Posts belonging to Category Caselaw Developments

In Wilson v. Ikea North America Services, LLC, C.D. Cal. Dec. 14, 2020 (slip op. available here), the district court found on a motion to remand that Ikea failed to meet its burden of proof that the amount in controversy exceeded the $5 million required for Class Action Fairness Act (“CAFA”) jurisdiction.

Ikea had removed the case to federal court alleging that the amount in controversy exceeded $22 million. Unlike a notice of removal, which need only include plausible allegations that the amount in controversy exceeds the minimal jurisdictional requirements, on a motion to remand, the removing party must submit evidence, and the court decides by a preponderance of the evidence whether the amount in controversy is met. Slip op. at 4. “Under this system, CAFA’s requirements are to be considered by real evidence and the reality of what is at stake in the litigation, using reasonable assumptions of underlying the defendant’s theory of damages exposure.” Id., quoting Ibarra v. Manheim Invs., Inc., 775 F.3d 1193, 1198 (9th Cir. 2015) (emphasis added).

Ikea failed to meet this burden. It presented “thin evidence” of the amount in controversy consisting of the number of employees and the number of workweeks for three calendar years; and it presented no evidence that every employee suffered all of the injuries alleged in the complaint. Slip op. at 5 (emphasis in original). Instead, Ikea relied on the plaintiff’s “pattern and practice” allegations to establish that point. The complaint, however, did not allege that Ikea violated wage and hour laws on each and every shift, so there was no judicial admission in play to support Ikea.

In closing remarks, the district court reminded that although Ikea’s $22 million estimate is far above the $5 million CAFA threshold, “it is not the Court’s job to perform the mathematical calculations to justify it. . . .  That is Ikea’s burden.” Slip op. at 6. Something to consider from a plaintiff’s perspective—that sometimes the removing defendant should be put to the task of proving up potential damages on a motion to remand after a flimsy notice of removal.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC

In Gulf Offshore Logistics, LLC v. The Superior Court of Ventura County, Cal. Ct. App. 2d Dist., No. B298318, Dec. 7, 2020 (slip op. available here), the Court of Appeal, on remand from the California Supreme Court, reconsidered whether Louisiana law applied to employees of Louisiana-based companies that operated outside the territorial waters of California. Following recent precedent in Ward v. United Airlines, Inc., 9 Cal.5th 732 (2020), and Oman v. Delta Air Lines, Inc., 9 Cal.5th 762 (2020), the court concluded that the California Labor Code applies to workers whose “base of work operations” is in California.

The plaintiffs are former crew members (two able-bodied seamen and an engineer), none of whom were California residents. They were flown into Los Angeles International Airport by their employers and shuttled to the ship, where they were employed for a “hitch” of 21 to 42 days before returning to their homes. The Adele Elise, an offshore supply ship that stationed in Port Hueneme, California, supplied four oil platforms located outside the boundaries of the state of California (a typical voyage lasted 24 hours). The plaintiffs alleged violations of the California Labor Code relating to minimum wages and overtime pay, meal and rest periods, maintenance of accurate work records, and provision of accurate and complete wage statements.

In a prior opinion, the court applied a conflict of law analysis and determined that Louisiana law governed the dispute “because that state had more significant contacts with the parties and a greater interest in regulating the employment relationships at issue.” On remand, the court acknowledged that was a mistake. Slip op. at 11. “Oman clarifies that the relevant consideration is the location in which work is performed. Here, that location is California. Other considerations, such as the residence of the employees or the location of the employer, are not relevant.” Id.

Ward and Oman applied California’s wage and hour laws to airline employees based in California, even though they worked in federally regulated airspace. Gulf extends this important concept to the federal waters off the California coast. Seamen based in California are entitled to the protections of the state’s wage and hour laws, even if their work takes them offshore.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC

Does a compensation plan providing for an advance on future commissions qualify as a “salary” for purposes of the administrative exemption established in Industrial Welfare Commission Wage Order 4? In Semprini v. Wedbush Securities, Inc., Cal. Ct. App. 4th Dist., No. G067740, Nov. 5, 2020 (slip op. available here), a California court of appeals concluded that it does not.

California law requires employers to pay overtime rates to employees who work above a set number of hours, unless an exemption applies. Under the applicable wage order, an employee is exempt under the administrative exemption if that employee (1) is primarily engaged in exempt duties and (2) earns “a monthly salary equivalent to no less than two (2) times the state minimum wage for full-time employment.” (Cal. Code Regs., tit. 8, § 11040, subd. 1(A)(2)(g).)

Wedbush attempted to comply with the wage order by essentially “loaning” its employees money, so that they would receive enough compensation to qualify under the exemption. Wedbush classified its financial advisors as “exempt” and paid them solely on commission; but if a financial advisor’s commission in a given month was less than double the minimum wage, it paid the financial advisor the commission plus a “draw” on future commissions to make up the difference. Financial advisors were then required to repay the “draw.”

The court ruled that this arrangement did not satisfy administrative exception’s salary basis test because “[a]n advance is not a wage.” Slip op. at 11. The court reasoned that “[t]he salary basis test requires the employers to pay their employees at least double the minimum wage, not loan them that amount.” Id. (emphases in original). The court went on to note that Wedbush’s compensation arrangement could also violate state minimum wage requirements if an employee was forced to repay advances after termination.

The matter is being remanded to the Orange County Superior Court, where the court previously granted the plaintiffs’ motion to certify a class of approximately 150 class members.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC

In Frlekin, et al. v. Apple, Inc., case number 15-17382, the Ninth Circuit requested that the California Supreme Court decide, as a matter of California law, whether time spent by Apple retail employees undergoing required security checks on Apple’s premises constituted “hours worked” under Wage Order 7, even though the packages, bags and technology devices checked were brought to work purely for employees’ convenience (slip op. available here). The California Supreme Court’s answer was a resounding “yes.” Frlekin v. Apple, Inc., __ F.3d __ at p. 8 (9th Cir. Sept. 2, 2020) citing Frlekin v. Apple, Inc., 8 Cal.5th 1038, 1042 (2020).

As the California Supreme Court explained, under California law, the definition of “hours worked” has two independent parts: “time during which an employee is subject to the control of an employer” and “time the employee is suffered or permitted to work, whether or not required to do so.” In the case of the Apple employees’ security checks, the California Supreme Court needed only to address the “control clause” of the minimum wage order. Frlekin, __ F.3d __ at p. 10, n. 2.

The underpinning of the California Supreme Court’s analysis under the “control clause” was that, during the searches, Apple controlled its employees in several ways. First, it had a bag search policy that employees were required to comply with under threat of discipline. Second, employees were confined to the premises while waiting and undergoing the searches, that took anywhere from 5 to 20 minutes. Third, employees had to actively participate in the search by locating a manager or security guard, moving or removing items, unzipping containers, opening packages, and removing personal Apple devices for inspection. Frlekin, 8 Cal.5th at 1046.

The fact that the employees’ packages, bags, and technology devices were brought for the employees’ own convenience did not sway the court. As “a practical matter,” employees routinely bring such items to work including, in particular, iPhones. The irony that Apple argued (unsuccessfully) that iPhones were not necessary for its own employees was lost on the Court. Frlekin, 8 Cal.5th at 1056.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC