about the lawsuit, presumably, and decided to pursue similar claims there:

A former Boston-area Starbucks worker claims he was shortchanged by the coffee company's tips policy and he is now taking the coffee giant to court, claiming his managers swiped his tips. The lawsuit filed in Suffolk Superior Court comes days after the Seattle-based coffee company was ordered to pay millions in a similar case.

There will probably be more still.

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.

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.