Aleman v. Airtouch Cellular confirms what we already suspected regarding reporting time pay and split shift wages

While this case ostensibly addresses issues of first impression in California, like many such decisions it was only a matter of time.  In Aleman v. Airtouch Cellular (December 21, 2011), the Court of Appeal (Second Appellate District, Division Two) examined claims for reporting time pay and split shift premiums.  The case was brought by former employees of AirTouch. The plaintiffs worked mostly as retail sales representatives or customer service representatives at AirTouch stores and kiosks.  Plaintiffs alleged that AirTouch did not properly pay its nonexempt employees for attending mandatory store meetings.

On the reporting time claim, the Court concluded that the plaintiffs were not entitled to receive "reporting time pay" for attending meetings at work, because all the meetings were scheduled and they worked at least half the scheduled time.  This issue stems from the argument that reporting time pay should be based on a two-hour minimum.  Thus, goes the argument, if you are called into a meeting one day for two hours, you should get two hours of pay, even if the meeting last 90 minutes.  This theory is dead.  If a meeting is scheduled, and the meeting lasts at least half the scheduled time, that is good enough.

On the split shift differential claim, the Court concluded, consistent with at least one treatise to examine the issue, that the split shift differential is intended only to protect the minimum wage law.  Thus, if your pay for the hours worked is enough to satisfy the split shift premium of one extra hour of pay at minimum wage, then no further pay need be supplied.

On the plus side, the Court explicitly held that an award of attorney's fees was improper, since both reporting time pay and split shift pay were governed by Labor Code section 1194, governing payment of minimum wages.  Since the one-way fee shifting statute controls the claims, defendant could not recover fees.  Phew.

What procedures must a Court follow when a plaintiff settles, leaving a "headless" putative class action?

I've faced a species of this issue myself.  But it turns out that the answer to this question involves more potential twists and turns than one might first believe.  Seems there's more than one way to skin this headless cat.  And, in a most interesting twist, the appellate division tackling this question is very same division that decided Parris v. Superior Court, 109 Cal. App. 4th 285 (2003) [pre-certification communications with class members], Belaire-West Landscape, Inc. v. Superior Court, 149 Cal. App. 4th 554 (2007) [discovery of putative class member identity and contact information], and Lee v. Dynamex, Inc., 166 Cal. App. 4th 1325 (2008) [discovery of putative class member identity and contact information], so one might say that this division has a certain expertise regarding this prickly area.

In Pirjada v. Superior Court (December 12, 2011), the Court of Appeal (Second Appellate District, Division Seven) issued an order to show cause but ultimately denied the petition for a writ of mandate brought by the plaintiff following the denial of a discovery motion.  The plaintiff settled his individual claim through direct negotiations with defendant's CEO.  The trial court granted leave to amend the complaint to name a new class representative but denied the motion to compel precertification discovery to identify a suitable class representative.

What will ultimately happen in this case remains unclear.  But this opinion does identify key decisions that might have changed the result, though that is hard to say with certainty.

The Court began its discussion by restating existing standards.  First, class member rights are protected, even pre-certification.  Second, court approval is not needed to communicate with putative class members, but when a court's assistance is solicited, a court can consider the potential for abuse.  Third, class member contact information is "generally discoverable."  Fourth, lead plaintiffs, who are unqualified to serve as a class representative may, "in a proper case," move for discovery to find a new representative.  However, the Court also noted that precertification discovery is not a matter of absolute right.

Next, citing La Sala v. American Savings & Loan Assn., 5 Cal. 3d 864  (1971) and Kagan v. Gibraltar Sav. & Loan Assn., 35 Cal. 3d 582 (1984) (disapproved in part on another ground in Meyer v. Sprint Spectrum L.P., 45 Cal.4th 634 (2009)), the Court emphasized the trial court's obligation, as also stated in Rule 3.770, to consider carefully any request to dismiss a class action and evaluate whether notice is necessary.

Then, after noting that the standard of review is the abuse of discretion standard, the Court explained why the writ must be denied. Petitioner first argued, as a matter of discovery law, that because defendant failed to respond to document requests, it waived any objection. Absent a finding that the failure was the result of mistake, inadvertence or excusable neglect, Petitioner argued that it was an abuse of discretion to deny the motion to compel. Second, as a matter of the procedural law governing class actions, Petitioner argued that the court abused its discretion in declining to authorize notice to potential class members about the need for a substitute representative. The Court found the first contention to be incorrect and the second premature.

Interestingly, though the Court ultimately rejected the challenge to the discovery order, it was highly critical of defendant's behavior:

Outside the context of representative and class actions it may well be, as Pacific National observes, “a matter of common knowledge and common sense” that once a plaintiff settles his or her case any discovery responses not yet due no longer need to be served. Because the lawsuit against Pacific National was filed as a class action, however, and the individual settlement with Pirjada was made without the participation or consent of his lawyer, the experienced employment law attorneys representing Pacific National should have either objected to the still-outstanding discovery as moot, moved for a protective order or taken steps to ensure that the settlement agreement between their client and Pirjada included a provision withdrawing any remaining discovery requests.

Slip op., at 12.  The Court then observed that the trial court could have crafted a number of alternative orders designed to locate a suitable representative.  Here's where things get interesting.  The trial court first considered and denied a motion to give notice to the class.  That order was not challenged, though the Court telegraphed its opinion of the Order:

Although the court's decision to deny Westrup Klick's motion for notice to the class was based largely on a distinction between consumer and employee class actions, a distinction we implicitly rejected in Belaire-West Landscape, Inc. v. Superior Court, supra, 149 Cal.App.4th 554, the propriety of that ruling is not before us. Westrup Klick did not seek writ review of the court's May 26, 2011 order. Instead, it elected to proceed by way of a motion to compel.

Slip op., at 13.  The Court then concluded that the trial court's decision to deny the motion to compel after giving time to find a new representative was not arbitrary or capricious.

As to the second, premature argument, the Court also seemed to be hinting that the trial court should proceed with caution:

Whether or not the superior court's initial decision not to notify potential class members that Pirjada now lacks standing to represent the class was correct, the court will necessarily revisit that question when it hears its order to show cause regarding dismissal. Counsel's declaration in support of the petition for writ of mandate indicates a new class representative cannot be identified by the informal means authorized in Parris, supra, 109 Cal.App.4th 285, and discussed by the superior court during the May 26, 2011 hearing. Assuming that remains the case, Westrup Klick will have an opportunity to demonstrate to the court that some form of notice is required to avoid prejudice to absent class members. It would be inappropriate for us to prejudge the outcome of that hearing or to restrict the superior court's discretion by attempting to outline the factors it should weigh in deciding how to comply with the requirements of La Sala, Kagan and Rule 3.770.

Slip op., at 14-15.  Riiiiiight.  Good thing they didn't give the trial court a look at their cards.

So now you know, at a minimum, that when the representative suddenly hits the eject button, class counsel needs to walk carefully through the dismissal process so as to seek the best possible methods for locating replacement representatives and/or obtaining notice to the putative class.

In Harris v. Superior Court, the California Supreme Court tries to clarify the administrative exemption as it applies to claims adjusters

(Whether it was successful is another matter entirely.)  After spending the majority of December out sick, I have a good deal of case commentary to cover before I'm current here.  In no particular oder, I begin with the California Supreme Court's opinion in Harris v. Superior Court (December 29, 2011).  Harris stems from four coordinated class action lawsuits contending that claims adjusters employed by Liberty Mutual Insurance Company and Golden Eagle Insurance Corporation were erroneously classified as exempt "administrative" employees.  The trial court certified a class of "all non-management California employees classified as exempt by Liberty Mutual and Golden Eagle who were employed as claims handlers and/or performed claims-handling activities."  Plaintiffs moved for summary adjudication of defendants' affirmative defense that plaintiffs were exempt under IWC wage order No. 4. (Cal. Code Regs., tit. 8, § 11040 (Wage Order 4).) Defendants opposed the motion and moved to decertify the class.  The trial court then decertified a portion of the class, depending upon whether the earlier, less specific version of Wage Order 4, or the later, more detailed version of Wage Order 4, applied to the class members.

On appeal, the Court of Appeal majority concluded that, under the terms of that wage order, plaintiffs could not be considered exempt employees, either before or after the amendment to Wage Order 4.  In a nutshell, the Supreme Court reveresed that ruling to the extent it set a bright line rule, holding, instead:

[I]n resolving whether work qualifies as administrative, courts must consider the particular facts before them and apply the language of the statutes and wage orders at issue. Only if those sources fail to provide adequate guidance, as was the case in Bell II, is it appropriate to reach out to other sources.

Slip op., at 22.

Between that summary of its holidng, and the explanation of the facts and procedural history, is a long and painful journey through the federal regulations incorporated into the current version of Wage Order 4.  In case you were wondering, the regulations incorporated as they existed in 2001 are: 29 C.F.R. Sections 541.201-205, 541.207-208, 541.210, and 541.215.  Next, in parsing the regulations, the Court's analysis turned on assessing when work is "directly related" to management policies or general business operations.  As the Court explained:

Work qualifies as "directly related" if it satisfies two components. First, it must be qualitatively administrative. Second, quantitatively, it must be of substantial importance to the management or operations of the business. Both components must be satisfied before work can be considered "directly related" to management policies or general business operations in order to meet the test of the exemption.

Slip op., at 10.  The Court then explained that the plaintiffs in the trial court below moved for summary adjudication of the affirmative defense of exemption by challenging defendants' ability to show one part of the conjunctive test for "directly related."  The plaintiffs argued that the defendants could not show that the work of the adjusters in that case was administrative in nature, the "qualitative" element.  The Supreme Court focused its analysis on that argument only, explicitly declining to review the record for triable issues on any other element of the exemption defense, including the "quantitative" element of the "directly related" regulatory language.

Turning to the administrative/production worker dichotomy discussed in Bell v. Farmers Ins. Exchange, 87 Cal. App. 4th 805 (2001) (Bell II) and the other Bell decisions, the Court explained that the Bell II decision was predicated on the older Wage Order 4 that lacked the detailed definitions included in the current version.  The Court also noted that the Bell II based its analysis on an undisputed record that the work of the employees at issues was "routine and unimportant."  One key fact from the Bell II analysis noted by the Supreme Court here was the limited settlement authorizations provided to the adjusters in that case.  It is important to note, however, that the Court did not invalidate the administrative/production worker dichotomy.  Rather, it stated that the dichotomy could not stand as a dispostive test in lieu of the Wage Order language.  Instead, the dichotomy is an analytical tool available when the language of the Wage Order and incorporated federal regulations is insufficient to resolve the classification question.

Turning to the current case, the Court criticized the creation of a rigid rule defining any employee carrying out day-to-day business as a production worker.  Instead, the Court cautioned against examining the duties of employees in one business to determine the correct classification of employees in another.  In other words, the administrative exemption is fact-specific test for which the Court offers no guidance in its application.

The Court reversed the Court of Appeal but directed it to re-consider the denial of summary adjudication while applying the correct legal standard.

Disclosure:  Spiro Moss represented one of the named plaintiffs, though other firms handled the appellate activities.

BOOM! Brinker goes on Supreme Court's calendar for November; nobody cares after Concepcion stole all the oxygen

There we have it.  Brinker is set for argument on Tuesday, November 8, 2011, at 9:00 a.m., in San Francisco.  I have to wonder if this will amount to less of a bombshell now that the class action practitioners of the world are intensely focused on how Concepcion will impact wage & hour class actions generally.  But we've waited so long for answers to the many questions raised by Brinker that we deserve an answer.  Thank goodness I don't have to make a Brinker-Watch 2012 graphic.

Court of Appeal construes Labor Code section 2810, which authorizes suits against contractors by certain employees of subcontractors

Labor Code section 2810 states that "[a] person or entity may not enter into a contract or agreement for labor or services with a construction, farm labor, garment, janitorial, or security guard contractor, where the person or entity knows or should know that the contract or agreement does not include funds sufficient to allow the contractor to comply with all applicable local, state, and federal laws or regulations governing the labor or services to be provided."   Section 2810 is a fairly new statute, and one that had not been the subject of any Court of Appeal decision.  But in Castillo v. Toll Brothers, Inc. (July 28, 2011), that changed.  I could tell you that this very exciting opportunity to read an opinion in a truly novel area of law prompted my review of the case.  But, in truth, it was just the defendant's name that caught my eye.

In any event, the trial court, dealing with summary judgment motions and lots of supplemental briefing, evidently had its hands full with a large number of arguments intersecting Labor Code section 2810.  The Court of Appeal commended the trial court's diligent efforts:

The order is a masterful synthesis of a sprawling factual record, reflecting the court's careful work with the parties over the course of several months. We recount the decision in some detail because it forms the foundation for our own ruling.

Slip op., at 6.

A key legal issue addressed in the appeal was determination of whether minimum wage or local prevailing wage sets the standard for insufficiency.  The Court also clarified that actual labor cost, and not the base wage, sets the correct standard.

As to the standard for insufficiency, the Court held that the "minimum wage" sets the standard:

Plaintiffs' position is untenable because there is no general law requiring an employer to pay its workers the average local wage for a particular skill or trade, if that average wage is higher than the legal minimum. Merely to pay less than the prevailing wage therefore violates no law. In the absence of a local, state, or federal law requiring the payment of a wage higher than the legal minimum, a contract cannot be insufficient under section 2810 merely because it does not provide sufficient funds to pay that higher wage, since section 2810 imposes nothing more than compliance with legal requirements.

Slip op., at 14.  (Note: Earlier in the opinion the Court clarified that "minimum wage" would depend upon the industry and wage order at issue in a particular case.)  While this soundbite quote seems clear enough, the opinion goes on for pages, reviewing legislative history and addressing, in detail, the contentions of the plaintiffs regarding the correct measure of sufficiency of funding.

On the second issue, the Court observed that compliance with all laws sets the standard for compliance, which requires analysis of total labor cost, not just the wage that would be paid to employees:

Because an employer is required to pay all of these costs to comply with applicable laws when employing a laborer, it is appropriate to use the total labor cost, rather than the worker‘s wage, in determining sufficiency under section 2810.

Slip op., at 7.

The second half of the opinion addresses (1) the sufficiency of evidence for summary judgement purposes on the issue of whether specific contracts were sufficiently funded, and (2) some over-reaching pre-emption arguments by Toll Brothers.  If that stuff floats your boat, this is a page turner.

Prevailing wage laws apply where a public entity provides a land rent credit to a private entity

Labor Code section 1720, subdivision (a)(1) of the Public Wage Law ("PWL") defines " 'public works'" to mean: "Construction, alteration, demolition, installation, or repair work done under contract and paid for in whole or in part out of public funds . . . ."  When public funds end up in the hands of private entities, it is not always clear whether the PWL applies.  In Hensel Phelps v. San Diego Unified Port District (July 26, 2011), the Court of Appeal (Fourth Appellate District, Division One) had no trouble following the money trail.  The Court considered whether a hotel construction project on land that the San Diego Unified Port District (the Port District) leases to the hotel owner qualified as a public work within the meaning of the PWL where the lease specified that the Port District would provide what the lease refers to as a "rent credit" in the total amount of $46.5 million during the first 11 years of the lease.  Characterizing the "rent credit" as a source of public funds flowing to the private hotel project, the Court concluded that the PWL applied:

In assessing CCCC's argument, we note that no case law exists interpreting the phrase "rents . . . that are . . . reduced, . . . waived, or forgiven" in section 1720, subdivision (b)(4). However, when interpreting a statute, "'"[t]he words of the statute should be given their ordinary and usual meaning and should be construed in their statutory context." [Citation.] If the plain, commonsense meaning of a statute's words is unambiguous, the plain meaning controls.' " (People v. King (2006) 38 Cal.4th 617, 622.) Here, we agree with CCCC that the phrase "rents . . . that are reduced" has a plain everyday meaning that is clear and unambiguous. Under a plain commonsense meaning, rent is reduced when the amount of the rental obligation is set at a certain amount by agreement or by operation of law, and a discount is given from that amount. Under a plain commonsense meaning, rents are waived or forgiven when a party agrees not to impose or demand rents.

Applying this plain commonsense meaning, we agree with CCCC that rents were reduced, waived or forgiven by the Port District. The Lease sets forth a monthly and minimum annual rent amount that OPB is obligated to pay to the Port District. The rent credit constitutes a reduction in that payment obligation. In addition, the 100 percent rent credit during the first 34 to 36 months of the Lease is not only a reduction, but also could be considered a waiver of the rent because no rent at all is due in that period.

Slip op., at 23-24.

Securitas Security Services USA, Inc. v. Superior Court (Holland) tells us what ISN'T a split shift

"Split shift."  So easy to say, but surprisingly hard to define in a way that doesn't require a list of demonstrative examples and exclusions.  In Securitas Security Services USA, Inc. v. Superior Court (Holland) (July 7, 2011), the Court of Appeal (Second Appellate District, Division Three) issued an order to show cause to consider issues related to the interaction of the split shift definiion in Industrial Wage Commission‟s wage order No. 4-2001 (Cal. Code Regs., tit. 8, § 11040) and the declaration of a "workday" by an employer (security guards worked shifts beginning in one "workday" and continuing into the next).  The trial court rejected the Securitas definition of "split shift" and denied its motion for summary judgment.  The Court of Appeal disagreed with the trial court's analysis, but agreed that summary judgment could not be granted.

For reference, the Court set forth the definitions at issue:

Wage Order No. 4 defines a “split shift” as “a work schedule, which is interrupted by non-paid non-working periods established by the employer, other than bona fide rest or meal breaks.” (Cal. Code Regs., tit. 8, § 11040, subd. 2(Q).)

A “shift” is defined as “designated hours of work by an employee, with a designated beginning time and quitting time.” (Cal. Code Regs., tit. 8, § 11040, subd. 2(P).) A “workday” is defined as “any consecutive 24-hour period beginning at the same time each calendar day.” (Id., subd. 2(T); see also Lab. Code, § 500, subd. (a).)

Slip op., at 6.  Jumping to the end of the story, the Court noted that "work schedule" is not tied to the definition of "workday."  The Court went with its common sense construction of the term: "In the context of a provision establishing minimum wages to compensate employees who are required to return to work after an interruption in their 'work schedule,' we believe that a 'work schedule' simply means an employee's designated working hours or periods of work."  Slip op., at 7.  Thus, consecutive overnight shifts that overlap a definied "workday" do not create split shifts because the "shift" is a continguous block, even though it overlaps a "workday."

The Court then discussed the policies behind overtime pay, split shift premiums, meal period premiums, and the like, quoting extensively from Murphy v. Kenneth Cole Productions, Inc., 40 Cal. 4th 1094 (2007).

After all that, the Court noted that Securitas failed to prove that the plaintiffs didn't work actual split shifts at other times.

Now we know one circumstance that isn't a split shift.  We are still left, however, without complete guidance as to what qualifies as a bona fide split shift.  Can an employer give its employees an hour and a half lunch without creating a split shift?  Can it give two hour lunches?  How many hours have to elapse between the end of one work period before it is viewed as a distinct and complete "shift?"  Bonus answer: probably more than 1 and less than 24.

Sullivan v. Oracle Corporation addresses how California law applies to nonresident employees working both in and outside California

Today, the California Supreme Court issued an Opinion following its acceptance of questions about the construction of California law from the United States Court of Appeals for the Ninth Circuit.  In Sullivan v. Oracle Corporation (June 30, 2011), the Court addressed (1) whether the Labor Code's overtime provisions apply to plaintiffs' claims for compensation for work performed in this state [with the ancillary question of whether the same claims can serve as predicates for claims under California's unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.)], and (2) whether the plaintiffs' claims for overtime compensation under the federal Fair Labor Standards Act of 1938 (FLSA) (29 U.S.C. § 201 et seq.; see id., § 207(a)) for work performed in other states can serve as predicates for UCL claims.

The Court responded "yes" to the first question group, and "no" to the second.

On the first issue, the Court said:  "The California Labor Code does apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week. (See Sullivan III, supra, 557 F.3d 979, 983.)"  (Slip op., at 18.)

On the related UCL question, the Court said: "Business and Professions Code section 17200 does apply to the overtime work described in question one. (See Sullivan III, supra, 557 F.3d 979, 983.)"  Slip op., at 19.)

The full answer to the last issues was:  "Business and Professions Code section 17200 does not apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs in the circumstances of this case based solely on the employer's failure to comply with the overtime provisions of the FLSA."  (Slip op., at 23.)

The Opinion was issued by a unanimous Court.

Update on Thursday, June 30, 2011 at 10:41AM by The Complex Litigator

The post title was corrected after the initial posting.

Not too late to register for Bridgeport's Mid Year Wage & Hour Litigation Conference

Bridgeport is holding its Mid Year Wage & Hour Litigation Conference on June 3, 2011, in San Diego, California, at the Westin San Diego Hotel.  I will be speaking with Julie Trotter, of Call & Jensen, about the impact of Concepcion on the employment law practice area.  View the full program agenda here.

California Supreme Court activity for the week of May 16, 2011

The California Supreme Court held its (usually) weekly conference on May 18, 2011.  Notable results include:

• As has been the practice in all prior published cases on this issue, on a petition for review, review was granted, and the matter held, in Tien v. Tenet Healthcare (February 16, 2011) (affirmed the trial court's order denying class certification of meal period, rest break, and waiting time penalty claims). The opinion spent a substantial amount of time discussing the meal period compliance question under review in Brinker.