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Friday, May 27, 2011

Areso v. CarMax, Inc.: Court of Appeal Issues Surprising Commission Decision

In Areso v. CarMax (5/20/11) --- Cal.App.4th ----, 2011 WL 1902200, plaintiff sold cars for defendant. Defendant classified plaintiff as an exempt commissioned salesperson. Defendant paid plaintiff a minimum guaranteed base, plus approximately $150 for each vehicle sold, but did not pay her overtime compensation. Plaintiff filed a class action, challenging defendant's pay practices. The trial court (Los Angeles Superior, Judge Highberger), granted summary judgment for defendant, holding that plaintiff was properly classified as exempt. The Court of Appeal affirmed.

First, it held that, although the order granting summary judgment did not dispose of all causes of action, plaintiff could appeal because the remaining causes of action (waiting time penalties, unfair competition, and PAGA penalties) were "purely ancillary" in that they "all depend entirely upon Areso's overtime claim, and therefore all became moot once the trial court granted summary adjudication on that claim." Slip op. at 5.

Second, it held that defendant's payments to plaintiff of $150 per vehicle constitute commission wages "based proportionately on the amount or value" of defendant's property or services sold, making plaintiff an exempt employee. Slip op. at 6-7.

The Court distinguished Keyes Motors, Inc. v. DLSE (1987) 197 Cal.App.3d 557, which held:
Labor Code section 204.1 sets up two requirements, both of which must be met before a compensation scheme is deemed to constitute commission wages. 'First, the employees must be involved principally in selling a product or service, not making the product or rendering the service. Second, the amount of their compensation must be a percent of the price of the product or service.'
Keyes at 563; see also Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, 804 (adopting Keyes). Contrary to Keyes and Ramirez, the Court held that "commission wages may be based proportionately on the amount (number) of property or services sold by the employee." Slip op. at 11. In other words, defendant's compensation structure of $150 per car was based on the amount of product sold and constituted a commission.  

The opinion is available here.

Monday, May 23, 2011

Harris v. Pac Anchor: Federal Law Does Not Preempt Independent Contractor Misclassification Action

In People ex rel. Harris v. Pac Anchor Transportation, Inc. (5/18/11) 195 Cal.App.4th 765, 2011 WL 1879209, the Court of Appeal held that the Federal Aviation Administration Authorization Act ("FAAAA") does not preempt an action alleging that a motor carrier violated the Unfair Competition Law ("UCL") by misclassifying its employee drivers as independent contractors. Here are the facts:
Pac Anchor is a trucking company in Long Beach, California. Barajas is an owner of Pac Anchor, where he works as a manager and truck dispatcher. Pac Anchor has contracts with shipping companies to transport shipping containers from the ports of Los Angeles and Long Beach to locations in Southern California, including warehouses and railroad freight depots.

Barajas owns 75 trucks. He recruits drivers, then leases his trucks and the drivers to Pac Anchor. Barajas and Pac Anchor classify the drivers as independent contractors. As a result, Barajas and Pac Anchor do not obtain workers' compensation insurance, withhold state disability insurance or income taxes, pay unemployment insurance or employment training fund taxes on behalf of the drivers, reimburse business expenses, insure payment of the state minimum wage, or provide itemized written statements of hours and pay to the drivers.

The drivers do not invest any capital, however, or own the trucks that they drive. They use trucks, tools, and equipment furnished by Barajas and Pac Anchor. The drivers are employed for extended periods of time, but can be discharged without cause. The drivers take all their instructions from Barajas and Pac Anchor. They are not skilled workers and do not have substantial control over operational details. The drivers do not have other customers or their own businesses. The drivers do not have Department of Transportation operating authority or other necessary permits and/or licenses to independently engage in the transport of cargo. They are an integrated part of Barajas's and Pac Anchor's trucking business, because they perform the core activity of delivering cargo.
Slip op. at 2-3.

The State of California filed suit, alleging that Pac Anchor and Barajas violated the UCL. Defendants moved for judgment on the pleadings, arguing that the action was preempted by the FAAAA. The Court (Los Angeles Superior, Judge White) granted the motion:
First, the court concluded that the holding of Fitz-Gerald v. SkyWest, Inc. (2007) 155 Cal.App.4th 411 (Fitz-Gerald) required finding all UCL causes of action against motor carriers preempted by the FAAAA. Second, the court found that requiring Barajas and Pac Anchor to treat its truck drivers as employees would increase the motor carrier's operational costs, and therefore, the action related to the motor carrier's prices, routes, and services. Third, the court concluded that the action threatened to interfere with the forces of competition by discouraging independent contractors from competing in the trucking market.
Slip op. at 4. The Court of Appeal reversed.

The Court began by discussing FAAAA preemption:
The FAAAA preempts state and local regulation relating to the prices, routes or services of motor carriers with respect to the transportation of property. (49 U.S.C. § 14501(c).) Specifically, section 14501(c) of title 49 of the United States Code provides in pertinent part: “(1) . . . Except as provided in paragraphs (2) and (3), a State . . . may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.
Slip op. at 5-6. After discussing a number of cases that deal with FAAAA preemption, the Court stated that it declined to follow Fitz-Gerald, supra:
We disagree with Fitz-Gerald’s cursory citation to Morales and Wolens to support the conclusion that all state unfair business practices statutes are preempted by the [Airline Deregulation Act of 1978, which is analogous to the FAAAA]. Where a cause of action is based on allegations of unlawful violations of the State's labor and unemployment insurance laws, we see no reason to find preemption merely because the pleading raised these issues under the UCL, as opposed to separately stated causes of action. We respectfully disagree with Fitz-Gerald’s contrary conclusion as to preemption of causes of action under the UCL.
Slip op. at 8. The Court then held that the State's UCL action "is not preempted by the FAAAA, because it is not related to the price, route or service of any motor carrier." Slip op. at 8. After explaining the broad scope of the UCL and the fact that wage violations also violate the UCL, the Court concluded:
In this case, the State's action to enforce Barajas's and Pac Anchor's statutory obligations as an employer is not related to Pac Anchor's prices, routes, or services, even though it may remotely affect the prices, routes, or services that the motor carrier provides. Case law supports finding that the effect of California's minimum wage law (Lab. Code, § 1194) on a motor carrier's prices, routes, and services is too tenuous for preemption under the FAAAA. (See Fitz-Gerald, supra, 155 Cal.App.4th at p. 423 [connection of minimum wage law to higher fares, fewer routes, and less service is tenuous]; Mendonca, supra, 152 F.3d at p. 1189 [California's prevailing wage law applicable to public works contractors is not preempted by the FAAAA].) Other California labor and unemployment insurance provisions that Barajas and Pac Anchor allegedly violated have a similarly indirect and tenuous connection to Pac Anchor's prices, routes, and services. We hold that the State's UCL action based on Barajas's and Pac Anchor's alleged violations of generally applicable state laws governing an employer's relationship with employees is not an action related to the price, route, or service of a motor carrier and, therefore, not preempted by the FAAAA.
Slip op. at 10. The opinion is available here.

Cal. Supremes Grant and Hold in Another Brinker Case

On May 18, 2011, the California Supreme Court granted review in Tien v. Tenet Healthcare Corp. (2/16/11) (blogged here) pending its decision in Brinker. I've lost track of the number of Brinker grant-and-holds. Here are the ones I can think of of the top of my head: Brinkley, Bradley, Faulkinbury & Boyd, Hernandez v. Chipotle. I forgot Brookler v. Radioshack. I probably forgot some others, too. Up next is the May 10 decision in Lamps Plus.

It's been suggested that the length of time that Brinker has been on review is a good sign for the plaintiffs because it means that the Court is really digging into the legislative history of the code and the Wage Orders, as it did not Martinez v. Combs, and that all takes a lot of time. Entirely possible. I would love it if they would schedule oral argument so we could start the clock on their decision.

Wednesday, May 18, 2011

Lamps Plus Overtime Cases: Another Court Joins the Brinker Chorus

Another Court has chimed in on the great Brinker debate. In Lamps Plus Overtime Cases (5/10/11) the Second District Court of Appeal held that the trial court (L.A. Superior, Judge West) did not abuse its discretion in denying class certification of a wage and hour action alleging, among other causes of action, violation of California's meal and rest period requirements.

The Court held that the trial court made the correct legal analysis in that employers need only "provide" meal periods, not ensure that they are taken, and that there was "overwhelming evidence that Lamps Plus's policies allowed and encouraged meal periods." Slip op. at 7. Further, it held that reaching this issue did not constitute a ruling on the merits (Slip op. at 8), substantial evidence supported the trial court's conclusions (Slip op. at 10), and the trial court did not err in denying a stay pending Brinker.

As to plaintiffs' off-the-clock claims, the Court held that resolving such claims would require an individualized inquiry, and the trial court did not err in denying class certification. Slip op. at 11.

Regarding plaintiffs' claims for waiting time penalties, the Court held: "The trial court could reasonably conclude that individualized inquiry was required, and that plaintiffs did not establish classwide violations." Slip op. at 12.

I would be surprised if the Supreme Court did not grant review and hold pending Brinker.

The opinion is available here.

Thursday, May 12, 2011

Cal. Supreme Court Grants Review in Hodge v. AON

The California Supreme Court on May 11 granted review in Hodge v. AON Insurance Services (blogged here) pending its decision in Harris v. Superior Court (blogged here). The Supreme Court also is holding Pellegrino v. Robert Half Intern., Inc. ("Pellegrino I," blogged here) pending Harris.

Cal. Supreme Court Grants Review in In re. UPS Wage and Hour Cases (McGann)

As predicted, on May 11, 2011, the California Supreme Court granted review in In re. UPS Wage and Hour Cases (Supreme Court Case No. S191908) pending its decision in Kirby v. Immoos Fire Protection. Our original post on UPS is here, and our post on Kirby is here. The Supreme Court framed the Kirby issues as follows:
  1. Does Labor Code section 1194 apply to a cause of action alleging meal and rest period violations (Lab. Code 226.7) or may attorney's fees be awarded under Labor Code section 218.5
  2. Is our analysis affected by whether the claims for meal and rest periods are brought alone or are accompanied by claims for minimum wage and overtime?