California Courts of Appeal
CACHO v. EUROSTAR, INC.
PLAINTIFFS/APPELLANTS ALLEGED VARIOUS WAGE AND HOUR VIOLATIONS
Plaintiffs/Appellants were non-exempt employees of Eurostar, Inc. Defendant/Respondent Eurostar owns Warehouse Shoe Sale (“WSS”) retail stores in California, as well as in other states.
Plaintiffs/Appellants alleged that they were not given proper meal periods or rest periods, and that they were required to work off the clock, among other Labor Code violations.
EUROSTAR’S EMPLOYEE HANDBOOKS CONTAINED POLICIES THAT VIOLATED THE WAGE ORDERS, AND WERE SILENT AS TO SOME ISSUES
As evidence in support of their motion for class certification, Plaintiffs/Appellants submitted two different versions of WSS’s employee handbooks, one from 2007 and one from 2013.
With respect to meal breaks, both versions of the handbook omitted language stating that employees were entitled their first meal break within the first five hours of work, and another before starting the tenth hour of work.
With respect to rest breaks, the 2007 handbook stated that employees were entitled to a rest break after four hours of work, instead of the 3.5 hours mandated by the wage orders. It also made no mention of a third rest break being authorized for shifts over 10 hours.
THE LACK OF EVIDENCE OF UNIFORM VIOLATIONS WAS FATAL TO THE MOTION
In affirming the denial of class certification, the appellate court stated that the mere existence of a policy facially violating the wage orders was not sufficient to support class certification. There must be evidence that the policy was actually applied in a uniform way, such that class questions predominate over individual ones. This is even more the case for policies that merely omit certain requirements, such as a second meal break prior to the 10th hour of work. Company policies will not be deemed in violation of the law merely because they don’t include every legal requirement, as opposed to facially contradicting them.
CONCLUSION
Although trial courts may not examine the merits of the plaintiff’s claim at the certification stage, it may require the plaintiff to submit evidence of common questions sufficient to support certification. The existence of a facially violative policy will not be enough in the absence of such evidence.
CELA INVOLVEMENT
Matthew Matern and Dalia Khalili of the Matern Law Group litigated this case on behalf of the putative class.
Second Dist., Filed 12/4/19, modified and certified for pub. 12/23/19, Opinion by Justice Feuer.
DOE v. DEPARTMENT OF CORRECTIONS AND REHABILITATION
PLAINTIFF/APPELLANT DOE REQUESTED AN ACCOMMODATION FOR HIS DISABILITIES
Plaintiff/Appellant Doe worked for the Department of Corrections as a psychologist at the Ironwood Penitentiary. He requested various accommodations for his disabilities, which included dyslexia and asthma.
The parties disagreed about whether reasonable accommodations were provided, and about who was responsible for the ultimate breakdown in the interactive process. Plaintiff/Appellant Doe provided multiple notes from his doctor indicating that he was under medical care, and what accommodations were needed for him to perform his primary work functions.
In response, the Department of Corrections requested Doe sign over access to his medical records. He refused to do so.
PLAINTIFF/APPELLANT DOE RESIGNED AFTER RECEIVING A NOTICE OF SEPARATION
In April 2016, the Department of Corrections issued Doe a report of separation during a time that he was on medical leave. Doe resigned the next month.
THE COURT FOUND NO ADVERSE EMPLOYMENT ACTION
In affirming summary judgment on Doe’s discrimination and retaliation claims, the court found that Doe had presented no evidence of an adverse employment action. It focused on various complaints that Doe had, including criticizing his work, sending police to his home for a wellness check when he was absent from work, and allegedly overburdening him with tasks. The court found this incidents to be minor and not rising to the level of materially affecting the terms, conditions or privileges of his job.
The court’s opinion never addressed the fact that the Department of Corrections issued him a notice of separation, and that he resigned only after receiving that notice.
THE COURT FOUND THAT DOE CAUSED THE INTERACTIVE PROCESS TO BREAK DOWN
Perhaps worse, the court found that the responsibility for the breakdown in the interactive process fell on Doe. It ruled this way because Doe did not reveal the nature of his disability, instead relying on his doctor’s notes detailing the accommodations he needed.
To reach this conclusion, the court relied on a single statement from another California case, which cited to a federal ADA case from the Fifth Circuit. That case, Scotch v. Art Institute of California, 173 Cal.App.4th 986 (2013) states that it is the employee’s burden “to specifically identify the disability and resulting limitations . . . . “ From this single statement, the Doe court concluded that failure to specify the disability – even if the limitations and requested accommodations are spelled out – defeats the claim.
No other California case has ever so held. In fact, the very next line of Scotch cautions that “it is important to distinguish between an employer’s knowledge of an employee’s disability versus an employer’s knowledge of any limitations experienced by the employee as a result of the disability. This distinction is important because the ADA requires employers to reasonably accommodate limitations, not disabilities.”
Nonetheless, on the strength of this single case which didn’t say that an employee must reveal the nature of his disability at any time, and in fact indicates otherwise, the Doe court affirmed summary judgment.
CONCLUSION
This unfortunate case is an outlier, and will likely be cited by defendants for this singular – and probably incorrect — proposition.
Fourth Dist., Filed 12/19/19. Opinion by Justice Slough.
ENA NORTH BEACH, INC. v. 524 UNION STREET
THE TRIAL COURT SUBSTANTIALY REDUCED THE JURY’S PUNITIVE DAMAGES AWARD VIA JNOV
Plaintiff ENA North Beach leased a premises from Defendant 524 Union Street and planned to open a restaurant. The premises’ conditional use authorization had expired, so the premises could not operate as a restaurant. ENA sued for false representations and other claims. A jury found for ENA and awarded compensatory damages of approximately $91,692.50 and punitive damages of $916,925. The trial court granted a motion for JNOV to reduce the punitive damages to $131,500, denied the motion on all other grounds, and denied the motion for new trial.
THE COURT MAY REDUCE PUNITIVE DAMAGES VIA REMITTITUR, GRANT NEW TRIAL ON DAMAGES, OR GRANT CONDITIONAL NEW TRIAL SUBJECT TO PLAINTIFF’S ACCEPTANCE OF A REMITTITUR
Where evidence supports punitive damages but the amount is challenged as unreasonably high, the trial court cannot reduce the amount of damages via JNOV. Here, the trial court found that punitive damages were appropriate but the amount was excessive. In that circumstance, the appropriate mechanism is a remittitur pursuant to CCP 662.5. The trial court may also grant a motion for new trial, but it may only order new trial or issue a conditional order granting new trial unless the plaintiff consents to the reduced amount. An exception occurs where the trial court finds evidentiary support for punitive damages but finds the amount awarded exceeds constitutional bounds. In that scenario, the trial court may determine the constitutional maximum and reduce the punitive damages to that amount via JNOV.
THE PUNITIVE DAMAGES AWARD WAS EXCESSIVE BECAUSE IT WAS 35% OF THE VALUE OF THE BUILDING AND WOULD HAVE FINANCIALLY DESTROYED THE DEFENDANT AND THERE WAS NO EVIDENCE OF ADDITIONAL CASH FLOW, PROFIT, OR REVENUE
Though a plaintiff objected to the reduction in damages, they did not object to the court’s use of JNOV for the reduction. The defense argued the objection was waived, but the Court of Appeal disagreed, holding that the question was solely one of law, giving it discretion regardless of the failure to object. Generally, the remedy for an erroneously granted JNOV is to reverse the order and reinstate the original judgment. However, because the ratio of punitive damages to compensatory damages was 10:1 and therefore at the threshold of being “suspect,” the Court of Appeal examined the evidence and found that the punitive damages award was not supported by substantial evidence. The punitive damages award was 35% of the building’s net value. Though there is no specific numerical percentage of net worth limiting punitive damages, the awards are generally limited to about 10% of the defendant’s net worth. Here, the record contained no evidence that the defendant could pay the punitive damages award without being effectively financially destroyed. To avoid this, the plaintiff needed to show evidence that the damages award would not unduly interfere with or hamper future operations, or that the defendant had large cash flow or net profit or revenue despite the lower net worth.
COA 1st Dist., Div. 2. Filed 12/12/19. 43 Cal.App.5th 195. Opinion by Presiding Justice Kline.
FABIAN v. RENOVATE AMERICA, INC.
DEFENDANT RENOVATE PRODUCED A DOCUSIGNED ARBITRATION AGREEMENT BUT COULD NOT PROVE THAT PLAINTIFF FABIAN ACTUALLY DOCUSIGNED THE AGREEMENT
Plaintiff Rosa Fabian sued Defendant Renovate America, Inc., alleging that Renovate had improperly installed her solar panels. Renovate filed a motion to compel arbitration based on a contract it claimed Fabian had signed electronically. Renovate’s Senior Director of Compliance submitted a supporting declaration asserting that Fabian had “entered into” the contract. Fabian submitted a declaration in support of her opposition stating that she had communicated with Renovate by telephone, had never been provided with documents, and had never physically or electronically signed anything. The trial court allowed the parties to conduct discovery regarding whether Fabian signed the contract. Renovate’s Director testified that no one at Renovate witnessed Fabian Docusigning the contract and no one had firsthand knowledge of her signature. The trial court denied the motion, and Renovate appealed.
RENOVATE COULD NOT COMPEL ARBITRATION BECAUSE IT COULD NOT SHOW THAT THE DOCUSIGNED SIGNATURE ON THE ARBITRATION AGREEMENT WAS AUTHENTIC
Where a court denies a motion to compel arbitration based on the petitioner’s failure to carry its burden of proof, the appellate court decides whether that finding is erroneous as a matter of law. For this reason, it is difficult for the moving party to prevail on appeal because the appellate court presumes the trial court found the moving party’s evidence lacked sufficient weight and credibility to carry the burden of proof. The appellate court will not judge the credibility of witnesses or reweigh the evidence. Renovate carried its initial burden by attaching a copy of the contract with Fabian’s electronic initials and signature. After Fabian declared that she did not sign the contract, Renovate had the burden to show by a preponderance of the evidence that the electronic signature was authentic. A Docusign signature alone was not sufficient where there was no evidence regarding the process by which Renovate acquired Fabian’s Docusign signature, received the signed documents, and verified that Fabian signed them. The Director’s declaration was also insufficient because it did not explain who presented Fabian with the contract, when and where it was signed, and how he knew that Fabian was present when the contract was signed. Therefore, Renovate failed to prove that Fabian signed the contract.
COA 4th Dist., Div. 1. Filed 11/19/19, publication ordered 12/4/19. 42 Cal.App.5th 1062. Opinion by Justice Irion.
LONG BEACH UNIFIED SCHOOL DISTRICT v. MARGARET WILLIAMS, LLC
DEFENDANT DISTRICT REQUIRED WILLIAMS TO AGREE TO INDEMNIFY THE DISTRICT AS A CONDITION OF HER EMPLOYMENT CONTRACT
Margaret Williams formed Margaret Williams LLC in 2006 for the purpose of working for Defendant Long Beach Unified School District. The District required her to form a business entity to contract with the District, and she was not permitted to negotiate the contract terms, including an indemnity provision. Williams worked full time for the District for a decade via her LLC, on construction management and environmental compliance. She worked on a project involving cleanup of a school construction site that was contaminated with arsenic. Williams was then diagnosed with arsenic poisoning, and the District terminated its contract with her LLC. Williams and her LLC sued the District, and the District invoked the indemnity provision in the contract, demanding that the LLC defend and indemnify the District against the LLC’s and Williams’ claims. When Williams refused to defend, the District filed a cross-complaint for breach of contract. Williams LLC filed an anti-SLAPP motion to strike the cross-complaint, arguing that the indemnity provision was unconscionable. The trial court granted the motion and struck the cross-complaint, and the District appealed.
THE DISTRICT’S CROSS-COMPLAINT AROSE FROM PROTECTED ACTIVITY BECAUSE IT WAS BASED ON LITIGATION FUNDING DECISIONS. THE DISTRICT WAS UNLIKELY TO SUCCEED ON THE MERITS BECAUSE THE INDEMNITY PROVISION WAS UNCONSCIONABLE
Under the first prong of the anti-SLAPP analysis, the cross-complaint arose from protected activity under CCP §425.16(e)(4) because it was based on Williams’ LLC’s refusal to fund the District’s defense of the underlying litigation. Litigation funding decisions are protected petitioning activity. Under the second prong, the District must show a probability of prevailing on its cross-claims, which it could not do. Williams LLC raised an affirmative defense of unconscionability, requiring both procedural (unfair imposition of the contract) and substantive (unfairness of the contract’s terms) unconscionability. The indemnity provision was substantively unconscionable because it barred any meaningful recovery by Williams regardless of merit. This “heads I win, tails you lose” provision was highly substantively unconscionable. An adhesive contract has some degree of procedural unconscionability. A contract is adhesive when it is standardized, like on a pre-printed form, and offered by the party with superior bargaining power on a take-it-or-leave-it basis. Oppression or surprise indicates a higher level of procedural unconscionability. Oppression involves lack of negotiation and meaningful choice. Pressure includes economic pressure on an employee to accept a contractual provision as a condition of keeping a job. Surprise is found where the agreement is drafted with an aim to thwart, rather than promote, understanding, such as by hiding the provision or using complex legal jargon. Williams LLC established moderate legal unconscionability by showing the contract was adhesive, oppressive given the length of her employment, and involved surprise because the contract separately required the parties to bear their own costs. Therefore, the District failed to show a probability of success on the merits.
CELA INVOLVEMENT
Congratulations to CELA member Wilmer Harris!
COA 2nd Dist, Div. 4. Filed 12/9/19, modified on denial of rehearing 12/31/19. 2019 WL 6695764, — Cal.Rptr.3d –. Opinion by Presiding Justice Manella.
MATHEWS v. HAPPY VALLEY CONFERENCE CENTER, INC.
PLAINTIFF REPORTED THE EXECUTIVE DIRECTOR’S SEXUAL HARASSMENT OF HIS CO-WORKERS
Plaintiff Mathews was a cook and maintenance supervisor with Defendant Happy Valley Conference Center. Happy Valley rented its space out and provided services for seminars, retreats and camps. Happy Valley is a subsidiary of Defendant Church of Christ.
A co-worker confided in Plaintiff that Happy Valley’s Executive Director, Melinda Gunnerud, had sent him sexually suggestive text messages and acted sexually inappropriately in other ways as well. Plaintiff reported the matter to the Church’s general counsel.
DEFENDANTS FIRED PLAINTIFF MATHEWS WITHIN A MONTH
Defendants conducted an investigation, which uncovered another employee who had received sexually harassing text messages from Gunnerud. The investigators were nonetheless dismissive, characterizing the messages as merely inappropriate jokes, and instead questioning Plaintiff’s motivations in bringing the matter to their attention.
Gunnerud received a reprimand, but continued in her position and continued to supervise Plaintiff and the other employees. When Plaintiff complained about this, he was given a new supervisor. That supervisor, who had been made aware of Plaintiff’s complaints, fired Plaintiff within a month.
THERE WAS SUFFICIENT EVIDENCE TO FIND THAT DEFENDANTS CONSTITUTED A SINGLE EMPLOYER
The court determined that there was ample evidence to find the defendants to have been a single employer for liability purposes. It used the four part test found in Laird v. Capital Cities/ABC Inc., 68 Cal.App.4th 727 (1998): (a) interrelation of operations, (b) common management, (c) common control of labor relationships, and (d) common ownership or financial control.
Using the “substantial evidence” standard, the court found that there was more than enough to hold both entities liable as a
single employer. Testimony adduced at trial showed that Happy Valley managers reported to the Church hierarchy. The Church audited Happy Valley’s books. Most importantly, the Church was involved extensively in Happy Valley’s labor issues, including Plaintiff’s termination.
The trial court erred by failing to highlight “common control of labor relationships” as the most important factor, but the error was harmless, given the amount of evidence presented at trial.
RELIGIOUS ENTITIES ARE NOT LIABLE UNDER FEHA, EVEN FOR RETALIATION
The appellate court did find that the trial court erred in ruling that Defendants could be liable under FEHA, or that they had waived or were estopped from asserting otherwise. Even though the FEHA retaliation section holds liable any “person,” the court relied on the reasoning in Jones v. Lodge at Torrey Pines Partnership, 42 Cal.4th 1158 (2008) to find that the term did not intend to include religious entities. Nonetheless, Plaintiff maintained his entitlement to attorney’s fees because he had also sued under Title VII.
THE WHISTLEBLOWER STATUTE ALLOWS FOR PUNITIVE DAMAGES
Finding it to be a matter of first impression, the court also affirmed the punitive damages award under Ca. Lab. Code §1102.5. Although the statute provides for a penalty, it states that that penalty is available in addition to other remedies. Moreover, §1102.5 does not have “a complex and detailed remedial scheme” such that its remedies should be deemed exclusive.
CONCLUSION
This case has a number of conclusions and language favorable to plaintiffs. Importantly, although tacitly assumed before, it may be the first case to find explicitly that punitive damages are available under the Labor Code’s whistleblower statute.
CELA INVOLVEMENT
Congratulations to CELA members Lisa Peck and Devin Coyle for this excellent result.
Sixth Dist., Filed 12/16/19. Opinion by Justice Grover.
NOORI v. COUNTRYWIDE PAYROLL & HR SOLUTIONS, INC.
COUNTRYWIDE ISSUED WAGE STATEMENTS WITH AN ABBREVIATION OF ITS FICTITIOUS BUSINESS NAME
Defendant/Respondent Countrywide issued wage statements listing “CSSG” as the employer. The evidence provided by Plaintiff/Appellant showed that this was an acronym for Countrywide’s fictitious business name, “Countrywide Staffing Solutions Group.”
Moreover, when Plaintiff/Appellant Noori requested his employment records, the documents provided did not include the company’s address.
AN ABBREVIATION OF A FICTITIOUS BUSINESS NAME IS INSUFFICIENT
The appellate court reversed the trial court’s sustaining of demurrer without leave to amend as to the first claim. Although a fictitious business name will satisfy the requirements of §226(a)(8), an abbreviation of that name may not. There have been cases where minor truncations of business name was deemed sufficient. Here, however, there was no easy way from the abbreviation that an aggrieved employee could determine the name of the legal entity that was the employer, as required by the statute.
By contrast, the claim of failure to maintain adequate records did not survive because Plaintiff/Appellant Noori failed to allege an injury. Unlike §226(a)(8), for which injury is assumed, the requirement that employers maintain proper records of the wage statements is only actionable if an injury is pled and proved.
PAGA NOTICE LETTERS NEED NOT SPECIFY THE SUBDIVISION OF THE LABOR CODE WHICH IS VIOLATED
Finally, Plaintiff/Appellant Noori challenged the trial court’s ruling that he had failed to give proper notice under the Private Attorneys General Act (“PAGA”). That statute requires that the plaintiff send a letter to the Labor & Workforce Development Agency (“L&WDA”) notifying it of “the specific provisions of this code alleged to have been violated, including the facts and theories to support the alleged violation.” That letter must be copied to the employer to provide it notice and a chance to cure.
The court held that the notice letter need not specify the subdivision of the Labor Code alleged to have been violated, nor to inform the employer that it had the opportunity to cure. So long as the correct statute is mentioned, the correct subdivision need not be, and the statute itself places the employer on notice of the chance to cure.
CONCLUSION
Employers may use either the legal entity name or a fictitious business name on their wage statements, but an abbreviation of a fictitious business name will usually not suffice.
Third Dist., Filed 12/26/19, Opinion by Justice Murray.
SAFEWAY WAGE AND HOUR CASES
PLAINTIFF ALLEGED HE WAS MISCLASSIFIED AS EXEMPT
Plaintiff Cunningham worked as a First Assistant Manager for Safeway, Inc. He alleged that he was misclassified as exempt, and was therefore owed significant overtime.
THE JURY FOUND THAT PLAINTIFF FELL WITHIN AN EXEMPTION
Safeway asserted the executive exemption, which is an affirmative defense. Because Safeway had the burden of proving it, Safeway presented its evidence first, by agreement between the parties.
The jury deliberated only 2 hours before finding that the exemption applied. The trial court therefore entered judgment in Safeway’s favor.
THE TRIAL COURT COMMITTED INSTRUCTIONAL ERROR
On appeal, Plaintiff/Appellant Cunningham challenged the jury instructions given by the court. Following language from Batze v. Safeway, Inc., 10 Cal.App.5th 440 (2017) and Heyen v. Safeway, Inc., 216 Cal.App.4th 795 (2013), the trial court instructed the jury that work that is “directly and closely related” to managerial functions will be deemed exempt if “it is helpful in supervising employees in the store or because it contributes to the smooth functioning of the store . . . . “
The appellate court found that, although this tracked the language of the cases, it was misleading out of context. This language should not be used when, as in this case, the only dispute regards whether the employee performed certain activities or not. It should only be used to determine whether particular tasks are exempt or non-exempt.
When the instructional language is used, it should be in conjunction with certain limiting principles. The jury should not be told, for example, that work is exempt if it is undertaken because it “contributes to the smooth functioning of the store.”
Arguably, everything the manager does falls under that category. Moreover, for otherwise non-exempt work to fall under the “directly and closely related” category, it must be done for a managerial purpose, such as training or demonstration.
Nonetheless, the appellate court affirmed, finding that the instructional error was harmless. Here, the dispute centered around how much time Plaintiff/Appellant Cunningham spent stocking shelves and working the cash register, undisputedly non-exempt work. Since the jury found that Plaintiff Appellant Cunningham spent less than 50% of his time with these tasks, there was not a significant probability that a different result would have occurred but for the error.
CONCLUSION
This case discusses a subtle distinction between exempt and non-exempt tasks when performed by managers, and deserves a close read by wage and hour practitioners.
Second Dist., Filed 12/18/19. Opinion by Presiding Justice Manella.