Posts belonging to Category Caselaw Developments



Monroy v. Yoshinoya: Reporting Time Gets Modernized

Yoshinoya—the Japanese-inspired fast food restaurant chain, like many modern companies, has tried to maximize its own flexibility while minimizing labor costs through an uncompensated “on-call” scheduling system. Specifically, in Monroy v. Yoshinoya, Case No. BC653419 (Los Angeles Superior Court), the plaintiff alleged that the restaurant would schedule employees for “on-call” shifts, where the employee is expected to call the manager at a specific time or two hours prior to his or her scheduled start time. If the employee is needed, he or she is called into work; if not needed, he or she is informed that he or she will not be working that day. If an employee does not call in and report to work when needed, the employee is subject to discipline. Employees do not receive any compensation for the “on-call” shifts, unless they were called into work.

Although “on-call” scheduling is a commonly-utilized practice, on November 27, 2017, Judge Elihu M. Berle denied Yoshinoya’s motion for summary judgment and ruled that its scheduling system was a violation of California’s reporting time laws. See Notice of Ruling on Defendant’s Motion for Summary Adjudication, available here. Wage Order No. 5-2001(5)(A)[1] provides that:

[E]ach workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work, the employee shall be paid for half the usual or scheduled day’s work, but in no event for less than two (2) hours not more than four (4) hours, at the employee’s regular rate of pay, which shall not be less than the minimum wage.

Employers have consistently argued that an employee does not “report for work” unless he or she physically shows up at the work site. Employees, on the other hand, have argued that the Wage Order encompasses any time an employee is required to reserve his or her day, check in, and be prepared to work—whether that be by physically reporting or checking in by phone or other electronic means.

Prior to Judge Berle’s ruling, two federal court cases had addressed this issue: Casas v. Victoria’s Secret, LLC (C.D. Cal. April 9, 2015), No. 2:14-cv-06412-GW-VBK, and Bernal v. Zumiez, Inc., 2017 WL 3585230 (E.D. Cal. Aug. 17, 2017). In Casas, the court found that reporting for work required physically appearing at the work site, whereas Bernal found the opposite and found that “reporting for work may be accomplished telephonically.” There is not yet any California appellate authority addressing this issue.

At oral argument, Judge Berle focused on two issues: first, the fundamental fairness of requiring employees to block off their day because they may be called to work. Judge Berle pointed out that by doing so, the employee is not free to make a doctor’s appointment, agree to take care of a family member, or schedule other appointments, because he or she must reserve the day or part of the day to be available to work. Second, the judge noted that, in this case, there was the threat of discipline if the employee failed to call in or report to work if called, which created a “right to control.” Judge Berle characterized Yoshinoya’s position as amounting to employer control “without compensation.”

What this means is quite simple: employers can no longer assume that unless an employee physically reports to work, that they are not responsible for reporting time pay. Reporting for work can now potentially encompass any time an employee is required to make himself or herself available to work and report in—no matter the means of reporting.

[1] All of California’s wage orders contain the same reporting time requirement.

Authored by:
Arnab Banerjee, Senior Counsel
CAPSTONE LAW APC

Davidson v. Kimberly-Clark: 9th Cir. Resolves Split and Closes Article III Loopholes in False Ad. Cases

On October 20, 2017, the U.S. Court of Appeals for the Ninth Circuit resolved the highly-contentious district court split over Article III standing for injunctive relief in deceptive advertising cases in favor of consumers. Davidson v. Kimberly-Clark Corp., et al., No. 15-16173, 2017 WL 4700093 (9th Cir. Oct. 20, 2017) (slip op. available here). In Davidson, the plaintiff alleged that she purchased, for a premium price, pre-moistened wipes manufactured and sold by the defendant, in part, because they were advertised as “flushable.” Ms. Davidson brought claims against Kimberly-Clark Corp. for violations of California’s consumer protection statutes, including the Consumers Legal Remedies Act (CLRA), False Advertising Law (FAL), and Unfair Competition Law (UCL), after her discovery that the wipes were not flushable, as advertised. Her complaint stated that, although she stopped purchasing the wipes, she would purchase them in the future, “if it were possible to determine prior to purchase if the wipes were suitable to be flushed.” Slip op. at 7. The district court granted, with prejudice, Kimberly-Clark’s motion to dismiss based in part on the finding that Davidson lacked Article III standing to seek injunctive relief because she was unlikely to purchase the wipes in the future.

In reversing the district court’s decision, the Ninth Circuit rejected the lower court’s reasoning that consumers who sue after being subjected to false or misleading advertisements lack Article III standing to pursue injunctive relief because they have since learned that the advertisements are false or misleading and thus “cannot be deceived again.” Rather, the appeals court found a plaintiff-consumer’s inability to rely on the accuracy of future labels constitutes an ongoing harm “sufficient to confer standing to seek injunctive relief” under Article III; thus, adopting the reasoning of other district courts that have found that “if injunctive relief were unavailable to a consumer who later learns after purchasing a product that the product’s label is false, California’s consumer protection laws would be effectively gutted.” Slip op. at 22.

Further, while dicta, the Ninth Circuit recognized the “anomalies” that would result from an opposite holding given the overwhelmingly common practice where, to defeat injunctive relief requests, defendants remove state court cases brought under state consumer protection statutes to federal court pseudo-automatically via the Class Action Fairness Act of 2005 (CAFA). Slip op. at 21-23. This would create a “’perpetual loop’ of plaintiffs filing their state law consumer protection claims in California state court, defendants removing the case to federal court, and the federal court dismissing the injunctive relief claims for failure to meet Article III’s standing requirements.” Id. at 22.

Injunctive relief is arguably the most significant remedy to consumers who bring class actions for false advertising under the UCL because it is the only remedy available that ensures future truthful advertising for a product. The decision in Davidson is vital to consumers, substantively and procedurally, in enforcing the protections afforded by California’s consumer statutes and receiving the appropriate and necessary remedies for violations of those statutes.

Authored by:
Trisha Monesi, Associate
CAPSTONE LAW APC

Lopez v. Friant: Neither Intent nor Injury Required for PAGA Wage Statement Claims

In September, the California Court of Appeal reversed a summary judgment ruling that applied the “knowing and intentional” standard of Labor Code section 226(e) to a Private Attorneys General Act (“PAGA”) claim for violation of section 226(a), the provision that requires employers to issue wage statements to employees containing certain information. The court held that PAGA claims based on wage statement violations are not subject to the statutory penalty requirements of section 226(e)(1). See Lopez v. Friant & Assocs., LLC, No. A148849, 15 Cal. App. 5th 773 (1st District Div. 1, Sept. 26, 2017) (slip op. available here). This is helpful clarification for employees seeking redress of wage statement violations through PAGA rather than through a private right of action.

The plaintiff in Lopez sought civil penalties on behalf of himself and other aggrieved employees through PAGA. PAGA affords private individuals, who allege violations of the Labor Code committed by an employer, to step into the shoes of California state labor enforcement agencies to collect civil penalties that otherwise could only be pursued by the state. As explained in Lopez, PAGA was designed to incentivize the enforcement of Labor Code provisions for which there was no private right of action, and to supplement the limited resources of state enforcement agencies. The plaintiff in Lopez’s PAGA claim was based on a violation of Labor Code section 226(a)(7), which requires the issuance of wage statements that include either the last four digits of the employee’s social security number, or some other employee identification number. The defendant moved for summary judgment against that predicate violation, arguing that the employer’s failure to include an identification number was not “knowing and intentional” as required for statutory damages or penalties under section 226(e)(1). The trial court granted summary judgment in favor of the defendant. The plaintiff appealed.

The plaintiff’s primary argument on appeal was that the “knowing and intentional” requirement under section 226(e) does not apply to a PAGA action based on a wage statement violation under section 226(a). The Court of Appeal began by examining the plain language of the relevant statutes, pointing to the “important distinction between the ‘civil penalties’ available under PAGA, and ‘statutory penalties’ recoverable by individual plaintiffs before PAGA was enacted.” Slip op. at 6. The penalties afforded by section 226(e) have always been available in private rights of action, and therefore constitute “statutory” penalties, whereas the penalties sought under PAGA for violations of section 226(a) are civil penalties, which are regulatory and not available to private plaintiffs outside of a PAGA suit, and thus are not bound by the same rules. Id. This interpretation was also supported by the relevant legislative history. Id. at 7-10. Lastly, the Court of Appeal noted that while section 226(a) is enumerated as one of the available predicate violations for a PAGA claim under section 2699.5, section 226(e) is not. Accordingly, the appellate court held: “Because section 226(e)(1) sets forth the elements of a private cause of action for damages and statutory penalties, its requirement that a plaintiff demonstrate “injury” resulting from a “knowing and intentional” violation of section 226(a) is not applicable to a PAGA claim for recovery of civil penalties.” Id. at 16.

In a footnote, the Court of Appeal also teased the issue of which civil penalty should apply to a PAGA claim predicated on a section 226(a) violation. Indeed, “various federal courts have taken different positions on this issue.” Slip op. at 11, n.6. PAGA ordinarily adopts whichever civil penalty is specifically defined by statute, and otherwise uses the default penalty amount under section 2699. And, while section 226.3 defines a civil penalty for wage statement violations, some courts have interpreted it as only providing the civil penalty for a failure to provide any wage statement at all—not one that was only missing some of the nine required elements. So does an incomplete wage statement fail to meet the definition of a “wage statement” provided? Should the section 226.3 civil penalty therefore apply? Or should the default penalty apply? Unfortunately, since that issue was neither directly raised nor sufficiently briefed, the Court of Appeal left the question unanswered.

Though many in the plaintiffs’ bar had already been operating under the interpretation that section 226(e) requirements do not apply to section 226(a) violations in the PAGA context, Lopez now makes this interpretation binding on all California trial courts. And, without the need to satisfy section 226(e), this makes wage statement claims much simpler to prosecute through PAGA than through a regular cause of action.

Authored by:
Jonathan Lee, Associate
CAPSTONE LAW APC

Betancourt v. Prudential Overall Supply: CA Ct. of App. Reiterates that PAGA Claims Cannot Be Arbitrated, Prudential Files Appeal

Complaining that California “leads the field” in circumventing United States Supreme Court’s pro-arbitration precedent Concepcion, Prudential Overall Supply petitioned for certiorari on August 15, 2017, seeking review of California’s Fourth Appellate District’s ruling that claims under California’s Private Attorneys General Act (“PAGA”) cannot be arbitrated. Betancourt v. Prudential Overall Supply, No. E064326 (4th District Div. 2, March 7, 2017) (slip op. available here) (petition for writ of certiorari available here). In April 2015, Betancourt filed a representative action suit solely based on PAGA against his employer, Prudential Overall Supply. Within the single PAGA claim, the plaintiff alleged violations of overtime and minimum wage law, meal and rest period requirements, timely pay and final pay requirements, and recordkeeping and wage statement requirements, among other claims. In a March 7, 2017 decision, the Court of Appeal affirmed the trial court’s denial of Prudential’s motion to compel arbitration of the plaintiff’s claim for penalties under PAGA. Slip op. at 2.

First, Prudential argued that Betancourt had already agreed to arbitrate the PAGA claim and that an arbitrator would decide the scope and application of the agreement. Id. at 10-11. Additionally, Prudential claimed since the “representative claims” portion of the agreement could be severed, Betancourt could be compelled to arbitrate his claims. Id. at 11. Prudential further asserted that if Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 5th 348 (2014), is interpreted as prohibiting arbitration of all PAGA claims, then the state law prohibiting arbitration is preempted by the Federal Arbitration Act (FAA). Id. at 12. Finally, Prudential, citing Sakkab v. Luxottica Retail North America, Inc. (2015 9th Cir.) 803 F.3d 425, contended that California law permits arbitration of PAGA claims. Id. at 12-13. Repeatedly citing Iskanian, the appellate court rejected each of these arguments, holding that Prudential could not “rely on a predispute waiver by a private employee to compel arbitration in a PAGA case, which is brought on behalf of the state . . .” because “[t]he state is not bound by Betancourt’s predispute agreement to arbitrate.” Id. at 8; see also id. at 9-13 (applying Iskanian in greater detail) (internal citations omitted). Further, the Court of Appeal noted that a state rule prohibiting arbitration of PAGA claims is not preempted by the FAA because it falls outside of the scope of the FAA, as PAGA “is not a dispute between an employer and an employee arising out of their contractual relationship. It is a dispute between an employer and the state . . . .” Slip op. at 10 (citing Iskanian, at 386-87, emphasis in original).

The Court of Appeal also rejected the defendant’s other argument, which was based on an alleged defect in the pleadings. The defendant argued that because Betancourt had sought non-PAGA remedies in the prayer for relief, e.g., for unpaid wages, business expenses, interest, and attorney’s fees, in addition to civil penalties, the action was not actually a PAGA action and that the plaintiff was trying to disguise a standard wage-and-hour action in order to evade arbitration. Slip op. at 4, 8-9. Yet, the trial court had found and the appellate court agreed, such a challenge is a challenge against the pleadings, and should have been brought as a motion to strike—not as a motion to compel arbitration. Id. at 9. As the Court of Appeal aptly noted, “Prudential accuses Betancourt of attempting to make an ‘end run around arbitration’ by incorrectly labeling his claims as a PAGA matter. It appears to this court that Prudential may be attempting to make an ‘end run” around a demurrer or motion to strike . . . .” Id. at 9.

Overall, the Court of Appeal’s Betancourt opinion makes a strong case for PAGA claims being inarbitrable, based on the fact that the state—the real party in interest in every PAGA action—is not a party to an employee’s bilateral agreement to arbitrate his or her employment claims, and thus cannot be bound by that agreement. Whether the United States Supreme Court will break its streak of rejecting cert petitions based on PAGA issues in Betancourt remains to be seen.

Authored By:
Jennifer Bagosy, Senior Counsel
CAPSTONE LAW APC