Litigating California Wage & Hour and Labor Code Class Actions

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Another employer policy fomenting class actions, has been a “floating holiday” policy that allows employees to take a paid day off at the employee’s discretion but does not treat the floating holiday as vacation–i.e., the employee who does not use the floating holiday is not credited with a day of vested vacation time, but instead simply loses the opportunity for a paid day off. The DLSE has opined that an employer may have a use-it-or-lose-it policy with bona fide “holidays,” but only when the holiday is tethered closely to a specific event. For example, an employer may give employees Martin Luther King, Jr. Day as a paid day off, on a use-it-or-lose-it basis. But where “holiday” pay can be claimed on any day, at an employee’s discretion, the DLSE views it as disguised “vacation” pay, and has opined that an employer must treat any such holiday pay as vested vacation time. 190 Based on this announced interpretation of the law, numerous class actions have been filed against employers who have a use-it-or-lose-it policy with respect to floating holidays. To date, no court decision has adopted or rejected the DLSE’s interpretation. VIII. Waiting Time Penalties A. Generally Many class actions assert, on behalf of class members who are former employees, claims for “waiting time penalties” under Labor Code Section 203. 191 Under California law, all wages due must be paid at the time of termination, unless the employee quits without notice, and then within seventy-two hours of termination. 192 When wages of a terminated employee are not timely paid, the employee’s wages continue, as a penalty, until paid or up to thirty days, whichever is shorter. Thirty days of penalties means thirty consecutive calendar days, including Saturdays, Sundays and holidays (typically equivalent to six weeks of pay), rather than simply one month’s pay. Each calendar day that passes before the employer pays all wages owed triggers an additional day of penalties at the employee’s regular daily rate, even if the employee is not normally scheduled to work on all of these days. 193 On its face, the waiting time penalty provision reads as though it were designed to apply when an employer fails to give a terminating employee the employee’s final paycheck. The Labor Commissioner, despite regulations providing that a good faith dispute precludes the 190 191 192 193 DLSE Enforcement Manual § 15.1.12, et seq. (“there must be an objective standard by which it can be established that the leave time is attributable to holidays, sick leave, bereavement leave or other specified leave.”) The statute of limitations period on Lab. Code § 203 claims is three years, regardless of whether only penalties are sought or whether underlying wages are also sought in same action. Pineda v. Bank of America, 50 Cal. 4th 1389, 1401 (2010), overruling McCoy v. Sup. Ct., 157 Cal. App. 4th 225, 233 (2008). Lab. Code § 203. Mamika v. Barka, 68 Cal. App. 4th 487 (1998). Seyfarth Shaw LLP | www.seyfarth.com Litigating California Wage & Hour Class Actions (12th Edition) 46
imposition of penalties, 194 routinely applies the penalty provision when the employer has failed to pay any wage claim over the entire course of employment and continues not to pay it at the time of termination. As a result, an employer who shorts an employee $1 of owed vacation pay could be required to pay the employee the equivalent of six weeks’ pay in penalties. Courts have ruled that good faith, or lack of willfulness, is a defense to waiting time penalties. 195 As the California Supreme Court explained: “A good faith dispute that any wages are due will preclude imposition of waiting time penalties under Section 203.” 196 Simple ignorance of the law, as opposed to a reasonable, good faith belief that the law provided a defense to payment of wages, generally is insufficient to avoid waiting time penalties. 197 Unvested stock that an employee chose to receive in lieu of full wages is not viewed as wages that must be paid to an employee if the employee resigns prior to the vesting date of the stock, though the wages not paid due to the receipt of the stock must be paid (without interest) to an employee who is involuntarily terminated prior to the vesting date. 198 B. Application to Fixed-Term and Temporary Employment 1. Assignments for a Fixed Term By Section 203’s terms, waiting time penalties are recoverable only by an employee “who is discharged or who quits.” 199 But what happens when the assignment simply comes to an end by its own terms, either because a fixed term has expired, or a fixed project is completed? The appellate court held that neither of those circumstances 194 195 196 197 198 199 8 C.C.R. § 13520 (“[A] good faith dispute that any wages are due will preclude imposition of waiting time penalties under Section 203.”). Road Sprinkler Fitters Local Union No. 669 v. G&G Fire Sprinklers, Inc., 102 Cal. App. 4th 765 (2002); Davis v. Morris, 37 Cal. App. 2d 269 (1940). Smith v. Rae-Ventner Law Group, 29 Cal. 4th 345, 354 n.3 (2002), superseded on other grounds by statute, Code Civ. Proc. § 98.2(c) as recognized in Eicher v. Advanced Business Integrators, Inc., 151 Cal. App. 4th 1363 (2007); Amaral v. Cintas Corp., 163 Cal. App. 4th 1157, 1201-03 (2008)(defendant’s failure to pay wages according to “living wage” clause in contract did not constitute a willful violation of the Labor Code where the defendant’s position raised “complicated issues of first-impression”); see also Nordstrom Com’n Cases, 186 Cal. App. 4th 576, 584 (2010) (holding that the trial court did not abuse its discretion in discounting the penalties on a Section 203 claim because the defendant could avoid the penalties by showing that a “good faith dispute” existed regarding the claimed wages). Barnhill v. Robert & Saunders Co., 125 Cal. App. 3d 1, 7 (1981). Schacter v. Citigroup, Inc., 47 Cal. 4th 610 (2009). This decision did not foreclose the possibility of a different outcome if the employee were fired rather than voluntarily resigned. Lab. Code § 203. In addition, the penalties for employees who quit are limited to employees “not having a written contract for a definite period.” Lab. Code § 202. Seyfarth Shaw LLP | www.seyfarth.com Litigating California Wage & Hour Class Actions (12th Edition) 47
Page 1 and 2: Litigating California Wage & Hour a
Page 3 and 4: Table of Contents I. Introduction a
Page 5 and 6: A. Disclosure of Class Member Names
Page 7 and 8: associated statutory penalties. 1 T
Page 9 and 10: who does not meet the threshold com
Page 11 and 12: exempt work is of a kind which in e
Page 13 and 14: 3) The employee performs his or her
Page 15 and 16: decisions have concluded that under
Page 17 and 18: Bell court to look beyond the Wage
Page 19 and 20: place of business, would that quali
Page 21 and 22: IWC had the authority to promulgate
Page 23 and 24: stores” by providing them a porti
Page 25 and 26: declare such a system illegal witho
Page 27 and 28: employers should be able to defend
Page 29 and 30: waive the right to reimbursement, s
Page 31 and 32: Due to the ambiguity in the meaning
Page 33 and 34: For each workday the employer fails
Page 35 and 36: Arguably, no additional $100-per-pa
Page 37 and 38: permitted” the employee to work t
Page 39 and 40: federal decisions also held that an
Page 41 and 42: for all overtime hours worked. The
Page 43 and 44: much broader, such as the court’s
Page 45 and 46: In the appeal of Chau, the appellat
Page 47: years before the lawsuit, or for an
Page 51 and 52: In one such class action, Elliot v.
Page 53 and 54: First, there has been a substantial
Page 55 and 56: Recent court decisions have begun t
Page 57 and 58: of her hours was paid at a rate of
Page 59 and 60: the limitations period for a penalt
Page 61 and 62: passage, then the employee could st
Page 63 and 64: all, but rather simply to proceed w
Page 65 and 66: Shortly thereafter, another Divisio
Page 67 and 68: and the ability to bring a collecti
Page 69 and 70: XIII. Class Action Fairness Act of
Page 71 and 72: the plaintiff is “master of her c
Page 73 and 74: alleged conduct or any related cond
Page 75 and 76: Initially, the decisions were split
Page 77 and 78: XIV. Class Certification A. General
Page 79 and 80: expectations and the realistic requ
Page 81 and 82: In the immediate wake of Sav-On, th
Page 83 and 84: Similarly, employers may argue that
Page 85 and 86: A 5 to 4 ruling reversed the Ninth
Page 87 and 88: facility to the next, or variations
Page 89 and 90: employer’s defense arsenal, and t
Page 91 and 92: In reaching this conclusion, the Co
Page 93 and 94: party who seeks the same relief, pr
Page 95 and 96: is to be so maintained.” This det
Page 97 and 98: speech. 429 Therefore, the court he
Page 99 and 100:
Puerto, or Crab Addison cases would
Page 101 and 102:
epresentative. That question was an
Page 103 and 104:
CashCall to disclose the identities
Page 105 and 106:
nothing but still are bound by the
Page 107 and 108:
Initially, there appeared to be a v
Page 109 and 110:
the case. As any one of these class
Page 111 and 112:
have any great impact on class sett
Page 113 and 114:
plaintiff’s attorney and putative
Page 115 and 116:
the California Supreme Court issued
Page 117 and 118:
While California courts have essent
Page 119 and 120:
The plaintiffs attempted to justify
Page 121:
Breadth. Depth. Results. www.seyfar
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