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: Statute of Limitations Bars Claims Based on Stale Administrative Charges

When an employee files a series of discrimination charges with the Department of Fair Employment and Housing, may she wait to sue until years later, even if she received "right to sue" letters long before she filed her lawsuit? No.

Esperanza Acuna was employed with San Diego Gas and Electric.  Over a course of several years, she claimed harassment and discrimination by a supervisor, and failure to accommodate  a work-related stress disability.   The court of appeal set out this timeline:

On March 16, 2006, Acuna filed her first DFEH complaint, alleging racial discrimination and harassment, and retaliation for having filed a worker's compensation claim. On March 27, 2006, the DFEH issued a right to sue notice on this first DFEH complaint.

On February 23, 2007, Acuna filed her second DFEH complaint, alleging disability discrimination (failure to accommodate her claimed disability). On February 19, 2008, the DFEH filed a right-to-sue notice on this second DFEH complaint.

On July 11, 2008, SDG&E terminated Acuna's employment.

On October 23, 2008, Acuna filed her third DFEH administrative complaint, alleging various wrongful acts, including her alleged retaliatory termination. On November 7, 2008, the DFEH issued a right-to-sue letter based on this third DFEH complaint.

On November 5, 2009, Acuna filed her lawsuit.

The Court of Appeal decided the statute of limitations barred any claims based on the first two DFEH complaints.  She had until March 2007 to file a lawsuit based on the first charge; she did not.  She had until February 19, 2009 to file the lawsuit based on the second "right to sue" notice.  But she did not file until November 5, 2009.

The Court rejected Acuna's attempt to argue that the "continuing violation" doctrine saved her claims based on the first two "right to sue" letters:

As discussed above, in California the continuing violations doctrine applies to toll section 12960's one-year period for filing a DFEH claim during the time the employee and employer are engaged in informal efforts to resolve the employer's claimed wrongful conduct. (Richards, supra, 26 Cal.4th at pp. 822-823.) The California Supreme Court held this tolling period ends when the employer's determination achieves a level of permanence, i.e., when a reasonable employee would understand that "further efforts to end the unlawful conduct will be in vain." (Id. at p. 823.)

Acuna's allegations establish that a reasonable person would have understood that SDG&E had denied her requests for accommodation no later than February 2007. According to Acuna's allegations, beginning in late 2005, SDG&E repeatedly declined to permit Acuna to return to her job and refused to permit her to work for a supervisor other than Valentine. In response to this conduct, Acuna retained counsel and filed a DFEH complaint. After SDG&E continued to refuse to accommodate her claimed disability, Acuna filed her second DFEH complaint in February 2007. In this complaint, Acuna specifically alleged that SDG&E was refusing to accommodate her disability. By retaining counsel and filing a DFEH complaint, Acuna manifested an understanding that further attempts at informal, rather than formal, resolution of the disability accommodation process would not be successful and were futile. Under these circumstances, the continuing violations doctrine is inapplicable.

The Court also held that the doctrine of "equitable tolling" did not save her stale claims either. 

The equitable tolling doctrine generally requires a showing that the plaintiff is seeking an alternate remedy in an established procedural context. (See McDonald, supra, 45 Cal.4th at p. 102-104; Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1082.) Informal negotiations or discussions between an employer and employee do not toll a statute of limitations under the equitable tolling doctrine. (See 65 Butterfield v. Chicago Title Ins. Co. (1999) 70 Cal.App.4th 1047, 1063.) Acuna does not allege any facts showing she was pursuing an alternate remedy that excused her from timely filing her administrative claim and/or from filing her lawsuit.

Moreover, the equitable tolling doctrine is inapplicable once the employee is on notice that his or her rights had been violated and that her alternate remedies will be unsuccessful. (Richards, supra, 26 Cal.4th at p. 814.) As discussed above, Acuna acknowledged that by February 2007 she understood that SDG&E was refusing to accommodate her disability and was not interested in informally resolving her claims.

So, the Court held that Ms. Acuna can proceed on her timely claims for wrongful termination and her FEHA-based retaliation claim concerning her discharge.

The case is Acuna v. San Diego Gas & Elec. and the opinion is here.