THE BAR ASSOCIATION OF SAN FRANCISCO LABOR AND EMPLOYMENT LAW SECTION

2014 YOSEMITE CONFERENCE

February 21, 2014 Catha Worthman, Lewis, Feinberg, Lee, Renaker & Jackson Laura L. Ho, Goldstein, Borgen, Dardarian & Ho Zach Hutton, Paul Hastings LLP

INTRODUCTION

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MINIMUM WAGE PAY AVERAGING

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Minimum Wage “Pay Averaging”

• Every employer shall pay to each employee wages not less than [the minimum wage] for all hours worked." Wage Orders, § 4(A).

•

Armenta v. Osmose

, 135 Cal. App. 4th 314 (2005).

• Hourly employees worked off-the-clock.

• "California's labor statutes reflect a strong public policy in favor of full payment of wages for all hours worked. We conclude, therefore, that the FLSA model of averaging all hours worked ‘in any workweek' to compute an employer's minimum wage obligation under California law is inappropriate. The minimum wage standard applies to each hour worked by respondents for which they were not paid .“ Minimum Wage “Pay Averaging”

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No Pay Averaging

•

Balasanyan v. Nordstrom, Inc.

, 2012 U.S. Dist. LEXIS 181350 (S.D. Cal. Dec. 20, 2012) • “[Commissioned] employees must be directly compensated at least minimum wage for all time spent on activities that do not allow them to directly earn wages.“ •

Gonzalez v. Downtown LA Motors, LP

, 215 Cal. App. 4th 36 (2013) • "Averaging piece-rate wages over total hours worked results in underpayment of employee wages required 'by contract' under Labor Code section 223, as well as an improper collection of wages paid to an employee under Labor Code section 221.“ •

Bluford v. Safeway, Inc.,

216 Cal. App. 4th 864 (2013).

• “[A] piece-rate compensation formula that does not compensate separately for rest periods does not comply with California minimum wage law .”

THE REGULAR RATE OF PAY

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The Regular Rate of Pay

• What Is the Regular Rate of Pay?

•

The Rate Used to Calculate Overtime Premiums.

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An Hourly Rate

: The Regular Rate is an hourly rate. Therefore, even though employers have the right to pay non-exempt employees other than by the hour (e.g., by salary, by commission, and by piece), they must reduce all non-hourly forms of pay to an hourly rate for overtime calculations.

•

Unique to Each Workweek

: The Regular Rate is an hourly rate that an employer must calculate workweek by workweek, not pay period by pay period.

•

Includes all remuneration for work

, subject to certain statutory exclusions.

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The Regular Rate of Pay

• Areas of Increased Litigation • Exclusion of “Discretionary Bonuses” • • "[T]o qualify . . . as a discretionary bonus . . . the employer must retain discretion both as to the fact of payment and as to the amount until a time quite close to the end of the [bonus] period . . . The sum [must be] determined by the employer without prior promise or agreement. The employee has no contract right, express or implied, to any amount. If the employer promises in advance to pay a bonus, he has abandoned his discretion . . . .” 29 CFR § 778.211(b).

“Bonuses which are announced to employees to induce them to work more steadily or more rapidly or more efficiently or to remain with the firm are regarded as part of the regular rate of pay. Attendance bonuses, individual or group production bonuses, bonuses for quality and accuracy of work, bonuses contingent upon the employee's continuing in employment until the time the payment is to be made . . . are [included]." 29 CFR § 778.211(c).

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The Regular Rate of Pay

• • Prizes or awards • General Rule: "All compensation (except statutory exclusions) paid by or on behalf of an employer to an employee as remuneration for employment must be included in the regular rate, whether paid in the form of cash or otherwise . . . .” 29 CFR § 778.330

•

Provine v. Office Depot, Inc.

, 2012 U.S. Dist. LEXIS 93881 (N.D. Cal. July 6, 2012). Other “Perks” •

Controulis v. Anheuser Busch

, No. BC51818, Los Angeles Sup. Ct. (Cmplt. Filed Aug. 16, 2013).

ROUNDING

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Rounding

• Identified by HR consultants as common violation • Claims arising in many industries • Time rounding lawful only if it: • “will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.” 29 CFR §785.48.

•

See’s Candy Shops v. Superior Court

, 210 Cal. App. 4th 889 (2012) (adopting CFR § 785.48, provided policy is neutral facially and as applied).

Rounding

•

Recent cases

•

Leyva v. Medline Indus.

, 716 F.3d 510 (9th Cir. 2013).

•

Waine-Golston v. Time Warner

, 2013 WL 1285535 (S.D. Cal.2013).

•

Class certification

• Intertwined with merits

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LABOR CODE SECTION 2810

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Labor Code § 2810

• Underfunded Contracts • • • Applies to agreements for labor or services with a construction, farm labor, garment, janitorial, security guard, or warehouse contractor Contractor may be liable if “knows or should know” that the contract is not sufficient to allow subcontractor to comply with “all applicable local, state, and federal laws or regulations governing the labor or services to be provided.” “Should know” includes “any additional facts or information that would make a reasonably prudent person undertake to inquire.” • Employee must show injury as a result of a violation of a labor law or regulation in connection with the performance of the contract.

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Labor Code § 2810 (cont’d)

• Remedies • Damages: the greater of actual damages or $250 per employee per violation for an initial violation and one thousand dollars $1,000 per employee for each subsequent violation.

• Injunctive relief • Prevailing employee can recover costs and reasonable attorney's fees.

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Labor Code § 2810 (cont’d)

•

Castillo v. Toll Bros., Inc.,

197 Cal. App. 4th 1172 (2011). • • Minimum wage is to be used when evaluating the sufficiency of a contract.

Contracting party’s knowledge based on knowledge arising from familiarity with the normal facts and circumstances of the activity as well as any knowledge of the contracting party; knowledge measured at time of entering contract.

• Workers not required to show causation, i.e. that violations were caused by underfunded contracts.

• “[W]e find a causation requirement unnecessary in these circumstances. . . . As we have held, a contract is insufficient in this context only if it does not provide enough funds for an employer to comply with minimum standards in performing the contract. In other words, a contract is insufficient in this context only if legal compliance in the performance of the contract is, as a practical matter, impossible. Given such insufficiency, labor law violations are inevitable, and they can be traced directly to the insufficiency of the contract price.”

Castillo,

197 Cal. App. 4th at 1209.

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Labor Code § 2810 (cont’d)

• Pleading Standards •

Hawkins v. TACA International Airlines

, S.A., 2014 WL 280301 (Jan. 27, 2014) • “[S]imply parroting the language of section 2810 in the complaint is insufficient to state a cause of action under the statute.” • Original complaint against employer alleged that employer had the ability to pay all wages earned by security guard class members.

• Once employer defaulted, plaintiffs added airlines as defendants under § 2810.

• • Undisputed that plaintiffs had not seen and had no information regarding contracts between employer and airlines Factual allegations of complaint were inconsistent were § 2810 violation.

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Labor Code § 2810 (cont’d)

• Pleading Standards (cont’d) •

Vasquez v. USM and Ross

, 2014 WL 296939 (Jan. 27. 2014) (J. Alsup ) (denying Ross’ motion to dismiss) and

Vasquez v. USM and Ross

, 2014 WL 492039 (Feb. 5, 2014) (denying Ross’ leave to file motion for reconsideration in light of

Hawkins

). • • Plaintiffs included work orders, schedules, and subcontractor agreements showing Ross knew or should have known its contracts with USM were underfunded.

The court held that

Hawkins

, and

Rojas v. Brinderson Constructors, Inc

567 F. Supp. 2d 1205 (C.D. Cal. 2008), were distinguishable on their facts. .,

INDEPENDENT CONTRACTORS

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Independent Contractors

Brand Name: Joint Employer (?) Independent Contractor (?) Independent Contractor & Employee (?)

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Worker Worker

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Independent Contractor v. Employee

• “Suffer or permit to work”: FLSA & California Law • CA law “even broader” than FLSA •

Martinez v. Combs

, 49 Cal.4th 35 (2010) • • • “Directly or indirectly, or through any agent or any other person, employs or

exercises control

over a person’s wages, hours or working conditions”;

or

“Suffers or permits” another to work;

or

“Engages” a worker.

• Common law control or “right to control” • Economic realities test

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Independent Contractor Tests

• • •

Borello

, “right to control,” or actual control multi-factor analysis

• • • • • • • •

Restatement factors

engaged in a distinct occupation or business; kind of occupation (supervision vs. independence); skill required; who supplies instrumentalities, tools, and the place of work; length of time for which services are to be performed; method of payment, whether by the time or by the job; part of the regular business of the principal; parties ’ beliefs.

Economic Reality (Real v. Driscoll Strawberry Associates)

• “right to control” • opportunity for profit or loss depending on managerial skill; • • investment in equipment or materials, or employment of helpers; whether the service rendered requires a special skill; • • degree of permanence of the working relationship; whether service rendered is an integral part of the business.

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Independent Contractor Issues

•

Ayala v. Antelope Valley,

pet’n for review granted • • Applicability of

Borello

in light of

Martinez Bradley v. Networkers Int’l, LLC

, 211 Cal. App. 4th 1129 (2012) (

Borello

and

Martinez

are separate standards, granting class certification).

•

Sotelo v. MediaNews Group, Inc.

, 207 Cal. App. 4th 639 (2012) (harmless error not to apply

Martinez

).

• Even if there is a “bona fide” independent contractor relationship, joint employer relationships may still exist. •

Arredondo v. Delano Farms

, E.D. Cal. 2013 (AWPA).

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Franchisor/Franchisee Relationships

Franchisor/Franchisee Relationships (cont’d)

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National attention

• Fight for $15 • DOL Focus • Subway Initiative •

Domino

’s FLSA settlement

•

Patterson v. Domino

’s (FEHA), pet’n for review granted

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MEAL AND REST PERIODS AFTER

BRINKER

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Brinker

Recap

Brinker’s

holdings: • Employers must: • Relieve employees of all duty • Relinquish control over their activities • Permit them a reasonable opportunity to take uninterrupted 30 minute break • Not impede or discourage them from doing so • However , employers need not “police” meal breaks to ensure that no work is performed. Employees may use the time as they wish.

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Brinker

Recap (cont’d)

• Second meal need not start within five hours after the first one ended (no “rolling 5”) – only by the end of the 10th hour of work.

• Employers must authorize and permit rest breaks every four hours

or major fraction thereof

(over two hours).

• Thus, employees may take second rest break after working more than 6 hours, 3rd break after working more than 10 hours, etc.

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San Diego Superior Court on the

Brinker

Remand

• Ordered the meal period class certified based on plaintiffs’ theory that Brinker maintained uniform unlawful policies or practices.

• Uniformly failed to maintain any meal policy during a portion of the class period.

• Failed to clarify meal timing or provide for 2nd meal periods in its later written policy.

• Failed to pay any meal premiums.

• Allegedly impeded employees from meal breaks by its policies on tip forfeiture and responsibility for cash drawers • Affirmed certification of the rest break class: refused to decertify.

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Certification Granted or Upheld

Security guard cases: •

Faulkinbury v. Boyd

, 216 Cal.App.4th 220 (2013). •

Avilez v. Pinkerton

, 286 F.R.D. 450 (C.D. Cal. 2012).

•

Abdullah v. U.S. Security Assoc

., 731 F.3d 952 (9th Cir. Sept. 27, 2013).

• Meal classes certified where plaintiffs alleged that all employees were required to sign on-duty meal period agreements and thus were uniformly denied off-duty meal breaks.

• “Nature of the work” rule for on-duty meal period agreements scrutinized.

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Certification Granted or Upheld

•

Bradley v. Networkers,

211 Cal. App. 4th 1129 (2013) – independent contractor misclassification case involving tech support workers; as non-employees, employer uniformly failed to provide meal or rest breaks.

•

Benton v. Telecom Network Specialists, Inc.,

220 Cal. App. 4th 701 (Oct. 16, 2013) – reverse and remand denial of class certification in meal and rest period and off the clock claim; evidence that some employees took breaks is not sufficient for denying class certification when plaintiffs’ theory of liability is that defendant failed to adopt meal and rest period policy; individual overtime damages not a bar to certification.

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Certification Granted or Upheld (Off the Clock)

•

Jones v. Farmers Insurance Exchange

, 221 Cal. App. 4 th 986 (Oct. 28, 2013) – reversing and remanding denial of class certification; “computer sync time” at home prior to shift; disputes about the existence of uncompensated preshift work is a common issue; to the extent it goes to damages, does not preclude class certification.

•

Williams v. Superior Court

, 221 Cal. App. 4 th 1353 (Dec. 6, 2013) -- Reversed decertification of previously certified class post-

Dukes,

reaffirms that California class action law not governed by

Dukes.

Off the clock case for pre-shift work ordered certified; again stating that any differences in damages does not preclude class certification.

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Certification Granted or Upheld (Misclassification)

•

Martinez v. Joe’s Crab Shack Holdings

, 221 Cal.App.4th 1148 (Nov. 12, 2013) – Reversed denial of class certification in manager misclassification case. Brinker provides “a renewed direction that class-wide relief remains the preferred method of resolving wage and hour claims, even those in wihc the facts appear to present difficult issues of proof.”

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Certification Denied

•

Dailey v. Sears, Roebuck & Co.,

214 Cal.App.4th 974 (2013) – overtime misclassification case; no common proof that managers were deprived of meal or rest breaks, even while classified as exempt.

•

Sotelo v. MediaNews Group, Inc

., 207 Cal.App.4th 639 (2012) – independent contractor case involving news carriers; plaintiffs could not show uniform policy or practice establishing class-wide liability for meal/rest violations.

•

Ordonez v. Radio Shack,

2013 U.S. Dist. LEXIS 27430 (C.D. Cal. 2013) – insufficient commonality; time records do not reflect “violations,” because they do not show reasons for missed, late or short meals.

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Duran v. U.S. Bank National Assoc.

• Set for oral argument on 3/4/14 • Issue on review: • This case presents issues concerning the certification of class actions in wage and hour misclassification litigation and the use of representative testimony and statistical evidence at trial of such a class action.