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Thursday, February 4, 2016

Alvarado v. Dart Container Corp: Where Defendant Paid Employees Daily Flat Sum Bonuses, It Properly Calculated Overtime Rates of Pay in Compliance with Federal Law

Here's one for the wage and hour folks.

In Alvarado v. Dart Container Corporation of California (Cal.App. 1/14/16), the defendant, Dart, paid its employees an "attendance bonus" for working a full Saturday or Sunday shift. The plaintiff filed a class and PAGA representative action, alleging that Dart failed to account properly for this bonus when calculating its employees' overtime rates of pay properly. Dart used the following calculation:
1. Multiply the number of overtime hours worked in a pay period by the straight hourly rate (straight hourly pay for overtime hours). 
2. Add the total amount owed in a pay period for (a) regular non-overtime work, (b) for extra pay such as attendance bonuses, and (c) overtime due from the first step. That total amount is divided by the total hours worked during the pay period. This amount is the employee’s “regular rate.” 
3. Multiply the number of overtime hours worked in a pay period by the employee’s regular rate, which is determined in step 2. This amount is then divided in half to obtain the “overtime premium” amount, which is multiplied by the total number of overtime hours worked in the pay period (overtime premium pay). 
4. Add the amount from step 1 to the amount in step 3 (total overtime pay). This overtime pay is added to the employee’s regular hourly pay and the attendance bonus.
Plaintiff alleged that Dart should use the following calculation instead:
1. Multiply regular hours by the employee’s hourly rate (regular pay); 
2. Multiply overtime hours by the employee’s hourly rate (overtime pay on overtime hours); 
3. Divide flat sum bonus by regular hours (overtime rate), and multiply by 1.5 (overtime pay on bonus); 
4. Add pay for regular hours, bonus, overtime pay on overtime hours, overtime pay on bonus (total pay).
The trial court granted summary judgment for Dart, and the Court of Appeal affirmed, holding as follows:

Federal law requires payment of weekly overtime only and uses a "fluctuating workweek" method of calculating overtime wage rates. 
Although federal law does not address a daily flat sum bonus such as the one here, it does provide that a weekly bonus should be added to the weekly compensation, which is divided by the number of hours worked to arrive at the regular rate of compensation. 29 CFR 778.209(a). 

California law requires payment of daily overtime and does not follow the fluctuating workweek system. In this respect, California law is more protective of employees than federal law.

Federal law does not preempt more protective state wage and hour laws and would not preempt California law regulating overtime in this situation, if there were such law.

California law does not set forth a method of calculating overtime rates of pay based on daily flat sum bonuses such as the one here.

Skyline Homes v. DIR (1985) 165 Cal.App.3d 239, in which the court held that an employer may not use the fluctuating workweek method to calculate overtime rates for salaried employees, does not apply. Skyline was "confined to salaried employees working a fluctuating workweek, did not address bonuses, and dealt with an employer who failed to pay overtime for work exceeding eight hours in a day."

Sections and 49.2.3 of the Division of Labor Standards Enforcement (DLSE) Enforcement Policies and Interpretations Manual provide a reasonable basis for calculating overtime rates. However, the DLSE Manual was not enacted in accordance with the Administrative Procedures Act, it does not carry the force of law, and it does not control here. 

Marin v. Costco Wholesale Corp. (2008) 169 Cal.App.4th 804 does not require adherence to the method set forth in the DLSE Manual. Marin considered a semi-annual bonus based on years of service and hours worked in the previous six months, rather than a flat sum bonus like the one here. No federal regulation applied in Marin, while 29 CFR section 788.209(a) applies here. Note: The Court here cites to CFR section 788.209(a), but this undoubtedly is a typo, and the Court meant to refer to section 778.209(a), discussed above.

Absent state law requiring use of the formula proposed by plaintiff, defendant properly used the formula stated in 
section 778.209(a). 

The opinion is available here.

Friday, January 29, 2016

USS-POSCO Industries v. Case: Employer Can Require Employees to Repay Educational Expenses

The introduction to USS-POSCO Industries v. Case (Cal.App. 1/26/16) gives a good summary of the case, so here it is (with a couple of edits):
Defendant and appellant Floyd Case [a union employee] voluntarily enrolled in a three-year, employer-sponsored educational program [that was the subject of an MOU between the employer and the union]. He agreed in writing that if he quit his job within 30 months of completing the program, he would reimburse his employer, USS-POSCO Industries (UPI), a prorated portion of program costs. Two months after completing the program, Case went to work for another employer. When he refused to reimburse UPI, the company sued for breach of contract and unjust enrichment. Case cross-complained, asserting the reimbursement agreement was unenforceable and UPI had violated the Labor Code and other statutory provisions in seeking reimbursement.

The trial court granted UPI’s motion for summary judgment on both its complaint and Case’s cross-complaint, and subsequently granted UPI’s motion for attorney fees for defeating Case’s wage claims. In granting the fee motion, the court applied the version of Labor Code section 218.5 in effect at the time of the summary judgment proceedings, rather than the version in effect at the time it awarded fees, which permits fees to a prevailing employer only when the employee’s wage claims have been brought in “bad faith.”

We affirm the summary judgment, but reverse and remand the attorney fees award. Under California Supreme Court precedent, statutory provisions that alter the recovery of attorney fees are deemed procedural in nature and apply to pending litigation.
The Court explained as follows:

The employer's voluntary, optional training program did not implicate Labor Code section 2802, which requires employers to indemnify employees for necessary expenditures or losses, or 450, which prohibits employers from requiring employees to patronize them. Case did not have to take the course, and UPI did not force him to do so. The Court distinguished In re Acknowledgment Cases (Cal.App. 8/12/15) (discussed here), in which the Court refused to allow the City of Los Angeles to recoup certain employer-mandated training expenses. Nor did the program implicate Labor Code sections 401 et seq., which prohibit the taking of certain bonds from employees.

The program did not violate Business and Professions Code 16600, which voids "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind." Case volunteered for the program and agreed to repay the training costs if he left UPI. The agreement did not prohibit or even limit him from working elsewhere, which he in fact did. It only required him to re-pay a prorated part of the training costs.

The agreement did not violate agreement did not violate sections 158(a)(5) and 159(a) of the National Labor Relations Act (NLRA), which prohibit employers from refusing to bargain collectively with employee representatives and provide that such representatives are the employees' sole bargaining agents. "An employee’s separate individual contract that is consistent with [a] collective bargaining agreement may be enforced." Case's MOU expressly authorized the reimbursement agreement, so the agreement was consistent with the MOU. 

The agreement did not lack consideration. UPI continued to pay Case his wages while enrolled in the program. In addition, Case received the training and, in consideration, agreed to repay a portion of the costs if he left. "That either Case or UPI could have terminated the agreement by ending the employment relationship at some point during the educational program does not render illusory the parties’ bargained-for exchange...." 

The agreement was not procedurally unconscionable. It was negotiated between UPI and the union, parties with equivalent bargaining power. The reimbursement provision was not a surprise, and Case could have obtained the training elsewhere if he so chose. 

Even if the agreement had been procedurally unconscionable, it was not substantively unconscionable. There was no evidence that the union colluded with UPI to overstate the training cost, and the agreement required Case to repay only a portion of it. 

Finally, the agreement did not violate Labor Code sections 221 to 223, which prohibit employers from recouping, withholding, or secretly paying less than agreed wages. 

UPI could not recover its attorney fees and costs from Case under the version of Labor Code section 218.5, which governs attorney fee awards in actions for the nonpayment of wages. Effective January 1, 2014, section 218.5 allows employers to collect such fees " only if the court finds that the employee brought the court action in bad faith." Although nothing in the legislative history indicated an intent to apply the amendment retroactively, under California law, "a new statute authorizing an award of attorney fees" or a statute "increasing or decreasing litigation costs, including attorneys’ fees" applies to actions pending at the time of enactment. This case was pending when the legislature amended section 218.5, and in fact the amendment went into effect before the trial court awarded UPI its fees. The court erred in not applying it. On remand, UPI would have to show bad faith to recover its fees. 

The opinion is available here

Thursday, January 21, 2016

Campbell-Ewald Co. v. Gomez: Supreme Court Holds that Unaccepted Settlement Offer Does Not Moot Class Action

The Supreme Court of the United States yesterday announced its decision in Campbell-Ewald Co. v. Gomez (SCOTUS 1/21/16), which considers whether an unaccepted offer to satisfy the named plaintiff ’s individual claim renders a putative class action moot. 

In an opinion written by Justice Ginsburg, the majority held that it does not. This issue has been brewing for a number of years, and many (including yours truly) expected the Court to hold that no case or controversy exists after such an offer, causing the district court to lose subject matter jurisdiction under Article III of the Constitution. 

The decision's syllabus states:

The United States Navy contracted with petitioner Campbell-Ewald Company (Campbell) to develop a multimedia recruiting campaign that included the sending of text messages to young adults, but only if those individuals had “opted in” to receipt of marketing solicitations on topics that included Navy service. Campbell’s subcontractor Mindmatics LLC generated a list of cellular phone numbers for consenting 18- to 24-year-old users and then transmitted the Navy’s message to over 100,000 recipients, including respondent Jose Gomez, who alleges that he did not consent to receive text messages and, at age 40, was not in the Navy’s targeted age group. Gomez filed a nationwide class action, alleging that Campbell violated the Telephone Consumer Protection Act (TCPA), 47 U. S. C. §227(b)(1)(A)(iii), which prohibits “using any automatic dialing system” to send a text message to a cellular telephone, absent the recipient’s prior express consent. He sought treble statutory damages for a willful and knowing TCPA violation and an injunction against Campbell’s involvement in unsolicited messaging.

Before the deadline for Gomez to file a motion for class certification, Campbell proposed to settle Gomez’s individual claim and filed an offer of judgment pursuant to Federal Rule of Civil Procedure 68. Gomez did not accept the offer and allowed the Rule 68 submission to lapse on expiration of the time (14 days) specified in the Rule. Campbell then moved to dismiss the case pursuant to Rule 12(b)(1) for lack of subject-matter jurisdiction. Campbell argued first that its offer mooted Gomez’s individual claim by providing him with complete relief. Next, Campbell urged that Gomez’s failure to move for class certification before his individual claim became moot caused the putative class claims to become moot as well. The District Court denied the motion. After limited discovery, the District Court granted Campbell’s motion for summary judgment. Relying on Yearsley v. W. A. Ross Constr. Co., 309 U. S. 18, the court held that Campbell, as a contractor acting on the Navy’s behalf, acquired the Navy’s sovereign immunity from suit under the TCPA. The Ninth Circuit reversed. It agreed that Gomez’s case remained live but concluded that Campbell was not entitled to “derivative sovereign immunity” under Yearsley or on any other basis.


1. An unaccepted settlement offer or offer of judgment does not moot a plaintiff’s case, so the District Court retained jurisdiction to adjudicate Gomez’s complaint.

Article III’s “cases” and “controversies” limitation requires that “an actual controversy . . . be extant at all stages of review, not merely at the time the complaint is filed,” Arizonans for Official English v. Arizona, 520 U. S. 43, 67 (internal quotation marks omitted), but a case does not become moot as “long as the parties have a concrete interest, however small,” in the litigation’s outcome, Chafin v. Chafin, 568 U. S. ___, ___ (internal quotation marks omitted).

Gomez’s complaint was not effaced by Campbell’s unaccepted offer to satisfy his individual claim. Under basic principles of contract law, Campbell’s settlement bid and Rule 68 offer of judgment, once rejected, had no continuing efficacy. With no settlement offer operative, the parties remained adverse; both retained the same stake in the litigation they had at the outset. Neither Rule 68 nor the 19th century railroad tax cases California v. San Pablo & Tulare R. Co., 149 U. S. 308, Little v. Bowers, 134 U. S. 547, and San Mateo County v. Southern Pacific R. Co., 116 U. S. 138, support the argument that an unaccepted settlement offer can moot a complaint. Pp. 6–12.

2. Campbell’s status as a federal contractor does not entitle it to immunity from suit for its violation of the TCPA. Unlike the United States and its agencies, federal contractors do not enjoy absolute immunity. A federal contractor who simply performs as directed by the Government may be shielded from liability for injuries caused by its conduct. See Yearsley, 309 U. S., at 20–21. But no “derivative immunity” exists when the contractor has “exceeded [its] authority” or its authority “was not validly conferred.” Id., at 21. The summary judgment record includes evidence that the Navy authorized Campbell to send text messages only to individuals who had “opted in” to receive solicitations, as required by the TCPA. When a contractor violates both federal law and the Government’s explicit instructions, as alleged here, no immunity shields the contractor from suit. Pp. 12– 14.

Justice Ginsburg wrote the opinion, joined by Justices Kennedy, Breyer, Sotomayor, and Kagan. Justice Thomas concurred in the result. Chief Justice Roberts wrote a dissent, joined by Justices Scalia and Alito. Alito also wrote a separate dissent. 

The opinion is available here. The SCOTUSblog page for the case is here

Monday, January 18, 2016

Carmax v. Areso: SCOTUS Denies Review of Case Applying Iskanian

In Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014) (discussed here), the California Supreme Court held that an arbitration agreement "requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy" and unenforceable. In Fowler v. CarMax (Cal.App. unpub. 1/25/15), the California Court of Appeal affirmed in part a trial court order enforcing a class action waiver and compelling arbitration of individual wage and hour claims, but followed Iskanian in holding that the trial court erred in compelling arbitration of PAGA claims.

On December 14, 2015, the Supreme Court of the United States denied certiorari of the decision in Fowler, sub nom. CarMax Auto Superstores California, LLC v. Areso. The SCOTUS web page for CarMax is here, and the SCOTUSblog page for it is here.

Friday, January 15, 2016

CRST Van Expedited, Inc. v. EEOC: SCOTUS Grants Review of Case on EEOC Conciliation Requirements

On December 4, 2015, the Supreme Court of the United States granted review in CRST Van Expedited, Inc. v. EEOC, which raises the following issue:
Whether a dismissal of a Title VII case, based on the Equal Employment Opportunity Commission’s total failure to satisfy its pre-suit investigation, reasonable cause, and conciliation obligations, can form the basis of an attorney’s fee award to the defendant under 42 U.S.C. § 2000e-5(k).
The Court's web page for the case is here, and the SCOTUSblog page for it is here. FYI, SCOTUSblog is the world's best resource for all things SCOTUS.

Thursday, January 14, 2016

DIRECTV, Inc. v. Imburgia: SCOTUS Rules on Concepcion and the "Law of Your State"

A quick word on DIRECTV, Inc. v. Imburgia (SCOTUS 12/14/15), in which the Supreme Court held that a California Court of Appeal erred in refusing to enforce a class action waiver in a somewhat unique arbitration clause. The clause provided that the entire arbitration provision was unenforceable if the “law of your state” made class-arbitration waivers unenforceable, but also declared that the arbitration clause was governed by the Federal Arbitration Act (FAA).

The Court held that the FAA preempted the Court of Appeal's decision. As explained in this article by Ronald Mann on SCOTUSblog, the opinion rests on three basic premises: "First, the Court concludes that the contract unambiguously refers to valid state law, not to the doctrine preempted by the Court’s decision in Concepcion." Second, "references to the 'law' of a state refer to 'valid law,' rather than 'the law as it would be in the absence of federal preemption.'" Third, the Court of Appeal relied on the fact that the language at issue was in an arbitration clause and failed to provide "any real non-arbitration justification for the ruling...."

The opinion is available here, and the SCOTUSblog page on the opinion is here.

Monday, January 11, 2016

Park v. Board of Trustees: Cal. Supreme Court Grants Review of Discrimination Case Raising Anti-SLAPP Issues

In Park v. Board of Trustees of the California State University (Cal.App. 8/27/15) (discussed here), the plaintiff alleged that the Board of Trustees of the California State University (CSU) discriminated against him based on his national origin when it denied his application for a tenured faculty position and consequently terminated him. The trial court denied CSU's motion to strike the complaint under CCP 425.16, the anti-SLAPP statute. The Court of Appeal reversed, holding that the plaintiff's allegations arose from the reviews and evaluations given to him in CSU's retention, tenure, or promotion (RTP) proceedings, and that those communications were protected.

The California Supreme Court granted review on December 16. The issue as stated on the Court's web site is as follows:

Does Code of Civil Procedure section 425.16 authorize a court to strike a cause of action in which the plaintiff challenges only the validity of an action taken by a public entity in an "official proceeding authorized by law" (subd. (e) ) but does not seek relief against any participant in that proceeding based on his or her protected communications?
Park is case number S229728, and the Court's web page for it is here. As always, you can request electronic updates on the Court's web site.