California Courts of Appeal
ATEMPA v. PEDRAZZANI
PLAINTIFFS SUED FOR MINIMUM WAGE AND OVERTIME VIOLATIONS
Plaintiffs Atempa and Reyes worked in a restaurant, Atempa first as a dishwasher and then as a cook, and Reyes as a dishwasher. They sued under the Labor Code Private Attorneys General Act (“PAGA”) for various wage claims, including failure to pay overtime under Ca. Lab. Code §558.1, and failure to pay the minimum wage under Ca. Lab. Code §1197.1.
Both of those statutes impose liability for civil penalties on the employer, as well as “any other person acting on behalf of an employer,” in the case of §558, or “other person acting either individually or as an officer, agent, or employee of another person” who causes the statutes to be violated.
THE TRIAL COURT FOUND IN FAVOR OF PLAINTIFFS AND ORDERED THE INDIVIDUAL DEFENDANT HELD LIABLE
After a bench trial, the court found in favor of the plaintiffs, and awarded $31,074 in penalties, as well as wages (which were not part of the appeal). Those penalties were awarded against both Pama, the corporate defendant, and Pedrazzini himself as an individual. The trial court also ordered both entities held jointly and severally liable for attorney’s fees in excess of $315,000.
SINCE THE L&WDA COULD RECOVER PENALTIES AGAINST THE INDIVIDUAL, THE PLAINTIFF COULD AS WELL UNDER PAGA
In upholding the judgment, the court found the statutory language unambiguous, and therefore there was no need for construction. “[O]ther person” included individuals who caused the statutes to be violated, and 1197.1(a) even went so far as to list the types of individuals who could be held so liable.
The court went further, and stated that there was no need to harmonize the statutes with the alter ego doctrine. Alter ego is a common law doctrine, and the statutes therefore take precedence. The Labor Code is unambiguous, and it means what it says.
The statutes at issue, of course, only authorize the Labor Commissioner to recover the penalties. A plaintiff may recover them instead of the Labor Commissioner through application of the PAGA statute.
The attorney’s fees, interest and costs were all chargeable to the individual defendant as well, through PAGA’s unambiguous language.
CONCLUSION
California courts continue to protect the wages of California workers, and the penalties for violating wage and hour laws are severe. Even a corporate shield will not protect individuals who engage in wage theft.
Ca. Ct. App., 4th Dist., Div. 1, Filed 9/28/18, Opinion by Judge Irion
MOSS BROTHERS TOY, INC., v. RUIZ
PLAINTIFF FILED A WAGE AND HOUR CLASS ACTION AGAINST HIS PREVIOUS EMPLOYER
This case is a continuation of Ruiz I, in which the appellate court ruled that the party petitioning to compel arbitration bears the burden of the formation of an agreement, especially in light of the non-moving party’s declaration that he did not remember signing such an agreement.
In June 2012, Plaintiff Ruiz filed a class action and Private Attorneys General Act claim against Moss Brothers Auto Group (MBAG), alleging that MBAG was his employer and that it had violated various provisions of California’s wage and hour laws.
MBAG SUED PLAINTIFF RUIZ FOR BREACH OF CONTRACT
MBAG lost its petition to compel arbitration, as well as its subsequent appeal. It then made the unwise decision to sue Plaintiff Ruiz for breach of contract. It based its claim on the notion that Ruiz had contracted to arbitrate his claims, but instead filed a lawsuit in breach of that contract.
THE ANTI-SLAPP MOTION WAS GRANTED AND UPHELD
The trial court granted Plaintiff Ruiz’s anti-SLAPP motion pursuant to CCP §425.16, striking the whole complaint. The appellate court upheld the motion.
Anti-SLAPP stands for “strategic lawsuit against public participation.” It was designed to unmask early those claims intended to chill a defendant’s participation in protected activity, such as the rights to petition, peaceful protest, and assembly. Passed at a time when energy companies were suing environmental protestors, its greatest use has been against defamation claims brought to stop the public’s speech.
The anti-SLAPP statute has a two-prong burden-shifting scheme. In the first prong, the moving defendant or cross-defendant must show that the underlying lawsuit “arises from” a protected act. The statute’s language of “arising from” does not mean “motivated by.” The statute does not consider the motivation of the non-moving party. Instead, “arising from” means “factually based upon.” A lawsuit brought with the motive of retaliation will not fall under the anti-SLAPP statute’s purview. A lawsuit brought with protected activity as the factual basis for the lawsuit will.
The second prong of the anti-SLAPP statute requires the non-moving party to demonstrate a reasonable probability of success on the merits. “Reasonable probability” has been held to be the same standard as that on summary judgment, lest the non-moving party be deprived of a constitutional right to a jury trial. The court does not weigh evidence, but merely decides if, with all inferences to the non-moving party, a reasonable jury could decide in its favor.
Here, the court ruled that MBAG’s lawsuit was based on the protected activity of Ruiz’s filing his own lawsuit pursuant to his right to petition the court for redress of grievances. It rejected MBAG’s contention that its lawsuit was based on a breach of contract, since, without Ruiz’s own lawsuit, there would be no basis for the claim at all.
The court ruled further that MBAG could not demonstrate a reasonable probability of success on the merits. It failed to show that Ruiz had signed the arbitration agreements, and therefore could not succeed on any breach of contract claim.
CONCLUSION: These types of hyper-aggressive defense tactics find no sympathy in the courts. Attempts to close the courthouse doors to California’s workers will be rejected, in this case by the anti-SLAPP statute and an award of attorney’s fees.
Ca. Ct. App., 4th Dist., Div. 2, Filed 9/20/18, Opinion by Judge R. Fields
Ninth Circuit
ALLIED CONCRETE & SUPPLY CO., v. BAKER
CALIFORNIA’S PREVAILING WAGE LAW INSURES A MINIMUM WAGE FOR PUBLIC WORKS
The California Labor Code includes a prevailing wage provision, requiring companies working on “public works” projects to pay their workers the prevailing wage, calculated by a process described by law.
“Public works” is defined by statute as construction or related work, done under contract, and paid for in any part by public funds.
EMPLOYERS CHALLENGED THE EXPANSION OF THE LAW TO READY-MIX CONCRETE DRIVERS
In 2015, California amended Labor Code §1720.9 to include ready-mix concrete drivers. A group of suppliers of ready-mix concrete challenged the amendment, claiming that it violated the Equal Protection clause of the 14th Amendment.
A RATIONAL BASIS EXISTED TO DISTINGUISH READY-MIX CONCRETE DRIVERS FROM OTHER DRIVERS
Under the 14th Amendment to the US Constitution, distinctions need only have a rational basis if a protected characteristic is not involved.
Moreover, the legislature’s rationale need not be correct; the court will not second-guess it. Any conceivable rational basis will be enough to allow the law to survive scrutiny.
Here, the court posited three possible rationales for including ready-mix concrete drivers: (a) they are more integrated into the construction process than other material drivers and should be paid accordingly; (b) they are more skilled than other drivers, and (c) they are more likely to be unionized, and therefore more likely to be underbid by non-union shops.
CONCLUSION
The courts will uphold rational decisions by the Legislature to Equal Protection challenges.
9th Cir., Filed 9/20/18, Opinion by Judge Tashima
BARONE v. CITY OF SPRINGFIELD, OREGON
PLAINTIFF REPEATEDLY REPORTED RACIAL PROFILING BY THE POLICE DEPARTMENT AND WAS TERMINATED FOR REFUSING TO AGREE NOT TO SAY ANYTHING NEGATIVE ABOUT THE DEPARTMENT
Plaintiff Thelma Barone worked for the Springfield Police Department as a Community Service Officer focusing on victim advocacy. During her employment, members of the Latino community often complained to her about racial profiling by the Department. She relayed these racial profiling complaints to Department leadership. She began complaining more frequently in the spring of 2013, around the time that the Department’s leadership was in transition. The Department then investigated her for two incidents. The next year, Barone spoke at an event as a representative of the Department and confirmed in response to a question that she was aware of increasing racial profiling complaints. One week later, the Department placed her on administrative leave for alleged untruthfulness in the previous year’s investigations. The Department found Barone had violated the code of conduct, suspended her, and told her she must sign a Last Chance Agreement or be terminated. Barone refused to sign the Agreement because it prohibited her from reporting racial profiling and discrimination. Barone also refused to sign the City’s amended Agreement, which prohibited her from saying or writing anything negative about the Department. The City terminated Barone. Barone sued for First Amendment retaliation and imposing an unlawful prior restraint. The District Court granted summary judgment, and Barone appealed.
PLAINTIFF’S SPEECH WAS NOT PROTECTED BY THE FIRST AMENDMENT BECAUSE IT WAS MADE PURSUANT TO HER OFFICIAL DUTIES
The Ninth Circuit affirmed summary judgment of the First Amendment claim because Barone spoke as a public employee, so her speech was not protected by the First Amendment. First Amendment retaliation claims are analyzed under a five-factor test requiring the employee to show that: (1) she spoke on a matter of public concern, (2) she spoke as a private citizen and not as a public employee, and (3) the speech was a substantial or motivating factor in the adverse action. If the employee satisfies the first three factors, the burden shifts to the employer to show that: (4) it had adequate justification for treating the employee differently than other members of the public, or (5) it would have taken the adverse action absent the protected speech. Barone could not meet her burden on the second prong. Public employees speaking pursuant to their official duties are not speaking as citizens for First Amendment purposes.
INSISTENCE THAT PLAINTIFF AGREE NOT TO SPEAK NEGATIVELY ABOUT THE DEPARTMENT WAS AN UNCONSTITUTIONAL PRIOR RESTRAINT
The Ninth Circuit reversed the grant of summary judgment on Barone’s prior restraint claim. Citizens do not surrender their First Amendment rights by accepting public employment. The Pickering test prescribed a two-step approach for balancing public employees’ First Amendment rights with the government’s need to control the speech of its employees. The first question is whether the restriction affects a government employee’s speech on a matter of public concern. If it does, the second question is whether the government entity had adequate justification for treating the employee differently from any other member of the public. The Amended Agreement presented to Barone involved matters of public concern and targeted speech not made as part of Barone’s official duties on a wide variety of topics. The Amended Agreement therefore violated the First Amendment.
PLAINTIFF’S CHIEF HAD FINAL POLICYMAKING AUTHORITY REGARDING HER DISCIPLINE FOR PURPOSES OF MONELL LIABILITY
A city or local government may be liable in a Section 1983 action under Monell when the plaintiff proves that the government entity caused her injury. A plaintiff may prove this by showing: (1) the government employee committed the constitutional violation pursuant to an official policy, (2) the employee acted pursuant to a longstanding practice or custom, or (3) the employee functioned as a final policymaker. Barone alleged that her Chief acted as a final policymaker for employee discipline. The Ninth Circuit agreed that the Chief had final policymaking authority and reversed summary judgment on the issue of Monell liability.
9th Circuit. Filed 9/5/18. 902 F.3d 1091. Opinion by Judge M. Smith.
CALIFORNIA TRUCKING ASSOCIATION v. SU
AN ASSOCIATION OF MOTOR CARRIERS SOUGHT DECLARATORY RELIEF THAT THE FAAAA PREEMPTS THE DEPARTMENT OF INDUSTRIAL RELATIONS FROM APPLYING THE BORELLO STANDARD
Plaintiff California Trucking Association (“CTA”) is an association of motor carrier companies. CTA members use either “company drivers” or “owner-operators” to haul freight. Company drivers are employees. Owner-operators are classified as independent contractors and provide their own trucks and maintenance. The Federal Aviation Administration Authorization Act (“FAAAA”) preempts certain state regulation of motor carriers. The CTA sued Defendant Julie Su in her official capacity as Labor Commissioner of California’s Department of Industrial Relations seeking a declaration that the FAAAA preempts the Commissioner’s application of the Borello standard for assessing motor carriers’ classification of independent contractors. The District Court granted the Commissioner’s motion to dismiss, and the CTA appealed.
CONGRESS, IN ENACTING THE FAAAA, DID NOT INTEND FOR MOTOR CARRIERS TO HAVE UNCHECKED ABILITY TO CONTRACT AROUND LABOR LAWS
The California Supreme Court’s Borello (48 Cal.3d 341) decision is the seminal California case regarding the common law test for determining whether a worker is an employee or an independent contractor. The most important part of the test is whether the company has the right to control the manner and means of accomplishing the work. The CTA contended that the FAAAA compels the Commissioner to accept any agreement between a motor carrier and a worker at face value. The Commissioner sought the power to look behind the agreements and apply the Borello standard as it would with any other employer. The purpose of the FAAAA was to prevent states from replacing market forces with their own commands. The purpose of the FAAAA was not to preempt applicable state transportation, safety, welfare, or business rules that do not regulate prices, routes, or services. Since Congress did not intend to preempt generally applicable labor laws, motor carriers do not have the unchecked ability to contract around labor laws. Therefore, the FAAAA does not preempt the Commissioner from applying the Borello standard to motor carrier claims within her jurisdiction.
9th Circuit. Filed 9/10/18. 903 F.3d 953. Opinion by Judge Tashima.
CAMPBELL v. CITY OF LOS ANGELES
PLAINTIFFS WHO HAD OPTED IN TO AN FLSA COLLECTIVE ACTION APPEALED FOLLOWING DECERTIFICATION AND DISMISSAL OF THE CASE
Los Angeles Police Department officers brought two related collective actions under the Fair Labor Standards Act (“FLSA”) alleging overtime violations. After years of discovery, the City of Los Angeles successfully moved to decertify the actions on the grounds that the officers were not similarly situated. The original named plaintiffs then settled their individual claims, and the opt-in plaintiffs appealed the decertification. Under the FLSA, every plaintiff who opts in to a collective action has party status. The opt-in plaintiffs had standing to appeal even though they were dismissed from the action before final judgment because the decertification and dismissal disposed of their statutory right to proceed collectively.
COURTS ASSESSING DECERTIFICATION UNDER THE FLSA SHOULD USE A SUMMARY JUDGMENT STANDARD
There was no established definition of “similarly situated” under the FLSA, nor was there an established test. Party plaintiffs are similarly situated where they share a similar issue of law or fact material to the disposition of their FLSA claims. A District Court may grant decertification where conditions make collective action truly unfeasible, but it may not decertify based on a perception of inconvenience. Where decertification overlaps with the merits of the underlying FLSA claims, courts should apply a summary judgment standard to the decertification analysis. Though the District Court used the wrong standard, the Ninth Circuit found no genuine dispute of material fact and affirmed.
9TH Circuit. Filed 9/13/18. 903 F.3d 1090. Opinion by Judge Berzon.
DENT v. NATIONAL FOOTBALL LEAGUE
FORMER FOOTBALL PLAYERS SUED THE NFL FOR NEGLIGENTLY AND FRAUDULENTLY ADMINISTERING PAINKILLERS
Plaintiff Richard Dent and a class of retired professional football players filed suit against the NFL for administering painkillers without warning of potential side effects or long-term risks. Dent ended his career with an enlarged heart, permanent nerve damage, and an addiction to painkillers. The NFL, its teams, and its players are bound by a series of CBAs. The District Court granted the NFL’s motion to dismiss, finding the players’ claims preempted by the Labor Management Relations Act (“LMRA”).
THE PLAYERS’ CLAIMS WERE NOT PREEMPTED BY THE LMRA
Claims are preempted under the LMRA when the dispute arises out of a labor contract. Claims are not preempted where: (1) the rights at issue are conferred by state law independent of any CBA, and (2) the dispute can be resolved without interpreting a CBA. The players’ claims did not arise from the CBA because the CBA did not require the NFL to provide medical care, and the players argued that the NFL violated laws governing prescription drugs, not the CBA. Any duty to exercise reasonable care in distributing medication arose from the general character of that activity, not from the CBA, which did not impose such a duty. The standard of care was imposed by the Controlled Substances Act, the Food, Drugs, and Cosmetics Act, and the California Pharmacy Laws. There was therefore no need to interpret the CBA. Likewise, the players could establish their other negligence and fraud claims without relying on the CBA. Therefore, the players’ claims were not preempted by the LMRA.
9th Circuit. Filed 9/6/18. 902 F.3d 1109. Opinion by Judge Tallman.
HARRIS v. COUNTY OF ORANGE
ORANGE COUNTY RENEGOTIATED THE HEALTH BENEFITS TERMS OF ITS MOU, ADVERSELY AFFECTING RETIREES
Orange County restricted its health benefits program in 2006, leading to several lawsuits. This litigation dealt with the County’s changes to the Retiree Premium Subsidy and the Grant Benefit. Retired County employees claimed that changes to these two programs constituted age discrimination and breach of contract because the changes significantly increased health care costs for County retirees.
THE RETIRED EMPLOYEES STATED A CLAIM FOR BREACH OF IMPLIED CONTRACT
The retirees alleged that they had an implied contractual right to receive the Grant Benefit throughout retirement. The MOUs stated that eligible retirees “shall receive” the Grant Benefit. Retirees alleged that an ongoing wage contribution by current employees combined with a fund estimated to cover the costs of the Grant Benefit for 30 years show that the Grant Benefit was intended to continue in perpetuity. The Ninth Circuit held that the complaint alleged sufficient facts to allow an inference that the County promised to provide the Grant Benefit for a longer period than the period of each MOU. Therefore, the District Court erred in dismissing the implied contract claim.
THE RETIRED EMPLOYEES FAILED TO STATE A CLAIM FOR AGE DISCRIMINATION BECAUSE IT IS NOT UNLAWFUL TO TREAT RETIREES, AS A GROUP, DIFFERENTLY THAN ACTIVE EMPLOYEES
The retirees challenged the elimination of the Retiree Premium Subsidy on age discrimination grounds. A previous case established that the retirees had no contractual right to continue receiving the Subsidy. California law does not require equal health care benefits for active employees and retirees. The Ninth Circuit held that the ADEA applies to retirees. The County did not discriminate among retirees based on age or among active employees based on age. The County may treat retirees as a group differently with regard to medical benefits, taking into account the cost of providing medical benefits to the retiree group. California law does not require public employers to provide medical benefits to retirees. The County therefore did not discriminate based on age by treating retirees as a group differently than active employees.
9th Circuit. Filed 9/5/18. 902 F.3d 1061. Opinion by Judge Berzon.
MARSH v. J. ALEXANDER’S LLC
The Fair Labor Standards Act (“FLSA”) establishes a federal minimum wage that employers must pay their employees. For employees who receive tips, employers are entitled to a “tip credit,” paying employees as little as $2.13 per hour, so long as that amount plus the tip equals the minimum wage.
An employer may not, however, apply the tip credit toward time worked in non-tipped tasks. Department of Labor regulations, and subsequent DOL interpretation of that regulation, prohibits it.
PLAINTIFFS WERE TIPPED EMPLOYEES WHO SPENT SUBSTANTIAL TIME ON NON-TIPPED ACTIVITIES
This case consolidated multiple class actions from across the circuit. Plaintiffs were employees in various restaurants, including servers, bartenders, and other jobs that often receive tips from customers.
As part of their job duties, plaintiffs frequently performed non-tipped job duties. These included stocking shelves, cleaning, brewing tea, and other tasks.
THE EMPLOYERS USED THE FLSA’s TIP CREDIT
The employers used the FLSA’s tip credit to pay a reduced wage. The amount the employer paid depended on the state, but the idea was the same. The employer reduced the amount it paid by whatever that state allowed for a tip credit, allowing the tip to make up the difference so that the employee would be paid at least the minimum wage.
THE DOL’s “DUAL JOB” REGULATION AND FIELD OPERATIONS HANDBOOK PROHIBITED THIS
Under the FLSA, an employer may pay as little as $2.13 per hour to a tipped employee, so long as that employee’s tips bring him or her up to the federal minimum wage. See 29 USC §203(m). If a server’s tips fall short of covering the minimum wage, the employer must make up the difference.
The issue here involved employees, like those described above, who spent significant time in non-tipped tasks. In 1967, the Department of Labor interpreted the FLSA as contemplating “dual jobs,” one tipped and one not. No tip credit could be applied to the time spent on the non-tipped job. See 29 C.F.R. §531.56.
In 1988, the DOL published a guidance in its Wage & Hour Division Field Operations Handbook, applying the “dual job” standard to any non-tipped duties that took more than 20% of the employee’s working time. The en banc court affirmed the DOL’s interpretation.
CONCLUSION
Although federal minimum wage has remained stuck at $7.25 per hour since 2009, California’s is currently $11 per hour. A mistaken employer who misapplied the tip credit could still bring a California employee below the federal minimum wage, which carries substantial remedies, and so this decision remains important in California.
9th Circuit, Filed 9/18/18, En Banc Opinion by Judge Paez
NUNIES v. HIE HOLDINGS, INC.
PLAINTIFF NUNIES WAS FIRED AFTER HE DISCLOSED HIS DISABILITY
Plaintiff Nunies worked for HIE as a truck driver, a position which required lifting as much as 50 pounds. After he injured his shoulder, he requested a transfer to a part-time, less physical job. His transfer was approved. He then revealed his injury to HIE, which withdrew his approval and, according to the court “forced him to resign.” Nunies sued for violation of the ADA and Hawaii’s anti-discrimination in employment law.
THE TRIAL COURT GRANTED SUMMARY JUDGMENT
The trial court granted HIE’s motion for summary judgment. It found that Plaintiff Nunies did not have a disability, and was not regarded as having a disability, because he had not shown that his shoulder injury substantially limited a major life activity.
THE “REGARDED AS” PRONG OF THE ADA’S DEFINITION OF DISABILITY DOES NOT REQUIRE A SUBSTANTIAL LIMITATION ON A MAJOR LIFE ACTIVITY
The Ninth Circuit reversed. In 2008, Congress passed the ADA Amendment Act (“ADAAA”), which substantially expanded the definition of a disability. Under the ADA, a disability is defined as having (a) a physical or mental impairment that substantially limits a major life activity, (b) a record of such an impairment (usually meaning having had such an impairment in the past), or (c) being regarded as having such an impairment.
Before the ADAAA, the statute’s language read that the “regarded as” prong required that the plaintiff be regarded as having an impairment that substantially limited a major life activity. But the ADAAA explicitly change that requirement, stating that one can be “regarded as” having a disability “whether or not the impairment limits or is perceived to limit a major life activity.” 42 USC 12102(3)(A).
The district court used pre-ADAAA case law to come to its conclusion, and was therefore overturned.
CONCLUSION
California’s FEHA states that, although it is patterned after the ADA, the federal law provides a floor of protection and the FEHA provides additional protection to the disabled. This case should be viewed by both state and federal practitioners as recognizing the broadening of protections under both statutes.