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Monday, December 27, 2010

Sheppard v. North Orange County Occupational Program: Minimum Wage Order Covers Public School Employees

Sheppard v. North Orange County Occupational Program (12/23/10) --- Cal.App.4th ----, 2010 WL 5188768, holds that employees of public entities are covered by the minimum wage protections of the Wage Order and may sue their employers for breach of contract when they fail to pay minimum wage. The plaintiff was employed by an entity created by four public school districts. His employer required him to spend 20 minutes of unpaid time preparing for every hour he spent teaching. He sued his employer for violation of the minimum wage law under Industrial Welfare Commission (IWC) wage order No. 4-2001 and Labor Code section 218, breach of contract, and quantum meruit. Slip op. at 1. The trial court (OCSC Judge Velasquez) sustained demurrers and granted judgment on the pleadings for the defendant.

The Court of Appeal reversed in part and affirmed in part:

We reverse the trial court’s order granting judgment on the pleadings as to the violation of the minimum wage law claim. Sheppard alleged he was employed by a regional occupational program which was the creation of one or more public school districts through Education Code section 52301. We conclude the minimum wage provision in Wage Order No. 4 2001 applies to Sheppard’s employment with NOCROP. We hold the Legislature has plenary authority over public school districts and was constitutionally authorized to vest in the IWC, through section 1173, the power to impose the minimum wage law provision contained in Wage Order No. 4 2001 as to employees of such public school districts. (For the reasons we explain, this holding is limited to employees of public school districts.) We therefore reverse the trial court’s order granting judgment on the pleadings as to the violation of the minimum wage law claim.

We also reverse the order sustaining NOCROP’s demurrer to Sheppard’s breach of contract claim. California Supreme Court precedent establishes that a public employee has a contractual right to earned but unpaid compensation, which is protected by the State Constitution.

We affirm the order sustaining the demurrer to the quantum meruit claim because the Government Claims Act (Gov. Code, § 810 et seq.) bars the assertion of such a claim against a public entity.


Slip op. at 1. The opinion is available here.

Wednesday, December 22, 2010

Azusa Land v. DIR: "Public Work" in Prevailing Wage Action Includes Public Infrastructure Constructed at Private Expense

In Azusa Land Partners v. Department of Industrial Relations (12/21/2010) 191 Cal.App.4th 1, the Court of Appeal held that where a developer contracts with a governmental entity to construct a master planned community, including public infrastructure and improvement work, and the public infrastructure and improvement work is to be funded at least in part with Mello-Roos tax bonds as a condition of regulatory approval for the project, then all construction of required public improvements is "public work" under Labor Code section 1720, and all such construction, including those portions of the public infrastructure constructed at private expense, is subject to prevailing wage requirements. The opinion is available here.

Home Depot v. Superior Court: Court of Appeal Confirms that PAGA Penalties Apply to Wage Order Violations

In Home Depot U.S.A., Inc. v. Superior Court (Harris) (December 22, 2010) --- Cal.App.4th ----, 2010 WL 5175194, the Court of Appeal again confirmed that employees may pursue civil penalties under the Labor Code Private Attorneys General Act (PAGA) for violations of the IWC Wage Orders.

The Wage Order at issue was section of Wage Order 7-2001, which requires employers in the retail industry to provide their employees with "suitable seats when the nature of the work reasonably permits the use of seats." The plaintiffs alleged that Home Depot failed to provide seats, although it has ample room for seats in its cashier and counter areas. Home Depot demurred, arguing that the plaintiffs had no private remedy for the Wage order violation. The trial court (LASC Judge Green) overruled Home Depot's demurrer, and Home Depot petitioned for a writ.

The Court of Appeal affirmed, holding that PAGA, specifically Labor Code section 2699(f), provides a civil penalty for violations of Labor Code section 1198, which provides:
The maximum hours of work and the standard conditions of labor fixed by the commission shall be the maximum hours of work and the standard conditions of labor for employees. The employment of any employee for longer hours than those fixed by the order or under conditions of labor prohibited by the order is unlawful.
Because the Wage order's seating requirement is a "standard condition of labor," violation of the requirement also violates section 1198 and gives rise to a civil penalty under PAGA. (This is the same conclusion that the Court of Appeal reached in Bright v. 99¢ Only Stores (November 12, 2010) 189 Cal.App.4th 1472, which I somehow failed to note when it came down. Mea culpa.) The Court explained:
The first amended complaint alleges that Home Depot has not provided seating for its employees, even though “there is ample space behind each counter/cashier to allow for a stool or seat.” The seating requirement of Wage Order 7-2001 clearly prohibits such conduct.
Slip op. at 12.

A secondary issue was which penalty provision applies: section 2699 or section 20(A) of the Wage Order, which provides:
In addition to any other civil penalties provided by law, any employer or any other person acting on behalf of the employer who violates, or causes to be violated, the provisions of this order, shall be subject to [enumerated civil penalties for the underpayment of wages].
The Court explained that 2699, rather than 20(A), applies to the alleged violation. Slip op. at 13-18.

The opinion is available here.

Tuesday, December 21, 2010

Duran v. U.S. Bank: Superior Court Issues $18 Million Fee Award After Class Action Trial

On December 17, 2010, in Duran v. U.S. Bank, Alameda County Superior Court Judge Robert Freedman issued an $18 million fee award to plaintiffs’ counsel following eight years of litigation and 53 days of trial before the court on misclassification claims by a class of 260 bank employees. The fee award, based on California Code of Civil Procedure section 1021.5, included a 2.25 multiplier.

The underlying case challenged the bank's alleged misclassification, under the outside sales exemption, of a class of 260 employees who provided banking services to small businesses. The case was tried to the court after the plaintiffs dismissed their Labor Code causes of action and proceeded solely on a claim for violation of the Unfair Competition Law (UCL). Cal. Business and Professions Code section 17200.

The Court earlier found that the employees were not properly deemed exempt and entered judgment in their favor for approximately $15 million in unpaid overtime and prejudgment interest. The bank has appealed the judgment.

The plaintiffs had two principal lawyers who sought and were awarded fees for 14,400 hours on the merits, and 168 hours on fee-related services. To show that their hours were reasonable, plaintiffs' counsel moved to compel defense counsel to provide its billing records. The Court ordered defense counsel to provide the hourly rates of its various counsel, the total hours spent by each attorney, and the total amount of attorneys’ fees incurred by Defendant. Those records showed that defense counsel had a total of 42 lawyers working on the cases and spent 22,000 hours.

The Court held that plaintiffs’ successful challenge to defendant's unlawful practices qualified class counsel to an award of reasonable attorneys’ fees under California’s private attorney general fee-shifting statute, Code of Civil Procedure §1021.5 because: (1) plaintiffs enforced important rights affecting the public interest; (2) the litigation conferred significant benefits on a large group of people; (3) plaintiffs' burden was greater than their individual stake in the action; and (4) the interests of justice supported an award against the defendant.

The Court awarded a lodestar of $8.3 million on the merits, awarding fees between $575 and $700 per hour. The Court then applied a 2.25 multiplier based on:
(1) the great risk Plaintiffs’ counsel took in litigating the case on an entirely contingent basis; (2) the negative impact the case had on counsel’s ability to maintain a practice; (3) the exceptional efficiency displayed in obtaining such an exceptional result with only two small law firms with just three attorneys; (4) the exceptional difficulties and complexities of maintaining this action in the face of over eight years of USB’s relentlessly aggressive defense tactics; (5) the public service Plaintiffs’ attorneys performed by enforcing California’s fundamental wage and hour laws, at no expense to the taxpayers; and (6) the fees awarded in comparable cases.
The Court did not apply an enhancement to fees incurred in bringing the motion for fees.

Monday, December 20, 2010

Futrell v. Payday California: Court of Appeal Affirms Finding that Payroll Processing Company Did Not Employ Plaintiff

Futrell v. Payday California, Inc. (December 16, 2010) --- Cal.Rptr.3d ----, 2010 WL 5117629, is one of the first published appellate cases applying the Supreme Court's recent decision in Martinez v. Combs, which defines employment for California wage law purposes. The Court described the case as follows:

This appeal arises from a class action alleging violations of sections of the Labor Code and the federal Fair Labor Standards Act (FLSA) by a payroll processing company operating in the local television commercial production industry. Plaintiffs' primary claim is that the payroll company violated various Labor Code and FLSA wage statutes, including Labor Code sections 510 and 1194 (authorizing a private right of action), by failing to pay statutorily required overtime compensation rates to Plaintiffs. In the context of a motion for summary adjudication of issues (SAI), the trial court ruled the payroll company had not been Plaintiffs' “employer.” The court thereafter entered judgment in favor of the payroll company, and Plaintiffs filed the appeal that comes before us today.

While Plaintiffs' appeal was pending in our court, the Supreme Court decided Martinez v. Combs (2010) 49 Cal.4th 35 (Martinez), cementing at least three employment principles in place which are relevant to the appeal. First, “no generally applicable rule of law imposes on anyone other than an employer a duty to pay wages.” (Id. at p. 49, italics added.) Second, a wage order adopted by the Industrial Welfare Commission (IWC) for a particular occupation, trade or industry, “and not the common law, properly defines the employment relationship in [an] action under section 1194.” (Id. at p. 62; id. at pp. 52-66.) Third, wage orders issued by the IWC “do not incorporate the federal definition of employment” under the FLSA. (Martinez, at p. 52; id. at pp. 66-68.) Because our review of the trial court's ruling on the motion for SAI is de novo (McDonald v. Antelope Valley Community College Dist. (2008) 45 Cal.4th 88, 114), we now apply Martinez. Having done so, and having separately considered federal case law interpreting the FLSA, we affirm the judgment in favor of the payroll company.

Slip op. at 1. The evidence on summary adjudication included the following:
Payday's evidence in support of its motion for SAI showed that Payday did not hire or fire Futrell or have the authority to do so. Further, the evidence showed Payday did not control Futrell's work, did not set or negotiate his wages, did not assign or supervise his work, did not determine his hours or conditions of employment, and did not set his work schedule. In addition, Payday presented evidence that it never entered into a written or oral employment contract with Futrell.

***

Futrell's evidence showed he completed timecards, employee information sheets, employment eligibility verifications, and W-4 employee withholding certificates provided by Payday, and that Payday collected the information about the hours he worked from the timecards and placed the information into Payday's computer payroll system to generate Futrell's paychecks. The pay stubs provided with Futrell's paychecks identified Futrell as the “employee” and identified Payday as the “employer of record.” Payday furnished W-2 forms which identified Payday as Futrell's “employer.” Futrell also presented evidence that Payday was considered by the Internal Revenue Service as an employer of record for income tax and unemployment insurance purposes. In addition, the evidence showed that the funds accessed for Futrell's paychecks were drawn on Payday's accounts and that Payday paid premiums for workers' compensation insurance and unemployment insurance covering Futrell. Don McVeigh, an expert in “the insurance industry, including matters involving workers' compensation insurance,” submitted a declaration in which he stated that only an “employer” can purchase workers' compensation insurance. Finally, Futrell showed the general practices at Reactor's television commercial productions included a freelance production supervisor working on site “to liaise” with Payday.
Slip op. at 3. The trial court granted the motion, and the Court of Appeal affirmed, holding:
  1. Futrell introduced no evidence to show that Payday controlled his wages, hours, or working conditions (Slip op. at 7);
  2. One "exercises control over workers' wages" when it "has the power or authority to negotiate and set an employee's rate of pay, and not [merely when it] is physically involved in the preparation of an employee's paycheck (Slip op. at 7);
  3. "There is no evidence in the current case Payday allowed Futrell to suffer work, or permitted him to work, because there is no evidence showing Payday had the power to either cause him to work or prevent him from working" (Slip op. at 8);
  4. "Payday did not direct or supervise Futrell at the production sites" or meet any of the secondary indicia of employment (Slip op. at 8-9);
  5. Payday did not employ Futrell under the FLSA "economic realities" test (Slip op. at 9-10).
  6. Payday was not estopped from denying that it employed Futrell "because, even accepting Futrell's evidence that people affiliated with Payday made statements indicating that he was a Payday employee, there is no substantial evidence showing that Futrell did any act - e.g., worked on the side apart from his police officer position - only because Payday made such statements." (Slip op. at 11).
The opinion is available here.

Wednesday, December 15, 2010

Parth v. Pomona Valley Revisited: Ninth Circuit Modifies FLSA Alternate Workweek Decision

On December 13, 2010, the Ninth Circuit amended its decision in Parth v. Pomona Valley Hospital Medical Center, --- F.3d ----, 2010 WL 5064380 (9th Cir. December 13, 2010). The amendment did not affect the outcome. Our discussion of the case, which holds that the Fair Labor Standards Act (FLSA) allows an employer to lower its employees' regular of pay to accommodate their desire to work an alternate workweek schedule, is here.

The amended decision is available here.

Alcazar v. Catholic Archbishop: Ministerial Exemption Bars Minimum Wage Action

In Alcazar v. Corporation of the Catholic Archbishop of Seattle, --- F.3d ----, 2010 WL 5029533 (9th Cir. December 10, 2010), an en banc panel of the Ninth Circuit affirmed an order granting judgment on the pleadings in a case involving a seminarian who alleged that the Church failed to pay him minimum wage in violation of Washington law. The Court held:
Churches, like all other institutions, must adhere to state and federal employment laws. But the federal courts have recognized a “ministerial exception” to that general rule. The exception exempts a church's employment relationship with its “ministers” from the application of some employment statutes, even though the statutes by their literal terms would apply. A key inquiry, therefore, is whether an employee is a “minister” for purposes of the exception. Where, as here, the plaintiff alleges that he “entered the seminary to become a Catholic priest” and performed his duties “in a ministerial placement,” “[a]s part of [his] preparation for ordination into the priesthood,” we hold that he is a “minister” for purposes of the ministerial exception.
Slip op. at 1. The opinion is available here.

Friday, December 10, 2010

In re UPS Wage and Hour Cases: Court of Appeal Affirms Summary Judgment on Exemption Defenses

In In re United Parcel Service Wage and Hour Cases (December 9, 2010) --- Cal.App.3d ----, 2010 WL 4983586, the California Court of Appeal affirmed a trial court order granting summary judgment to the employer on the executive and administrative exemption defenses. The plaintiff had been employed as "an air hub full-time supervisor (Hub Supervisor)," an "on-road supervisor (ORS)," and a "Center Manager" or "business manager." Slip op. at 4.
In all three job positions, Taylor has regularly worked in excess of eight hours a day, often as many as 10 to 12 hours. He also has often felt compelled, due to the press of business, to skip breaks and take a “working lunch,” eating a sandwich at his desk and continuing to work. All three job positions have been salaried positions paying more than double the state minimum wage, starting at approximately $4800 per month as a Hub Supervisor up to his current salary as Center Manager of approximately $7115 per month. Since 1999, Taylor has received Management Incentive Program awards consisting of stock. His annual stock “awards” ranged in value from $9385.59 to $18,506. During that same time period, Taylor has also received annual monetary bonuses equal to a half-month's salary. Nonexempt hourly employees at UPS are not eligible to receive stock awards through the Management Incentive Program. Taylor has supervised numerous hourly employees and lower-level full- and part-time supervisors while holding each of the three job positions.
Ibid.

Considering these facts and others, the Court affirmed the order granting summary judgment. The opinion is available here.

Monday, December 6, 2010

Supreme Court Will Review Dukes v. Wal-Mart

The Supreme Court of the United States this morning granted Wal-Mart's petition for certiorari in Dukes v. Wal-Mart. The Court's order is here. It limits review to the first issue presented by Wal-Mart, then adds a second issue. The two issues to be decided are as follows:
  1. Whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2) and, if so, under what circumstances; and
  2. Whether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a).

The Court's docket is here. I do not yet know the briefing schedule, but the Court will decide the case by the close of the session on June 11, 2011.