Atempa. v Pedrazzani, 27 Cal.App, 5th 809 (2018)

Labor Code § 558(a) provides that an employer “or other person acting on behalf of an employer” who causes a violation of the laws in the 500 series of the Code (which includes statutes pertaining to overtime and meal periods) is subject to a civil penalty. Labor Code § 1197.l(a) similarly provides that an employer “or other person acting either individually or as an officer, agent, or employee of another person” who pays or causes to be paid less than the applicable minimum wage is subject to a civil penalty. The plaintiffs worked for a restaurant owned by a corporation of which the defendant was the owner, president, secretary, and director. Plaintiffs filed a class action for, inter alia, failure to pay overtime and the minimum wage and included a cause of action for civil penalties under the Labor Code Private Attorneys General Act of 2004 (PAGA). Plaintiffs prevailed at a bench trial and were awarded PAGA penalties against both the restaurant and the defendant, jointly and severally, The defendant contended he should not be held personally liable simply for being an individual officer of the corporate employer (restaurant), since he was not the plaintiffs’ employer. The court of appeal rejected this argument, holding that the plain meaning of the statutes’ language established individual liability based on the facts at issue. The Atempa court distinguished Reynolds v. Bement ¹ and Martinez v Combs,² noting that those two cases focused on who could be held liable for the employer’s conduct and how to determine the employer’s “identity” for purposes of a private right of action for wages, whereas the statutes in question focus on the actions of individuals and conduct giving rise to civil penalties. The court highlighted that dictum in Reynolds suggested there were remedies other than recovering lost wages from corporate officers and directors, such as through civil penalties.³ In a footnote, the Atempa court agreed that the two statutes in question allowed for recovery of flat sums in amounts “sufficient to recover underpaid wages,” not as wages qua wages but rather as civil penalties. Because the defendant was a person other than the employer who had caused the Labor Code sections regarding overtime and minimum wage to be violated, he was subject to civil penalties, which could be enforced by the plaintiffs through a PAGA action, and to post-judgment interest. The court also held that the alter ego doctrine did not apply.

PAGA Notices Must Contain More Than Bare Pleadings and Must Be Timely Filed

Brown v. Ralphs Grocery Co., 28 Cal. App. 5th 824 (2018)

Labor Code§ 2699.3(a)(l) requires an aggrieved employee under PAGA to give written notice of the Labor Code sections alleged to have been violated to both the employer and the Labor and Workforce Development Agency (LWDA), and the notice must describe the facts and theories supporting each violation. Here , the plaintiff’s description of the violations was little more than “a string of legal conclusions with no factual allegations or theories of liability to support them,” ⁴ Such as the employees “did not take all meal and rest periods and were not properly compensated for missed meal and rest periods” in violation of Labor Code §§ 226.7 and 512. The court of appeal held that such a notice did not provide enough information for the LWDA to assess how serious the violations were (i.e., “·whether it should investigate), or for the employer to understand which policies or procedures needed curing. The court did note two exceptions, however. First, in the plaintiff’s description of the alleged wage statement violations, “the failure to include the name and address of the legal entity that is the employer,” was adequate to describe the violation of Labor Code §226(a) requirements. Second, the claimed violation of Labor Code §558, which sets forth a civil penalty for the violation of other Labor Code provisions, was “not the type of provision to be specified in a PAGA notice,” since the employee needed to allege an underlying violation in the notice for which §558 provided the remedy.

The court found that the plaintiff’s second PAGA notice, filed seven years after the first and alleging violations of different Labor Code sections than the first notice, was neither timely filed within the one-year statutory period nor saved by other doctrines such as equitable tolling, judicial estoppel, or waiver. However, the appellate court remanded the matter to the trial court to determine whether the later-added Code sections allegedly violated (201, 202, 203, 1174(d), and 1198) related back to the original notice of the §226(a) violation.

PAGA Representative Plaintiffs May Pursue Claims for Any Labor Code Violation Employer Has Committed; Strict Class Action Procedural Requirements Do Not Apply

Carrington v. Starbucks, 30 Cal. App. 5th 504 (2018)

At trial, the plaintiff prevailed in a PAGA-only action for penalties related to violations of Labor Code §226.7 and 512 (meal periods). Although the plaintiff had only been a barista for four months and individually suffered “at least” two meal period violations, the trial court found they were ascertainable and therefore the plaintiff had an adequate representative claim and the de minimis doctrine should not apply. However, the trial court substantially limited the penalty award the plaintiff sought, noting the violations were “greatly minimal” and the defendant had attempted to comply fully with the legal meal period requirement. Still, the court imposed a $5 civil penalty (instead of $50) for approximately 30,000 violations. The Fourth District Court of Appeal affirmed the recent decision in Huff v. Securitas Sec. Servs. USA, Inc.,⁵ in which the Sixth District held that an employee who has suffered at least one Labor Code violation may “pursue penalties for all the Labor Code violations committed by that employer.” ⁶ The Carrington court noted that the plaintiff had directly experienced a meal period violation herself and disagreed that the allegations in her complaint and at trial should be construed as narrowly as the defendant urged. Rather, the salient issue was that Starbucks did not provide compliant meal breaks for which it needed to be held accountable. The appellate court also rejected the defendant’s argument that Carrington’s experience was too individualized for her to be an adequate representative plaintiff, holding, “Because this was a PAGA action, Carrington was not required to fulfill strict class action procedural requirements.” ⁷ However, the court found the plaintiff presented sufficient evidence showing that “generally applicable corporate policies and procedures resulted in [violations for] numerous employees,” and therefore substantial evidence supported the plaintiff’s representative claim.

Class Certification Properly Denied, Plaintiff’s Adequacy Properly Challenged

Payton v. CSI Blee. Contractors, Inc.,27 Cal. App. 5th 832 (2018)

The Second District Court of Appeal upheld the denial of class certification, finding the plaintiff’s rest period claim unworkable because too many individual issues predominated. The appellate court further found that with respect to both classes plaintiff sought to certify,

(1) his trial plan was inadequate; and (2) he was not a suitable class representative, because (a) he had prior criminal convictions, and (b) he was pursuing an individual wrongful termination action, which the trial court found would be too distracting to the prosecution of the class claims at trial. Plaintiff also had credibility issues (on his union apprenticeship application, he had failed to disclose a three-month sentence he had served for felony sale of marijuana, and an eight-year sentence he had served for lewd and lascivious acts with a minor under 14). ⁸ The Payton

Wage Order Provision Exempting Healthcare Workers From Waiver of Second Meal Period Does Not Violate the Labor Code

Gerard v. Orange Coast Mem. Med. Ctr.,6 Cal. 5th 443 (2018)

California has long recognized that its wage and hour laws are “governed by two complimentary and often overlapping sources of authority”:⁹ the Labor Code and the wage orders promulgated by the Industrial Welfare Commission (IWC). If there is a conflict between the two, the Labor Code prevails, as the IWC’s authority derives from the Legislature. In this case, the defendant hospital, pursuant to the applicable wage order, allowed employees working shifts longer than 12 hours to waive their second meal periods, which the plaintiffs did, but then sued, alleging the waiver violated Labor Code § 512. This case has a well-traveled past highlighting the interplay between the wage orders and the Labor Code. In 1993, the healthcare industry successfully lobbied for a carve-out in the wage order regarding overtime requirements for its workers. The Legislature responded by amending the Labor Code in 1999 and ordering the IWC to reissue regulations consistent with the new statutes. The IWC adopted new wage orders in 2000 (keeping the carve-out), but before they became effective the Legislature enacted further amendments to the Code seemingly overriding the carve-out. Gerard was first taken up by the court of appeal in 2015 (Gerard I), which invalidated the wage order carve-out. In response, the Legislature amended Labor Code § 516, overruling Gerard I, and noting support from both hospitals and healthcare employee unions. Defendant petitioned the supreme court, which granted review and remanded in light of the new legislation. In 2017, the court of appeal concluded (Gerard II, previously reviewed in this column) it had erred in Gerard I by misconstruing the date the IWC wage order was adopted with the date it became effective and reversed its decision. Plaintiffs appealed Gerard II, and the supreme court again granted review. Plaintiffs’ appeal of Gerard II focused on the language in Labor Code §517(a), which stated that the IWC wage orders adopted by July 1, 2000 needed to be “consistent with this chapter,” which the plaintiffs contended meant the moment the initial legislation was enacted in 1999. The high court disagreed, noting that the wage order was adopted before July 1, 2000.

Labor Code §226.2, Requiring Paid Rest Periods for Piece Rate Workers, Is Not Unconstitutional

Nisei Farmers League v. LWDA,30 Cal. App. 5th 997 (2019)

Plaintiffs, on behalf of thousands of California employers in the agricultural and construction industries, challenged the constitutional validity of Labor Code § 226.2, which established effective January 2016 that piece rate workers must be paid for rest and recovery periods and “other nonproductive time” separate and apart from any compensation on a piece-rate basis. The new code section also established a “safe harbor” affirmative defense, allowing employers to promptly correct past failures to compensate piece-rate workers for “actual sums due” while being shielded from liability for statutory penalties and damages. Section 226.2 codified the 2013 decisions of Gonzalez v. Downtown LA Motors, LP ¹⁰ and Bluford v Safeway Inc., ¹¹ which both applied the rule from Armenta vs Osmose, Inc., ¹² that employees paid on a piece­ rate basis are not fairly compensated for time in which they are not being “productive,” i.e., earning their piece rate, and therefore must be paid separately for nonproductive time. Per Bluford, a piece-rate compensation formula that does not compensate separately for rest periods fails to comply with California’s minimum wage. ¹³ Plaintiffs alleged that their piece-rate system ensured workers earned compensation that “far exceed[s] minimum wage or what they could expect to earn through hourly compensation.”

Plaintiffs further alleged that the phrase “other nonproductive time” was unconstitutionally void for vagueness, and that the “safe harbor” provision was so unclear that it was impossible for employers to know how to comply with the terms of the affirmative defense; therefore, it failed to provide adequate due process.

The court of appeal adopted the reasoning of Gonzalez and Bluford, along with general void for vagueness principles, and found the plaintiffs failed to allege adequate grounds to attack the statute on its face. The appellate court held that the constitution does not require statutes to be as detailed in the definitions of their terms as the plaintiffs contended, so long as they give fair notice to whom they are directed. The court also found that the statute’s terms did not impose new requirements on employers retroactively, as the plaintiffs alleged, and affirmed the denial of declaratory relief as a nonjusticiable request for an advisory opinion.

Prevailing Wage Law Is Neither Unconstitutional nor Preempted by the FAAAA

Allied Concrete & Supply Co. v. Baker, 904 F.3d 1053 (9th Cir 2018)

California’s prevailing wage law is the minimum wage which workers employed on “public works” (construction or related work, done pursuant to contract, and paid for in part or in whole by public funds) must receive. The Director of the Department of Industrial Relations (Director) publishes prevailing wage rates. Labor Code § 1720.9, which became effective January 2016, clarifies that the prevailing wage applies to drivers of ready­ mixed concrete (ready-mix drivers) delivering to public works. Plaintiffs filed suit against the Director and Labor Commissioner, alleging that § 1720.9 violated the Equal Protection Clause of the U.S. Constitution or, in the alternative, was preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA). The district court granted the plaintiffs’ motion for a preliminary injunction, finding that § 1720.9 arbitrarily classified ready-mix drivers differently from other drivers, and that such a distinction was not rationally related to any State interest, however legitimate. The Director and Labor Commissioner appealed. The Ninth Circuit held that California’s prevailing wage laws further several State goals, including worker protection, benefiting the public with superior efficiency of public works projects due to well­ paid employees, and allowing union contractors to compete with nonunion contractors. The court further surmised that the Legislature could have rationally concluded that extending prevailing wage law specifically to ready-mix drivers would further those goals because ready-mix drives are more integrated into the construction process, more skilled than other drivers, and more likely to be unionized and therefore vulnerable to underbidding-any one of which could have passed the rational basis test. The appellate court rejected the plaintiffs’ argument that the new law was nothing more than bare economic favoritism by the State.

The Ninth Circuit also affirmed the district court’s dismissal of the FAAAA preemption claim, holding that the prevailing wage law was not “related to” prices, routes, and services. ¹⁴