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.

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.

Steve

Quote of the Week: Andrew Jackson

One man with courage makes a majority.

Andrew Jackson

Why post this here? As advocates for employees in wage and hour cases, we sometimes have the good fortune to represent people who want to help not only themselves, but also their co-workers. The decision to stand up for other people can be difficult to make. Our clients know that class actions can take years to prosecute and that they will have to provide information, documents, and a deposition, and be available at every step along the way. They also know that their current or former employer may be tempted to retaliate against them for standing up for themselves and their co-workers. The people who ultimately choose to be class representatives are those who trust the courage of their own convictions. One person with courage makes a majority.

More Good Stuff From the UCL Practitioner: Live Blog of Advanced Class Action Seminar

Last night, the UCL Practitioner did a live blog from a seminar on Advanced Class Action topics, with a focus on wage and hour. Speakers included Judges Robert Freedman and Steven Brick from Alameda County's complex department, Judge David Flinn from Contra Costa County's complex department, and research attorneys Philip Obbard and Walter Stemmler from Alameda County's complex department. Many thanks to the UCL Practitioner for making this info available for those of us who couldn't make it. (It sounded like a good seminar, but I wasn't going to travel from LA for it!)

California Supreme Court Will Review Arbitration Decision

The California Supreme Court has granted review in Sonic-Calabasas A, Inc. v. Moreno (2009) 94 Cal.Rptr.3d 544, which held that an employee who signs an otherwise valid pre-dispute arbitration agreement may not pursue his claims for unpaid vacation pay in front of the Labor Commissioner. The Court of Appeal held that the plaintiff waived his right to a Labor Commissioner hearing, and that enforcement of the waiver was not barred by Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, or Gentry v. Superior Court (2007) 42 Cal.4th 443. The Supreme Court framed the issues to be decided as follows:

(1) Can a mandatory employment arbitration agreement be enforced prior to the conclusion of an administrative proceeding conducted by the Labor Commissioner concerning an employee's statutory wage claim?

(2) Was the Labor Commissioner's jurisdiction over employee's statutory wage claim divested by the Federal Arbitration Act under Preston v. Ferrer (2008) 552 U.S. 346, 128 S.Ct. 978, 169 L.Ed.2d 917?

The Supreme Court's docket is available here. It will be interesting to see whether the Court puts this case on track with Pearson Dental, a case discussing similar issues in the context of the Fair Employment and Housing Act.

Quote of the Week: The Seventh Amendment

In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.

Seventh Amendment to the Constitution of the United States of America.

Why post the Seventh Amendment? Too many companies and employers are forcing their customers to waive their right to jury trial by imposing mandatory arbitration schemes that work to protect the companies' and employers' short-term interests, but subvert the interests of justice. People far too often forget that the right to jury trial is not trivial. It is a fundamental, core principal of American democracy. If it was important enough for our country's founders to put in the Bill of Rights, it is important enough for us to fight to protect.