Court of Appeal: Some Wage Claims Tolled; Some Time Barred and More

This case is the poster child for needless litigation over a pretty simple issue, which was a loser for the employer from the jump. (And I say that in the most respectful way).

Harold Bain worked for Tax Reducers, Inc. (TRI) and its predecessor as a tax preparation consultant. He also performed other duties.  It's pretty clear from the facts that he was an employee, not an independent contractor. So, that part of the case is not breaking new ground.  However, the court of appeal allowed the trial court to consider a "presumption" of employee status, because the trial court also underwent the normal analysis of independent contractor. The evidence was overwhelmingly in favor of employee status, presumption or no.

After TRI bought the predecessor, Bain got into a dispute with the new owner of TRI about his compensation.  He worked for TRI for just seven weeks or so, but with the predecessor for several years.  However, because of the dispute, TRI didn't pay Bain at all for his seven weeks of work.

Bain filed a claim with the Labor Commissioner at the DLSE.  TRI argued that Bain was an independent contractor, but even if he wasn't, there was no agreed upon rate. As a result, TRI argued, Bain should recover only minimum wage.  Bain sought the $1100 per week he was earning before the take-over.  And that's what the DLSE awarded him, plus waiting time and interest, for about $15K.

When in a hole, stop digging?  Nah. TRI appealed the DLSE's ruling.  The parties then reached a settlement for the wages and interest, plus some attorney's fees, but no waiting time penalties.  The deal fell through when the parties could not agree on the scope of the release.

The court then re-set the case for trial.  The parties then settled again for $17,700, higher than the DLSE's award.  The settlement was supposed to include releases, but the parties again could not agree on the language, or even who was to prepare them.

Massive amounts of litigation ensued over the breached settlement agreement, including discovery motions, demurrers, summary judgment motions, anti-SLAPP motions, an appeal, too.  Bain even named TRI's president, Griffin, as an individual defendant, which typically is a no-go in a wage claim.
Guess who ended up getting rich here?  (Not Bain's lawyer; stay tuned).

The trial court conducted a four-day bench trial, after which it awarded Bain just over $25,000 plus attorney's fees on the wage claims.  (Bain had a choice of electing recovery on the breach of settlement agreement or recovery on the wage claims. He chose wisely, because the latter includes an award of attorney's fees).  How much attorney's fees did Bain seek?  Bain sought over $400,000 in fees, including a 1.5 multiplier.

Unfortunately for Bain's lawyer, he filed the motion for attorney's fees late and received nothing from the trial court, and nothing from the court of appeal, either.  I believe this clip from Willie Wonka captures the court's holding well.

TRI President Griffin, though, successfully obtained an award of fees for his individual claim, but only for $4225 (the fees for his summary judgment motion).  Continuing his losing streak, the court of appeal reversed Griffin's award, because he sought fees under the wrong statute (Lab. Code Section 218.5).  Because Bain won under the unpaid minimum wage law, the right statute is a one-way law that awards fees to employees only.  See, supra, Willie Wonka clip.  218.5 is becoming a one-way statute next year, so no one will make that mistake again.  Sigh.

Annnywayyyyyy, now that the discussion of litigation excess is over, here's the wage-hour issue that the court decided.

First, the Court set out the relevant statutes of limitations in wage claims:

1. Final pay - 3 years per Labor Code Section 201 and Code of Civil Procedure 338(a).
2. Waiting time - runs with the limitations period of the underlying wages sought - here 3 years, per Labor Code Section 203.
3. Liquidated damages for failing to pay minimum wage per Labor Code 1194.2 - one year per  Code of Civil Procedure 340(a).

Second, the Court had to decide whether Bain's claims were untimely.  He left on February 18, 2005, but did not sue until May of 2008.  That's more than three years and could have time-barred all his claims.

But the Court held that Bain's filing his DLSE claim "tolled" or suspended the statute of limitations. during the period is pursued his DLSE claim until the first DLSE proceeding was final. Once that time was added to the Bain's claims were timely, except for the 1194.2 liquidated damages penalty.  The court held the "equitable tolling" doctrine applied even though Bain was not required to go to the DLSE in the first place.  This decision, therefore, could extend limitations period in wage cases that involve administrative proceedings followed by litigation.

Even the tolled claims did not save the liquidated damages penalty, which was subject to the one-year statute. The court held that claim was barred and deduced those penalties.

So, Bain won about $18,000 bucks plus more interest... his lawyer lost out on at least $200K in fees.  And who knows how much TRI spent to obtain its lousy result.  Just sayin'.

This case is Bain v. Tax Reducers, Inc. and the decision is here.

Court of Appeal Upholds Wage Statement Penalties

So, several employees of Heritage Residential Care, Inc. "lacked social security numbers."  Naturally, the employer immediately fired them. 

No, silly, the employer re-classified them as independent contractors!   Because, after all, without social security numbers, the employer could not withhold taxes. And you have to withhold an employee's taxes.  But you don't have to withhold an independent contractors!  Brilliant! 

As you can imagine, since this has come to my attention over here, the employer's deft maneuver did not end well. Employees sued for penalties, among other things, because the employer did not provide adequate "wage statements" per Labor Code section 226. 

After losing before the Labor Commissioner, they sought review on whether the failure to issue compliant wage statements was "inadvertent."  If so, Section 226.3 permits the Labor Commissioner to take that into consideration in deciding whether to assess the penalties.

No sale. After a painstakingly thorough analysis of the meaning of "inadvertence," the court of appeal decided it simply means that it was unintentional.  Here, the employer intentionally chose to issue 1099 forms to these employees, because they lacked social security numbers. 

Therefore, employers who intentionally issue defective wage statements, or who skip issuing them on purpose, will not qualify for the statutory leniency built into Labor Code section 226.3. 

The case is Heritage Residential Care, Inc. v. DLSE and the opinion is here.

California Supreme Court: Waiting Time Penalties are..Penalties!

I know, sounds obvious. But folks were claiming that waiting time penalties, like meal period penalties, are a form of wage.  They were making this argument to permit claims for waiting time penalties under California's unfair competition law, because that law has a four year statute of limitations.

No sale, said the California Supreme Court in Pineda v. Bank of America (opinion here). In that case, Pineda received his wages four days late. He brought a class action for waiting time penalties. on behalf of everyone who was paid late under Bank of America's final pay policies. 

Pineda argued that he should be able to sue for waiting time penalties under California's unfair competition law (Bus. Prof. Code section 17200).  The Supreme Court rejected that argument because waiting time penalties are not "restitution," the only time that money is recoverable under the UCL.  Plaintiffs wanted to use the UCL to benefit from that law's four-year statute of limitations.

But the Supreme Court giveth, and taketh away.  The other issue decided today is that the statute of limitations for waiting time penalties is not affected by whether the employer ultimately paid the wages, albeit late.

The lower courts dismissed the case because he did not file his case within a year of his termination. The lower courts applied case law like in McCoy v. Superior Court (2007) 157 Cal.App.4th 225, 229-230. There, the court of appeal held a one-year statute of limitations applies to waiting time penalty claims if the wages are paid as of the time of suit. 


The Supreme Court rejected McCoy and held that in all instances, the waiting time penalty statute, Labor Code Section 203, imposes the same statute of limitations. That section says that the statute of limitations for waiting time penalties is the same as the limitations period applied to the underlying wage claims.  The Supreme Court said that rule applies whether the wages are paid or not at the time of suit.

DGV

"Suitable Seating" Class Action Goes Forward

Retailers must provide "suitable seating" in accordance with the California Industrial Welfare Commission's Wage Order 7-2001, section 14. It says: "All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats."

Eugina Bright worked for 99 Cents Only Stores. She brought a class action alleging that, as a cashier, the company could reasonably have provided her with a seat suitable for cashiering. She sought penalties under PAGA (Private Attorneys General Act of 2004), claiming that the Wage Order violation supported PAGA penalties.

The trial court held that Ms. Bright was not "underpaid" and, therefore, could not collect penalties under Section 20 of the Wage Order. She also could not collect PAGA penalties, the trial court believed, because PAGA's extra "catchall" penalty does not apply when there is an applicable penalty in place. Sort of a "gotcha" ruling, which I admire.

But the court of appeal did not share my sense of irony, holding that PAGA penalties are available for wage order violations, even if Wage Order Section 20 penalties do not apply:

Section 2699, subdivision (f) makes its civil penalty applicable to violations of “all provisions of this code except those for which a civil penalty is specifically provided.” (§ 2699, subd. (f).) Section 1198, the code section Bright contends was violated, contains no civil penalty. (See § 1198.) Nowhere in the Labor Code is a civil penalty specifically provided for violations of the suitable seating requirement incorporated in section 1198. Thus, section 2699, subdivision (f), by its terms, allows for a civil penalty for violations of section 1198 based on failure to comply with the suitable seating requirement.

The case is Bright v. 99 c Only Stores, Inc. and the opinion is here.

DGV