The California Court of Appeals held late last week that a plaintiff does not have standing to pursue California Private Attorneys General Act (PAGA) claims on behalf of the state or other employees once he accepts an offer to settle his individual claims. The court in Kim v. Reins International California, Inc. B278642 (Dec. 29, 2017), held that once the plaintiff accepted the settlement offer, he no longer qualified as an “aggrieved employee” within the meaning of the statute. The case expands the potential impact of offers of judgment in California wage-hour class actions.
The Sixth Circuit yesterday outlined narrow circumstances under which an employer can show good faith reliance on a Department of Labor opinion letter in setting wage-hour policy. In Perry v. Randstad General Partner, No. 16-1010 (6th Cir. Nov. 20, 2017), the Court held the employer did not establish a good faith reliance defense despite undisputed evidence that the employer relied on a 2005 DOL opinion letter in determining that its employees met the administrative exemption of the FLSA. The opinion serves as a note of caution to employers relying on DOL opinion letters for wage-hour policies.
On October 3, 2017, California Governor Jerry Brown signed into law Senate Bill 306, dramatically limiting an employer’s right to defend itself against allegations that it retaliated against an employee for making wage claims. In short, the law makes it far easier for employees and the California Labor Commissioner to obtain injunctive relief in retaliation cases, potentially requiring employers to reinstate discharged employees before an employer can fully defend itself against the allegations. The law takes effect January 1, 2018.
The law allows the Labor Commissioner or an employee to obtain injunctive relief against an employer based on a mere showing that “reasonable cause exists to believe a violation has occurred.” That’s a far lower burden of proof than a court’s typical standard for injunctive relief, which requires a showing that (1) the employee will suffer irreparable harm, (2) the employee will likely succeed on the merits, and (3) the employee’s interests outweigh the employer’s. The law also requires a court considering a request for an injunction to evaluate “the chilling effect on other employees.”
Other features of the new law that restrict employers’ rights include:
- Authorizing the Labor Commissioner to seek injunctive relief before concluding its own investigation;
- Permitting the Labor Commissioner to initiate investigations on its own, “without a complaint,” if the suspected retaliation occurred during the adjudication of a wage claim or a field inspection, or in instances of immigration-related threats;
- Allowing the Labor Commissioner to issue its own citations ordering reinstatement or back pay, without going to court;
- Placing a heavy burden on the employer to challenge Labor Commissioner citations, including requiring the employer to post a bond equal to the total amount of back pay allegedly owed.
Key Takeaways: The new law increases the need for California employers to make careful, well-reasoned, and thoroughly-documented disciplinary and discharge decisions. Notably, when employees make wage claims, they often also simultaneously engage in protected concerted activity under Section 7 of the NLRA. Given the potential overlap between the Labor Commissioner’s jurisdiction and the NLRB’s jurisdiction, employers facing legal action under the new law should consider whether an NLRA preemption defense applies.
On September 21, 2017, a federal district judge rejected a $19.1 Million proposed deal to end a nationwide wage-hour class action against the TGI Friday’s restaurant chain. In Zorrilla v. Carlson Restaurants Inc., 14-cv-2740 (SDNY), a class of nearly 29,000 tipped workers in nine states alleged violations of the FLSA and state wage-hour laws, including that the restaurant improperly took a tip credit, required an unlawful tip pool, and failed to pay spread-of-hours and uniform-related expenses. After more than four years of litigation, the parties reached perhaps the largest wage-hour settlement for the restaurant industry and sought court approval as required under the FLSA.
On August 31, a Texas federal court struck down the Obama-era Department of Labor rule that significantly increased the salary threshold for the white collar exemptions to overtime pay. The court temporarily enjoined the rule in November 2016, and this latest ruling makes that decision final (save for an unlikely appeal).
The court ruled that the DOL “does not have the authority to use a salary-level test that will effectively eliminate the duties test” set forth in the Fair Labor Standards Act.
Notably, new Secretary of Labor Alexander Acosta issued a request for information on the DOL’s overtime rules in late July. The request solicited several comments on whether the DOL should update the current $23,660 salary threshold. So while the Texas court’s ruling gives employers some temporary certainty on overtime exemptions, it remains to be seen what the Trump Administration’s DOL will do.
Overtime claims continue to dominate class action filings and cause significant exposure for companies in all industries. In July alone, plaintiffs filed more than 200 class action complaints alleging overtime violations in federal courts across the country (not counting the number also filed in state court). And because courts calculate back wages at time-and-a-half the regular rate, plus liquidated damages and other penalties, overtime mistakes can cause significant damage to a company’s bottom line.
This post kicks off a series for Steptoe’s Labor & Employment blog on the top five overtime pay violations alleged in class action complaints. The first in the series focuses on one of the most common (and most expensive) kinds of overtime blunders: misclassification of employees as exempt.
Today, the Ninth Circuit in Mendoza v. Nordstrom, No. 12-57144, affirmed dismissal of the plaintiffs’ California Private Attorneys General Act (PAGA) claims. The plaintiffs sought to recover from the luxury retailer on behalf of themselves and other employees for violations of California’s day-of-rest rules, Cal. Labor Code §§ 551 and 552. The court rejected the plaintiffs’ arguments that it should remand the case to permit them to name a new PAGA class representative after their underlying claims failed, reasoning that nothing prevented a proper plaintiff from filing a new suit.
The Department of Labor posted its anticipated Request for Information on the 2016 overtime rule. In its post, the DOL stated that it will publish the RFI in the Federal Register tomorrow, July 26. The RFI represents a preliminary step in the rulemaking process to revise the federal overtime rules set by the Obama administration. The RFI seeks comments on whether and how the DOL should set salary minimums, whether the regulations should contain multiple salary levels, and the impacts of the 2016 rule.
Stakeholders have 60 days from publication to submit comments.
As many people hit the road this summer for vacations and family trips, one recently filed class action serves as a reminder that certain driving activities qualify as compensable time under federal and state wage laws.
In Smith v. Allegheny Technologies, Inc., No. 2:17-cv-00911-RCM (W.D. Pa. filed 7/10/17), a metal manufacturer hired temporary replacement workers during a seven-month lockout with its union at multiple plant locations. According to the complaint, the replacement workers needed to cross active picket lines to get into the plants. To do so safely, the employer required the temporary workers to meet at a central location outside of the plant before work so that they could ride together in company vans to the plant. The company returned the employees to the central location in company vans at the end of the work day. A temporary replacement worker typically drove the van.
The complaint alleges that the time from the central location to the plant and back each day qualified as “integral and indispensable to the principal activities,” and thus counted as working time under the FLSA. The complaint claims underpayment of 10.5 to 14 hours of time, per employee, per week, in violation of the FLSA’s overtime provisions and Pennsylvania and Oregon state law. With potentially thousands of temporary workers, it’s easy to see how liability could reach the millions-of-dollars if the plaintiffs proved their case.
Key Takeaway: Employers should carefully review their travel and commuting practices to ensure that they compensate employees for all travel that qualifies as working time. As illustrated in the Smith complaint, employers should take particular note of any travel where the employer exercises control over the employee, e.g., by requiring him/her to travel from specific locations or in company vans. Of course, employers should have written, lawful travel pay policies in place. But, it’s also important to train on-site managers about potential travel-pay issues so that they know to reach out for advice before implementing a local practice that might expose the company to liability. Regular on-site audits by legal counsel or experienced HR personnel also help to catch potential issues before they turn into litigation.
On July 7, the California Court of Appeals issued a decision in Espejo v. The Copley Press, No. D065397, with potentially far-reaching implications for companies facing current or future expense-reimbursement class action claims. In a superficial analysis, the court ruled that expenses qualify as “wages” for purposes of California’s unfair competition law, Bus. & Prof. Code, § 17200 et seq. That holding potentially expands companies’ exposure in claims for unpaid expenses under California Labor Code § 2802; the ruling paves the way for plaintiffs to bring additional “piggyback” claims for waiting time penalties under California Labor Code § 203 and wage statement penalties under California Labor Code § 226.
The court also ruled that employers who pay employees “enhanced compensation” to cover their expenses must tell employees how much of their pay covers expenses at or near the time of payment. Otherwise, the employer will get no credit for such payments.
The trial court awarded plaintiffs more than $4.95 million in damages on their expense claim and in prejudgment interest, plus an additional $6.1 million in attorneys’ fees. However, the court of appeals remanded for recalculation of the expenses (as well as the attorneys’ fees) to give The Copley Press credit for the expenses that records showed it did pay.
Key Takeaway: Employers in California need to take a close look at their expense-reimbursement policies and practices because the risk of not properly reimbursing expenses just got more costly. In addition, employers who pay employees “enhanced compensation” must correctly identify it to employees.