Recent Employment Law Decisions

California Supreme Court

When a utilization reviewer is alleged to have harmed a plaintiff during the course of an exam under the workers compensation utilization review process, workers compensation is that plaintiff’s exclusive remedy.

KING v. COMPPARTNERS, INC.

PLAINTIFF KING USED THE WORKERS COMPENSATION SYSTEM FOR HIS BACK INJURY

Because the court was reviewing the matter after the sustaining of a demurrer, it took the allegations in the complaint to be true.

Plaintiff King injured his back at work in 2008. He experienced pain, anxiety and depression for which he received medication, including psychotropic drugs, since 2013.

THE UTILIZATION REVIEWER DETERMINED THAT THE PSYCHOTROPIC DRUGS WERE NOT MEDICALLY NECESSARY

The Workers Compensation Act provides for a utilization reviewer, a medical doctor acting on the employer’s behalf, to determine if the treating physician’s treatment recommendations are medically necessary. In 2013, a utilization reviewer determined that one of the psychotropic drugs, Klonopin, was unnecessary and decertified the prescription.

PLAINTIFF KING SUED FOR THE SIDE EFFECTS OF STOPPING THE MEDICATION WITHOUT A WEANING PERIOD

According to the complaint, the utilization reviewer did not warn Plaintiff King of the side effects of stopping the medication, nor of the need to be weaned off of it. Plaintiff King suffered seizures as a result of immediately stopping the medication.

Plaintiff King sued the utilization reviewer for professional negligence, among other claims.

THE APPELLATE COURTS SUSTAINED A DEMURRER, BUT FOUND NO PREEMPTION BY WORKERS COMPENSATION

The trial court sustained a general demurrer without leave to amend on the ground of preemption. The appellate court upheld the sustaining of the demurrer. The appellate court stated, however, that leave to amend should have been granted because the utilization reviewer owed a duty of care to Plaintiff King, and it challenged the failure to warn rather than the medical necessity determination.

THE SUPREME COURT FOUND THE CLAIMS PREEMPTED BY WORKERS COMPENSATION

The Supreme Court disagreed. It discussed extensively those provisions of the Workers Compensation Act that preempt, both explicitly and otherwise, claims for damages arising out of workplace injuries.

The court found that the injuries alleged were “collateral to or derivative of” the original back injury because they occurred as a result of “conduct occurring in the workers compensation claims process.” The statutory scheme of workers compensation differs from ordinary tort principles of causation, requiring only a link “in some casual fashion” to the workplace injury.

CONCLUSION

Injuries that come about as a result of a workplace injury will have their exclusive remedies within the workers compensation system, even if the relationship between them is attenuated, if it came about due to conduct occurring in the workers compensation claims process.

Cal. Supreme Ct., Filed 8/23/18, Opinion by Justice Kruger

Full Decision

California Courts of Appeal

Under Labor Code Section 512(a), Employees and Employers May Mutually Agree to Waive Meal Periods for Shifts of Six Hours or Less.

EHRET v. WINCO FOODS, LLC

PLAINTIFFS WAIVED MEAL PERIODS AND THEN SUED FOR LACK OF MEAL PERIODS

Plaintiffs brought a wage and hour class action against Defendant WinCo, claiming meal break violations for shifts lasting between five and six hours. Employees had previously signed a collective bargaining agreement (CBA) providing that employees who work shifts of over five hours get a 30-minute meal period, except where the day’s work is six hours or less. The trial court granted summary judgment, finding that the employees had waived their right to a meal period for shifts of six hours or less. Plaintiffs appealed.

A CLEAR AND UNMISTAKABLE MUTUAL WAIVER OF MEAL PERIODS FOR SHIFTS OF SIX HOURS OR LESS IS VALID

Labor Code section 512(a) requires an employer to provide a meal period for employees working more than five hours per day. Section 512(a) allows the employer and employees to mutually consent to waive the meal period if the employees work no more than six hours per day. A union may waive statutory rights of represented employees in a CBA, but the waiver must be clear and unmistakable. To be clear and unmistakable, the waiver must be specific and mention either the statutory protection being waived or the statute itself. Here the CBA waiver clearly and unmistakably waived meal periods for shifts of six hours or less and was therefore valid.

Ca. Ct. App., 4th Dist., Div. 2. Filed 8/13/18. 26 Cal.App.5th 1. Opinion by Justice Ramirez.

Full Decision

If an employer appeals to the Superior Court from a Labor Commissioner decision, the employer must post an undertaking equivalent to the amount awarded the employee. That undertaking is mandatory, and must be posted prior to filing the notice of appeal. Failure to do so deprives the court of jurisdiction, and the appeal will be dismissed.

BURKES v. ROBERTSON

BURKES WON HIS WAGE CLAIM BEFORE THE LABOR COMMISSIONER

California’s Labor Code provides a comprehensive scheme for employees to obtain unpaid wages, as well as attendant penalties, liquidated damages and interest. This scheme is described at Ca. Lab. Code §98 et seq.

Burkes used this process, and filed a complaint with the Labor Commissioner. He won the hearing (called a “Berman Hearing”) and was awarded over $81,563.34 by the Labor Commissioner.

THE EMPLOYER TIMELY APPEALED, BUT DID NOT FILE AN UNDERTAKING

The Labor Code allows for an appeal of the Labor Commissioner’s decision to the Superior Court. That appeal must be made within 10 days of the decision, 15 days if notice is served by mail.

The employer timely appealed pro se. The employer did not, however, post an undertaking in the amount of the award, as required by Ca. Lab. Code §98.2(b).

THE FAILURE TO POST AN UNDERTAKING TIMELY WAS A JURISDICTIONAL BAR TO THE APPEAL

The trial court allowed the employer time to get an attorney, and to request a waiver of the undertaking. The employer did so by motion.

The trial court denied the motion and dismissed the appeal.

The Burkes court affirmed. The court held that the plain language of §98.2(b) was mandatory and jurisdictional: “As a condition to filing an appeal pursuant to this section, an employer shall first post an undertaking with the reviewing court in the amount of the order, decision, or award.” The court found further that the posting of an undertaking was not only jurisdictional, but so was the timing. That is, the plain language of the statute requires that the undertaking be posted “first.” Therefore, the failure at least to seek a waiver prior to filing an appeal was a jurisdictional bar, and the trial court was correct to dismiss the appeal.

PUBLIC POLICY NEEDS OUTWEIGHED THE HARSHNESS OF THE CONCLUSION

However harsh such a result may be to an indigent employer, public policy demands the result. The purpose of the undertaking is to prevent frivolous appeals by the employer, as well as intentional delay or improper hiding of assets. The short time frame for the posting of the undertaking promotes California public policy requiring the prompt payment of wages.

CONCLUSION

California continues to affirm the importance of the wages of its workers. The Labor Code scheme for pursuing unpaid wages through the Labor Commissioner is intended to be a quick enforcement tool, and its requirements will be enforced strictly against employers.

Ca. Ct. App., 1st Dist., Div. 5, Filed 8/20/18, Opinion by Judge Bruiniers

Full Decision

An Arbitrator’s Failure to Comply With Disclosure Requirements is Grounds for Disqualification and Vacating an Award.

HONEYCUTT v. JPMORGAN CHASE BANK, N.A.

PLAINTIFF HONEYCUTT LOST AT ARBITRATION, THEN LEARNED THE ARBITRATOR HAD ACCEPTED TEN NEW CASES INVOLVING DEFENDANT CHASE OR ITS COUNSEL

Plaintiff Patrice Honeycutt filed suit against her former employer, Defendant JPMorgan Chase for discrimination, retaliation, and related claims. The trial court granted Chase’s petition to compel arbitration, and the case proceeded before the American Arbitration Association (AAA). AAA appointed a retired judge to serve as arbitrator and provided the parties with the arbitrator’s disclosure worksheet regarding the arbitrator’s past or present relationships with the parties, counsel, witnesses, etc. The arbitrator answered most of the questions “no” but stated she would entertain offers from the parties and counsel during the pendency of the matter. The arbitrator conducted a six-day arbitration and issued an interim award in favor of Chase on all claims. Surprised by the loss, Honeycutt’s attorney wrote to AAA and asked the case manager to identify every other case the arbitrator had accepted involving Chase or its counsel. The case manager responded that, during the pendency of the arbitration, the arbitrator had accepted eight more cases from Chase’s counsel and two more from Chase. The parties had received no notification regarding several of the cases. Honeycutt sent AAA a formal objection to the arbitrator’s continued involvement in the Honeycutt case and requested the arbitrator’s immediate disqualification. AAA denied the disqualification request. The arbitrator then issued a final award in favor of Chase. Honeycutt filed a petition to vacate the award, arguing that the arbitrator violated Ethics Standards by failing to make the required disclosures. Chase filed a petition to confirm the award, and the trial court confirmed the award. Honeycutt appealed.

ETHICS STANDARDS 7 AND 12 REQUIRE THE ARBITRATOR TO MAKE TIMELY DISCLOSURES RELATED TO THE APPEARANCE OF BIAS

The Legislature is taking an increasingly active role in protecting the fairness of the arbitration process due to the extreme and largely unchecked power of arbitrators. The Code of Civil Procedure and Ethics Standards impose numerous disclosure obligations on arbitrators. “The public deserves and needs to know that the system of private justice that has taken over large portions of California law produces fair and just results from neutral decisionmakers.” At issue here are Ethics Standards 7 and 12, which the Judicial Council adopted to address the bias or appearance of bias that occurs when one side in an arbitration is a source of additional employment and income for the arbitrator. Ethics Standard 7 describes the initial disclosures the arbitrator must make upon nomination or appointment to a case and requires supplemental disclosures within ten days after the arbitrator becomes aware of the matter. The disclosures are a continuing duty from the proposed nomination through the conclusion of the arbitration proceeding. Ethics Standard 7 requires disclosure of all matters that could cause a person to doubt the arbitrator’s impartiality, and specifically requires disclosure of all cases where the arbitrator is acting as a neutral involving a party or lawyer in the current arbitration. Ethics Standard 12 requires disclosure within ten days of the proposed nomination or appointment whether the arbitrator will entertain offers from a party or a party’s attorney during the pendency of the matter. Ethics Standard 12 further requires the arbitrator to inform all parties of any such offer and whether it was accepted within five days.

THE COURT MUST VACATE AN ARBITRATION AWARD WHERE THE ARBITRATOR FAILED TO TIMELY DISCLOSE A GROUND FOR DISQUALIFICATION OF WHICH THE ARBITRATOR WAS AWARE

Code of Civil Procedure Section 1286.2(a)(6)(A) provides that the court “shall vacate the [arbitration] award” if the arbitrator fails to disclose a ground for disqualification of which the arbitrator was aware within the required time. There is no discretion if the grounds for vacating the award are met. Here, the arbitrator violated Ethics Standard 12(b) because her initial disclosure was missing a page. However, Honeycutt waived her right to vacate the award on this basis because she did not serve a notice of disqualification within fifteen days of the arbitrator’s error. Honeycutt was required to object to the defective disclosure, demand a complete and compliant disclosure, or move to disqualify the arbitrator at that time.

“THE ARBITRATOR DISCLOSURE RULES ARE STRICT AND UNFORGIVING.”

The arbitrator violated Ethics Standard 12(d) by failing to disclose four acceptances of new cases involving Chase or its counsel. She violated the same rule for all new cases by only disclosing acceptances, when she was required to disclose both the offer and the subsequent acceptance. This also violated the arbitrator’s continuing duty under Ethics Standard 7(d) to disclose her service as an arbitrator in another pending case involving a party or lawyer in the current arbitration. Vacating the award is required only if the arbitrator was aware of the ground for disqualification and did not disclose it. However, where the arbitrator fails to comply with Ethics Standard 12(d), the party seeking to vacate the award does not have to show the arbitrator was aware of the failure to disclose because Ethics Standard 7(d) governs the arbitrator’s disclosure obligations in that situation. Here, the arbitrator was aware of four additional arbitrations involving Chase’s counsel and did not disclose them. This failure requires that the arbitration award be vacated under CCP section 1286.2. An arbitrator may be unaware that a case manager did not send a notice or that a notice was incorrectly addressed, but an arbitrator knows she has an arbitration and knows the parties and attorneys involved in that arbitration. Honeycutt did not waive her right to vacate the award because she did not know of the arbitrator’s failure to disclose at the time of the failure. Honeycutt timely moved to disqualify within fifteen days of learning of the arbitrator’s failure.

CELA INVOLVEMENT

Congratulations to CELA member Twila White and Imran Rahman.

Ca. Ct. App., 2nd Dist., Div. 7. Filed 8/2/18. 25 Cal.App.5th 909. Opinion by Justice Segal.

Full Decision

Labor Code Section 226.2’s Safe Harbor Provision Applies to Rest Break Claims Accruing on or Before December 31, 2015.

JACKPOT HARVESTING COMPANY, INC. v. SUPERIOR COURT (LAINEZ)

Effective January 1, 2016, Labor Code section 226.2 addresses how piece-rate employees are compensated for rest periods and other nonproductive time on the job. Section 226.2(b) provides a safe harbor for employers who failed to properly compensate piece-rate employees for rest time prior to 2016. An employer that pays its employees for previously unpaid rest time accrued between July 1, 2012 and December 32, 2015 has an affirmative defense to any claim based solely on its failure to timely pay compensation for missed rest breaks. Plaintiffs filed suit claiming that the safe harbor applies only to claims accruing during that time period and not to claims that began accruing before July 1, 2012 and continued to accrue during the safe harbor period.

THE TRIAL COURT FOUND LABOR CODE SECTION 226.2 AMBIGUOUS AS TO THE TIMEFRAME COVERED BY THE SAFE HARBOR

Plaintiffs filed a class action in May 2015. In March 2016, Jackpot filed an amended answer alleging compliance with section 226.2(b). It later moved for summary adjudication of the rest break cause of action due to its compliance with the safe harbor provision. The trial court denied the MSA, finding that the safe harbor provision did not apply to rest break claims accruing before July 1, 2012. Jackpot filed a petition for writ of mandate.

THE COURT OF APPEAL FOUND LABOR CODE SECTION 226.2 UNAMBIGUOUS, AND JACKPOT MET THE REQUIREMENTS OF THE SAFE HARBOR

Labor Code section 226.2(b) states that the safe harbor applies to “time periods prior to and including December 31, 2015.” One of the following subparts requires the employer to pay employees for unpaid rest time from July 1, 2012 to December 31, 2015. The statute is unambiguous that the safe harbor applies to all time periods before and including December 31, 2015. The subpart means only that the employer need not pay employees for rest period violations occurring before July 1, 2012 to meet the requirements of the safe harbor.

Ca. Ct. App., 6th Dist. Filed 8/14/18. 26 Cal.App.5th 125. Opinion by Justice Bamattre-Manoukian.

Full Decision

An Attorney Who Signs a Settlement Agreement Approving as to Form and Content is Not Bound By the Settlement Agreement.

MONSTER ENERGY COMPANY v. SCHECHTER

ATTORNEY SCHECHTER GAVE A REPORTER INFORMATION REGARDING A CONFIDENTIAL SETTLEMENT

The Fourniers filed a lawsuit against Defendant Monster Energy Company. One of their attorneys was Plaintiff Bruce Schechter. The Fourniers and Monster settled the case, and the settlement agreement provided that it was entered into by the parties individually and on behalf of their attorneys. The agreement contained a confidentiality provision applying to “Plaintiffs and their counsel of record.” The Fourniers and Monster signed the agreement. Schechter signed under the “approved as to form and content” signature block as the Fournier’s counsel. Schechter then participated in an interview with a reporter during which he stated that Monster energy drinks were deadly and that he had resolved a case involving a dead teenager for substantial money, but Monster did not want the amount disclosed. An article including Schechter’s statements was published online. Monster sued Schechter for breach of contract and other claims related to his statements. Schechter filed an anti-SLAPP motion to strike pursuant to CCP section 425.16. The trial court denied the motion as to the breach of contract claim, finding that the settlement agreement clearly contemplated counsel being subject to the agreement, and counsel had signed the agreement. Schechter appealed.

THE ANTI-SLAPP STATUTE DOES NOT APPLY TO COMMERCIAL SPEECH

The anti-SLAPP statute allows a defendant to bring a special motion to strike a cause of action arising from constitutionally protected speech or petitioning activity. The anti-SLAPP analysis has two steps: (1) The court decides whether the defendant made the threshold showing that the cause of action arises from protected activity. If so, (2) the court considers whether the plaintiff demonstrated a probability of prevailing on the claim. The cause of action must both arise from protected activity and lack even minimal merit in order to be stricken. The anti-SLAPP statute does not apply to commercial speech, even though commercial speech is protected by the First Amendment. The trial court found that Schechter’s speech was not commercial. Because that determination was based on an assessment of intent and credibility, and not a question of law, the Court of Appeal declined to reverse it since the trial court’s conclusion had some support in the record. Therefore, Schechter’s speech was protected activity.

SCHECHTER WAS NOT BOUND BY THE SETTLEMENT AGREEMENT BECAUSE HE WAS NOT A PARTY TO IT

Signing “approved as to form and content” meant that Schechter had reviewed the agreement and given his clients professional approval to sign it. His signature did not mean he was bound by the agreement. Any language in the agreement purporting to apply to Schechter was null because Schechter never consented to be bound by the agreement. The Court noted that an attorney who discloses a confidential settlement faces practical and ethical risks, so avoid a Monster headache and maintain confidentiality.

Ca. Ct. App., 4th Dist., Div. 2. Filed 8/13/18. 26 Cal.App.5th 54. Opinion by Ramirez.

Full Decision

Resignation After Business Hours Does Not Immediately Start the 72-Hour Deadline to Issue a Final Paycheck. A Claimant With Minimal Success is Considered Successful for Purposes of Labor Code Section 98.2 Attorney Fees.

NISHIKI v. DANKO MEREDITH, APC

Plaintiff Taryn Nishiki resigned via email at 6:38 p.m. on a Friday. Defendant Danko Meredith, APC mailed her a check the following Tuesday. The dollar amount written in the check’s amount box differed slightly from the spelled-out version of the dollar amount. On Wednesday, Nishiki emailed Danko Meredith notice that she could not deposit the check due to the inconsistency in the amounts. Danko Meredith mailed her a corrected check nine days later. Nishiki filed a complaint with the Labor Commissioner seeking unpaid vacation wages, rest period premiums, and waiting time penalties for the delay in receiving her final check. The hearing officer rejected the first two claims but found she was owed waiting time penalties for the time between the mailing of the first check and the mailing of the corrected check. Danko Meredith appealed to the Superior Court, and the Court agreed with the hearing officer and awarded attorney fees. Danko Meredith appealed.

THE 72-HOUR DEADLINE TO PAY FINAL WAGES DOES NOT BEGIN TO RUN IN THE EVENING AFTER BUSINESS HOURS

When an employee resigns without notice, Labor Code section 202 requires the employer to pay the employee all wages within 72 hours. If the employer willfully fails to pay, the employee’s wages continue as a penalty for up to 30 days, pursuant to Labor Code section 203 (waiting time penalties). The 72 hours did not begin to run when Nishiki sent her emailed resignation, since it was sent after business hours. The Court of Appeal declined to decide whether the 72 hours began to run on Saturday or Monday, noting that the check mailed on Tuesday was timely either way.

FAILURE TO PAY FINAL WAGES IS NOT “WILLFUL” UNDER SECTION 203 IF THE FAILURE WAS DUE TO A MISTAKE

Danko Meredith argued that it had not willfully refused to pay Nishiki. “Willful” under section 203 means the employer intentionally failed or refused to perform an act that was required to be done. “Willful” does not mean blameable or malicious in this context, but rather that the person knows what he is doing, intends to do what he is doing, and is a free agent. Here, there is no evidence that the mistake on the first check was anything but clerical error. Therefore, the failure to pay was not willful. However, the failure to fix the mistake was willful. Nishiki was entitled to waiting time penalties for the period between her notice of the defective first check and the issuance of the second check.

ATTORNEY FEES UNDER SECTION 98.2 OFTEN EXCEED THE WAGE RECOVERY, AND MULTIPLIERS ARE FAVORED WHEN BASED UPON CONTINGENT RISK

Labor Code section 98.2 is a one-way attorney fee provision allowing fees only against a party who unsuccessfully appeals an administrative award. A claimant who achieves only minimal success is considered successful for purposes of section 98.2. In many cases, the employee’s attorney fees will exceed the wage recovery. The trial court properly rejected Danko Meredith’s request to reduce the fee award in proportion to Nishiki’s unsuccessful claims, and the Court of Appeal affirmed the full fee award, including the 1.5 multiplier. The primary factor in upholding the multiplier was the risk incurred by Nishiki’s attorneys in taking the case on contingency, which the Court likened to offering a loan with a high risk of default.

Ca .Ct. App., 1st Dist., Div. 4. Filed 8/1/18. 25 Cal.App.5th 883. Opinion by Judge Schulman.

Full Decision

Ninth Circuit

An employer violates the Americans with Disabilities Act when it regards a job applicant as having a disability, and requires the applicant to provide diagnostic tests at the applicant’s expense.

EEOC v. BNSF RAILWAY CO.

PLAINTIFF RECEIVED A JOB OFFER CONDITIONED UPON GETTING AN MRI OF HIS BACK AT HIS OWN EXPENSE

Plaintiff Holt received a conditional job offer from Defendant BNSF Railway Company. It was conditioned upon the results of a post-offer medical review. During that review, Holt disclosed that he had a previous back injury, and several of his doctors determined that he had no limitations as a consequence.

After the review, BNSF required Holt to provide an MRI of his back at his own expense. Because he could not afford it, and therefore did not obtain it, BNSF withdrew the job offer.

THE DISTRICT COURT FOUND THAT BNSF VIOLATED THE ADA AND ISSUED AN INJUNCTION

The parties filed cross-motions for summary judgment. The district court denied BNSF’s motion and granted the EEOC’s motion for partial summary judgment, finding that BNSF had indeed violated the ADA. The parties agreed to the damages amount without waiving their rights to appeal.

The district court also issued a nationwide injunction, requiring BNSF to bear all costs of additional medical information that it deems necessary to complete an applicant’s medical review. If BNSF chose not to obtain additional medical information, it must complete its review based on the information it did have.

PLAINTIFF HOLT HAD A DISABILITY AND WAS DISCRIMINATED AGAINST BECAUSE OF IT

On appeal, the 9th Circuit determined that Plaintiff Holt had a disability within the meaning of the ADA. Using the ADA’s “regarded as” prong, the 9th Circuit pointed out that, so long as an employer regards an applicant as having a disability, that disability need not even substantially limit a major life activity – nor even actually be a disability at all.

Here, by requiring an MRI as a condition of employment, BNSF demonstrated that it regarded Holt as having a disability, unless he could disprove it. The fact that doctors testified that they were uncertain whether he had a back condition or not was irrelevant, because the “perceived impairment” requirement of the “regarded as” prong was broadly worded, especially without the need for a substantial limitation on a major life activity.

Discrimination occurred when BNSF required Holt to obtain and pay for an MRI as a condition of employment. That was a condition discriminatory applied to him because of his perceived disability.

The court remanded the matter for additional factual findings to support the scope of the injunction.

CONCLUSION

Although medical examinations can be required of applicants in some cases, they cannot be discriminatorily required of applicants with disabilities, including perceived disabilities.

9th Cir., 4th Dist., Filed 8/29/18, Opinion by Judge Gould

Full Decision

The Amount in Controversy Assessment Under CAFA Includes Present and Future Attorney Fees.

FRITSCH v. SWIFT TRANSPORTATION COMPANY OF ARIZONA, LLC

THE DISTRICT COURT ERRONEOUSLY INCLUDED ONLY ATTORNEY FEES ACCRUED AT THE TIME OF REMOVAL

Plaintiff Fritsch, on behalf of the class of employees, served Defendant Swift with a mediation brief that included a damages chart. The damages chart outlined over $5.9 million in damages, fees, and penalties. Swift removed the case to federal court under the Class Action Fairness Act (CAFA). Swift cited the damages chart in its removal papers. The amount in controversy analysis under CAFA excludes interest and PAGA penalties. The district court found only $4.7 million in controversy. The district court remanded the case to state court because Swift failed to prove that the matter in controversy exceeded the value of $5 million, as required by CAFA. In assessing the amount in controversy, the district court held that only the attorney fees incurred as of the date of removal could be included. Swift appealed to the Ninth Circuit.

DEFENDANT BEARS THE BURDEN OF PROVING POTENTIAL FUTURE ATTORNEY FEES WHEN SEEKING REMOVAL

The amount in controversy is determined at the time of removal. However, the actual dollar amount is the amount at stake in the litigation and includes all relief to which the plaintiffs would be entitled if they prevail. Therefore, future attorney fees must be included when assessing the amount in controversy. The Ninth Circuit remanded the matter back to the district court to assess whether Swift had proven that the amount in controversy exceeded $5 million with future attorney fees included.

9th Circuit. Filed 8/8/18. 899 F.3d 785. Opinion by Judge Ikuta.

Full Decision

Although California class actions are opt-in, and FLSA collective actions are opt-out, the settlement of a state class claim can effectively release FLSA claims.

RANGEL v. PLS CHECK CASHIERS OF CALIFORNIA, INC.

A CLASS OF PLAINTIFFS SETTLED A WAGE-AND-HOUR CLASS ACTION UNDER CALIFORNIA LAW

In early 2014, a putative class of plaintiffs sued PLS Check Cashiers, alleging violations of California’s Labor Code. The parties reached a tentative settlement at the end of that year, and a final settlement in April 2015.

The settlement included all class members who did not opt out, releasing all claims that could have been brought under the facts as alleged.

PLAINTIFF RANGEL SUED UNDER THE FLSA

Plaintiff Rangel, who was covered by the settlement, nonetheless sued in federal court, alleging claims of the Fair Labor Standards Act (“FLSA”). She alleged wage and hour causes of action under that statute, and sought to bring her claim as a collective action under federal law.

THE FLSA CLAIMS WERE PRECLUDED BY RES JUDICATA

The district court dismissed Rangel’s suit on the ground that the settlement in state court constituted res judicata as against the FLSA claims. Rangel appealed, arguing that the FLSA claims were opt-in, as opposed to the state opt-out claims, and therefore res judicata didn’t apply.

The Ninth Circuit upheld the district court. Although the FLSA claims were opt-out, they were factually related, and therefore the court deemed them released. The settlement released claims that could have been brought under the facts alleged, which the court concluded meant claims that were factually related, whether they could functionally have been brought or not.

CONCLUSION

There seems to be a trend to uphold previous settlement agreements, even when the connection between the settlement and the new action is tenuous. This case is an example of that.

CELA INVOLVEMENT

Kevin Mahoney, Katherine J. Odenbreit, Atoy H. Wilson, and Dionisios Aliazis of the Mahoney Law Group APC litigated this matter on behalf of the Plaintiff/Appellant.

9th Cir., Filed 8/16/18. Opinion by Judge Berzon

Full Decision

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