California Courts of Appeal
CRUZ v. FUSION BUFFET, INC.
PLAINTIFF CRUZ PREVAILED AT TRIAL WITH AN AWARD LESS THAN THE THRESHOLD FOR UNLIMITED JURISDICTION
Plaintiff Justine Cruz worked as a server for a restaurant operated by Defendant Fusion Buffet. Cruz sued Fusion Buffet for minimum wage, overtime, and other wage and hour violations. Fusion Buffet sought to reclassify the action as a limited jurisdiction case. In opposition, Cruz estimated she sought $41,000 in damages. The trial court denied the motion. After a bench trial, the court found for Cruz on seven of her ten claims. Both parties filed competing motions for attorney fees and costs. The court analyzed the motions pursuant to Labor Code sections 218.5 and 1194 and awarded Cruz a reduced fee award of $47,000 plus costs. Fusion Buffet appealed, and the Court of Appeal affirmed.
COURTS HAVE DISCRETION TO AWARD ATTORNEY FEES TO PLAINTIFFS
Though CCP 1033 gives a court discretion to decline to award fees and costs where a plaintiff could have filed in limited jurisdiction, it does not require the court to do so. Fusion failed to demonstrate that the court abused its discretion in deciding to award Cruz her costs and some of her attorney fees. Cruz reasonably could have expected to recover $41,000 in damages, meaning she did not over-file or abuse court resources. Nor did the court abuse its discretion in failing to apportion attorney fees between the causes of action. The court was not required to apportion where all of Cruz’s claims involved common factual and legal issues and were inextricably intertwined.
CELA INVOLVEMENT
Congratulations to CELA members Rodrigo E. Guevara and Rafael Hurtado of Abogato, LLP!
COA 4th Dist., Div 1. Filed 10/15/20, publication ordered 11/9/20. 57 Cal.App.5th 221. Opinion by Justice Aaron.
SEMPRINI v. WEDBUSH SECURITIES, INC.
WEDBUSH PAID ITS EXEMPT FINANCIAL ADVISORS ON COMMISSION ONLY
Defendant Wedbush Securities classified its financial advisors as exempt under the administrative exemption. It paid the financial advisors in commissions. However, if the advisor did not earn at least double California’s minimum wage in a given month, Wedbush paid the commissions plus a “draw,” an advance on future commissions, equal to the difference between that month’s commissions and the minimum wage. Advisors were expected to repay the draw, and it carried forward as a deficit until it was repaid in commissions. Plaintiffs Joseph Semprini and Bradley Swain filed a class action, alleging that Wedbush misclassified the financial advisors as exempt. The trial court certified the class. In a bifurcated bench trial, the court ruled that the compensation plan satisfied the salary basis test, and the administrative exemption provided a complete defense. The Plaintiffs appealed, and the Court of Appeal reversed.
A COMPENSATION PLAN BASED ON 100% COMMISSIONS DOES NOT SATISFY THE SALARY BASIS TEST FOR THE ADMINSITRATIVE EXEMPTION
Pursuant to IWC wage order 4-2001, an employee qualifies for the administrative exemption if they: (1) are primarily engaged in exempt duties, and (2) earn a monthly salary equivalent to at least two times the state minimum wage for full-time employment. Since the parties stipulated that the duties test was satisfied, the only issue on appeal was the salary basis test. Since an exemption is an affirmative defense, the employer bears the burden of proof. 29 C.F.R. 541.602(a)(3) states that up to 10% of the salary amount may be satisfied by commissions, so a compensation plan based 100% on commissions cannot satisfy the salary basis test under federal or California law. To satisfy the test, the employee must receive a pre-determined amount that is not subject to reduction. Though earned commissions are wages, advances on commissions not yet earned are not wages, so Wedbush’s “draws” do not satisfy the test. Advances are not wages.
COA 4th Dist., Div. 3. Filed 11/9/20. 57 Cal.App.5th 246. Opinion by Justice Goethals.
THE PEOPLE v. SUPERIOR COURT (CAL CARTAGE TRANSPORTATION EXPRESS)
DRAYAGE WORKERS WERE BEING TAKEN ADVANTAGE OF
Drayage involves the short haul transportation of goods, in this case from the ports of L.A. and Long Beach. Drivers were deemed independent contractors to the motor carrier companies for which they worked. The drivers frequently netted less than minimum wage or nothing at all, as they had to finance their trucks under unfavorable terms and accept various costs of doing business that would normally fall on an employing company. In 2018, S.B. 1402 referred to California’s drayage drivers as “the last American sharecroppers, held in debt servitude and working dangerously long hours for little pay.”
THE STATE SUED FOR UNFAIR BUSINESS PRACTICES, AND THE TRIAL COURT FOUND THE CLAIMS PREEMPTED UNDER THE FAAAA
The Los Angeles City Attorney, acting for the State of California, filed a class action alleging unfair business practices. The People alleged that the defendant companies, by misclassifying drayage drivers as independent contractors, improperly realized various unfair advantages, including avoiding payroll taxes, workers compensation insurance payments, paystubs, and many others.
Upon motion by the defendants, the trial court dismissed the lawsuit. It ruled that the Federal Aviation Authority Authorization Act (“FAAAA”) preempted AB 2257, which codified the “ABC” test, enumerated by our Supreme Court under Dynamex Operations W v. Superior Court.
THE APPELLATE COURT FOUND THAT THE FAAAA DOES NOT PREEMPT AB 2257 OR THE DYNAMEX TEST
The appellate court reversed by writ. It looked to our Supreme Court’s ruling in People ex rel. Harris v. Pac Anchor, 59 Cal.4th 772 (2014) to find that the FAAAA’s preemption applied only to state laws that prohibited the use of independent contractors in the transportation industry. Rules of general applicability that did not involve such restrictions are not preempted.
Here, no such prohibition was in effect, either explicitly or de facto. The ABC test does not preclude the use of independent contractors; it merely states the considerations used to determine proper classification of workers.
The court also rejected the argument that, because AB 2257 had limited exceptions for certain industries, it was not a rule of general applicability.
CONCLUSION
California continues to protect the wages of its workers. This ruling in favor of an exploited group is welcome news.
Similar issues are currently under consideration in the federal courts, including the 9th Circuit. The 1st Circuit has already ruled that prong B of the ABC test is preempted, and various district courts have split on the issue. There will probably be more decisions on this matter in the future.
COA, 2nd Dist. Div. 4, filed 11/19/20. Opinion by Justice Currey
Ninth Circuit
OLSON v. USA (DEPT. OF ENERGY)
DEFENDANT BONNEVILLE POWER ADMINISTRATION DID NOT NOTIFY PLAINTIFF OLSON OF HER FMLA RIGHTS
Plaintiff Olson worked for Defendant Bonneville Power Administration (“BPA”) through a payroll service provider, MBO Partners (“MBO”). Olson aided BPA with compliance with respect to the Americans with Disabilities Act.
When Plaintiff Olson began experiencing anxiety, she became unable to appear personally at work. She requested some reasonable accommodations, and received certain of her requests. At one point, she declined the accommodations offered by Defendants, and filed suit.
In relevant part, Olson’s complaint alleged that Defendants failed to give her notice of her FMLA rights, pursuant to 29 C.F.R. §825.300(d), (e). Defendants admitted that they did not give her notice. Such failure to give notice, if coupled with prejudice to the employee, can constitute an illegal interference with FMLA rights.
After a bench trial, the district court found that any violation was not willful. As such, the claim was time barred by the 2-year statute of limitations.
THE TEST FOR WILLFULNESS IN THE FMLA IS THE SAME AS THAT FOR THE FLSA
The Ninth Circuit affirmed. It noted that Olson filed her complaint more than 2, but less than 3 years after the last alleged violation. Because the FMLA statute of limitations extends from 2 years to 3 years in the event of a willful violation, Olson could only prevail with a finding of willfulness.
Because the district court sat as the trier of fact, it used the “clear error” standard in reviewing the findings. Because the FMLA does not define “willful,” the court looked to the US Supreme Court’s decision in McLaughlin v. Richard Shoe Co, 486 US 128 (1988) for the definition of “willfulness.”
McLaughlin evaluated the FLSA’s use of that term, and determined that it required behavior that is either knowing or reckless. The Ninth Circuit pointed out that every circuit to have considered the matter agreed that this standard applied to the FMLA because of its similar structure and language.
THE BPA DID NOT ACT WILLFULLY
Here, the district court found, and the 9th Circuit affirmed, that the facts did not indicate a willful violation. BPA consulted its attorney before acting, provided many of the accommodations that Olson requested, and attempted to bring her back to work.
A lack of notice is not a standalone action, and without willfulness, the statute of limitations was only 2 years. Therefore, the action was time barred, and the court did not reach the balance of the issues.
CONCLUSION
The FMLA standard for “willfulness,” to extend a violation from 2 years to 3 years, is knowledge or recklessness, the same standard as used in the FLSA.
U.S. 9th Cir., Filed 11/23/20. Opinion by Judge Benitez, sitting by designation.