Litigating California Wage & Hour and Labor Code Class Actions

The Labor Code also includes extra protections for employees to prevent them being
coerced into waiving their wage claims for less than the claims are truly worth. Labor Code
Section 206.5 provides, “[a]n employer shall not require the execution of a release of a
claim or right on account of wages due . . ., unless payment of those wages has been
made.” The Section goes on to provide that any release obtained in violation of the section
“shall be null and void as between the employer and the employee.” Before 2009, there
was some ambiguity whether this precluded enforcement of any settlement of a claim for
unpaid wages where the employee could prove that the amount received in settlement was
less than the total amount the employee was owed.
In 2009, however, two decisions clarified that the protection in Labor Code Section 206.5
applies only to releases obtained where there was no genuine dispute over the wages
owed. 498 In other words, where an employer concedes (or lacks a genuine dispute) that it
owes an employee wages, it cannot obtain a release of that claim by paying less than the
undisputed amount owed. But, where the employer has a good faith defense to wage
claims and seeks to compromise them with a member of a putative class in an ongoing
class action, such settlements are not invalidated by Labor Code Section 206.5.
It should be emphasized that the above decisions arose under facts where the employer
took pains to ensure it did nothing in its individual settlement efforts that could be viewed as
coercive conduct. As the law currently stands, employers who are careful to be fair may
settle individually with class members and enforce the releases obtained as a result.
Notwithstanding that ability, employers must be very careful not to overreach and attempt
to settle these cases in a coercive manner or at an unreasonable discount, as those sorts
of facts may yield a less favorable outcome for employers in the next case.
XVII. Class Action Waivers and Arbitration
Employers have attempted to protect themselves from potential class actions by including
provisions in mandatory arbitration agreements that the employee must individually arbitrate any
claims and that the arbitrator cannot certify a class or otherwise allow employees covered by the
arbitration agreements to pursue their claims on anything other than an individual basis. Federal
courts outside California have enforced such provisions. 499 Unfortunately for California employers,
498
499
Chindarah v. Pick up Stix, Inc., 171 Cal. App. 4th 796, 803 (2009) (individual settlements enforceable when they involve
“a bona fide dispute over wages already earned,” settle “a dispute over whether [the employer] had violated wage and
hour laws in the past”; and do not “purport to exonerate [the employer] from future violations.”); Watkins v. Wachovia
Corp., 172 Cal. App. 4th 1576, 1586-87 (2009) (same).
See, e.g., Livingston v. Assocs. Fin., Inc., 339 F.3d 553, 559 (7th Cir. 2003) (class action waiver enforceable in action
filed under federal Truth-in-Lending Act); Snowden v. Checkpoint Check Cashing, 290 F.3d 631, 638-39 (4th Cir. 2002)
(same); Burden v. Check Into Cash of Kentucky, LLC, 267 F.3d 483, 492 (6th Cir. 2001) (same); Randolph v. Green
Tree Fin. Corp.-Alabama, 244 F.3d 814, 819 (11th Cir. 2001) (same); Johnson v. West Suburban Bank, 225 F.3d 366,
370-78 (3d Cir. 2000) (same).
Seyfarth Shaw LLP | www.seyfarth.com Litigating California Wage & Hour Class Actions (12th Edition) 112