Posts belonging to Category PAGA

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
CAPSTONE LAW APC

Many employers and defense attorneys are heralding recent amendments to Labor Code §§ 2699, 2699.3, and 2699.5 (collectively referred to as the Private Attorneys General Act of 2004, or “PAGA”)—precipitated by Assembly Bill (“AB”) 1506, Chapter 445 (available here)—as a key shift in wage statement litigation in California. However, their sentiments are premature and overstate the effect of this amendment, which will likely be minimal.

California Labor Code section 226(a) provides that employees’ wage statements must include nine specific pieces of information that allow employees to determine if they are being paid correctly. “The purpose of the wage statement requirement is to provide transparency as to the calculation of wages. A complying wage statement accurately reports . . . the information necessary for an employee to verify if he or she is being properly paid in accordance with the law.” Division of Labor Standards Enforcement (“DLSE”) Opn. Letter No. 2006.07.06 (July 6, 2006). The nine items include “the inclusive dates of the period for which the employee is paid,” (Labor Code § 226(a)(6)), and “the name and address of the legal entity that is the employer . . .” (Labor Code § 226(a)(8)). Labor Code section 226(e) allows employees to obtain damages for failing to correctly state the required items on wage statements. Specifically, an employee can collect the greater of (1) all actual damages or (2) $50 for the initial pay period in which the violation occurred and $100 for each subsequent violation for an aggregate penalty not to exceed $4,000. These remedies remain unchanged by the amendment.

Employees may also recover civil penalties on behalf of the state of California for these violations under PAGA. Under PAGA, employers are given 33 days to cure certain violations of the Labor Code before a civil action may be commenced. Previously, employers did not have the right to cure wage statement violations. AB 1506 will amend PAGA’s cure provision to allow employers to cure certain types of wage statement violations. However, the expanded cure provisions will not apply to all wage statement violations, but only those based on either missing or inaccurate inclusive dates of the pay period or the name and address of the employer. Although theoretically available, it may well prove extremely difficult for an employer to utilize the cure provision in practice. This is especially so because these two violations “shall only be considered cured upon a showing that the employer has provided a fully compliant, itemized wage statement to each aggrieved employee for each pay period for the three-year period prior to the date of the written notice sent pursuant to paragraph (1) of subdivision (c) of Section 2699.3.” In other words, the employer must provide proof that, within 33 days, it located and provided fully compliant wage statements to all employees who had received violative wage statements over the prior three years.

The amendment also likely has no retroactive effect, and therefore will not help any employer currently involved with PAGA litigation based on wage statement violations. Neither the amendment nor the legislative history provides for retroactive application, strongly supporting the notion that the amendments do not have any retroactive application. See Myers v. Philip Morris Companies, Inc., 28 Cal. 4th 828, 841 (2002) (quoting INS v. St. Cyr, 533 U.S. 289, 320-321, n.45 (2001)) (“[A] statute that is ambiguous with respect to retroactive application is construed . . . to be unambiguously prospective.”).

In short, the fact that the “cure” provision would be extremely difficult to perform in the limited time provided, and the fact that AB 1506 has no retroactive effect, means that the recent PAGA amendment should not affect the status quo regarding PAGA litigation.

Authored by:
Arnab Banerjee, Associate
CAPSTONE LAW APC

Many employers require their employees to wear slip-resistant shoes to maximize safety in the workplace. While some employers fully cover or subsidize the cost of slip-resistant shoes, others pass their entire cost onto employees. In the past, plaintiff’s attorneys have sought to recover the cost of these shoes incurred by employees by bringing claims for unreimbursed business expenses. However, where the shoes are not considered a uniform (because they are not of a distinctive design or color and generally can be used at another job), employers are not required to pay for the cost of requiring employees to wear non-slip shoes. See generally Lemus v. Denny’s Inc., 2015 U.S. App. LEXIS 10284 (9th Cir. June 18, 2015) (unpublished). Plaintiff’s attorneys have also brought employee claims for unlawful deductions under Labor Code sections 221 and 224, where the employer deducts the cost of non-slip shoes from employee paychecks. Many of these claims have not gained traction in the class action context, due to some courts finding that common issues do not predominate because determining whether written authorization was obtained prior to making deductions for the shoes necessitated individualized inquiries or because courts found that the employer had obtained written employee authorizations. See Munoz v. Chipotle Mexican Grill, Inc., 238 Cal. App. 4th 291, 302-304 (1st Dist. Div. 5 Oct. 15, 2015), Lemus at *4-5.

However, in a recent case, the plaintiffs used a different legal theory to recoup the cost of the non-slip shoes, under Labor Code sections 3751 and 3752. Labor Code section 3751 subsection (a) provides that “[n]o employer shall exact or receive from any employee any contribution, or make or take any deduction from the earnings of any employee, either directly or indirectly, to cover the whole or any part of the cost of compensation under this division.” In other words, section 3751 prohibits employers from receiving contributions to workers’ compensation insurance plans.

In Lewings v. Chipotle, the plaintiff alleged that Chipotle violated Labor Code section 3751 by requiring employees to purchase slip-resistant shoes through a third-party seller, Shoes for Crews, because Shoes for Crews extended warranties to Chipotle for slip-and-fall-related workplace injuries. On July 1, 2015, in an unpublished decision, the California Court of Appeal reversed a trial court order dismissing the plaintiff’s class action case after finding Chipotle did violate section 3751. Lewings v. Chipotle Mexican Grill, Inc., No. B255443, 2015 Cal. App. Unpub. LEXIS 4673 (2nd Dist. Div. 2 July 1, 2015) (slip op. available here). The appellate court held that warranties were considered compensation under the statute because the warranties either directly covered the cost of compensation by paying medical expenses for work-related injuries or indirectly covered the cost of compensation by preventing increases in workers’ compensation insurance. Slip op. at 5. As such, the appellate court found Chipotle had violated section 3751 because its employees were contributing, whether voluntarily or involuntarily, to the cost of Chipotle’s workers’ compensation insurance. Id. at 4-7.

After the decision, it seemed that employers would now be at risk to the extent that they received warranties or other types of contributions toward the cost of workers’ compensation that were in part, funded by employees. Then, on rehearing, the appellate court reversed a portion of its decision reviving the plaintiff’s first cause of action under section 3751, though it left much of its prior decision intact. Lewings v. Chipotle Mexican Grill, Inc., No. B255443, 2015 Cal. App. Unpub. LEXIS 6770 (2nd Dist. Div. 2 Sept. 22, 2015) (slip op. available here). Specifically, after finding a violation of section 3751 had been sufficiently alleged, the court then held that section 3751 does not provide for a private right of action because neither the statute nor the legislative history clearly indicated a private right of action was intended. Slip op. at 9-10. It is not clear from the opinion whether legislative history was considered, as neither party submitted briefing on the legislative intent of section 3751. See id. However, despite the lack of a private right of action in section 3751, the court still found a violation of the statute had been sufficiently alleged, allowing the plaintiff’s claim for Business & Professions Code section 17200 (UCL) to proceed. Id. at 11. Furthermore, although section 3751 is not actionable under PAGA, the court indicated that the violations plaintiff alleged under sections 201, 202, and 226(a) were sufficient to state a claim under PAGA, because the violations were not “purely derivative” of section 3751 and were “factually distinguishable” from a section 3751 violation. Id. at 14. Additionally, the standalone claims for violations of sections 201, 202, and 226(a) were also held to be sufficiently alleged. Id. at 10-13.

As such, although Labor Code sections 3751 and 3752 do not necessarily offer a new avenue of claims when it comes to the battle over employer programs mandating slip-resistant shoes, a violation of the UCL premised on those sections is still a viable cause of action and claims for other sections of the Labor Code, such as 201 and 202, including under PAGA, can be derived from violations of 3751.

Authored by: 
Jamie Greene, Associate
CAPSTONE LAW APC

In a recent opinion, the Ninth Circuit Court of Appeals underscored the distinction between class actions and representative claims brought under the California Private Attorneys General Act (“PAGA”), holding that PAGA claims cannot be aggregated with class claims in order to obtain jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”). Yocupicio v. PAE Group, LLC, No. 15-55878 (9th Cir. July 30, 2015) (slip op. available here). CAFA provides for federal jurisdiction over class actions where the amount in controversy exceeds $5 million. Prior to a line of cases including Yocupicio, Baumann v. Chase Inv. Servs. Corp., 747 F.3d 1117 (9th Cir. 2014), and Urbino v. Orkin Servs. of Cal., Inc., 726 F.3d 1118 (9th Cir. 2013), federal district courts had generally aggregated the claims of individual class members, including any relief sought for non-class claims (such as PAGA claims), in order to determine whether the jurisdictional threshold was met.

In her complaint, Plaintiff Yocupicio alleged multiple violations of the California Labor Code against her employer, PAE Group, on behalf of herself and a putative class of other employees, along with a representative claim under PAGA. PAE removed the case to federal court, alleging that the amount in controversy exceeded CAFA’s $5 million threshold. The defendant reached this calculation by combining class claims valued at $1.6 million with a $3.25 million PAGA claim and adding reasonable attorney’s fees. The district court denied the plaintiff’s motion to remand.

The Ninth Circuit reversed the district court’s decision and remanded, finding that the lower court had failed to properly consider CAFA’s legislative history, which clearly distinguishes between class actions and other representative actions. According to the panel, CAFA’s focus on “class actions” shows that Congress did not intend to grant jurisdiction over all representative actions; thus, the panel held that the statute grants federal jurisdiction only when the class claims alone meet the $5 million threshold. Slip op. at 7-8. In addition, the court held that the class claims could not be brought in federal court under supplemental jurisdiction since there was no independent complete diversity of citizenship with respect to the PAGA claim.

The crux of this opinion is succinctly summarized in a footnote, which points out the common mischaracterization of representative actions as being the same as class actions for all intents and purposes: “No doubt all class claims are representative in nature. However, not all representative claims are class claims; to say that they are would be a logical fallacy.” Slip op. at 6 n.6, citing Washington v. Chimei Innolux Corp., 659 F. 3d 842, 848 (9th Cir. 2011).

Authored By:
Rebecca Labat, Partner
CAPSTONE LAW APC