Articles from December 2015

LA Metro Transit Authority Cannot Avoid Minimum Wage, PAGA Claims

The California Court of Appeal, Second Appellate District, recently partially reversed a key trial-court ruling that had been in favor of the Los Angeles Metropolitan Transportation Authority (MTA), thereby clearing the way for MTA employees to pursue claims for statutory minimum wages and under the Private Attorneys General Act (PAGA). The appellate court’s opinion was certified for publication on December 17, 2015. See Flowers v. Los Angeles Cnty. Metro. Transp. Auth., No. B256744 (Cal. Ct. App. Nov. 25, 2015) (slip op. available here).

In July 2013, former MTA bus driver Nathan Flowers filed a class, collective, and representative action on behalf of approximately 7,000 current and former MTA bus and train operator employees, asserting that the MTA failed to pay minimum wages, provide rest periods, or pay rest period premiums in violation of state labor laws. The MTA argued that Public Utilities Code sections 30257 and 30750 give it exclusive authority to set wages and working conditions for employees in a good-faith bargain with the designated union, and that it was therefore exempt from the requirements of Industrial Welfare Commission (IWC) Order 9, which governs wage-and-hour issues in the transportation industry. The trial court agreed with the MTA and dismissed three out of four of the plaintiff’s claims. Plaintiff Flowers voluntarily dismissed the only remaining claim, for violations of the Fair Labor Standards Act, and appealed the trial court’s order.

First, the Court of Appeal found the MTA to be exempt from the California law rest period requirements. Section 12(C) of IWC Order 9 states that California rest break requirements do not apply to public transit bus drivers covered by a valid collective bargaining agreement “if the agreement provides for (1) rest periods . . . , (2) final and binding arbitration of disputes concerning application of its rest period provisions, (3) ‘premium wage rates for all overtime hours worked,’ and (4) ‘regular hourly rate of pay of not less than 30 percent more than the State minimum wage.'” Slip op. at 15 (emphasis added). In his appeal, the plaintiff argued the rest period exemption did not apply because the agreement did not fulfill the third requirement, since it excluded certain tasks performed by operator employees, such as filling out accident reports, from overtime pay, and defining overtime in this way violated the requirement of “premium wage rates for all overtime hours worked.” The appellate court then analyzed the overtime compensation requirements in the collective bargaining agreement at issue and in federal and state law. California Labor Code section 514 exempts from section 510 overtime requirements employees covered by a valid collective bargaining agreement that provides “premium wage rates for all overtime hours worked” and a regular hourly rate of pay of not less than 30 percent more than the state minimum wage. Citing Vranish v. Exxon Mobil Corp., 223 Cal.App.4th 103 (2014), the panel found that Labor Code section 514 only required the MTA to pay a premium for all overtime worked as it’s defined in the collective bargaining agreement, and that this collective bargaining agreement indisputably did so. Thus, in light of the exemptions under Labor Code section 514 and in section 12(C) of IWC Order 9, the appellate court found the MTA met those requirements, and therefore affirmed the trial court’s dismissal of the rest break claim. 

However, the Court of Appeal reversed the trial court’s dismissal of the minimum wage claim and civil penalties under PAGA, rejecting the MTA’s contention that the Public Utilities Code immunizes it from state minimum wage requirements simply because it authorizes the MTA to adopt a general personnel system defined by a collective bargaining agreement. See Pub. Util. Code § 30257. The opinion, citing Grier v. Alameda-Contra Costa Transit Dist., 55 Cal. App. 3d 325, 332 (1976), unequivocally states that compliance with California’s statutory minimum wage requirement in no way limits or restricts the MTA’s ability to bargain in good faith and execute a written collective bargaining agreement. Because the MTA failed to show how complying with the applicable minimum wage requirement would prevent it from carrying out its obligations to its employees under the Public Utilities Code, it is now potentially liable for its failure to pay minimum wages for all hours worked, pursuant to Labor Code section 1194. The reversal of the trial court’s ruling also resuscitates the plaintiff’s PAGA claim for that alleged violation.

Authored by: 
Karen Wallace, Associate

CA Supreme Court to Consider Constitutionality of ICRAA, CA’s Background Check Law

California’s highest court will decide whether the appellate court correctly upheld the constitutionality of California’s background check law, the Investigative Consumer Reporting Agencies Act (“ICRAA,” Cal. Civ. Code § 1786, et seq.) in Connor v. First Student, Inc., No. B256075, B256077 (2nd Dist. Div. 4, Aug. 12, 2015) (slip op. available here), rev. granted, 360 P.3d 1022 (Nov. 24, 2015). The Connor appeal was filed by Eileen Connor and Jose Gonzalez, two bellwether plaintiffs among the roughly 1,200 bus drivers who filed a series of coordinated mass actions against employers First Student, Inc. and First Transit, Inc. and against credit reporting agency HireRight, Inc. for violations of the ICRAA. Specifically, the drivers asserted that First Student violated the ICRAA by running background checks without the proper disclosure language or written consent required under the ICRAA. First and HireRight sought to dismiss the lawsuits on the ground that the ICRAA is unconstitutionally vague and moved for summary judgment, which was granted by Judge Wiley of the Los Angeles County Superior Court. Plaintiffs Connor and Gonzalez separately appealed and their cases were later consolidated (the consolidation order was subsequently vacated).

In Connor, the Second Appellate District overturned the trial court’s grant of summary judgment for the employer, holding that the ICRAA is not void for vagueness just because the Consumer Credit Reporting Agencies Act (“CCRAA,” Cal. Civ. Code § 1785.1, et seq.)—another California statute that regulates consumer reporting agencies—might also apply to those same background checks. Slip op. at 3 (“There is nothing in either the ICRAA or the CCRAA that precludes application of both acts to information that relates to both character and creditworthiness.”). In so holding, the Connor court expressly disagreed with a prior decision by a sister court in the Fourth District in Ortiz v. Lyon Management, 157 Cal.App.4th 604 (2007), which held that the ICRAA was “unconstitutionally vague” because both the ICRAA and CCRAA governed certain background reports, and agreed with the plaintiff that “Ortiz was wrongly decided because it failed to consider case law governing the interpretation of overlapping statutes.” Slip op. at 5, 9 (rejecting the employer’s vagueness argument that was “based upon the faulty premises that (1) any given consumer report must be governed by either the CCRAA or the ICRAA, but not both, and (2) the CCRAA ‘authorizes’ certain conduct.”). The Connor court also found that the application of ICRAA and CCRAA are not mutually exclusive in that the employer can comply with each act without violating the other “because each act expressly excludes those specific reports governed by the other act.” Id. at 14.

The Connor decision is a long-awaited and much-needed victory for plaintiffs in ICRAA litigation. As noted in Connor, “two federal district courts have followed and extended Ortiz, and no court has criticized or departed from it.” Slip op. at 5. Indeed, Judge Wiley stated that he found the Ortiz ruling “surprising,” but was nonetheless bound by it to rule in favor of First Student and HireRight on their constitutionality challenge. Thus, prior to Connor, the fate of ICRAA litigation involving background checks within the employment context was grim; no claim under ICRAA would have survived no matter how egregious the violation. Such a result was significant because “generally, the ICRAA imposes greater obligations and stricter limitations, and allows greater remedies.” Id. at 2. Connor, however, gave new life to claims arising under ICRAA; it is therefore of critical importance that Connor be kept alive.

Authored by: 
Suzy Lee, Associate

Campbell v. Vitran: Class Certified on Behalf of Truck Drivers

In 2010, two truck drivers brought an action against their employer, Vitran Express, Inc., alleging that Vitran failed to provide its drivers legally-mandated meal and rest breaks. On November 12, 2015, Judge Klausner granted certification of the drivers’ claims. Campbell v. Vitran Express, Inc., No. CV 11-5029 RGK (SHx) (C.D. Cal. 2015) (slip op. available here). In the interim, the case had been appealed to the Ninth Circuit twice, the latter of which reversed the lower court’s grant of summary judgment in favor of the defendant, remanding the case and holding that the plaintiffs’ claims were not preempted by the Federal Aviation Administration Authorization Act (FAAAA) (previously covered on the ILJ here and here). The drivers pursued class certification on two theories: (1) the defendant implemented an unofficial policy of pressuring its drivers to forego their meal and rest breaks, and (2) the defendant’s written meal and rest break policies were facially invalid. The court granted the plaintiffs’ motion as to both theories.

First, the court found that the drivers could rely on the company’s unofficial policy of pressuring its drivers to forego their breaks, or a “policy-to-violate-the-policy” theory of liability, assuming the drivers supported the theory with enough evidence to demonstrate that such a policy existed and was applied uniformly to all class members. After reviewing the evidence submitted, the court held that the plaintiffs’ declarations, as well as declarations of thirteen fellow drivers and one dispatcher, constituted sufficient evidence that drivers were intimidated and threatened to forego meal and rest breaks for four of the five California locations. Furthermore, the defendant failed to provide any conflicting testimony that the meal and rest break practices differed among locations or supervisors. Thus, all of the evidence in the record supported a finding of a uniform, common policy of denying meal and rest breaks at each of the company’s locations.

Second, the court held that common questions predominated as to the plaintiffs’ claims that the defendant’s written meal and rest break policies were facially invalid. Vitran’s meal break policy provided that employees were entitled to a 30-minute lunch period when working five or more hours a day, but it failed to provide for a second 30-minute meal period for employees who worked 10 or more hours a day. Slip op. at 10. Similarly, Vitran’s rest break policy failed to provide a rest break for every “major fraction” of a four-hour period that drivers worked and failed to provide rest breaks in the middle of the workday “insofar as practicable.” Id. The court noted that California courts and federal courts are split on the issue of whether an allegation of a facially defective policy, without more, subjects an employer to liability—state appellate court decisions impose liability “solely on the basis of a facially defective policy,” whereas federal district courts require the employee to show that the employer “not only maintained a facially defective policy[,] but also implemented unlawful practices pursuant to the policy.” Id. Here, the court applied the recent Ninth Circuit decision, Abdullah v. U.S. Sec. Assocs., Inc., 731 F.3d 952 (9th Cir. 2013), which acknowledged that while liability may flow from a facially defective policy, courts must consider the entire record before determining the predominance question. The Campbell court then assessed all of the evidence in the record as to the allegations of facially defective meal and rest break policies, and found that the plaintiffs presented sufficient evidence to show a uniform policy that failed to comply with California’s meal and rest break requirements.

Holding that an allegation of facially defective policies was supported by substantial evidence of Vitran’s non-compliant meal and rest break practices, the court found that common questions predominated and granted class certification.

Authored By:
Bevin Allen Pike, Senior Counsel

Daniel v. Ford: 9th Cir. Revives Class Action re Ford Focus Rear Suspension

Last week, the Ninth Circuit Court of Appeals provided consumers another shot at class certification when it reversed a district court’s decision granting summary judgment to Ford. Daniel v. Ford Motor Co., No. 13-16476 (9th Cir. Dec. 2, 2015) (slip op. available here). Daniel, filed in 2011, alleged that 2005-2011 Ford Focus vehicles contain a rear suspension “alignment/geometry” defect that leads to premature tire wear and dangerous driving conditions, including “decreased control in handling, steering, stability, and braking . . . .” Slip op. at 5. In 2013, Judge Shubb of the Eastern District of California granted summary judgment against the plaintiffs’ claims and denied their motion for class certification, holding that the suit raised too many individualized questions to warrant class treatment, such as the fact that the premature tire wear did not occur at the same rate for all plaintiffs.

First, the appeals court found that the district court had erred in holding that the language of Ford’s New Vehicle Limited Warranty did not cover design defects, including the alleged rear suspension defect, and reversed the lower court’s grant of summary judgment as to the plaintiffs’ claims for breach of express warranty. In applying traditional rules of contract construction, the panel stated that due to Ford’s ambiguous wording, the ambiguity “must be resolved against the draftsman, Ford.” Slip op. at 14 (internal citations omitted). Thus, Ford’s express warranty was deemed to cover both manufacturing and design defects, a positive finding for consumers in class actions, provided auto manufacturers do not choose to cure warranty ambiguities regarding defects covered.

Further, regarding the grant of summary judgment as to their Song-Beverly Consumer Warranty Act claims, the plaintiffs argued that it was improper for the district court to decline to follow a California appellate court decision, Mexia v. Rinker Boat Co., 95 Cal. Rptr. 3d 285 (Ct. App. 2009), which held that latent, or hidden, defects may breach the implied warranty under Song-Beverly, even if not discovered within the implied warranty’s duration of one year. Agreeing with the plaintiffs, the panel clarified that a federal district court sitting in diversity “must follow decisions of the intermediate appellate courts of the state unless there is convincing evidence that [California Supreme Court] would decide differently.” Slip op. at 8 (internal citations omitted, emphasis added). In its review, the panel could not find any evidence to suggest the California Supreme Court would decide Mexia’s holding any differently, which, as noted in the opinion, serves to expand consumer protection and remedies in furtherance of the legislative intent behind the Song-Beverly Act.

Lastly, and perhaps most beneficial for consumers, the appellate court held that the lower court incorrectly found no genuine factual dispute as to reliance, an essential element for a fraudulent omission claim under the California Consumers Legal Remedies Act and Unfair Competition Law. Reliance can be shown by proving that had an omission been disclosed, the consumer would have been aware of it and acted differently; that one would have acted differently can be presumed or inferred if the omission is material, or poses an unreasonable safety risk. The panel found that plaintiffs offered sufficient evidence to create a genuine issue of material fact as to whether consumers would have acted differently if Ford had disclosed the alleged defect, stating, “[a] reasonable fact finder could infer that a vehicle that experiences premature and more frequent tire wear would pose an unreasonable safety risk, such that it can be presumed that the nondisclosure of the safety risk impacted Plaintiffs’ purchasing decision.” Slip op. at 16. Additionally, though Ford had shown that the plaintiffs did not view any of Ford’s advertising prior to purchasing their vehicles, the panel stated that the plaintiffs’ interactions with and information received from Ford-authorized sales representatives prior to purchase, at the Ford dealerships, was sufficient to find that the plaintiffs would have been aware of disclosures made by Ford through its sales representatives, ultimately making it easier for consumers to demonstrate reliance.

In light of this ruling, the Ninth Circuit remanded and ordered the district court to reconsider its denial of the plaintiffs’ motion for class certification.

Authored by: 
Trisha Monesi, Associate