Obama Budget Boosts DOL Funding

Great news! President Obama's proposed 2010 federal budget would boost the U.S. Department of Labor's discretionary budget authority to $13.3 billion in fiscal year 2010, in what the administration says is a bid to restore the agency's ability to enforce worker protection laws.

Hilda Solis Confirmed as US Secretary of Labor

News outlets are reporting that the Senate has confirmed California Representative Hilda L. Solis to be the Obama administration's Secretary of Labor, after several weeks of delays by Republican Senators. The fight over Rep. Solis's nomination foreshadows the larger fight that is expected over the Employee Free Choice Act, legislation that would make joining a union easier.

The Department of Labor defines its mission as follows:

The Department of Labor fosters and promotes the welfare of the job seekers, wage earners, and retirees of the United States by improving their working conditions, advancing their opportunities for profitable employment, protecting their retirement and health care benefits, helping employers find workers, strengthening free collective bargaining, and tracking changes in employment, prices, and other national economic measurements. In carrying out this mission, the Department administers a variety of Federal labor laws including those that guarantee workers’ rights to safe and healthful working conditions; a minimum hourly wage and overtime pay; freedom from employment discrimination; unemployment insurance; and other income support.

After eight years of an administration that was hostile to this mission, I look forward to changes that the new Secretary of Labor undoubtedly will bring to office.

More New Laws For 2009: Final Pay Requirements for Temporary Employees

Amanza Smith was working as a salesperson in a Beverly Hills boutique when a representative of L’Oreal approached her and asked if she would like to be a “hair model” at an upcoming show featuring L’Oreal products and a hair stylist. After she attended a modeling call, L'Oreal agreed to pay her $500 for one day’s work at the show. Ms. Smith worked at the show, where her hair was colored and styled, and she then walked a runway a few times. Ms. Smith stayed at the show until she was told she could leave. L'Oreal did not immediately pay her the $ 500 in wages it owed her, but waited over two months to do so.

Ms. Smith filed a class action law suit against L'Oreal, alleging that she worked for one day, that her employment was terminated at the end of the day, that L'Oreal violated its obligation to pay earned wages promptly upon separation, and that it should pay her and all similarly situated temporary employees "waiting time" penalties under Labor Code Section 203.

In Smith v. L'Oreal USA, Inc. (2006) 39 Cal. 4th 77, the California Supreme Court agreed. The Court held that the discharge element of Section 201 can be satisfied either when an employee is involuntarily terminated from an ongoing employment relationship or when an employee is released after completing the specific job assignment or time duration for which the employee was hired. An employee who works on a job assignment of short duration is not excluded from the protective scope of Sections 201 and 203.

Effective January 1, 2009, Labor Code Section 201.3 provides, with certain exceptions:

if an employee of a temporary services employer is assigned to work for a client, that employee's wages are due and payable no less frequently than weekly, regardless of when the assignment ends, and wages for work performed during any calendar week shall be due and payable not later than the regular payday of the following calendar week. A temporary services employer shall be deemed to have timely paid wages upon completion of an assignment if wages are paid in compliance with this subdivision.

New Laws for 2009: Overtime Exemption for Employees in the Computer Software Field

Assembly Bill 10 was passed effective October 1, 2008, to extend the exemption for employees in the computer software field to those paid on a salary basis.

Here's the background: In 2000, the legislature passed a bill (SB 88) providing that certain employees in the computer software field are exempt from the overtime compensation laws. In order to be exempt under the law in 2000, an employee had to:

(1) be "primarily engaged" in work that is "intellectual or creative and that requires the exercise of discretion andindependent judgment";
(2) be "primarily engaged" in certain duties that cover most of what employees in the computer software field do;
(3) be "highly skilled and proficient in thetheoretical and practical application of highly specialized information to computer systems analysis, programming, or software engineering"; and
(4) be paid an "hourly rate" of "not less than $41.00."

For a regular work year with 2,080 hours (not that any of you computer people work regular work years of 2,080 hours), this would equal $85,280. This "hourly rate" increased annually:

$42.64 per hour ($88,691) effective January 1, 2002;
$43.58 per hour ($90,646) effective January 1, 2003;
$44.63 per hour ($92,830) effective January 1, 2004;
$45.84 per hour ($95347) effective January 1, 2005;
$47.81 per hour ($99,444) effective January 1, 2006;
$49.77 per hour ($103,521) effective January 1, 2007.

That was it. I think the idea that a programmer earning $100,000 per year would not be exempt from the overtime law drove businesses nuts, and they worked hard to change the law. Effective January 1, 2008, the legislature brought the "hourly rate" of pay down to $36.00 ($74,880 per year).

But this still left a question about whether salaried employees could be exempt. Those of us who represent employees argued that the language of the statute meant what it said: that only employees who were paid on a hourly basis could be exempt, leaving salaried employees eligible for overtime compensation. And the legislative history backed that up. Defendants, of course, argued that it didn't matter whether someone was paid on an hourly or salary basis, as long as the math worked out.

Effective October 1, 2008, any employee meeting the other requirements of Section 515.5 is exempt from the overtime requirements as long as her or she earns not less than $36.00 per hour or not less than $75,000 per year, paid at not less than $6,250 per month.

Effective January 1, 2009, this rate started to climb back up. For year, anyone who meets the other requirements is overtime exempt as long as he or she earns an hourly rate not less than $37.94 or annual salary of not less than $79,050 for full-time employment, and paid not less than $6,587.50 per month.

Schwarzenegger and Business Interests Fail to Roll Back Employee Protections

Last week I posted about the Schwarzenegger administration's efforts to use the budget crisis as an excuse to roll back overtime, meal and rest period laws that protect employees. The Sacramento Bee now reports that a budget deal has been reached, and that the administration and business interests failed to roll back the wage and hour laws that protect employees:

While businesses were unable to obtain rollbacks in labor provisions related to meal breaks and overtime pay, they scored victories on tax code changes. A major shift in how the state calculates each company's sales could save businesses an estimated $650 million in state taxes. Republicans also have asked for a $2,000 tax credit per each new employee hire.

This is good news for all Californians. Congratulations to those who worked very, very hard to defeat the administration's efforts.

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Will the Economy Turn Juries Against Employers?

A recent article from the National Law Journal says ... maybe.

Some attorneys believe that increased lay-offs will bring more sympathy for employees who have been terminated or suffered discrimination or harassment, and that corporate mis-management scandals have eroded the public trust in corporate America. Others believe that jurors will take into account how badly companies are doing, and that all the news about lay-offs will lead jurors to believe that terminations are justified.

I believe that the cases that are most likely to increase in value are whistle-blower cases in which an employee raises concerns about an employer's management and suffers retaliation or termination as a result. These cases will raise juries' sympathy for the terminated employee and their anger at corporate mismanagement.

You can find the article here.

L.A. City Attorney Files Criminal Charges in Car Wash Case

Los Angeles City Attorney Rocky Delgadillo today announced that he has filed a 176-count criminal complaint against two Los Angeles car wash owners, a manager, and their four car wash businesses, for repeatedly and willfully violating labor laws and creating a work environment that bordered on indentured servitude.

The complaint, filed Monday in Los Angeles County Superior Court, alleges car wash owners Benny and Nissan Pirian, their four car wash businesses, and manager Manuel Reyes, routinely ignored wage, hour, and rest break laws, forced workers to drink non-potable water, and required employees to purchase uniforms and equipment from their bosses, in violation of numerous laws.

The four car wash businesses named in the criminal complaint are: Celebrity Car Wash, Inc. (901 N. Vine Street, Hollywood), Five Star Car Wash, Inc. (9240 Reseda Blvd, Northridge), Hollywood Car Wash, Inc. (6200 Sunset Blvd, Hollywood), and Vermont Hand Wash, Inc. (1666 N. Vermont, Los Feliz).

The owners, Benny and Nissan Pirian, are each charged with 172 counts of California Labor and Penal Code violations. If convicted on all counts, the Pirians each face nearly 86 years in county jail, and $136,000 in fines. The manager, Manuel Reyes, faces 2 counts each of witness intimidation and brandishing a deadly weapon, which carries a maximum penalty of 2 ½ years in county jail, and $3,000 in fines.

"With this lawsuit, the City Attorney is sending a clear message: wage theft is a crime, and it won't be tolerated in Los Angeles," said Kevin Kish, Director of the Employment Rights Project at Bet Tzedek Legal Services the legal-aid organization. Bet Tzedek attorneys are representing employees of Pirian-owned car washes in a class-action suit in Los Angeles County Superior Court.

The City Attorney's press release can be found here.

The Class Action Fairness Act and the Securities Act of 1933

I'm not a securities litigator, but given the rise in wage and hour cases being prosecuted in federal court since passage of the so-called "Class Action Fairness Act" ("CAFA") in 2005, I found this article interesting. As reported on law.com:

The 7th U.S. Circuit Court of Appeals has made it tougher for plaintiffs to keep securities class actions in state court by holding that the 2005 Class Action Fairness Act's preference for federal jurisdiction trumps the Securities Act of 1933.
The decision, issued on Jan. 5, stems from a disputed real estate investment trust merger and splits with a 9th Circuit interpretation of conflicting terms between the 1933 Act's anti-removal provisions and the Class Action Fairness Act's terms that allow removal of state class actions to federal court.
The 7th Circuit held that an anti-removal provision in Section 22 of the Securities Act of 1933 does not prevent removal when other requirements of the CAFA are met. The CAFA is more recent and thus generally allows removal, despite the 1933 Act bar, so long as terms of the CAFA are met. Katz v. Gerardi, 08-8031 (7th Cir.).
This breaks with a 2008 decision in the 9th Circuit that held that the more specific terms of the 1933 Act, applying to securities cases, can trump the generalized terms of the 2005 act applying to all civil actions, Luther v. Countrywide Home Loans Servicing, 533 F.3d 1031 (9th Cir. 2008).

Ninth Circuit Invalidates Forum Selection and Choice of Law Clauses

The use and enforcement of choice of law and forum selection clauses has become a very important issue in wage and hour law.

In Doe 1 v. AOL, LLC (Jan. 16, 2009) the plaintiffs filed a class action against AOL after AOL made public information regarding its users' search records. The plaintiffs sued in federal court in California for violation of a federal privacy law, and the California plaintiffs sued for violation of the Consumer Legal Remedies Act ("CLRA"). California Civil Code Section 1770.

AOL moved to dismiss the case, relying on its member agreement, which designated the courts of Virginia as the proper venue for any dispute between AOL and its members, and designated Virginia law to govern such disputes. The District Court granted the motion without prejudice to plaintiffs' right to file in the Virginia state or federal courts.

The Ninth Circuit Court of Appeals reversed the trial court's decision. First, the Ninth Circuit held that the Member Agreement's clause designating the "courts of Virginia" as the proper fora for any dispute meant the Virginia state courts, and not the federal courts located in Virginia.

Next, the Court held that "the forum selection clause so construed is unenforceable as a matter of federal law, because it violates California public policy against waivers of class action remedies and rights under the California Consumers Legal Remedies Act." Despite the "heavy burden" on the party opposing the forum selection clause to show that it is not enforceable, the Court held that the forum selection clause is not enforceable. The Court relied on a 2001 California Court of Appeal decision finding the same forum selection clause unenforceable because the clause violated California public policy on two grounds:

(1) enforcement of the forum selection clause violated California public policy that strongly favors consumer class actions, because consumer class actions are not available in Virginia state courts, id. at 712;12 and (2) enforcement of the forum selection clause violates the anti-waiver provision of the Consumer Legal Remedies Act (CLRA), id. at 710, which states “[a]ny waiver by a consumer of the provisions of this title is contrary to public policy and shall be unenforceable and void.” Cal. Civ. Code § 1751.

Accordingly, the Court held that the forum selection clause in AOL's member agreement is unenforceable as to California resident plaintiffs bringing class action claims under California consumer law.

Judge Nelson wrote the Court's opinion. Judges Reinhardt and Bea joined, with Judge Bea writing a separate concurring opinion.

Court of Appeal Reverses Decision Denying Class Certification

The California Court of Appeal recently reversed a decision denying class certification, holding that the trial court had abused its discretion. In Ghazaryan v. Diva Limousine, Ltd. (December 22, 2008, ordered published January 12, 2009) 169 Cal.App.4th 1524, the plaintiff challenged his employer's policy of "paying its drivers an hourly rate for assigned trips but failing to pay for on-call time between assignments ('gap time')." The plaintiff, like his co-workers, frequently had substantial periods of gap time for which he was not compensated. After a run-in with his employer over his right to eat during this "gap time," the plaintiff filed suit, alleging failure to pay overtime and earned wages, failure to provide meal and rest periods, failure to provide timely and accurate wage and hour statements, and violation of the Unfair Competition Law.

The plaintiff sought to certify two classes of employees: "(1) based on Diva’s alleged failure to pay earned overtime and straight time, 'All current and former employees of Defendant who worked as Limousine Drivers during the period of May 10, 2002 to the present'; and (2) targeting Diva’s failure to provide mandatory rest breaks, 'All current and former employees of Defendant who work as Limousine Drivers at any time during the period of May 10, 2002 to the present, worked one or more four hour increments of time without being given a rest break for each such increment and who were not properly compensated therefor.'"

The employer used a very common strategy in defending class certification, focusing on purported differences in the way that its drivers used their gap time. The employer emphasized that some members of the putative class were paid for their gap time and submitted declarations from others who stated that they used gap time for personal business and did not support the law suit.

The trial court found the declarations "convincing" and denied class certification. The trial court held that it could not determine how many people would be in the class (and thus whether the numerosity requirement was satisfied) without first determining whether the employer's gap time policy was legal, which the court said it could not do at the certification stage. Similarly, the court held that it could not tell who would fit into the class unless it determined the legality of the policy, and thus found that ascertainability was lacking.

The Court of Appeal held that the trial court utilized "improper criteria" in analyzing the class certification motion.

The trial court is, of course, correct, under well-established Supreme Court authority, “The certification question is ‘essentially a procedural one that does not ask whether an action is legally or factually meritorious.’” (Sav-On Drug Stores, supra, 34 Cal.4th at p. 326.) But the trial court fundamentally misconceived the import of the rule against evaluating the merits of the plaintiff’s claims in deciding whether class treatment is appropriate. Rather than denying certification because it cannot reach the merits, as the court did here, the trial court must evaluate whether the theory of recovery advanced by the plaintiff is likely to prove amenable to class treatment: “As the focus in a certification dispute is on what type of questions -- common or individual -- are likely to arise in the action, rather than on the merits of the case [citations], in determining whether there is substantial evidence to support a trial court’s certification order, [the reviewing court] consider[s] whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment.” (Id. at p. 327.)

Having set forth the proper standard for evaluating the class certification motion, the Court went on to hold that the case satisfied all requirements for class certification.

Regarding ascertainability and numerosity, the Court held that the plaintiff had properly identified the class. The Court stated, "a class is properly defined in terms of 'objective characteristics and common transactional facts,' not by identifying the ultimate facts that will establish liability." The plaintiff's proposed class, consisting of all drivers employed during a particular time, was perfectly appropriate. Any drivers who had been paid for their on-call time, the Court held, could be excluded from the class without destroying ascertainability. "Alternatively, the class can be modified to specify only those drivers who were not paid for their on-call or gap time." Either way, the proposed class satisfied "the purpose of the ascertainability requirement to ensure notice to potential class members who at some time during their employment by Diva accumulated gap time."

Regarding community of interest, the Court reiterated: "Determining whether a sufficient community of interest exists to warrant class certification, however, depends not on the differences among individual drivers’ use of their gap time but on the reasonableness of Diva’s policies as applied to its drivers as a whole." Rather than focusing on the different rates at which the drivers accumulated gap time or the way they spent that time, the Court held that the proper focus was on the employer's gap time policies -- policies that should be examined on a class-wide basis:

Diva dictates to a large extent how drivers use their on-call time. Diva distributes an official “Chauffeur’s Handbook” to all drivers that expressly bars personal use by drivers of Diva’s vehicles (albeit Diva appears to ignore incidental errands within a geographically proximate area), requires drivers to respond promptly to dispatch calls and accept trip assignments absent pre-arranged circumstances, requires drivers to be in full uniform while in or proximate to their vehicles and requires drivers to clean and maintain their vehicles during their on-call time. Those limitations apply across the board to all drivers who have on-call time during the course of a day. Although individual testimony may be relevant to determine whether these policies unduly restrict the ability of drivers as a whole to utilize their oncall time for personal purposes, the legal question to be resolved is not an individual one. To the contrary, the common legal question remains the overall impact of Diva’s policies on its drivers, not whether any one driver, through the incidental convenience of having a home or gym nearby to spend his or her gap time, successfully finds a way to utilize that time for his or her own purposes.

Regarding superiority, the Court held:

There is no question class treatment constitutes the superior mode of resolving Ghazaryan’s claims in this action. Based on the evidence submitted by Diva in opposition to the motion, its compensation policy has been carefully drafted; and Diva very well may find its policy upheld as reasonable under the existing DLSE standard. We see no advantage to either party to resolution of this question on a piecemeal basis and agree with Ghazaryan such a prospect would jeopardize the ability of employees to find competent representation if restricted to their own individual claims.

Judge Perluss wrote the Court's opinion. Judges Zelon and Jackson joined.

Steven G. Pearl to speak at LACBA Labor and Employment Law Symposium 3/31/09

I am speaking at the Los Angeles County Bar Association's Twenty Ninth Annual Labor and Employment Law Symposium on March 31, 2009, at the Millennium Biltmore Hotel in Los Angeles. I am speaking on the increasingly common practice of employers classifying their employees as independent contractors.

Why would an employer classify its employees as independent contractors? I don't know, but maybe it has something to do with the fact that employers don't have to pay independent contractors overtime compensation, don't have to provide them with meal periods, rest periods, or proper wage statements, don't have to pay them promptly on termination or quitting, and don't have to follow the other laws that protect employees, but don't protect independent contractors.

Oh yeah, and they don't have to pay their fair share of employment taxes to the government, either. Sounds like a great deal for the employer, and a bad deal for everyone else.

Go here for more information on the Symposium.

California Supreme Court Schedules Oral Argument in Unfair Competition Case

California's Unfair Competition Law ("UCL"), Business and Professions Code Section 17200 et seq., "was enacted to protect consumers as well as competitors from unlawful, unfair or fraudulent business acts or practices, by promoting fair competition in commercial markets for goods and services." Over the years, the UCL has been used to stop such practices as stores selling cigarettes to underage kids or selling re-packaged meat as new. It has been used succesfully in countless wage and hour cases.

On November 2, 2004, California voters passed Proposition 64, amending the UCL in several important ways. Among other changes, Prop. 64 amended Section 17204 to provide that only the Attorney General, district attorney, city attorney, or "any person who has suffered injury in fact and has lost money or property as a result of such unfair competition" could prosecute a UCL action.

The Supreme Court announced today that it will hear oral argument in In re. Tobacco II Cases, Case S147345, on March 3 at 9:00 a.m. in San Francisco. The case includes the following issues:

(1) In order to bring a class action under Unfair Competition Law (Bus. & Prof. Code, section 17200 et seq.), as amended by Proposition 64 (Gen. Elec. (Nov. 2, 2004)), must every member of the proposed class have suffered "injury in fact," or is it sufficient that the class representative comply with that requirement?

(2) In a class action based on a manufacturer's alleged misrepresentation of a product, must every member of the class have actually relied on the manufacturer's representations?

In a typical wage and hour case, all class members will have suffered "injury in fact," so the Tobacco case will not be as important in wage and hour litigation as in other areas, but the case remains of interest.

Layoffs Trigger More Employment Lawsuits

We've seen a number of articles recently talking about how the economic down-turn is increasing the amount of employment-related litigation. This makes sense and follows a pattern that we've seen for years.

People don't like to sue their employers. Even if things are bad at a job -- even if the employer doesn't pay for all overtime or there's discrimination -- most people don't like to complain and don't want to risk losing their job. Most people only step forward after there's been some kind of break in the employment relationship -- either the boss or supervisor does something that the employee just can't take any more, or the job ends. With all the lay-offs, it's no surprise that more people are filing law suits.

Here's an article from today's New York Times on this issue.

Undocumented Workers Have Equal Rights Under the Wage and Hour Laws

"Do not withhold the wages due to your poor or destitute hired hand, whether he is one of your brethren or a stranger living in a settlement in your land." Deuteronomy 24:14.

Statutory changes over the last several years and a 2007 Court of Appeal decision, Reyes v. Van Elk (2007) 148 Cal.App.4th 604, make clear that all workers have the right to enforce California’s wage and hour laws, regardless of their immigration status. Indeed, questions about immigration status have no place in wage and hour litigation, and discovery directed at a worker’s immigration status is expressly prohibited.

California Labor Code section 1171.5, enacted in 2002, "finds and declares" the following: 

(a) All protections, rights, and remedies available under state law, except any reinstatement remedy prohibited by federal law, are available to all individuals regardless of immigration status who have applied for employment, or who are or who have been employed, in this state.

(b) For purposes of enforcing state labor and employment laws, a person’s immigration status is irrelevant to the issue of liability, and in proceedings or discovery undertaken to enforce those state laws no inquiry shall be permitted into a person’s immigration status except where the person seeking to make this inquiry has shown by clear and convincing evidence that the inquiry is necessary to comply with federal immigration law.

(c) The provisions of this section are declaratory of existing law.  

California Civil Code section 3339 and Government Code section 7285 contain similar language, but include civil rights and employee housing laws under the protection afforded by Labor Code section 1171.5. 

The Legislature enacted these statutes in response to Hoffman Plastic Compounds, Inc. v NLRB (2002) 535 US 137, 122 S Ct 1275, 152 L Ed 2d 271, the decision in which the United States Supreme Court held that the National Labor Relations Board ("NLRB") may not award "backpay" to undocumented workers. Hoffman concerned remedies available to undocumented workers under the National Labor Relations Act ("NLRA") and not their standing to file a claim before the NLRB. In fact, the Supreme Court in Hoffman reaffirmed its earlier holding in Sure-Tan, Inc. v. NLRB (1984) 467 US 883, 104 S Ct 2803, 81 L Ed 2d 732, that undocumented workers have standing to file claims under the NLRA and are considered "employees" within the meaning of that statute. 

In March of 2007, in Reyes v Van Elk (2007) 148 Cal.App.4th 604, the Second District Court of Appeal held that the Immigration Reform and Control Act of 1986 ("IRCA") and Hoffman do not preclude undocumented workers from asserting claims for unpaid prevailing wages, and do not preempt California’s immigration status privacy statutes. In a case brought by employees on public works projects subject to California’s prevailing wage law, (Lab Code, §§ 1720-1861), the Court began by recognizing that prevailing wages are minimum wages, and that an employee has a private statutory right to recover unpaid prevailing wages from an employer. The court then wrote: "Earned but unpaid salary wages are vested property rights, [cite omitted]. Noncitizens are guaranteed the same property rights as citizens. (Cal Const, art I, § 20)." Hoffman, the Court continued, "does not prohibit plaintiffs from having standing to raise claims for prevailing wages, as those claims are ... for work already performed." See also Patel v. Quality Inn South (11th Cir 1988) 846 F.2d 700 (IRCA does not limit remedies for unpaid wages available to undocumented workers under the Fair Labor Standards Act).  

Concerning preemption by the IRCA, the Second District emphasized that the historic police powers of the states are not to be superseded by federal act unless that is the clear and manifest purpose of Congress. The Court further explained: 

We conclude there is no actual conflict between the IRCA and the prevailing wage law as the state law is not an obstacle to the accomplishment and execution of the full purposes and objectives of the IRCA.... [¶] The ultimate goal of the IRCA is to control illegal immigration into the United States by prohibiting the employment of unauthorized aliens... Allowing employers to hire undocumented workers and pay them less that the wage mandated by statute is a strong incentive for the employers to do so, which in turn encourages illegal immigration...

Reyes confirms a number of important points for California employees, both documented and undocumented. First, employees have a private right of action to pursue prevailing wage claims, just as they do to pursue other wage claims. Second, undocumented workers have the same right as documented workers to enforce California’s wage and hour laws. Finally, all workers have the right to prosecute such actions without intrusive and irrelevant inquiries into their immigration status.