Court of Appeal: Meal/Rest/Wage Statement Class Action Should Be Certified

Safeway compensated truck drivers based on a compensation formula rather than a straight hourly rate: 

The collective bargaining agreements also obligated Safeway to utilize what it calls an activity based compensation system to determine the drivers‟ wages. Pay was calculated based on (1) mileage rates applied according to the number of miles driven, the time of day the trips were taken, and the locations where the trips began and ended; (2) fixed rates for certain tasks (e.g., rates for number of pallets delivered and picked up); (3) an hourly rate for a predetermined amount of minutes for certain tasks (e.g., paid for 10 minutes at hourly rate for set-up time at each store); and (4) an hourly rate for delays (e.g., breakdowns, impassable highways, time spent at scales, or other causes beyond the driver‟s control).

Drivers logged their mileage and activities for each trip manually on trip sheets. They also logged their activities into an onboard computer system known as the XATA system. Through XATA, Safeway tracked the drivers' moves, including their stops. The drivers input codes into XATA to record specific reasons for delays. Neither the trip sheets nor the XATA system, however, provided a place or means to record meal or rest periods.

 
So, the compensation system did not include separate payment for contractually and legally required rest periods.  Safeway argued that the paid rest periods were included in its compensation formula, presumably because the payment for miles and tasks assumed the rest periods would be taken during these activities.  Safeway also had drivers sign time cards to acknolwedge they were authorized and permitted to take rest periods. 
The trial court refused to certify a sub-class of rest period claims.  But the court of appeal reversed.  The court held Safeway's system of compensation was akin to a piece rate method of compensation.  And, the court decided, California law does not allow paid rest periods to be included in piece rates because it was an improper averaging of compensation: 

under the rule of Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314, 323 (Armenta), rest periods must be separately compensated in a piece-rate system. Rest periods are considered hours worked and must be compensated. (Cal. Code Regs., tit. 8, §§ 11070, subd. 12; 11090, subd. 12.) Under the California minimum wage law, employees must be compensated for each hour worked at either the legal minimum wage or the contractual hourly rate, and compliance cannot be determined by averaging hourly compensation.

The court expressly held that there was a common issue for determining liability - that the compensation system did not compensate employees for paid rest periods separately. The court did so by holding that piece rates may not include payment for rest periods. That is another way of saying that there was no payment for rest periods as a matter of law.

With all respect to the court of appeal, this decision seems to over-analyze the merits of the case.  The court seems to be saying the common proof is that all rest periods were paid incorrectly as a matter of law.  Without saying so, therefore, the court essentially granted summary judgment for the plaintiff rather than just class certification. 

While we're talking about the merits, I am not sure I understand why the piece rate payment cannot include implied payment for rest periods, as Safeway testified it did. An hourly pay rate does not expressly include payment for rest periods either.  During the hour that an employee takes a rest period, he is paid the same hourly rate, but simply works less.  During the hour that an employee does not take a rest period, she receives the same rate as if she did take one. Employers likely set their hourly rates under the assumption that the employee will take a rest period during one of every four hours worked.  The hourly rate therefore "averages" compensation, which the cout said could not be done.   Anyway, I don't get a vote.  So, I descend from my soap box, dejected.

The court also certified a meal period sub-class class on the basis that there was a common issue regarding whether Safeway adequately provided second meal periods before 2006, which is when the case was filed.  The court did not reach the plaintiff's argument that Safeway did not do enough to ensure drivers were relieved of duty, because the one common issue was enough for class certification.  This part of the decision may not be all that significant to employers who adequately provide for both meal periods per Brinker.  Safeway changed practices in 2006.

Finally, the court of appeal decided the wage statement sub-class should be certified.  The court agreed that the wage statement did not adequately spell out wage rates applicable to miles driven, such that the employees would have to refer to their own trip sheets to verify whether they received adequate compensation and engage in mathematical calculations:

Plaintiff‟s argument goes to the structure of the wage statements. As a result, his and the other drivers‟ claims of injury on account of the wage statements will be resolved by means of common proof. The structural omissions in the wage statements, and their alleged violation of Labor Code section 226, are, like employer policies, the types of matters best resolved by class adjudication.

There have been other decisions regarding  piece rates lately. See, e.g., here.  Employers should review their compensation plans to ensure compliance with minimum wage, overtime, meal and rest period laws.

This case is Bluford v. Safeway Stores, Inc. and the opinion is here.

9th Circuit Allows Wage Claim Based on End of Day Security Screen

Integrity Staffing Solutions employed temp warehouse workers in Nevada.  At the end of the workers' day, they had to pass through security screenings to minimize theft. They had to remove metal from pockets and pass through a metal detector.  Sometimes, they had to wait up to 25 minutes for the security check.

The plaintiffs brought a claim for off-the-clock work, claiming the screenings were part of the compensable work day in violation of the Fair Labor Standards Act. They also brought state law claims under Nevada law.  They claimed that they had to walk to the lunch room to punch out for meals, and had to undergo security screenings after lunch before returning to work. These took only 5 minutes.

The court of appeals held that (based on the plaintiffs' allegations in the complaint) waiting for security could be compensable time under the Fair Labor Standards Act:

Here, Busk and Castro have alleged that Integrity requires the security screenings, which must be conducted at work. They also allege that the screenings are intended to prevent employee theft – a plausible allegation since the employees apparently pass through the clearances only on their way out of work, not when they enter. As alleged, the security clearances are necessary to employees’ primary work as warehouse employees and done for Integrity’s benefit. Assuming, as we must, that these allegations are true, the plaintiffs have stated a plausible claim for relief.
***
Integrity allegedly requires the screening to prevent employee theft, a concern that stems from the nature of the employees’ work (specifically, their access to merchandise).

As for the claims that the plaintiffs were delayed from enjoying their unpaid meal period, the court of appeals was not convinced:

Busk and Castro alleged they were not “completely relieved from duty” because by placing the time clocks far from the lunchroom, Integrity forced upon them the “duty to walk to the lunch room in order to eat lunch.” But the district court correctly held that walking to the lunchroom is not a work duty. Walking to the lunchroom is not necessary to the plaintiffs’ principal work as warehouse employees. Moreover, though the Portal-to-Portal Act does not clearly preclude compensation for walking to the lunchroom, as it only expressly applies to walking before the workday starts

* * *

Finally, the first amended complaint alleges that employees had to pass through a security clearance on their way to the lunchroom. Assuming that the time passing through the security clearance on the way to lunch constitutes compensable work, the time alleged in this case is de minimis. See Lindow v. United States, 738 F.2d 1057, 1062–64 (9th Cir. 1984) (discussing de minimis exception). As alleged in the first amended complaint, the walk to and from the cafeteria takes “approximately five minutes” each way, though employees pass through security only on their way to the cafeteria, not on the return trip. The relatively minimal time expended on the clearance in this context differs from the 25-minute delay alleged for employees passing through security at day’s end. Therefore, the district court correctlydismissed this claim under Rule 12(b)(6).

Based on this case, employers should consider whether "bag checks" and other security screening at the end of the shift should paid time (at least in the Ninth Circuit), unless it happens quickly enough to be "de minimis."

Of interest to litigators, the Court of Appeals decided that a federal "opt in" class action under the Fair Labor Standards Act could proceed simultaneously with a state-law based "opt out" class action.

This case is Busk v. Integrity Staffing Solutions and the opinion is here.

Court of Appeal Affirms Denial of Class Certification

The court of appeal decided in a retail exemption case that the trial court ruled within its discretion to de-certify or preclude class action status.  The  case involved Sears automotive center managers and a dispute over whether they were correctly classified as exempt. The trial court issued a brief order denying certification, which the plaintiff appealed.

The appellate court's analysis focused on a few issues of interest. First, the trial court has discretion to credit one party's evidence over the other party's conflicting evidence. Second, the appellate court defers to the trial court's discretion by inquiring only whether there is substantial evidence supporting the trial court's ruling.  It does not matter if the other side also offered enough evidence to support a contrary ruling. 

Third, the court emphasized that an employer's uniform policy or classification of a group of employees as exempt is not going to suffice as a "predominating" common issue to warrant class action treatment. Rather, the trial court is supposed to determine whether the actual work performed by the potential class members is susceptible to common questions and answers.

And that brings us to the important part of the opinion. The court rejected the plaintiff's attempt to offer a statistician's opinion that one could "sample" a small group of managers to predict whether all class members were exempt or non-exempt.

To obtain class certification, Dailey was required to demonstrate the predominance of common questions of law or fact. . . . We have found no case, and Dailey has cited none, where a court has deemed a mere proposal for statistical sampling to be an adequate evidentiary substitute or demonstrating the requisite commonality, or suggested that statistical sampling may be used to manufacture predominate common issues where the factual record indicates none exist. If the commonality requirement could be satisfied merely on the basis of a sampling methodology proposal such as the one before us, it is hard to imagine that any proposed class action would not be certified.
***
[C]ourts have held that when the class action proponent fails to satisfy the threshold requirement of commonality, as occurred here, the trial court does not err in rejecting the use of statistical sampling or other methodologies to establish liability as to the whole proposed class. (See, e.g., Mora, supra, 194 Cal.App.4th at pp. 501, 509-510 [rejecting argument that trial court erred in failing to consider survey methodology proposed by plaintiffs' expert to measure the amount of time employees spent on exempt versus nonexempt tasks, in light of that court's reasonable conclusion that common questions of fact or law did not predominate over individual ones]; Dunbar v. Albertson's Inc. (2006) 141 Cal.App.4th 1422, 1432 (Dunbar) [no error in court's conclusion — and in its implicit rejection of the use of surveys and exemplar evidence — that the "findings as to one grocery manager could not reasonably be extrapolated to others given the variation in their work"].)

 The court of appeal also rejected the notion that the absence of a formal policy regarding meals and breaks for exempt employees supports class certification:

Dailey also is not helped by evidence that Sears does not have formal written policies regarding rest breaks and meal periods for salaried managers, does not ensure that breaks are taken, and does not keep records of breaks these employees take. First, such evidence is consistent with Sears's contention that Managers and Assistant Managers are exempt employees. Second, to the extent this evidence relates to whether Managers and Assistant Managers actually take uninterrupted breaks, or to whether Sears enforces meal and rest periods, that evidence is not directly relevant after Brinker. (Brinker, supra, 53 Cal.4th at pp. 1034, 1040-1041.) Finally, the absence of a formal written policy explaining salaried managers' rights to meal and rest periods does not necessarily imply the existence of a uniform policy or widespread practice of either depriving these employees of meal and rest periods or requiring them to work during those periods. Sears presented substantial evidence that no one prevents Managers and Assistant Managers from taking meal and rest breaks, and they are free to do so as they deem appropriate. As explained previously, the trial court was entitled to credit this testimony over contrary inferences suggested by Dailey's evidence. (See, e.g., Sav-On, supra, 34 Cal.4th at p. 331.)

The case is Dailey v. Sears, Roebuck & Co. and the opinion is here.

Random Post-Brinker Thoughts

I have taken more time to read Brinker.  Here are some thoughts to add on to yesterday's post.

1.  The Supreme Court tried to clarify when class actions should be certified.  The trial court will have a  lot of latitude to decide certification, as it has been since 2004's Sav-on decision.  But this opinion will give trial courts more encouragement to certify class actions. The Court limited the trial court's examinations of whether a case has legal merit at the class action stage to resolving a legal issue that affects common issues so much that class certification would be improper. The trial courts will still wrestle with this issue and class action practice is likely safe under this analysis.  As explained below, the Court's application of class action rules means that class actions based on common policies (such as rest periods) may be authorized more freely than courts have been allowing up to now.

1.5 The summary judgment motion will be a very important part of class action defense and should be considered early in the process to avoid class certification of claims that are based on a common policy, but have no merit.

2.  Rest period law:  The Court precisely explained to employers the rest period rules.  Policies must be drafted in accordance with this formula:  "the rest time that must be permitted as the number of hours worked divided by four, rounded down if the fractional part is half or less than half and up if it is more (a “major fraction”), times 10 minutes."

You don't like math?  Well they explain it even better here, because they incorporate the fact that employees with shifts of fewer than 3.5 hours in length are not entitled to any rest period: "Employees are entitled to 10 minutes’ rest for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on.... an employee would receive no rest break time for shifts of two hours or less, 10 minutes for shifts lasting more than two hours up to six hours, 20 minutes for shifts lasting more than six hours up to 10 hours, and so on." 

Caveat re scheduling:  although the court added up the rest-period minutes above, the law requires paid, 10-minute rest periods during each four hour work period.  So, the employer should draft its policies such that the rest periods fall somewhere in the middle of each four-hour work period.  Here is the rule regarding timing:

Employers are thus subject to a duty to make a good faith effort to authorize and permit rest breaks in the middle of each work period, but may deviate from that preferred course where practical considerations render it infeasible. ....

in the context of an eight-hour shift, “[a]s a general matter,” one rest break should fall on either side of the meal break. (Ibid.)

3. The Court then held that the trial court properly certified a rest-period class because Brinker's rest-period policy was uniformly applied and was vague enough to permit the argument that it violated the law because it did not specifically authorize rest periods when employees work "major fractions" of four-hour periods.  Here is the policy:

Under the written policy, employees receive one 10-minute rest break per four hours worked: “If I work over 3.5 hours during my shift, I understand that I am eligible for one ten minute rest break for each four hours that I work.”

As you can see, this policy permits the argument that employees who worked 6.5 hours were not given a second rest period, even under the policy.  So, the Court's holding re class certification re-opens the door for rest period class actions. Therefore, employers must have a more detailed rest-period policy that spells out rest periods are authorized and permitted in accordance with the formula above, or a class action lawyer can argue that the vague, common policy is applied contrary to law.  Additionally, management must be educated to enforce rest period policies in accordance with their terms when they schedule. Make with the drafting!

4.  Meal periods.   I pulled the quotes in my post yesterday.  Here are some more thoughts.
- Meal period policies should emphasize they are "duty free," meaning the employee can come and go and leave the premises as desired.

the wage order’s meal period requirement is satisfied if the employee (1) has at least 30 minutes uninterrupted, (2) is free to leave the premises, and (3) is relieved of all duty for the entire period.

Under the class action rule the Court developed, a vague policy is subject to an argument that the common policy violates the law.  So, policies should be explicit.

- Employers will be liable for regular straight time or overtime pay when the know or should have known that employees work through meal periods.  That's normal, because you have to pay employees when you "suffer or permit" them to work.  So, if employees don't punch out for meals, you cannot "auto-deduct" meal period time. As we have said before, the remedy for employees who do not comply with policies is discipline, not docking pay.

- Managers who prevent employees from taking meal periods per policy (such as discouraging meal periods) may expose the company to liability for meal period premiums.  When there is a "corporate culture" of discouraging the meal period, look for class actions based on a "common de facto policy."

- The legally compliant policy must provide that a meal period must start before the sixth hour of work begins.  That means, an employee who starts at 9 must be given a meal break by 2 pm.  Again, employers do not have to police the requirement, but the policy should be explicit to avoid the argument that the policy allows for illegal lunches.

- The legally compliant policy also should provide for a second meal period that starts before the eleventh hour of work begins.  There is a waiver of the second meal period allowed upon certain conditions, and that can be included as well.

- Caveat:  Know your business's wage order!  I am going over the general rules here (Wage Order 4, 5, 7 - the biggies).  There are different meal period provisions in some of the lesser used wage orders, such as Wage Order 12, applicable in the film industry. That Wage Order requires meals at six-hour intervals, not before the sixth hour and before the eleventh hour.

5.  Off the clock.  The Supreme Court decided that no "off the clock" work class would be allowed because (1) Brinker had an express and specific policy prohibiting off the clock work and (2) the only evidence in support of class certification was anecdotes about specific instances.  The Court noted the absence of a "de facto" policy requiring workers to work off the clock.  So, it pays to have a policy barring off the clock work.  We also like sign offs on time cards / time sheets certifying that employees reported all time worked, and verifying they know not to work off the clock.

Well, that's it for now.  I'm sure we'll have more down the road.  I hope this has been helpful.

Greg

Brinker Meal Period Opinion To Be Released Thursday 4/12

I think we're finally going to find out what the law is on meal periods in California.  But I have no idea if employers are going to like it or not.  

Here's the Supreme Court's announcement.
BRINKER RESTAURANT v. S.C. (HOHNBAUM)
Case: S166350, Supreme Court of California
Event Description:   Notice of forthcoming opinion posted
To be filed on Thursday, April 12, 2012 at 10 a.m.

Our announcement is that Shaw Valenza will be conducting a webinar on Brinker on April 25.  Find out about it here.

Brinker delayed

The Supreme Court is considering even more briefing in the Brinker case re meal and rest periods. So, they are going to delay the opinion past the normal 90 days from argument. Here is the order:

Pursuant to California Rules of Court, rule 8.520(f)(7) and this court's December 2, 2011, order, the parties' answers to the amicus curiae brief of the California Employment Law Council, addressing the grounds for prospectively applying portions of this court's eventual decision on the merits, are due Tuesday, January 3, 2012. Each party may file a simultaneous reply to the other party's answer within 10 days thereafter. Submission of the cause is vacated. (See Cal. Rules of Court, rule 8.524(h)(1) [submission runs from expiration of the time in which to file briefs, including supplemental briefs].) The cause will be resubmitted on January 13, 2012.

Brinker (Meal Period Case) Oral Argument

I am told there are lawyers who waited hours to get a seat at the California Supreme Court's hearing on Brinker v. Superior Court.  It's called "Youtube."  Look into it.  

For those of you who would not wait in line for a courtroom hearing, the oral argument is here.

As you will see, it looks like some justices are concerned that employers should not have to force employees to take meal periods.  The court will issue its decision within 90 days.

Brinker!! Argument is 11/08/11

The California Supreme Court will hear arguments in Brinker v. Superior Court (see a bunch of posts here) regarding employers' obligations to provide meal periods.  Argument is November 8 in San Francisco.  I'm so excited, I need a rest period.  Docket is here.

DGV

Another Meal / Break Class Action Dies; Everyone Waiting for Brinker

Selections from the Supreme Court mailbag re Brinker meal period case.
Dear Supreme Court. The suspense is killing us. Please send Brinker soon - Love Plaintiff's bar.
Dear Supreme Court:  Take your time. - Best wishes, Defense bar.

The letter writers wait for the Supreme Court's decision in Brinker (on what the meal period laws require).  Meanwhile, the Courts of Appeal keep cranking out decisions that consistently hold meal periods do not have to be forced, and therefore meal period class actions are properly not certified when the employer demonstrates it "provides" the opportunity to take them.

The latest opinion re meal period class actions is called Lamps Plus Overtime Cases, or Flores v. Lamps Plus. As stated, the court decided that the class certification was properly denied, and along the way held that meal periods need not be forced, but merely must be authorized and permitted. The opinion is here.

Court of Appeal: Meals and Breaks are Penalties for Attorneys Fees Law

Did you know the Labor Code permits employers to recover attorney's fees when the employer wins certain wage claims?  It's true.

Labor Code section 218.5 contains a reciprocal fee recovery provision in favor of the "prevailing party" in certain wage disputes. Section 218.5 states, in relevant 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."

 In light of the last sentence, claims involving "overtime" are not subject to this fee statute, but rather section 1194.  That is a "one way" fee provision that precludes employers from recovering fees even when they win claims for unpaid overtime.  Thus, the Court of Appeal decided that UPS could not recover attorney's fees when it won a lawsuit by a single plaintiff challenging his exemption.

But what if the complaint alleges unpaid overtime AND other wage claims.  The Court of Appeal decided that fees MAY be recovered by employers relating to the non-overtime-related claims.  But then things got weird.

In United Parcel Service Wage and Hour Cases, the court dealt with Thomas McGann's individual claim, which not only involved overtime, but also meals and breaks.  UPS sought its fees when it prevailed on the meal and break portion of the case. 

Section 218.5 applies only to "wage" claims.  Rather than award UPS the fees, the Court of Appeal held that meal and rest period penalties are penalties for purposes of the attorneys' fees statute permitting employers to recover attorney's fees for unsuccessful suits to recover wages.  But wait. I thought the California Supreme Court said that meal period penalties were wages for the purposes of the statute of limitations.  You're right.  The Supreme Court did so in the Murphy v. Kenneth Cole case, discussed here.

But the Court of Appeal decided that Murphy does not apply because it did not address attorney's fees, but rather which statute of limitations should apply.

UPS contends Murphy establishes that an action for recovery of the statutory remedies for missed meal and rest breaks is a claim for “nonpayment of wages” within the meaning of Labor Code section 218.5. UPS offers no analysis to support its contention that Murphy, which decided a statute of limitations question under the Code of Civil Procedure, should control or guide our analysis of the Labor Code attorney fees provisions. We are not persuaded that extending the holding in Murphy to the discreet fee issue presented here is appropriate or in keeping with our duty to construe statutes regulating the conditions of employment liberally, “with an eye to protecting employees.” (Murphy, supra, 40 Cal.4th at p. 1111; accord, Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, 794.)

Recognizing that the statutory remedy for denial of breaks -- payment of one additional hour of regular pay for each day a break is denied -- was susceptible to an interpretation as a wage and also as a penalty, the Supreme Court in Murphy found the remedy provided in Labor Code section 226.7 was primarily intended “to compensate employees for their injuries” occasioned by missed breaks and was, therefore, akin to a wage for purposes of assigning the appropriate statute of limitations. (Murphy, supra, 40 Cal.4th at p. 1111.) The court therefore gave employees the benefit of the three-year statute of limitations. However, nothing in the Murphy opinion suggests the court intended its decision to permit a prevailing employer-defendant in a section 226.7 action to recover attorney fees from the unsuccessful employee. To so find would undermine the Supreme Court‟s heavy reliance in its analysis on the principle that statutes governing working conditions must be liberally construed in favor of employees.

So, the court instead decided that section 218.5 permits employers to recover attorney's fees when wage claims are based on contractual wages, such as unpaid bonuses, rather than wages - such as meal period penalties- that are required by statute. I guess vacation pay disputes won't result in awards of attorneys' fees either now?
 
Sorry - but if Murphy held that meal periods are subject to the limitations period applicable to wages not penalties, then Murphy said that meal and break penalties are wages. Since 218.5 applies to "wages" and not just "contractual-based wages" the court giveth something to the statute, and taketh away from employers.
 
The case is United Parcel Services Wage and Hour Cases, and the opinion is here.

Court of Appeal: Up to 2 Meal / Rest Period Penalties Per Day

The Court of Appeal in UPS v. Superior Court decided that when an employee claims to have been denied both meal AND rest periods in a single day, s/he may recover two of the one-hour penalties made available under Labor Code Section 227.6.  So, one penalty is available for however many meal periods are denied in a day, and a separate penalty is available for however many rest periods are denied.
The case is UPS v. Superior Court and the opinion is here.

Court of Appeal Upholds the Denial of Meal Period Class Action

While the world waits for the California Supreme Court to issue the fabled Brinker decision on meal periods, the courts of appeal continue to find that employers need only make available meal periods, and not force them. 

The latest opinion involves a class action over meal and rest breaks and wage statements. The trial court found that the company took great measures to provide meal breaks and that, therefore, it would be impossible to have a class claim over denial of same. The court also held that wage statement claims require proof of actual injury, which is another subject that the California Supreme Court is considering.

I don't see anything new here for HR to be concerned with. There is a heady discussion of when courts can rely on precedent that is subsequently "de-published," but that's only good for procedure geeks like moi.

This opinion is in Tien v. Tenet Healthcare and it is available here.

Court of Appeal: Meal and Rest Breaks Need Not Be Forced

Everyone is waiting for the California Supreme Court to issue its decision in Brinker or Brinkley or both regarding whether meal / rest periods must be ensured or merely provided under California law. Well, nearly everyone.

The Court of Appeal in Hernandez v. Chipotle Mexican Grill, Inc., just decided that meal and rest periods must be allowed, but that employees who choose not to take them cannot recover penalties. The court upheld dismissal of a class action given that each individual class member would have to prove he or she was prevented from taking given meal or rest periods.

The opinion in Hernandez v. Chipotle Mexican Grill, Inc. is here.

Bye Bye Brinkley

The California Supreme Court granted review in Brinkley v. Public Storage, here. We posted about Brinkley, a very employer-friendly meal and rest period decision, here. Yes, yes, I know. We predicted the Supreme Court would grant review in our earlier post. No wonder we rank among the top 700,000 blogs.

Greg

No Punitive Damages for Meal and Rest Period Violations

While the wage and hour world waits for the Walmart decision, in which the court awarded roughly $170 million in meal period premiums, penalties and punitive damages. the other courts are working away.

Wait no longer. Ms. Brewer is a waitress at Cottonwood golf resort's restaurant. She sued for meal and break violations among a smorgasbord of other employment claims. She lost on her age discrimination claims. But she won on some Labor Code violations. The jury also awarded her punitive damages, over and above the meal and break premiums, penalties for improper wage statements, etc. (I bet you thought I was going to make food puns throughout this post, didn't you?)

The court of appeal reversed on punitive damages. The court decided that the Labor Code creates new rights not available at common law. Therefore, their remedies are exclusive. The court also held that a claim for unpaid meal periods and other Labor Code violations "arise" out of contract - the employment relationship. As such, punitive damages are not available as a matter of law.

Here's a long quote from the opinion to prove I read it, or at least that I know how to cut and paste:

We agree with Cottonwood’s contention, which Brewer does not dispute on appeal, that the Labor Code statutes regulating pay stubs (§ 226) and minimum wages (§ 1197.1) create new rights and obligations not previously existing in the common law. Moreover, those same statutes provide express statutory remedies, including penalties for the violation of those statutes that are punitive in nature, that are available when an employer has violated those provisions. Section 226, subdivision (e), provides that any employee “suffering injury as a result of a knowing and intentional failure by an employer to comply with [the pay stub requirements] is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not exceeding an aggregate penalty of four thousand dollars ($4,000), and is entitled to an award of costs and reasonable attorney’s fees.” Similarly, section 1197.1, subdivision (a) provides that any employer who pays or causes to be paid to any employee a wage less than the minimum wage “shall be subject to a civil penalty as follows: [¶] (1) For any initial
violation that is intentionally committed, one hundred dollars ($100) for each underpaid employee for each pay period for which the employee is underpaid[;]
[¶] (2) For each subsequent violation for the same specific offense, two hundred fifty dollars ($250) for each underpaid employee for each pay period for which the employee is underpaid regardless of whether the initial violation is intentionally committed.” Here, Brewer sought and recovered the maximum $4,000 penalty available for Cottonwood’s pay stub violations, and the judgment contained an additional penalty of $15,300 pursuant to section 1197.1 for the overtime violations. We are not persuaded by Brewer’s argument that the remedies set forth in the statutory scheme were not intended to be the exclusive remedy available for statutory violations, and Brewer does not articulate any basis for concluding those penalties are so inadequate that other remedies should be permitted. Similarly, the
regulations requiring employers to provide meal breaks (§ 512) and rest breaks
(Cal. Code Regs., tit. 8, § 11090, subd. 12(A)), and providing numerous forms of
remedies for their violation, also appear to have created new rights and obligations not previously existing in the common law, and the statutory scheme provides “a comprehensive and detailed remedial scheme for its enforcement.” (Rojo v. Kliger, supra, 52 Cal.3d at p. 79.) Those remedies include an award in the nature of liquidated damages under section 226.7 (cf. Murphy v. Kenneth Cole
Productions, Inc. (2007) 40 Cal.4th 1094, 1112 [because “damages [from missed
meal and rest breaks] are obscure and difficult to prove, the Legislature may
select an amount of compensation [for the violation] without converting that
remedy into a penalty” for statute of limitations purposes]), injunctive relief
(see generally § 1194.5), and potential statutory penalties (see § 558). We are convinced that, because the meal and rest break provisions of the Labor Code “established a new and comprehensive set of rights and remedies for [employees]… [and] [n]o such specialized rights and remedies existed at common law… the remedy provided in the statute ‘is exclusive of all others unless the statutory remedy is inadequate.’ [Quoting Turnbull, supra, 219 Cal.App.3d at p. 827.]” (De Anza Santa Cruz Mobile Estates Homeowners Assn. v. De Anza Santa Cruz Mobile Estates, supra, 94 Cal.App.4th at p. 916.)

* * *
We are also convinced that, even were the remedies provided by the statutory scheme not the exclusive remedies for the new rights, punitive damages would nevertheless be unavailable because punitive damages are ordinarily limited to actions “for the breach of an obligation not arising from contract” (Civ. Code, § 3294), and Brewer’s claims for unpaid wages and unprovided meal/rest breaks arise from rights based on her employment contract. Brewer argues, without citation to relevant authority, that Cottonwood’s breach of its statutory obligations under the Labor Code is a “breach of an obligation not arising from contract,” thereby supporting the award of punitive damages.

However, in analogous situations, the courts have recognized that, when a statute imposes additional obligations on an underlying contractual relationship, a breach of the statutory obligation is a breach of contract that will not support tort damages beyond those contained in the statute.(See, e.g., Kwan v. Mercedes-Benz of North America, Inc. (1994) 23 Cal.App.4th 174, 187–192 [breach of Consumer Warranty law obligations is breach of contract and does not support tort damages for emotional distress].) We apprehend the Labor Code provisions governing meal and rest breaks, minimum wages, and accurate pay stubs constitute statutory obligations imposed only when the parties have entered into an employment contract and are obligations arising from the employment contract. The breach of an obligation arising out of an
employment contract, even when the obligation is implied in law, permits contractual damages but does not support tort recoveries. (Cf. Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 700.) Although Brewer relies on language from Gould v. Maryland Sound Industries, Inc. (1995) 31 Cal.App.4th 1137, 1147 to assert prompt payment of wages involves sufficiently fundamental public polices that the willful failure to make such payments will support punitive damages, the court in Gould expressly recognized that, although a claim for wrongful discharge in violation of public policy would state a tort claim, a claim seeking tort recoveries based on the allegation the employer otherwise breached the employment contract agreement was barred by Foley. (Gould, at p. 1155.)

The case is Brewer v. Premier Golf Properties and the opinion is here.

Son of Brinker?

Brinker's gone. But Brinkley's here! At least for now. In Brinkley v. Public Storage, Inc., the court of appeal issued a published opinion, in which it held that meal and rest periods merely must be provided, not forced. This holding tracks Brinker v. Superior Court (now on review).
The court in Brinkley relied on federal case law, the same cases on which the court of appeal in Brinker relied.

Given the similarity to Brinker, the Supreme Court may accept review of Brinkley under a "Grant and Hold" order. So, don't rely on Brinkley unless review is denied. We won't learn its fate for a couple of months.

The second key issue in Brinkley is the court's holding that the wage statement statute, Lab. Code section 226 requires proof of injury and some intent on behalf of the employer. That statute provides penalties of up to $4000 per employee for non-compliant wage statements....

Be careful out there!

DGV

DLSE: Brinker is Dead. Long Live Brinker!

Earlier this year, the California Division of Labor Standards Enforcement adopted the meal period standards that the Court of Appeal announced in the famous Brinker decision. We covered that DLSE memo here.

So now that the California Supreme Court decided to review the Brinker case, what will the DLSE do?

Well DLSE just issued a NEW memo in which it rescinds its Brinker memorandum, here. In its new "rescission" memo, the DLSE strongly suggests it will continue to enforce meal period laws such that an employer need not force employees to take meal periods; it simply must offer them. (So, to DLSE, Brinker is gone, but not forgotten).

Good news for employers facing DLSE claims. But in court, this area of the law remains pretty muddy.

Hat tip to Storm and Wage Law.

California Supremes Accept Review in Brinker

In a not-very-surprising development, the California Supreme Court accepted review of the Brinker v. Superior Court decision, discussed here and here. And here.

When the California Supreme Court accepts review, the opinion cannot be cited. So, the law now reverts to the pre-Brinker days. Which means you should read my old article, here.

However, there is one wrinkle that remains to be ironed out. The DLSE, our labor standards agency, has adopted the Brinker opinion as its enforcement position. Will the DLSE leave its interpretation in effect while the high court considers the case? We shall see. The discussion of the DLSE memorandum regarding Brinker is here.

DGV