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Wednesday, January 27, 2010

Schachter v. Citigroup: Cal. Supreme Court Upholds Bonus Compensation Plan

In Schachter v. Citigroup, Inc. (November 2, 2009) 47 Cal.4th 610, the California Supreme Court upheld an employer's bonus compensation plan against allegations that it worked a forfeiture of wages in violation of California law. The Court described the plan and the issues presented as follows:
Citigroup offered a voluntary employee incentive compensation plan that provides employees with shares of restricted company stock at a reduced price in lieu of a portion of that employee's annual cash compensation. Employees agree that, should they resign or be terminated for cause before their restricted shares of stock vest, they would forfeit the stock and the portion of cash compensation they directed be paid in the form of the restricted stock. We consider here whether the incentive plan's forfeiture provision violates Labor Code sections 201, 202, and 219, which provide that employees be paid all earned, unpaid wages upon termination or resignation and prohibit agreements that purport to circumvent that requirement. We conclude the forfeiture provision does not run afoul of the Labor Code because no earned, unpaid wages remain outstanding upon termination according to the terms of the incentive plan.
The Court held that:
  1. shares of restricted stock constituted a wage; but
  2. compensation plan did not violate statute prohibiting agreements that attempt to circumvent requirements of Labor Code;
  3. forfeiture provision did not violate statutes requiring prompt payment of all earned wages upon termination or resignation;
  4. employer was not required to provide cash compensation for forfeited stock; and
  5. employee was not entitled to a pro rata payment for the elapsed portion of the two-year vesting period for the forfeited stock.
In light of the Supreme Court's decision a couple of years ago in Prachasaisoradej and Court of Appeal decisions such as Neisendorf v. Levi Strauss, this decision does not come as a real surprise. 

Ninth Circuit Refuses to Enforce Class Arbitration Waiver

In Laster v. AT&T Mobility LLC (9th Cir. October 27, 2009), the Ninth Circuit followed Shroyer v. New Cingular Wireless Services, Inc., 498 F.3d 976 (9th Cir. 2007) and affirmed a District Court decision that a class arbitration waiver was unconscionable and unenforceable in a class action against a telephone company based on allegations that the company’s offer of a "free" phone was fraudulent because the company charged the customer sales tax on the phone. The "new wrinkle" in this case -- a very creative contract clause providing a "premium" payment of $7,500 to any customer who recovered more in arbitration that the company's last written offer before selecting the arbitrator -- did not prevent the class action waiver from being substantively unconscionable. The Court also held that the Federal Arbitration Act does not preempt California unconscionability law.

Monday, January 25, 2010

Back Up and Running

You may have noticed that we've been off air for about four months now. I broke my leg back in September while playing soccer, then came down with swine flu. (Fun!) On top of that, we've had four trials in the last four months:
  • a bench trial on behalf of two car wash workers (unfortunately, due to several continuances ordered by the court, we are still in the middle of this trial);
  • a bench trial in which we recovered $58,000 on behalf a low-wage worker and $50,000 in attorney fees;
  • a two-week jury trial in which we recovered $30,000 in overtime compensation for three car wash workers (motion for attorney fees pending);
  • a bench trial in which we recovered $20,000 in overtime compensation for a delivery driver (motion for attorney fees pending).

It seems that the smaller cases have gotten more difficult to resolve short of trial in this economy.

Now that we're through the rush of the last four months, I have a chance to do a little catching up on the blog. As always, I hope you find this a useful space to watch for information on California wage and hour laws.