Safeway v. Superior Court: Class Certification Appropriate in Action Alleging that Employer Uniformly Failed to Compensate Employees for Missed Meal Periods "When Required"

In Safeway v. Superior Court (7/22/15) --- Cal.App.4th ---, the plaintiffs alleged that the defendants had a uniform practice of failing to compensate employees for missed meal periods, among other wage and hour violations. The trial court certified a class under the Unfair Competition Law, Business and Professions Code section 17200 (UCL) on the theory that the defendants had a practice of failing to pay for missed meal periods when required. The defendants filed a petition for writ of mandate to reverse the order, and the Court of Appeal denied the petition, holding as follows:

The legal viability of the plaintiffs' theory of recovery is not at issue on the motion for class certification, unless the merits are enmeshed with class action requirements. "Nonetheless, that determination may be proper when the defendants cannot attack the claim by demurrer or summary judgment following certification, or the parties jointly request a merits determination." The defendants did not show that either of these conditions applied.

The plaintiffs' theory of liability -- that the defendants had a system-wide practice of failing to pay meal break premium wages when required -- was capable of common proof. A UCL claim may be predicated on a practice of not paying premium wages for missed, shortened, or delayed meal periods "attributable to the employer’s instructions or undue pressure, and unaccompanied by a suitable employee waiver or agreement." Although an employer's failure to pay accrued meal period premiums, standing alone, does not violate section 226.7, nothing in the law "clearly permits" an employer to fail to pay meal period premiums. A UCL claim for failure to pay meal period premiums when required may stand even in the absence of an underlying claim for failure to provide meal periods.

The plaintiffs demonstrated that they could prove the alleged systemic unlawful practice and the damage caused thereby on a class-wide basis. The plaintiffs "did not seek accrued meal break premium wages owed to individual class members, but rather the loss of the 'compensation guarantee and enhanced enforcement' implemented by section 226.7." 

In our view, real parties demonstrated that the existence of the practice and the fact of damage were matters suitable for class treatment. Real parties’ evidence supports the reasonable inference that in the context of a class action, they could establish that petitioners engaged in the alleged practice, that is, they never paid meal break premium wages, even though a significant number of employees accrued them. Furthermore, in view of real parties’ theory of restitution, those facts would also suffice to demonstrate the fact of damage. Under that theory, the fact of damage does not require a showing that all -- or virtually all -- class members accrued unpaid meal break premium wages, but only that on a system-wide basis, petitioners denied the class members the benefits of the compensation guarantee and enhanced enforcement implemented by section 226.7.

The plaintiffs' proposed method of determining the amount of restitution did not create a barrier to certification. The plaintiffs argued that they could recover the "market value" of the loss of their statutory protections, rather than the value of the meal periods themselves. Although not entirely clear, it appears that the plaintiffs would measure this market value by the amounts that defendant paid when it began paying its employees meal period premiums. This measure did not require litigation of issues unsuitable for class treatment.

The opinion is available here. 

Wallace v. County of Stanislaus: Disability Discrimination Plaintiff Need not Prove Employer's Animus or Ill Will

Wallace v. County of Stanislaus (Cal.App. 2/25/16) considers "how to instruct a jury on the employer’s intent to discriminate against a disabled employee and, more specifically, what role 'animus' plays in defining that intent." 

Sheriff's Deputy Dennis Wallace sued the County of Stanislaus for disability discrimination after it placed him on an unpaid leave of absence based on its belief that he could not safely perform his duties as a bailiff with or without accommodation. 

The case went to trial prior to the California Supreme Court's decision in Harris v. City of Santa Monica (2013) 56 Cal.4th 203. The trial court modified the then-current version of California Civil Jury Instruction (CACI) No. 2540 to include a requirement that Wallace prove the County regarded or treated him “as having a disability in order to discriminate.” They jury found as follows: (1) the County treated Wallace as disabled; (2) Wallace was able to perform his essential job functions with or without reasonable accommodation; and (3) the County failed to prove Wallace could not safely perform those functions; but (4) County did not regard or treat Wallace as disabled "in order to discriminate." The trial court entered judgment for the County, and Wallace appealed. 

The Court of Appeal reversed, holding as follows: 

Where there is only circumstantial evidence of an employer's discriminatory motive, proof of motive follows the three-step burden-shifting McDonnell Douglas test. However, disability discrimination cases often involve "direct evidence of the role of the employee’s actual or perceived disability in the employer’s decision to implement an adverse employment action." In disability discrimination cases, courts should not "automatically apply" McDonnell Douglas, but should "determine whether there is direct evidence that the motive for the employer’s conduct was related to the employee’s physical or mental condition." 

Disability cases differ from other discrimination cases because California's definitions of physical disability, mental disability, and medical condition are broad and are intended to protect employees from discrimination based on actual or perceived disability. Further, the law protects employees "erroneously or mistakenly believed" to have a disability. 

Under Harris, an employer discriminates against an employee because of a disability when the disability is a substantial motivating reason for the employer’s decision to subject the employer to an adverse employment action. An employee need not demonstrate that the employer had any discriminatory animus; only that the employee's disability was a substantial motivating factor in the adverse employment action decision. 

A plaintiff who meets the substantial motivating factor test need not show any additional animus. The Court emphasized that the term "animus" is vague and should not be used in disability discrimination cases with "direct evidence that the employer’s motive for taking an adverse employment decision was the plaintiff’s actual or perceived disability." 

The trial court's erroneous instruction prejudiced Wallace. There was no dispute that the County's mistaken perception that Wallace could not perform the essential functions of the job was a substantial motivating factor for its decision to place him on unpaid leave. There also was no dispute that this decision caused Wallace economic harm. 

The Court remanded for a limited trial on the amount of Wallace's economic damages and the existence and amount, if any, of his non-economic damages. 

The opinion is available here. 

Hernandez v. Restoration Hardware: Objecting Class Member Lacks Standing to Appeal Class Action Judgment

Hernandez v. Restoration Hardware, Inc. (Cal.App. 3/15/16), is not an employment law case, but it deals with attorney fees after trial, and people doing class action work should know about it.

In Hernandez, the trial court found Restoration Hardware liable for violating the Song-Beverly Credit Card Act (Civ. Code section 1747.08) and assessed a penalty of $30 per violation, for a maximum total of approximately $36 million. The parties stipulated that this amount would be treated as a common fund, inclusive of fees and costs, and that class members filing claims would receive an amount equal to $30 per violation, less a prorated share of attorney fees and costs.

Plaintiff's counsel then asked for an attorney fee award of 25%, or $9 million, to be paid from the common fund. Francesca Muller, a class member, asked the court to order notice of the attorney fee motion be sent to all absent class members. The court denied the request, granted the attorney fee motion, and entered judgment. The Court of Appeal dismissed Muller's appeal, holding as follows:

Only a "party aggrieved may appeal" from a judgment. Civ. Code section 902. To appeal, Muller must have been both a party of record and aggrieved by the judgment. Although unnamed class members may be deemed parties for the limited purposes of discovery, they do not stand on the same footing as named plaintiffs and are not otherwise considered parties to the litigation. Muller was not a party to the action, took no steps to become a party to the action, and could not maintain her appeal.

The court rejected Muller's contention that she gained standing to appeal by objecting to the judgment below. While cases have held that an objecting class member may be "aggrieved" by an underlying judgment, they did not address whether such a class member was a party to the action.

Muller could have gained standing by intervening and moving to vacate the judgment, but she did not do so.

The opinion is available here. 

Desaulles v. Community Hospital: Plaintiff Who Receives Monetary Settlement Is "Prevailing Party" and May Recover Costs as a Matter of Right

In DeSaulles v. Community Hospital of the Monterey Peninsula (2014) 225 Cal.App.4th 1427, the plaintiff sued for failure to accommodate disability and other causes of action. After the defendant won several motions, the parties settled the case, with the defendant paying the plaintiff $23,500. The trial court found that the defendant had obtained a dismissal, was the prevailing party, and was entitled to recover its costs.

The Court of Appeal reversed, holding that when an employer pays an employee in settlement, the employee obtains a "net monetary recovery" and is the prevailing party under Code of Civil Procedure section 1032(a)(4). As such, where the settlement agreement is silent as to the recovery of costs, the employee is entitled to recover his or her costs as a matter of right. The employer is not entitled to recover its costs, even though it obtained a judgment denying the plaintiff any relief, which ordinarily would make the defendant the prevailing party.

The Supreme Court has affirmed that decision in full:

When a defendant pays money to a plaintiff in order to settle a case, the plaintiff obtains a "net monetary recovery," and a dismissal pursuant to such a settlement is not a dismissal "in [the defendant‘s] favor." (§ 1032(a)(4).) [T]his holding sets forth a default rule; settling parties are free to make their own arrangements regarding costs.

The opinion is available here.

Carbajal v. CWPSC: Arbitration Agreement Unconscionable, Unenforceable

In Carbajal v. CWPSC, Inc. (Cal.App. 2/26/16), the plaintiff filed a putative wage and hour class action against her former employer, CW. Relying on an arbitration agreement with a class action waiver, CW moved to compel the plaintiff to arbitrate her individual claims. The trial court denied the motion, holding the arbitration agreement unconscionable. The Court of Appeal affirmed, holding as follows:

CW failed to meet its burden of demonstrating that the Federal Arbitration Act (FAA) applied. "The party asserting FAA preemption bears the burden to present evidence establishing a contract with the arbitration provision affects" (1) the channels of interstate commerce, (2) the instrumentalities of interstate commerce and persons or things in interstate commerce, or (3) those activities having a substantial relation to interstate commerce. CW "presented no evidence to establish any connection to interstate commerce."

CW's arbitration agreement had a moderate level of procedural unconscionability. The agreement was a contract of adhesion. The agreement stated that arbitration would proceed under AAA rules, but it did not state which set of AAA rules would apply. CW did not give the plaintiff a copy of the applicable rules, tell her where to find the rules, offer to explain the arbitration provision, or give her an opportunity to review any rules.

The arbitration agreement also had a moderate level of substantive unconscionability. It required the plaintiff to bring all claims in arbitration, but "broadly authorize[d] CW to seek any type of injunctive relief in court." It waived the requirement that CW post a bond to obtain injunctive relief. The agreement also provided that each party should bear its own fees, which would interfere with the plaintiff's right to recover attorney fees if she prevailed on certain of her wage claims.

A provision giving CW the right to appeal an award granting class-wide relief was not substantively unconscionable.

Here, the arbitration provision states, “the arbitrator shall have no authority or jurisdiction to enter an award or otherwise provide relief on a class, collective or representative basis.” If the arbitrator awarded any form of class relief, CW Painting would be entitled to challenge the award in court and have it set aside regardless of whether the Agreement’s arbitration provision included the appeal term Carbajal challenges. The appeal term therefore does not increase the arbitration provision’s substantive unconscionability.

Given the moderate level of both procedural and substantive unconscionability, the agreement was unenforceable.

The presence of three substantively unconscionable provisions supported the conclusion that the agreement was "permeated with unconscionability," and the trial court did not abuse its discretion in refusing to sever the unconscionable terms from the agreement.

The Court did not address the plaintiff's contentions that Labor Code section 229 precludes arbitration of her Labor Code claims, and that CW could not enforce the Agreement because CW never signed it.

The opinion is available here.

Astorga v. Retirement Board: Court Rules on Effective Date of Public Employee's Disability Retirement

Just a quick word on Astorga v. Retirement Board of the Santa Barbara County Employees Retirement System (Cal.App. 2/2/16), which concerns the effective date of a public employee's disability retirement.

Sara Astorga applied for retirement disability. To maintain health insurance pending the decision on her application, she elected to remain on the payroll and receive her accrued sick leave, vacation and holiday pay in small but regular increments.

The Retirement Board of the Santa Barbara County Employees Retirement System (Board) approved Astorga's disability retirement application. Government Code section 317241 states that a disability retirement may not commence until the day following the last day the applicant received "regular compensation." The Board determined the effective date of her retirement was the day after she received her last sick leave, vacation or holiday payment. It rejected her argument that the effective date should be calculated based on the day her sick leave, vacation and holiday pay balances would have been exhausted had she taken them in full rather than in smaller increments.

Astorga petitioned for a writ of mandate. (Code Civ. Proc., § 1094.5.) The trial court denied the petition, concluding that the Board correctly calculated Astorga's effective date of disability retirement. We affirm.

The opinion is available here. 

DFEH Issues FAQ for Employers on Transgender Rights in the Workplace

The California Department of Fair Employment and Housing (DFEH) has issued an "FAQ for Employers" on transgender rights in the workplace. Among other things, the FAQ provides:

Employers should not ask questions designed to detect a person’s sexual orientation or gender identity or questions about an employee's plans to have surgery.

If an employer has a dress code, it should apply it a non-discriminatory manner. For example, an employee who identifies as a female should be held to the same standards as other females.

Employers should allow employees to use restrooms that correspond with their gender identities. Where possible, employers should provide private restrooms for use by any employee who wants greater privacy, including those who do not want to share facilities with transgender coworkers.

The FAQ is available here.