California Employment Law Update : Labor and Employment Lawyers & Attorneys : Proskauer Rose Law Firm : Wage & Hour Laws, Disability, Workplace Safety

Ellis v. Costco Wholesale Corp., 657 F.3d 970 (9th Cir. 2011)

In this appeal, Costco challenged the district court's order granting class certification in an action in which Costco's promotional practices were alleged to have discriminated against female employees. The district court's order granting class certification preceded the United States Supreme Court's opinion in Wal-Mart Stores v. Dukes, 131 S. Ct. 2541 (2011). In this opinion, the Ninth Circuit recognized that the Wal-Mart opinion "altered existing law" and, accordingly, vacated the lower court's order granting class certification. Specifically, the Court: (i) vacated and remanded the district court's ruling as to commonality under Fed. R. Civ. P. 23(a) because the lower court had failed to conduct the required "rigorous analysis" to determine whether there were common questions of law or fact among the class members' claims; (ii) vacated and remanded the district court's ruling as to "typicality" under Fed. R. Civ. P. 23(a) because the district court failed to consider the effect that defenses unique to the named plaintiffs' claims might have on that question; (iii) affirmed the district court's ruling as to the adequacy of the one class representative who was a current employee allegedly being denied promotion; and (iv) vacated and remanded the district court's certification of the class pursuant to Rule 23(b)(2) based upon the Supreme Court's unanimous rejection of the predominance test for determining whether monetary damages may be included in a 23(b)(2) class certification.

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The California Supreme Court announced today that it will hear oral arguments in the landmark wage-and-hour case Brinker Restaurant v. Superior Court on November 8 in San Francisco. In Brinker, the Court will decide whether employers must merely provide meal and rest breaks to their employees or actually ensure that breaks are taken, as well as the related issue of whether such claims are generally amenable to class treatment or whether they require individualized inquiries that make class treatment inappropriate. The outcome of the Court's decision is likely to have a significant impact on the exposure of large employers to wage-and-hour class action lawsuits. As the Court has 90 days from the date of oral argument to issue its opinion, the much anticipated decision is scheduled to be handed down no later than Monday, February 6, 2012. We will continue to follow the run up to the decision as new events unfold.

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In Ellis v. Costco Wholesale Corp., 2011 U.S. App. LEXIS 19060 (9th Cir. Sept. 16, 2011), the Ninth Circuit reviewed the standards for class certification in an employment class action following the U.S. Supreme Court’s decision in Dukes v. Walmart. In Ellis,three named plaintiffs sought injunctive relief, compensatory damages, and backpay on behalf of a nationwide class of female employees who the plaintiffs claimed had been denied promotion because of their gender. The district court granted class certification. In reviewing the certification order, the court provided guidance for class action litigation in the Ninth Circuit following Walmart.

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In Wal-Mart Stores, Inc. v. Dukes, No. 10-277 (U.S. June 20, 2011), the Supreme Court vacated class certification of a gender discrimination lawsuit brought by 1.5 million current and former Wal-Mart employees because the plaintiffs failed to identify a specific, company-wide policy or practice of discrimination. Additionally, the Court held unanimously that the employees’ backpay claims could not be certified as a class action because Wal-Mart was entitled to individual proceedings so that it could present defenses as to each claim.

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Campbell v. PricewaterhouseCoopers LLP, 2011 WL 2342740 (9th Cir. June 15, 2011) (pdf)

The U.S. Court of Appeals for the Ninth Circuit reversed a lower court’s grant of partial summary judgment in favor of the plaintiff-junior accountants, noting that the district court’s holding would produce “significantly troubling results” and create “highly problematic precedent affecting several non-accounting professions.” The plaintiffs, a class of approximately 2,000 current or former junior accountants resident in six California offices of PricewaterhouseCoopers LLP (“PwC”), claimed that PwC improperly classified them as “exempt” employees and failed to provide them overtime pay in accordance with California’s rigid overtime pay requirements. As “junior accountants,” the plaintiffs occupied the bottom two tiers of their department’s seven-tier hierarchy and performed, among other accounting functions, audits of financial records. While Certified Public Accountant (“CPA”) licenses were required for the five levels above them, the plaintiffs were unlicensed.

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As the federal government wades deeper into the realm of mobile "apps" (among the most useful, of course, the Smithsonian Institution’s “MEanderthal” app, which enables users to morph personal photos into prehistoric images of themselves), various U.S. agencies are promoting new apps that allow the public to access official information from “the palm of [one's] hand.”

Not to be left behind, the U.S. Department of Labor (DOL) recently rolled out a smartphone app to help employees independently track the hours they work. The “DOL-Timesheet,” as the app has been dubbed, is currently available in English and Spanish for use on the iPhone, iPod Touch, and iPad. The app is designed to assist employees in recording their hours worked and calculating the wages – including overtime – that they're owed. (Overtime pay is computed at a rate of one and one-half times the employee’s regular rate for all hours worked each week in excess of 40 – though California also has a daily overtime requirement for hours worked in excess of eight.) Users are currently able to view and email summaries of their logged hours and gross pay, and additional features have been promised, including the ability to track tips, commissions, bonuses, deductions, holiday and weekend pay, shift differentials, and paid time off.

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In a case possibly signaling a new direction in California wage and hour law, a California appellate court ruled Friday that a class of car dealers fell within the commissioned salesperson exemption to California overtime laws despite receiving flat fee commissions instead of commissions calculated as a percentage of the price of the cars sold.

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In a ruling that has garnered significant interest among employers, the U.S. Supreme Court held on Wednesday that the Federal Arbitration Act (FAA) preempts the California Supreme Court’s efforts to impose heightened unconscionability standards on class action waivers in consumer arbitration agreements. This decision may also sound the death knell for similar restrictions imposed by California and other states on arbitration agreements in the employment setting.

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 On December 6, 2010, the United States Supreme Court granted Wal-Mart's petition for certiorari, agreeing to review the Ninth Circuit's decision [pdf] to permit certification of a class of 500,000 current and former Wal-Mart employees in Dukes v. Wal-Mart Stores, Inc.  This litigation, which has been ongoing for nearly a decade, alleges sex discrimination under Title VII of the Civil Rights Act of 1964 against the retailer's female employees with respect to pay, promotion and job assignments. The plaintiffs originally sought to represent a class of approximately 1.5 million female employees, and much of the litigation to date has involved the propriety of certificating such a large class under the standards of FRCP 23.  

For a discussion of the class action issues on appeal on their relevance to employers, click over to the thoughtful analysis of our colleague, Mark Batten.   

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On November 18, the California Supreme Court in Pineda v. Bank of America, No. S170758 (Cal. Nov. 18, 2010) (pdf) clarified two issues regarding so-called “waiting time penalties” (i.e., penalties under California Labor Code Section 203 associated with the late payment of final wages upon termination of employment). First, the Court ruled that a three-year statute of limitations applies to such actions, whether or not accompanied by a claim for the underlying late wages. Second, it held that waiting time penalties are not recoverable as restitution under California’s unfair competition law, Business and Professions Code Section 17200 (the “UCL”). While the latter ruling is marginally beneficial to employers by limiting liability under the UCL, the Court’s finding of a three-year statute of limitations for waiting time penalties dramatically expands potential employer liability.

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On November 3, 2010, the Ninth Circuit Court of Appeals refused to hear an appeal brought by a Harrah’s Las Vegas casino dealer challenging the District Court’s ruling that her proposed state wage-and-hour class action was preempted by the Fair Labor Standards Act (FLSA).  In so doing, the Ninth Circuit chose not to revisit the District Court's ruling that the plaintiff could not assert parallel federal and state wage-and-hour class actions.  This ruling provides welcome relief to employers threatened by such a multiplicity of claims.

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While California employers continue to await a definitive ruling from the California Supreme Court, the California Court of Appeal this week issued a ruling determining that employers need only provide employees with meal and rest breaks and need not necessarily ensure that employees take them.

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On October 22, 2010, the California Court of Appeal in Villacres v. Abm Industries Inc., No. B219584, __ Cal. App. 4th __ (2010) rejected an attempt by a settling class member to use the California Private Attorney Generals Act (PAGA) to bring successive claims for civil penalties against his former employer, from whom he had previously accepted the proceeds from a class action settlement involving similar claims.  In so doing, the Court of Appeal affirmed the trial court's granting of summary judgment for the employer on the ground that the plaintiff's claims were barred under the doctrine of res judicata.  This outcome is a clear victory for employers who purchase costly peace through court-approved class action settlements, and a welcome clarification that PAGA cannot be used to peck an employer to death once such settlements are final.

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Recent developments demonstrate that an employer’s uniform policy of classifying employees as exempt from wage-and-hour laws is insufficient to establish the requirements of class certification.

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Haro v. City of Rosemead, 174 Cal. App. 4th 1067 (2009)

Randy Haro and Robert Ballin filed an action against the city of Rosemead alleging a violation of the federal Fair Labor Standards Act (“FLSA”). The trial court denied plaintiffs’ motion to have the class certified pursuant to Cal. Code Civ. Proc. § 382 (the California class action statute) on the ground that an FLSA collective action (which requires members of the collective action to affirmatively opt-in) cannot be prosecuted as a class action under California law (which requires class members to opt-out). The Court of Appeal dismissed the appeal from the trial court’s orders denying class certification and denying leave to amend the complaint, holding that “an FLSA action has to be litigated according to rules that are specifically applicable to these actions and if litigants do not like these rules, they should not file under the FLSA.” Cf. Smith v. T-Mobile USA Inc., 2009 WL 1651531 (9th Cir. 2009) (plaintiffs who had voluntarily settled their FLSA claims before appeal was filed could not continue to prosecute action, rendering appeal moot).

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Martorana v. Marlin & Saltzman, 2009 WL 1875681 (Cal. Ct. App. 2009)

Ron Martorana was a class member in a wage and hour class action that had been filed against his former employer, Allstate Insurance Company. The Los Angeles Superior Court approved a settlement of the class action, but Martorana did not recover any portion of the settlement because he had failed to timely submit a claim form. Although Martorana received notice of the settlement and the accompanying claim form, he failed to submit the form because he had been diagnosed with prostate cancer and was experiencing the physical effects of his diagnosis and treatment. Martorana subsequently filed this action against Allstate and the various law firms that had prosecuted the class action, alleging that defendants were negligent in failing to take reasonable steps to contact him about his failure to file a claim and to make sure his claim form was timely submitted. The trial court dismissed that action against Allstate and granted Allstate’s request for sanctions against Martorana and his attorney. Martorana filed an amended complaint asserting malpractice against class counsel, but the trial court sustained class counsel’s demurrer to Martorana’s amended complaint as well, finding that “it would defeat the purpose of mass notification to a large number of class members if, after written notice, Class Counsel were required to follow up…with every class member who neglected to file a timely claim.” The Court of Appeal affirmed dismissal of Martorana’s claims but reversed the award of sanctions to Allstate because of its failure to comply with the safe harbor provisions of Cal. Code Civ. Proc. § 128.7. Cf. In re Consumer Privacy Cases, 2009 WL 1863730 (Cal. Ct. App. 2009) (trial court did not abuse its discretion in approving attorney’s fees award to class counsel and in using lodestar method); Hernandez v. Vitamin Shoppe Indus. Inc., 2009 WL 1679937 (Cal. Ct. App. 2009) (class counsel’s communications with conditionally certified and separately represented class members urging them to opt-out of settlement were properly enjoined by trial court).

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Arias v. Superior Court, 2009 WL 1838973 (Cal. S. Ct. 2009)

Jose Arias sued his former employer, Angelo Dairy, for a number of alleged violations of the California Labor Code, including five claims that he asserted on behalf of himself as well as other current and former employees under the Unfair Competition Law (“UCL”). The trial court granted the employer’s motion to strike all five claims that Arias purported to assert on behalf of himself and others on the ground that he had failed to comply with the pleading requirements of a class action (Code Civ. Proc. § 382). The Court of Appeal held that all causes of action brought in a representative capacity alleging violations of the UCL (with the exception of the claim asserting a violation of the Labor Code Private Attorneys General Act of 2004 (“PAGA”)) were subject to the class action pleading requirements. The California Supreme Court affirmed, holding that although Proposition 64 (passed by the voters in 2004) requires that a private party asserting a UCL claim in a representative capacity satisfy the class action requirements, an aggrieved employee need not satisfy those requirements in order to assert a representative action under PAGA. Cf. Amalgamated Transit Union v. Superior Court¸ 2009 WL 1838972 (Cal. S. Ct. 2009) (labor union could not bring a representative action under PAGA either as an assignee or association whose members had suffered actual injury); In re Tobacco II Cases, 46 Cal. 4th 298 (2009) (class action standing requirements for UCL claim need only be satisfied by class representatives and not unnamed class members); Sanders Constr. Co. v. Cerda, 2009 WL 1844280 (Cal. Ct. App. 2009) (employees of unlicensed subcontractor may assert wage claims against general contractor pursuant to Labor Code § 2750.5).

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Chau v. Starbucks Corp., 174 Cal. App. 4th 688 (2009)

Jou Chau, a former Starbucks “barista,” brought a class action against the company, challenging Starbucks’ policy of permitting shift supervisors to share in tips that customers place in a collective tip box. Chau alleged the policy violated California’s Unfair Competition Law based on a violation of Labor Code § 351. The trial court certified a class consisting of thousands of current and former baristas from 1,350 Starbucks stores in California and, after finding liability, awarded the class $86 million in restitution. The Court of Appeal reversed the judgment, concluding that Starbucks had not violated the statute by allowing the shift supervisors (who spent more than 90 percent of their time performing the same service tasks as the baristas) to keep a portion of the collective tips merely because those employees also had limited supervisory duties.

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