Tag Archives: California Supreme Court

Commissioned Sales Exemption: Employers May Attribute Commissions Only to Pay Period When Commissions Are Paid for Purposes of Exemption

The California Supreme Court today issued its opinion in Peabody v. Time Warner Cable, Inc., Case No. S204804, __ Cal. 4th __ (July 14, 2014).  At issue was whether an employer may attribute commission wages paid in one pay period to other pay periods in order to satisfy California’s compensation requirements.  The court concluded that an employer may not do so:

[A]n employer satisfies the minimum earnings prong of the commissioned employee exemption only in those pay periods in which it actually pays the required minimum earnings. An employer may not satisfy the prong by reassigning wages from a different pay period.

Id. at *9.  The explained its reasoning as follows:

Whether the minimum earnings prong is satisfied depends on the amount of wages actually paid in a pay period. An employer may not attribute wages paid in one pay period to a prior pay period to cure a shortfall. This interpretation narrowly construes the exemption’s language against the employer with an eye toward protecting employees. (Ramirez v. Yosemite Water Co., supra, 20 Cal.4th at pp. 794-795.) It is also consistent with the purpose of the minimum earnings requirement. Making employers actually pay the required minimum amount of wages in each pay period mitigates the burden imposed by exempting employees from receiving overtime. This purpose would be defeated if an employer could simply pay the minimum wage for all work performed, including excess labor, and then reassign commission wages paid weeks or months later in order to satisfy the exemption‟s minimum earnings prong.

Id. at *7.

By CHARLES H. JUNG

 

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Press Quotes About Analysis of Compton v. Superior Court

Armendariz: Besta Berri 2009 4906

Armendariz: Besta Berri 2009 4906 (Photo credit: dantzan)

The author’s analysis of the Compton v. Superior Court, No. B236669, — Cal.Rptr.3d —-, 2013 WL 1120619 (2d Dist. Mar 19, 2013), was quoted in legal press today:

“In both cases, the First and Second districts applied Armendariz and invalidated arbitration agreements for lack of mutuality,” said Charles Jung, a Nassiri & Jung LLP attorney. “At least as far as California courts are concerned, Armendariz is alive and well, and it appears that this is going to continue to be the case until the California Supreme Court overrules it.”

In light of the latest ruling, plaintiffs and their attorneys looking to defeat mandatory arbitration agreements will keep an eagle eye out for any type of one-sidedness, according to Jung.

“The Compton ruling creates an avenue for employees to argue that mandatory agreements are unlawfully one-sided and that under Armendariz, they should be stricken,” he said. “For employers, it suggests the way to make arbitration agreements enforceable is by making them simple and even-handed. Employers can’t have their cake and eat it too.”

“The California Supreme Court really has its work cut out for it,” Jung said. “The challenge for the California Supreme Court is to try to preserve what it can of California’s public policy, yet not fall afoul of and directly contradict or simply ignore the U.S. Supreme Court. It’s a very tricky position for the court to be in.”

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California Court of Appeal for the First District Invalidates Arbitration Agreement Citing Lack of Mutuality

albanian car dealer

albanian car dealer (Photo credit: gabork)

In a ruling with implications for employment class action litigants, the California Court of Appeal struck down an arbitration agreement by a defendant in a putative class action, rejecting an argument that an unconscionability analysis that focuses on the lack of mutuality in an arbitration contract violates Concepcion. Natalini v. Import Motor, Inc., 213 Cal. App. 4th 587 (1st Dist., mod. February 5, 2013).

Relying on the U.S. Supreme Court’s holding in AT & T Mobility LLC v. Concepcion,  563 U.S. –––– , 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), appellant car dealer argued that an “unconscionability analysis that focuses on the lack of mutuality or bilaterality in an arbitration provision is ‘an example of applying a generally applicable contract defense in a manner which disfavors arbitration.'”  The First District declined to read Concepcion so broadly, and noted that:

Recent California and federal district court decisions addressing arbitration provisions very similar to that in the present case and in the identical car purchase context have not read  Concepcion so broadly.  (See  Trompeter v. Ally Financial, Inc. (N.D.Cal., June 1, 2012, No. C–12–00392 CW) 2012 WL 1980894 [p. *8] [nonpub. opn.]  ( Trompeter );   Smith v. Americredit Financial Services, Inc. (S.D.Cal., Mar. 12, 2012, No. 09cv1076 DMS (BLM)) 2012 WL 834784 [pp. *2–*4] ( Smith );   Lau v. Mercedes–Benz USA, LLC (N.D.Cal., Jan. 31, 2012, No. CV 11–1940 MEJ) 2012 WL 370557 [pp. *6–*7] ( Lau );  see also  Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 804, fn. 18, 137 Cal.Rptr.3d 773.)   Continue reading

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Central District Rejects Opt-Out Procedure and Orders Disclosure of Name and Contact Information for Members of an Unpaid Commission Wages Class Action

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The Central District granted plaintiff’s motion to compel disclosure of the name and contact information (full name, last known addresses and telephone numbers) for class members of a putative class action for unpaid commission wages.  Celia Alvarez, et al. v. The Hyatt Regency Long Beach, et al., CV 09-04791-GAF (VBKx).  According to the court, the class was defined as all non-exempt employees for the period commencing May 7, 2005.  (Thank you to Radhika Sainath for alerting me to the decision.)

Defendants contended that the information was not relevant for class certification and invaded the privacy rights of the putative class.  Plaintiffs offered to enter into a protective order and offer that the information be given to a third party who would send the class members an opt-out letter.  Defendant rejected these proposal. Continue reading

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Second District Holds That, Pending Brinker, Employer Has a Duty to Provide Meal Breaks “as a Practical Matter”

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While the California Supreme Court will resolve this issue shortly, in Brookler v. Radioshack Corp., B212893, 2010 WL 3341816 (Cal. Ct. App. 2d Dist. Aug. 26, 2010), an unpublished opinion issued today, the Second District Court of Appeal held that “Unless and until our Supreme Court holds otherwise, we agree with the analysis in Cicairos which held an employer’s obligation under the Labor Code and related wage orders is to do more than simply permit meal breaks in theory; it must also provide them as a practical matter.”

Morry Brookler filed a class action complaint against Radioshack for its alleged failure to provide employees with a meal period of not less than 30 minutes during a work period of more than five hours.  Id. *1.  The trial court certified the class. Radioshack filed a second motion for decertification after issuance of the opinion in Brinker, 165 Cal. App. 4th 25 which the trial court granted. The California Supreme Court granted review in Brinker and the matter is currently pending. Continue reading

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Basing a UCL Claim Partially on FLSA Violation Does Not Confer Federal Question Jurisdiction

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Judge Percy Anderson of the Central District of California faced the question of whether basing a UCL claim partially on a violation of the FSLA creates federal jurisdiction.  The Court held that it did not.  The case is Williams, et al. v. Wells Fargo Bank, N.A., No. CV 10-4761 PA (PJWx), 2010 WL 3184248 (C.D. Cal. Aug. 9, 2010).

Plaintiffs’ alleged that defendant Wells Fargo Bank, N.A. (“Defendant”) misclassified them as exempt from overtime and failed to pay wages for overtime compensation.

Plaintiffs were employed by Defendant as “Home Mortgage Consultants” sometime between February 10, 2001 and the present. During that time, Plaintiffs were paid on a commission sales basis and were never paid any overtime or premium pay. On May 30, 2010, Plaintiffs brought this action against Defendant in the Superior Court for the County of Los Angeles, alleging (1) violation California Labor Code §§ 510 and 1198 for unpaid overtime; (2) violation of California Labor Code §§ 2800 and 2802 for unpaid business expenses; (3) violation California Labor Code §§ 201 and 202 for wages not timely paid upon termination; (4) violation California Labor Code § 204 for wages not timely paid during employment; (5) violation California Labor Code § 226(a) for non-compliant wage statements; and (6) violation of California Business & Professions Code §§ 17200, et seq.

Defendant filed a Notice of Removal on June 28, 2010, alleging federal question jurisdiction.  Plaintiffs filed a motion to remand, maintaining that they have only alleged state law claims, and thus there is no basis for subject matter jurisdiction.

Defendant contended that Plaintiffs have effectively alleged a separate federal claim by alleging violation of the UCL based on violation of the FLSA.

Defendant is asking that this Court treat UCL claims and the violations upon which they are based as one in the same. However, Defendant has not cited, and the Court has not found, any authority which supports this position. Indeed, Defendant’s view seems to directly contradict the California Supreme Court‘s characterization of the UCL as a statute that “borrows” violations of other laws and makes them “independently actionable.” Accordingly, the Court does not find that Plaintiffs have somehow alleged a federal cause of action by basing their UCL claim in part on Defendant’s alleged violation of FLSA.

Defendant also contended that because most of Plaintiffs’ claims stem from their allegations that Defendant misclassified them as exempt from overtime compensation, and Plaintiffs’ overtime claim is entirely dependent on an interpretation of the FLSA, the resolution of Plaintiffs’ claims depends upon the resolution of whether Defendant violated the FLSA.  The court was not persuaded.

Although Defendant is correct in noting that most of Plaintiffs’ claims stem from allegations that Defendant improperly classified them as exempt, there is no indication in the complaint that this misclassification is based on exemptions set forth in federal law, as opposed to California law. . . . Where a plaintiff has alleged a UCL claim based on both the violation of state and federal law, courts have found that federal question jurisdiction does not exist. See, e.g., Holliman v. Kaiser Foundation Health Plan, 2006 U.S. Dist. LEXIS 14627 at *13 (N.D. Cal. March 14, 2006) (finding no federal question jurisdiction where UCL claim was based on violations of California Labor Code and FLSA); Roskind v. Morgan Stanley Dean Witter & Co. 165 F. Supp. 2d 1059, 1067 (N.D. Cal. April 11, 2001) (finding no federal question jurisdiction where UCL claim was based on “unfair” misrepresentations and violation of the National Association of Securities Dealers rules); Castro v. Providian Nat’l Bank, 2000 U.S. Dist. LEXIS 19062 at *8-9 (N.D. Cal. Dec. 29, 2000) (finding that even if plaintiffs were basing UCL claim on violation of federal Truth in Lending Act (“TILA”) in addition to violations of California law, claim did not depend on question of federal law because jury could find violation of section 17200 without finding violation of TILA).

Here, Plaintiffs have alleged a UCL claim based on a number of “unlawful” acts, which include two FLSA violations in addition to nine violations of the California Labor Code. Because a single unlawful business practice may give rise to liability under the UCL, a jury could very well find that Defendant violated section 17200 without also finding that it violated the FLSA. As such, Plaintiffs’ UCL claim does not depend upon the resolution of a question of federal law.

Id. **3-4.

By CHARLES H. JUNG

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California Supreme Court Rejects Private Right of Action for Plaintiffs in Tip Pooling Cases Under Labor Code section 351

Hawaiian Gardens from the 605
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The California Supreme Court today issued its opinion in Lu v. Hawaiian Gardens Casino, Inc., an eagerly anticpiated decision where the issue was whether Labor Code section 351 provides a private cause of action for employees to recover any misappropriated tips from employers.  The Court concluded that “section 351 does not contain a private right to sue.”

Labor Code section 351 prohibits employers from taking any gratuity patrons leave for their employees, and declares that such gratuity is “the sole property of the employee or employees to whom it was paid, given, or left for.” Several appellate opinions have held that this prohibition, at least in the restaurant context, does not extend to employer-mandated tip pooling, whereby employees must pool and share their tips with other employees. (See Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal. App. 3d 1062, 1067 (Leighton); see also Etheridge v. Reins Internat. California, Inc. (2009) 172 Cal. App. 4th 908, 921-922; Budrow v. Dave & Buster’s of California, Inc. (2009) 171 Cal.App.4th 875, 878-884; Jameson v. Five Feet Restaurant, Inc. (2003) 107 Cal.App.4th 138, 143.)

Plaintiff Louie Hung Kwei Lu (plaintiff) was employed as a card dealer at defendant Hawaiian Gardens Casino, Inc. (the Casino), from 1997 to 2003. The Casino had a written tip pooling policy.  Plaintiff brought a class action against the Casino and its general manager. His complaint alleged that the Casino‟s tip pooling policy amounted to a conversion of his tips, and violated the employee protections under sections 221 (prohibiting wage kickbacks by employer), 351 (prohibiting employer from taking, collecting, or receiving employees‟ gratuities), 450 (prohibiting employer from compelling employees to patronize employer), 1197 (prohibiting payment of less than minimum wage), and 2802 (indemnifying employee for necessary expenditures). The complaint also alleged that the Casino‟s conduct giving rise to each statutory violation constituted an unfair business practice under the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.).

The trial court granted the Casino‟s motion for judgment on the pleadings on the causes of action based on sections 351 and 450. It agreed with the Casino that neither section contained a private right to sue. The court also granted the Casino‟s successive motions for summary adjudication on the remaining causes of action. Plaintiff appealed.

The Court of Appeal held, “pursuant to the analysis in Leighton, that tip pooling in the casino industry is not prohibited by Labor Code section 351.” However, it reversed the trial court‟s order granting summary adjudication of the UCL cause of action based on section 351. While section 351 itself contains no private right to sue, the Court of Appeal concluded this provision may nonetheless serve as a predicate for a UCL claim because plaintiff presented triable issues of fact as to whether section 351 prohibited certain employees who participated in the tip pool from doing so because they were “agents” of the Casino.

Less than two months later, another Court of Appeal expressly disagreed with the holding on section 351 of the appellate court below. (See Grodensky v. Artichoke Joe’s Casino (2009) 171 Cal.App.4th 1399, review granted June 24, 2009, S172237.) The Supreme Court granted review to resolve the conflict on this narrow issue.

The Court concluded that the statutory language does not “unmistakabl[y]” reveal a legislative intent to provide wronged employees a private right to sue.  Based on a review of section 351‟s legislative history, the Court also concluded that there is no clear indication that the legislative history showed an intent to create a private cause of action under the statute.

Justice Chin wrote the opinion for the California Supreme Court, with all other Jusitices concurring.  Judge David L. Minning of the Los Angeles Superior Court was the trial judge.

The attorneys for appellant were Spiro Moss, Dennis F. Moss, and Andrew Kopel.

David Arbogast submitted an amicus curiae brief for the Consumer Attorneys of California.

Respondents were represented by Tracey A. Kennedy and Michael St. Denis

Anna Segobia Masters and Jennifer Rappoport submitted an amicus curiae brief for the California Gaming Association on behalf of Defendants and Respondents.

Dennis F. Moss and Tracey A. Kennedy argued in front of the Court.

By CHARLES H. JUNG

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Ninth Circuit Amends Narayan v. EGL, Weakening Language Re Effect of Contracts Acknowledging Independent Contractor Status

Truck driver at TVA's Douglas Dam, Tennessee (LOC)
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Significantly, the Ninth Circuit Court of Appeals yesterday amended its opinion in Narayan v. EGL, Inc., — F.3d —-, 2010 WL 3035487 (9th Cir. July 13, 2010).  The Court had written 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.”

The Court replaced this holding with “That the Drivers here had contracts ‘expressly acknowledging that they were independent contractors’ is simply not dispositive under California’s test of employment.”

By CHARLES H. JUNG

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Cal. Supreme Court Issues Opinion in Reid v. Google, Rejecting Strict Application of Stray Remarks Doctrine in Cal. Discrimination Cases

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The California Supreme Court today issued its decision in Reid v. Google.  The Court rejected strict application of the stray remarks doctrine in California discrimination cases.  Under this doctrine, statements that non-decision-makers make or that decision makers make outside of the decisional process are deemed stray, and they are irrelevant and insufficient to avoid summary judgment.

Plaintiff Brian Reid filed an age discrimination lawsuit against his former employer, Google, Inc. The trial judge, Hon. William J. Elfving, granted Google‘s summary judgment motion relating to plaintiff‘s claims. The Court of Appeal reversed.

The Court decided two issues:

  1. Does a trial court‘s failure to rule on a party‘s evidentiary objections relating to a summary judgment motion waive the objections on appeal?
  2. Should California courts follow the federal courts in adopting the stray remarks doctrine in employment discrimination cases?

The Court of Appeal found that the trial court’s failure to issue express rulings on evidentiary objections did not waive those objections on appeal.  And the Court of Appeal further refused to apply the stray remarks doctrine to exclude alleged discriminatory statements that Reid‘s supervisors and coworkers made.

The Supreme Court agreed with the Court of Appeal’s conclusions:

Regarding the waiver issue, the Court of Appeal correctly determined that a finding of waiver does not depend on whether a trial court rules expressly on evidentiary objections and that Google‘s filing of written evidentiary objections before the summary judgment hearing preserved them on appeal. (Code Civ. Proc., § 437c, subds. (b)(5), (d).)  After a party objects to evidence, the trial court must then rule on those objections. If the trial court fails to rule after a party has properly objected, the evidentiary objections are not deemed waived on appeal.

Regarding the stray remarks issue, the Court of Appeal also correctly determined that application of the stray remarks doctrine is unnecessary and its categorical exclusion of evidence might lead to unfair results.

Robin Weideman of the California Labor & Employment Law Blog gives a nice analysis of the stray remarks portion of today’s ruling.

The attorneys for plaintiff and appellant were Barry L. Bunshoft, Ray L. Wong, Paul J. Killion, Lorraine P. Ocheltree, Eden E. Anderson and Allegra A. Jones.  Charlotte E. Fishman for California Employment Lawyers Association filed an Amicus Curiae on behalf of Plaintiff and Appellant.  Thomas W. Osborne, Melvin Radowitz and Barbara A. Jones for AARP also filed an Amicus Curiae on behalf of Plaintiff and Appellant.

The attorneys for defendant and respondent were Fred W. Alvarez, Marina C. Tsatalis, Amy K. Todd, Marvin Dunson III, Koray J. Bulut, Elizabeth C. Tippett, Jeanna Steele, Gary M. Gansle of Wilson Sonsini and Paul W. Cane, Jr. of Paul Hastings.  Greines, Martin, Stein & Richland and Robert A. Olson for Association of Southern California Defense Counsel filed an Amicus Curiae on behalf of Defendant and Respondent.  Orrick, Herrington & Sutcliffe‘s Gary S. Siniscalco, Patricia K. Gillette, Greg J. Richardson and Lynne C. Hermle on behalf of the Employers Group and California Employment Law Council also filed an Amici Curiae on behalf of Defendant and Respondent. Jonathan B. Steiner, Jay-Allen Eisen, Jon B. Eisenberg, Dennis A. Fischer, Steven L. Mayer, Robert A. Olson, Douglas R. Young, and Robin Meadow also filed an Amicus Curiae.

By CHARLES H. JUNG

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Judge Vaughn Walker Strikes Down Proposition 8

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Judge Vaughn R. Walker of the Northern District of California issued his much anticipated ruling today in Perry, et al. v. Shwarzenegger, et al., Case No. C09-2292 VRW.  Judge Walker struck down the so-called gay marriage ban, Proposition 8, concluding that “Plaintiffs have demonstrated by overwhelming evidence that Proposition 8 violates their due process and equal protection rights and that they will continue to suffer these constitutional violations until state officials cease enforcement of Proposition 8.”   The case involved a challenge to the November 2008 voter-enacted amendment to the California Constitution (“Proposition 8” or “Prop 8”).  Cal. Const. Art. I, § 7.5.

The Court concluded that:

Proposition 8 fails to advance any rational basis in singling out gay men and lesbians for denial of a marriage license. Indeed, the evidence shows Proposition 8 does nothing more than enshrine in the California Constitution the notion that opposite-sex couples are superior to same-sex couples.Because California has no interest in discriminating against gay men and lesbians, and because Proposition 8 prevents California from fulfilling its constitutional obligation to provide marriages on an equal basis, the court concludes that Proposition 8 is unconstitutional.

Plaintiffs have demonstrated by overwhelming evidence that Proposition 8 violates their due process and equal protection rights and that they will continue to suffer these constitutional violations until state officials cease enforcement of Proposition 8. California is able to issue marriage licenses to same-sex couples, as it has already issued 18,000 marriage licenses to same-sex couples and has not suffered any demonstrated harm as a result, see FF 64-66; moreover, California officials have chosen not to defend Proposition 8 in these proceedings.

The Court ordered the following:

Because Proposition 8 is unconstitutional under both the Due Process and Equal Protection Clauses, the court orders entry of judgment permanently enjoining its enforcement; prohibiting the official defendants from applying or enforcing Proposition 8 and directing the official defendants that all persons under their control or supervision shall not apply or enforce Proposition 8. The clerk is DIRECTED to enter judgment without bond in favor of plaintiffs and plaintiff-intervenors and against defendants and defendant-intervenors pursuant to FRCP 58.

By CHARLES H. JUNG

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