This week, Rep. Linda Sanchez (D-CA) introduced legislation that would extend the federal minimum wage and overtime protections of the Fair Labor Standards Act (FLSA) to most home care workers. See the report from The Hill.
On Thursday, a former employee at General Motors and her husband were indicted in federal court in Detroit for allegedly conspiring to steal secrets from G.M. relating to hybrid technology. Read the article here. A press release by the U.S. Attorney’s Office in the Eastern District of Michigan states that Shannon Du and her husband, Yu Qin conspired to “possess trade secret information of General Motors Company relating to hybrid vehicles, knowing that the information had been stolen, converted, or obtained without authorization.” “The indictment alleges that DU, while employed with GM, provided GM trade secret information relating to hybrid vehicles to her husband, QIN, for his benefit and for the benefit of a company, Millennium Technology International Inc. (MTI), that the defendants owned and operated.”
In Narayan v. EGL, Inc., — F.3d —-, 2010 WL 2735708 (9th Cir. July 13, 2010), the Ninth Circuit decided whether, assuming the existence of an employer-employee relationship in California, the employer may avoid its obligations under the Labor Code by inserting a clause in an employer-drafted pre-printed form contract in which: (1) the employee acknowledges that he is an independent contractor and (2) agrees that the contract would be interpreted in accordance with the laws of another jurisdiction where such an agreement is generally enforceable. Judge Ronald M. Whyte of the Northern District of California found that declarations in the underlying agreements stating that the drivers were independent contractors rather than employees compelled the holding that the plaintiffs were indeed independent contractors as a matter of law. Id. at *2. Consequently, the district court granted the employer’s motion for summary judgment. The Ninth Circuit reversed.
EGL, the employer, is a global transportation, supply chain management and information services company incorporated under the laws of Texas and headquartered in Texas. EGL’s services include, inter alia, “air and ocean freight forwarding, customs brokerage, [and] local pickup and delivery service.” Plaintiff drivers (the “Drivers”) were residents of California who were engaged to provide freight pick-up and delivery services for EGL in California. All three Drivers signed agreements with EGL for “Leased Equipment and Independent Contractor Services” (the “Agreements”). The Agreements provided that the “intention of the parties is to … create a vendor/vendee relationship between Contractor and [EGL],” and acknowledged that “[n]either Contractor nor any of its employees or agents shall be considered to be employees of” EGL. The terms of the Agreements provide, inter alia, that the Drivers “shall exercise independent discretion and judgment to determine the method, manner and means of performance of its contractual obligations,” although EGL retained the right to “issue reasonable and lawful instructions regarding the results to be accomplished.” Id. at *1.
The Ninth Circuit noted the difficultly in overcoming the Drivers’ prima facie case that the relationship was one of employer/employee. “This hurdle is particularly difficult for EGL to overcome in light of the second special consideration in this case, namely, the multi-faceted test that applies in resolving the issue whether the Drivers are employees.” Id. at *4.
The Ninth Circuit described the multifactor approach to evaluating the:
indicia of an employment relationship, the most important of which is the “right to discharge at will, without cause.” Borello, 256 Cal.Rptr. 543, 769 P.2d at 404 (quoting Tieberg v. Unemployment Ins.App. Bd., 2 Cal.3d 943, 88 Cal.Rptr. 175, 471 P.2d 975, 979 (Cal.1970)). Borello endorsed other factors derived from the Restatement (Second) of Agency that may point to an employment relationship: (a) whether the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee.
Id. at *4.
The Court concluded that the “fact that the Drivers here had contracts ‘expressly acknowledging that they were independent contractors’ is simply not significant under California’s test of employment.” Id. at *8 (citing Borello, 256 Cal. Rptr. 543, 769 P.2d at 403 (“The label placed by the parties on their relationship is not dispositive, and subterfuges are not countenanced.”)).
The Court evaluated the various indicia of employment and concluded that:
Ultimately, under California’s multi-faceted test of employment, there existed at the very least sufficient indicia of an employment relationship between the plaintiff Drivers and EGL such that a reasonable jury could find the existence of such a relationship. Indeed, although it plays no role in our decision to deny summary judgment, it is not without significance that, applying comparable factors to those that we apply here, the Internal Revenue Service (at EGL’s request) and the Employment Development Department of California (at Narayan’s request) have determined that Narayan was an employee for federal tax purposes (applying federal law) and California Unemployment or Disability Insurance (applying California law), respectively.
Id. at *8.
UPDATE:
On August 5, 2010, the Ninth Circuit amended its holding, highlighted above.
In a case with serious implications for Plaintiff’s wage & hour attorneys, the Third District Court of Appeal held that an employer may recover its attorneys fees in a case alleging wrongful denial of rest breaks. In Kirby v. Immoos Fire Protection, Inc., 2010 WL 2910075 (Cal. Ct. App. 3 Dist. July 27,2010) two former employees challenged an award of attorney’s fees to an employer who successfully defended against allegations of labor law violations. Plaintiff-Appellants Anthony Kirby and Rick Leech, Jr. sued Respondent-Defendant Immoos Fire Protection, Inc. as well as 750 Doe defendants for violating various labor laws as well as the unfair competition law (Bus. & Prof.Code, § 17200 et seq.). Plaintiff dismissed the case after the trial court denied class certification.
Judge Loren McMaster of the Sacramento Superior Court subsequently awarded $49,846.05 in attorney’s fees to Defendant for its defense of the first, sixth and seventh causes of action. The first cause of action sought recover for violations of the UCL. The third cause of action alleged that Immoos failed to pay overtime compensation, as required by sections 204.3, 510, and Industrial Wage Commission Order No. 16-2001 (Order No. 16-2001). The sixth cause of action alleged that Immoos failed to provide Kirby with rest periods as required by Order No. 16-2001. The Third District Court of Appeal reversed, allowing reasonable fees for the sixth cause of action only.
Defendant moved to recover attorney’s fees from Plaintiff pursuant to Labor Code section 218.5. Plaintiff opposed the motion arguing, in part, that the unilateral fee-shifting provision in favor of plaintiffs provided by Labor Code section 1194 barred an award of fees to Immoos.
Section 218.5 provides in pertinent part: “In any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, the court shall award reasonable attorney’s fees and costs to the prevailing party if any party to the action requests attorney’s fees and costs upon the initiation of the action…. [¶] This section does not apply to any action for which attorney’s fees are recoverable under Section 1194.”
Section 1194 provides in relevant part: “Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney’s fees, and costs of suit.”
The trial court concluded that it is “apparent from the express language of … section 218.5, that only section 1194 can defeat a prevailing party employer’s entitlement to attorneys’ fees under that statute, under the rule of statutory construction, expressio unius est exclusio alterius-the expression of one thing is the exclusion of another.” “As only [section] 1194 is named as an exception to 218.5, no other Labor Code sections may be implied to defeat a prevailing party employer’s entitlement to attorneys’ fees under that section.”
In addition to the fees allowed for defense against the complaint, the trial court awarded Immoos fees for bringing the motion for attorney’s fees. Altogether, attorney’s fees were awarded to Immoos in the amount of $49,846.05.
The Court of Appeals concluded that the trial court did not err in awarding fees to Defendant for the sixth cause of action. However, the court erred in awarding attorney’s fees for defense against claimed violations of section 2810 as set forth in the first and seventh causes of action.
Plaintiff argued that fees should not be awarded since section 218.5 includes an express exception to its bilateral fee-shifting provision, which states: “This section does not apply to any action for which attorney’s fees are recoverable under Section 1194.” Arguing that an “action” refers to an entire case, Kirby concluded that the inclusion of causes of action subject to section 1194 bars Immoos’s recovery of any attorney’s fees in this case. The Court rejected the argument.
The Court construes the “section 1194 exception as applying only to causes of action for unpaid minimum and overtime wages.” Id. at *6. “To adopt Kirby’s statutory construction would allow the exception of section 1194 ‘s unilateral fee shifting to eviscerate the rule of section 218.5.” Id.
We harmonize sections 218.5 and 1194 by holding that section 218.5 applies to causes of action alleging nonpayment of wages, fringe benefits, or contributions to health, welfare and pension funds. If, in the same case, a plaintiff adds a cause of action for nonpayment of minimum wages or overtime, a defendant cannot recover attorney’s fees for work in defending against the minimum wage or overtime claims. Nonetheless, the addition of a claim for unpaid minimum wages or overtime does not preclude recovery by a prevailing defendant for a cause of action unrelated to the minimum wage or overtime claim so long as a statute or contract provides for fee shifting in favor of the defendant.
Id.
Since Plaintiff’s sixth cause of action alleged that Plaintiff was “owed an additional one hour of wages per day per missed rest period” the court concluded that it was a claim seeking additional wages. Therefore section 218.5’s provision of attorney’s fees for “any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions…” applied. Id. **7-8.
It is now common practice to include a rest break claim in wage & hour complaints. Plaintiffs attorneys will need to seriously reconsider whether they will continue this practice or risk bearing defendant’s fees in an unsuccessful claim.
The federal Third Circuit Court of Appeals upheld an injunction yesterday blocking an expert on nooks on crannies from jumping to rival Hostess Brands, Inc. The case is Bimbo Bakeries USA Inc v. Botticella, U.S. 3rd Circuit Court of Appeals, No. 10-1510. Michael L. Banks of Morgan, Lewis & Bockius LLP and Joseph Anclien of Schnader Harrison Segal & Lewis LLP appeared for oral argument.
California Employment Lawyer 