Cardenas v. M. Fanaian, D.D.S.: Supreme Court Dismisses Labor Code Section 1102.5 Retaliation Case

In Cardenas v. M. Fanaian, D.D.S., Inc. (Cal.App. 10/1/15) (discussed here), the Court of Appeal held as follows: a retaliation action under Labor Code section 1102.5 exists independently of, and does not depend upon, an action for wrongful termination in violation of public policy; section 1102.5 does not require the employee to show that the allegedly illegal activity violates a policy that "inures to the benefit of the public at large rather than to a particular employer or employee;" and section 1102.5 also does not require the employee to show that the alleged illegal activity involved wrongdoing by the employer.

The California Supreme Court granted review on December 16 (Case No. S230533). Apparently the parties have settled the case, because they asked the Supreme Court to dismiss it, and the Court, of course, agreed.

I am no appellate specialist, but I understand that the lower court's decision will remain unpublished. I do not know whether the Court of Appeal can republish the decision if it were so inclined. Maybe one of you can fill me in. 

Oregon Restaurant and Lodging Ass'n v. Perez: Ninth Circuit Revisits Tip Pooling

Just a quick word on Oregon Restaurant and Lodging Association v. Perez (9th Cir. 2/23/16). The opinion itself does a good job of stating the holding:

Under the Fair Labor Standards Act of 1938 (“FLSA”), as amended in 1974, an employer may fulfill part of its hourly minimum wage obligation to a tipped employee with the employee’s tips. 29 U.S.C. § 203(m). This practice is known as taking a “tip credit.” Section 203(m) of the FLSA obligates employers who take a tip credit to (1) give notice to its employees, and (2) allow its employees to retain all the tips they receive, unless such employees participate in a valid tip pool. Id. Under section 203(m), a tip pool is valid if it is comprised exclusively of employees who are “customarily and regularly” tipped. Id.

In both cases before this court, Employer-Appellees did not take a tip credit against their minimum wage obligation; they paid their tipped employees at least the federal minimum wage. Employer-Appellees required their employees to participate in tip pools. Unlike the tip pools contemplated by section 203(m), however, these tip pools were comprised of both customarily tipped employees and non-customarily tipped employees.  

In 2010, we held in Cumbie v. Woody Woo, Inc. [discussed here] that this type of tip pooling arrangement does not violate section 203(m) of the FLSA, because section 203(m) was silent as to employers who do not take a tip credit. 596 F.3d 577, 583 (9th Cir. 2010). In 2011, shortly after Cumbie was decided, the Department of Labor (“DOL”) promulgated a formal rule (“the 2011 rule”) that extended the tip pool restrictions of section 203(m) to all employers, not just those who take a tip credit. 76 Fed. Reg. 18,832, 18,841–42 (April 5, 2011).

The United States District Court for the District of Oregon held that Cumbie foreclosed the DOL’s ability to promulgate the 2011 rule and that the 2011 rule was invalid because it was contrary to Congress’s clear intent. Or. Rest. & Lodging v. Solis, 948 F. Supp. 2d 1217, 1218, 1226 (D. Or. 2013). The United States District Court for the District of Nevada followed suit. Cesarz v. Wynn Las Vegas, LLC, No. 2:13-cv-00109-RCJ-CWH, 2014 WL 117579, at *3 (D. Nev. Jan. 10, 2014). For the reasons set forth below, we reverse both district court decisions.

In other words, under the 2011 DOL rule, a tip pool is valid only if it is comprised exclusively of employees who are “customarily and regularly” tipped, whether the employer takes a tip credit or not. The opinion is available here.  

Bains v. DIR: Wage Orders for Agricultural Workers

The introduction to Bains v. Department of Industrial Relations (Cal.App. 2/16/16) includes a terrible pun. See if you can find it:

Prunes are harvested from trees and must be dried to be marketed. Two administrative rules set forth different overtime pay rates for agricultural workers who harvest fruit and for those who process fruit for market; generally speaking, the latter receive more generous overtime pay. This case plumbs the line dividing the workers subject to each respective rule, as applicable to the agricultural practices described herein. 

Plumb and plum, get it? Prunes are dried plums. I'm surprised they didn't say anything about the workers who prune the trees. 

Anyway, the plaintiffs sought a declaration that certain of their workers were subject to Wage Order 14, which provides the less generous overtime rules than Wage Order 13. The trial court ruled against the plaintiffs, and the Court of Appeal affirmed, holding as follows:

The fact that the plaintiffs failed to exhaust their administrative remedies did not deprive the court of jurisdiction over the case. The plaintiffs asked the trial court to decide the issue and rejected the DLSE's position that an administrative hearing should be held first. To the extent that the trial court erred, the plaintiffs invited the error.

Wage Order 14 applies generally to employees engaged in planting, tending, and harvesting crops. Those employees receive overtime compensation only if they work more than ten hours in a workday or more than six days in a workweek.

Wage Order 13 applies to those "employed in industries preparing agricultural products for market, on the farm." Like most other California employees, they receive overtime compensation if they work more than eight hours in a workday, more than 40 hours in a workweek, or more than six days in a workweek.

Those employees engaged in shaking plums from trees and collecting them in bins are engaged in harvesting and fall within Wage Order 14. Those engaged in drying the fruit in permanently fixed structures on the farm are engaged in preparing the fruit for market. They fall within Wage Order 13.

The opinion is available here.

Lafitte v. Robert Half International: Cal. Supreme Court Grants Review in Class Action Attorney Fee Dispute

I wanted to note this case, which is pending in the California Supreme Court. In Lafitte v. Robert Half International, Inc. (2014) 231 Cal.App.4th 860, a class member objected to a class settlement of $19 million and the award of $6.3 million in fees to class counsel. Among other things, he objected that the class notice required class members to object before counsel filed their attorney fee motion, the notice stated that class members would not be responsible for counsel's fees when the fees were being deducted from the settlement fund, the settlement agreement's "clear sailing" provision on fees was collusive, and the court improperly calculated fees as a percentage of the settlement fund, with a lodestar cross-check. The trial court overruled the objections and approved the settlement. The objector appealed, and the Court of Appeal affirmed.

The Supreme Court granted review last year, and the Court's web site states the issues on appeal as follows: 

Does Serrano v. Priest (1977) 20 Cal.3d 25 permit a trial court to anchor its calculation of a reasonable attorney's fees award in a class action on a percentage of the common fund recovered?

Lafitte is Case No. S222996, and the Court's web site for it is here. You can sign up for automatic email updates on the case here. 

Department of Labor Issues Joint Employer Guidelines

On January 20, 2016, the U.S. Department of Labor’s Wage and Hour Division (WHD) issued an Administrator’s Interpretation (AI) on joint employment under the Fair Labor Standards Act (FLSA) and Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The Department uses these Administrator's Interpretations, rather than more narrow opinion letters. The AI distinguishes between two types of joint employment:

Horizontal joint employment exists where the employee has employment relationships with two or more employers and the employers are sufficiently associated or related with respect to the employee such that they jointly employ the employee. The analysis focuses on the relationship of the employers to each other. This AI explains that guidance provided in the FLSA joint employment regulation – which focuses on the relationship between potential joint employers – is useful when analyzing potential horizontal joint employment cases.  

Vertical joint employment exists where the employee has an employment relationship with one employer (typically a staffing agency, subcontractor, labor provider, or other intermediary employer) and the economic realities show that he or she is economically dependent on, and thus employed by, another entity involved in the work. This other employer, who typically contracts with the intermediary employer to receive the benefit of the employee’s labor, would be the potential joint employer. Where there is potential vertical joint employment, the analysis focuses on the economic realities of the working relationship between the employee and the potential joint employer. This AI explains that guidance provided in the MSPA joint employment regulation is useful when analyzing potential vertical joint employment. The structure and nature of the relationship(s) at issue in the case, reflecting potentially horizontal or vertical joint employment or both, should determine how each case is analyzed.

The AI and other WHD materials on joint employment are available here.

Interesting timing here. Dr. David Weil, Administrator of the WHD, is speaking on February 23 at the Los Angeles County Bar Association's Ben Aaron Lecture. His topic is "Mending the Fissured Workplace," and I am sure he will address joint employment, independent contractor status, and other important issues. More information on the program is available here. 

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 49.2.4.2 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.