Litigating California Wage & Hour and Labor Code Class Actions

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I. Introduction and Overview Since the turn of the century, there has been a huge increase in the number of class action lawsuits filed in state courts alleging violations of California’s overtime laws or other Labor Code statutes and wage and hour regulations. Currently, several such class actions are filed every day in California. The reasons for this trend are essentially fourfold. First, California’s wage and hour law differs from federal law in subtle yet important ways. This means that an employer might be compliant with federal law, but not California law. Second, California procedural rules make it easier to file a class action or collective action. In contrast, the federal Fair Labor Standards Act requires an “opt-in” procedure that tends to restrict the size of classes as compared to the “opt-out” class action procedure used in California. Third, California’s unfair competition law allows claimants to borrow violations of other laws and extend the statute of limitations to four years, which tends to make class actions more lucrative. Fourth, many California Labor Code provisions allow for the recovery of attorney’s fees to a prevailing plaintiff, creating additional incentives to pursue litigation. California Labor Code class actions come in various shapes and sizes. Essentially, however, any Labor Code violation that can be tied to a corporate policy could support a class action. For that reason, plaintiffs in California continue to come up with new theories as to how wage and hour violations may support class litigation. This publication reviews the most commonly filed wage and hour and Labor Code class claims and the development of the law over the last several years. It does not, however, attempt to provide a comprehensive overview of California wage and hour law. Sections II through X of this paper address some of the most common types of class claims in California, such as claims for exempt classification, meal period violations, and denial of expense reimbursement. The next two Sections address some peculiar provisions in California law that tend to expand potential damages recoverable in California class actions such as the Labor Code Private Attorneys General Act, and the Unfair Competition Law (“UCL”). Lastly, Sections XIII through XVIII address various aspects of class action procedure in California—the rules governing class certification, class discovery, class settlement, class arbitration, and individual liability. II. Common Exempt Misclassification Claims The first wave of class claims filed against large California employers challenged the exempt status of groups of employees holding the same job. In short, the plaintiffs’ counsel argued that the employer had engaged in a common practice of misclassifying a group of employees as exempt from overtime, thus entitling all employees in the group to back overtime pay, interest, and Seyfarth Shaw LLP | www.seyfarth.com Litigating California Wage & Hour Class Actions (12th Edition) 4
associated statutory penalties. 1 The following discussion addresses some of the issues that have arisen concerning the misclassification of employees under the various available exemptions. A. Overview of State Overtime Law Before January 1, 2000, the California Industrial Welfare Commission (“IWC”) was the body authorized by statute to set overtime requirements. It acted in a quasi-legislative capacity, promulgating a series of “Wage Orders” that set rules for wages, hours, and working conditions that differed slightly from one industry to another. The IWC eliminated daily overtime from the Wage Orders in 1997. 2 In response, after Gray Davis became governor in 1998, the Legislature passed AB 60 which amended the Labor Code to provide for daily overtime and to enshrine various employee protections into the Labor Code so that they could not be altered by the IWC. 3 The Wage Orders are still in effect, but the IWC is precluded from promulgating rules within the Wage Orders that are inconsistent with the Labor Code itself. 4 Under Labor Code Section 510, employees are entitled to one and one-half times their regular rate when they work more than eight hours in a single day, more than forty hours in a workweek, or during the first eight hours of the seventh straight day of a single workweek. 5 Employees are entitled to double time when they work more than twelve hours in a single day or beyond the eighth hour of the seventh straight day of a single workweek. These rules apply to non-exempt employees in California in every industry. 6 These rules 1 2 3 4 5 6 Punitive damages are not recoverable when liability is premised solely on Labor Code wage and hour violations. Brewer v. Premier Golf Properties, 168 Cal. App. 4th 1243, 1252 (2008). Collins v. Overnite Transp. Co., 105 Cal. App. 4th 171, 176 (2003). See, e.g., Lab. Code § 510 (daily overtime requirement) and Lab. Code § 226.7 (meal and rest period requirements). Collins, 105 Cal. App. 4th at 178-80 (Wage Orders and Labor Code should be read together to understand scope of wage and hour regulation of California employees). Note that employers may assign employees to work schedules that differ from company’s designated workweek/workday and base overtime calculations on the designated workweek/workday as long as the schedule is not established for the purpose of evading lawful overtime requirements. Seymore v. Metson Marine, 194 Cal.App. 4th 361 (2011). However, employees and employers may specifically agree in advance to a “specific mutual wage agreement” that provides a guaranteed salary covering both base hours and a specific number of overtime hours. The required elements of such an agreement are: “(1) the days that [employee] would work each week; (2) the number of hours [employee] would work each day; (3) that [employee] would be paid a guaranteed salary of a specific amount; (4) that [employee] was told the basic hourly rate upon which his salary was based; (5) that [employee] was told his salary covered both his regular and overtime hours; and (6) the agreement must have been reached before the work was performed.” Archiega v. Dolores Press, Inc., 192 Cal. App. 4th 567, 571 (2011) quoting Ghory v. Al-Lanham, 209 Cal. App. 3d 1487, 1491 (1989). Seyfarth Shaw LLP | www.seyfarth.com Litigating California Wage & Hour Class Actions (12th Edition) 5
Page 1 and 2: Litigating California Wage & Hour a
Page 3 and 4: Table of Contents I. Introduction a
Page 5: A. Disclosure of Class Member Names
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 and 48: years before the lawsuit, or for an
Page 49 and 50: imposition of penalties, 194 routin
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:
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