Wal-Mart’s Record Seating Settlement in Williamson: $65 Million

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On December 6, 2018, Judge Edward Davila approved a $65 million PAGA settlement for Wal-Mart’s failure to provide seats to its front-end cashiers. Williamson v. Wal-Mart Stores, Inc., No. 5:09-cv-03339-EJD (N.D. Cal. Dec. 6, 2018), Order Granting Motion for Preliminary Approval (slip op. available here). This represents the largest PAGA settlement in the history of the statute. In addition, the settlement provided for injunctive relief in the form of a “Seating Pilot Program” for these employees.

Suitable seating is one of the worker protections covered by California’s Wage Orders, which have the same dignity as statutes, are remedial in nature, and are to be broadly construed to effectuate the goal of protecting the comfort and welfare of employees. Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004, 1027 (2012). The suitable seating requirement at issue is contained in section 14(A) of the of the Wage Order and states: “All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.”

Although this sentence has been in the Wage Orders for decades and was originally included as a protection for women and children, its meaning was frequently debated by employers, who argued that it was only applicable if the employer believed that seating would have no effect on the job—essentially rendering it a nullity. However, in 2016, the California Supreme Court in Kilby v. CVS Pharmacy, Inc., 63 Cal.4th 1 (2016), issued its interpretation. As the Supreme Court explained, first, “[t]here is no principled reason for denying an employee a seat when he spends a substantial part of his workday at a single location performing tasks that could reasonably be done while seated, merely because his job duties include other tasks that must be done standing.” Furthermore, “[t]he inquiry does not turn on the individual assignments given to each employee, but on consideration of the overall job duties performed at the particular location by any employee while working there, and whether those tasks reasonably permit seated work.” Finally, it stated:

When evaluating whether the “nature of the work reasonably permits the use of seats,” courts must examine subsets of an employee’s total tasks and duties by location, such as those performed at a cash register or a teller window, and consider whether it is feasible for an employee to perform each set of location-specific tasks while seated . . . . An employee may be entitled to a seat to perform tasks at a particular location even if his job duties include other standing tasks, so long as provision of a seat would not interfere with performance of standing tasks . . . the frequency and duration of those tasks with respect to each other, and whether sitting, or the frequency of transition between sitting and standing, would unreasonably interfere with other standing tasks or the quality and effectiveness of overall job performance.

Id. at 10, 17-18.

The Wal-Mart settlement was reached when the parties were less than a month away from trial, and after nearly a decade of litigation. Notably, unlike many PAGA settlements, because the Williamson case was one of the first suitable seating cases filed, it faced unique challenges, such as a dispute regarding if Wage Order claims could be brought under PAGA. Moreover, unlike many PAGA actions, this was an already-certified class action.

Although, at first blush, the settlement may seem like an extraordinary gift to the plaintiffs, a closer analysis shows that it is in fact quite reasonable. The settlement involved approximately 99,000 employees and 2,610,921 pay periods. Thus, the settlement provided for approximately $25 per pay period. The PAGA statute provides for default penalties of $100 for each initial violation and $200 for each subsequent violation. Accordingly, when weighed against Wal-Mart’s potential exposure at trial, the settlement amounts to only approximately 12.45% of its exposure.

Authored by:
Arnab Banerjee, Senior Counsel
CAPSTONE LAW APC

Friends of the Earth v. Sanderson Farms: The Detective Standard Fails

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In a short but substantive opinion issued in December 2018, Judge Richard Seeborg of the Northern District of California slapped down an attempt by Sanderson Farms, Inc. to dismiss claims brought by two non-profit organizations, Friends of the Earth and the Center for Food Safety, regarding Sanderson Farms’ misleading “100% Natural” advertising of their chicken products. Friends of the Earth, et al. v. Sanderson Farms, Inc., No. 17-cv-03592-RS (N.D. Cal. Dec. 3, 2018) (slip op. available here). In a scant eleven pages, the court methodically dismantled each of Sanderson Farms’ arguments—which mainly focused on the notion that the company’s website provided context to the company’s “100% Natural” slogan, rendering it not deceptive or misleading—and sustained the plaintiffs’ third amended complaint in its entirety. This case offers a roadmap for plaintiffs seeking to defeat the kind of tactics deployed by defendants to defeat consumer claims, such as imputing knowledge of disclaimers found in the company’s website to consumers, in an effort to show that its advertising is not false or misleading.

In Friends of the Earth, the plaintiffs alleged that Sanderson Farms’ “100% Natural” advertising campaign falsely and misleadingly suggests that the poultry it produces, through purportedly “natural” farming practices, meets reasonable consumer expectations of “natural” poultry. A reasonable consumer’s expectation is that “natural” poultry would not be regularly treated with antibiotics for a majority of their lives and that the farming practices would not contribute to the spread of antibiotic-resistant bacteria.

In its motion to dismiss, Sanderson Farms argues that the full context of its advertisements, including an infographic on its “100% Natural” webpage, dispels any potential confusion arising from the slogan “100% Natural.” And Sanderson Farms “double[d] down” on its “100% Natural” webpage by pointing to a link on that page that takes consumers to a separate FAQ webpage, which acknowledges that their chicken is treated with antibiotics (contrary to their “100% Natural” advertising and undisclosed elsewhere). According to Sanderson Farms, had consumers reviewed the entire website, the “100% Natural” statement would not have been misleading in that context. Slip op. at 6. The court however, rejected such an argument: “Sanderson attempts to bootstrap case support for the need to assess a full webpage into the proposition that an entire website must be considered in determining if a statement was misleading.” Id. (emphasis added). In its rebuke, the district court stated: “[n]o authority suggests a reasonable consumer is expected to search a company’s entire website . . . to find all possible disclaimers . . . . Although the reasonable consumer standard demands that a plaintiff must show ‘more than a mere possibility’ that a challenged advertisement might conceivably mislead a few consumers, it does not ask they be a private investigator . . . .Id. at 7 (internal citation omitted) (emphasis added).

In other words, consumers should not be required to go trawl through each page of a manufacturer’s website to determine whether they are being misled by claims that are made on food packaging. This pro-consumer opinion should put corporate defendants on notice that plaintiffs are not required to piece together a puzzle of webpages in order to avoid being deceived or misled by mislabeled or falsely advertised goods.

Authored by:
Tarek Zohdy, Senior Counsel
CAPSTONE LAW APC

Magadia v. Wal-Mart: Employer Loses Bid to Decertify Meal Period Class Due to Its Own Records

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Last November, a California federal court rejected Wal-Mart’s effort to decertify a class of employees who took late meal breaks or missed their meal breaks and were not paid adequately by Wal-Mart. Magadia v. Wal-Mart Associates, Inc., No. 17-CV-00062-LHK (N.D. Cal. Nov. 13, 2018) (slip op. available here). The court refused to disturb the prior certification order because the employer’s records, which included codes it generated after its investigation of a missed or late meal period, enabled the court to evaluate Wal-Mart’s liability on a class-wide basis. Slip op. at 8. Plaintiff employees should note that, following this example, certain employer records can be effectively used to answer the question of why meal periods were missed and avoid the need for an individualized, factual inquiry into the violations.

Earlier, the district court had certified three classes: a meal period class, an overtime/wage statement class, and a final wage statement class. Wal-Mart sought to decertify solely the meal period class. Under California law, employers may not employ employees for a work period of more than five hours per day without providing a 30-minute meal period. Cal. Lab. Code § 512(a). Pursuant to the Labor Code, when an employer fails to provide a meal period to an employee in accordance with state law, it must pay the employee one additional hour of pay at the employee’s regular rate of compensation—a meal period premium. Cal. Lab. Code § 226.7(c). The plaintiff alleged that, while Wal-Mart pays meal period premiums for non-compliant meal periods, the premiums are inadequate because they are paid at a straight hourly rate rather than at a higher, regular rate. The district court had certified the meal period class because it found that common questions predominated over individualized inquiries with respect to Wal-Mart’s liability to class members “because Wal-Mart’s own records ‘document why each meal exception [i.e., a late or missed meal period] happened.’” Slip op. at 8. In other words, “because Wal-Mart investigates and documents why each meal exception happened, ‘it would not be difficult to determine [Wal-Mart’s] liability to individual plaintiffs.’” Slip op. at 9.

Indeed, Wal-Mart’s practice included conducting an investigation, where its managers or human resource officials met with employees to determine why the meal period exception occurred, and then issuing Exception Management System (“EMS”) codes that Wal-Mart used to categorize the meal period exceptions. For certification, the district court found that such records could be used to extrapolate “whether each meal period premium that was paid to a class member was prompted by an actual failure by Wal-Mart to provide a compliant meal period.” Slip op. at 7.

In moving for decertification, Wal-Mart claimed that its investigations of meal period exceptions focused on documenting associate allegations rather than whether a meal premium was legally required. Wal-Mart contended that its own investigation worksheets were not reliable for determining whether or not Wal-Mart prevented a proper meal period; therefore, individual inquiries would predominate. The plaintiff argued that Wal-Mart’s own testimony demonstrated that it conducted significant and detailed investigations of meal period exceptions, logging the results, and it could not discredit its own documents. Ultimately, the district court denied Wal-Mart’s motion for decertification, finding that “[t]he evidence submitted . . . continues to demonstrate that Wal-Mart’s own records—specifically, the EMS codes generated after a meal period exception investigation—enable the Court to evaluate Wal-Mart’s liability to class members ‘on a class-wide basis,’ which warrants certification.” Slip op. at 8. Wal-Mart’s records appear to answer the question of why meal periods were missed and obviate the need for any heavily factual inquiry into the particular circumstances of each class member. Slip op. at 11.

Although decertification was improper, the district court nonetheless concluded that the question of the significance of Wal-Mart’s records could be revisited at the merits stage. For now, however, the certification order stands and the class’s “claims will ‘prevail or fail in unison,’ as required by Rule 23(b)(3).’” Id. Thus, a large class of Wal-Mart employees was able to utilize the employer’s records to support their theory of liability and could continue to proceed with their claims that the employer underpaid them for non-compliant meal breaks.

Authored By:
Liana Carter, Senior Counsel
CAPSTONE LAW APC

Garcia v. Border Transportation Group: CA Appeals Court Reaffirms Dynamex Req. that Employers Prove Independent Contractors Actually Have Existing Independent Business Operations

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California appellate courts are beginning to make sense of Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 (2018), which promulgated a new “ABC” test for determining whether independent contractors are misclassified for claims arising from wage orders. In one recent case, the Fourth Appellate District examined the C-prong of the ABC test, concluding that the plaintiff-appellant Garcia, a taxi driver, was improperly classified as an independent contractor under the ABC test. See Garcia v. Border Transportation Group, LLC, No. D072521 (4th District, Div. 1, Oct. 22, 2018) (slip op. available here).

The appellate court reversed summary judgment as to the wage order claims only (Garcia’s claims for unpaid wages, minimum wages, meal and rest periods, itemized wage statements, and unfair competition law claims derived from the foregoing). Slip op. at 3, and 22-23. The panel first considered how courts had differentiated employees and independent contractors at common law, turning to the “seminal California decision on this subject”—S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (1989). The state Supreme Court in Borello held that “‘[t]he principal test of an employment relationship is whether the person to whom the service is rendered has the right to control the manner and means of accomplishing the result desired. . . .’” Slip op. at 15 (citing Borello, 48 Cal.3d at 350). Borello also found that the right to discharge at will without cause is strong evidence of an employment relationship and identified several “secondary indicia” that bear on employment status. Slip op. at 15-16.

Turning from the common law “control” test, the appellate court then considered the California Supreme Court’s discussion of “employ” as set forth in Martinez v. Combs, 49 Cal.4th 35, 64 (2010), which found that the wage orders encompass three alternative definitions, the broadest of which is “to suffer, or permit to work.” Slip op. at 18 (citing Cal. Code Regs., tit. 8, § 11090, subd. 2(D); Martinez, at 57–58). The appellate court noted Martinez’s finding that “[a] proprietor who knows that persons are working in his or her business without having been formally hired, or while being paid less than the minimum wage, clearly suffers or permits that work by failing to prevent it, while having the power to do so.” Id. (citing Martinez, at 69).

The appellate court then reaffirmed the California Supreme Court’s adoption of its own three-part ABC test to decide whether a worker is a covered employee or an independent contractor. Slip op. at 19 (citing Dynamex, at 956–957). Unlike a multifactor test, the ABC test “‘allows courts to look beyond labels and evaluate whether workers are truly engaged in a separate business or whether the business is being used by the employer to evade wage, tax, and other obligations.’” Id. (citing Dynamex, at 958 n.26). The ABC test presumes that a worker is an employee unless the hiring entity establishes each of the following:

(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Id. (citing Dynamex, 4 Cal.5th at 957).

The appellate court concluded that there was a triable issue as to whether Garcia was an employee since he was “presumed” to be such and since Border Transportation failed to show that Garcia fit the common conception of an independent contractor (Part C)—“an individual who independently has made the decision to go into business for himself or herself” and “generally takes the usual steps to establish and promote his or her independent business—for example, through incorporation, licensure, advertisements, routine offerings to provide services of the independent business to the public or to a number of potential customers, and the like.” Slip op. at 24-25 (citing Dynamex, at 962). As the appellate court explained, the question in part C is not whether the hiring entity prohibited or prevented the employee from engaging in an independently-established business, but whether it established that the employee actually had an existing, not potential, independent business operation. Id. at 26 (citing Dynamex, at 962 n.30).

Here, because the regulations in the plaintiff’s municipality tied each taxi driver’s permit to their employment at a specified taxi company, Garcia would have been required to obtain another permit with any new taxi company he drove for. The panel stated, “there is at best limited evidence he was even capable of providing services to a different taxi company under the regulations.” Slip op. at 27 (emphasis in original). Applying Dynamex’s ABC test, the appeals court reversed and remanded with instructions to enter a new order denying summary adjudication of Garcia’s wage order claims, allowing these claims to live on.

Authored By:
Molly DeSario, Senior Counsel
CAPSTONE LAW APC