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Posts Tagged ‘California Supreme Court’

California Supreme Court Unanimously Holds Employers May Not Attribute Commissions Paid in One Period to Other Periods to Satisfy Commissioned Sales Exemption

In Commission Sales Exemption, Commissions on July 14, 2014 at 11:13 am

This morning, the California Supreme Court issued its opinion in Peabody v. Time Warner Cable, Inc., Case No. S204804, __ Cal. 4th __ (July 14, 2014).  At the request of the Ninth Circuit, the Court considered whether an employer may attribute commission wages paid in one pay period to other pay periods in order to satisfy California’s compensation requirements.  The court unanimously concluded no:

[A]n employer satisfies the minimum earnings prong of the commissioned employee exemption only in those pay periods in which it actually pays the required minimum earnings. An employer may not satisfy the prong by reassigning wages from a different pay period.

Id. at *9.  The Court cited the narrow construction of exemptions against the employer and the purpose of the minimum earnings requirement:

Whether the minimum earnings prong is satisfied depends on the amount of wages actually paid in a pay period. An employer may not attribute wages paid in one pay period to a prior pay period to cure a shortfall. This interpretation narrowly construes the exemption’s language against the employer with an eye toward protecting employees. (Ramirez v. Yosemite Water Co., supra, 20 Cal.4th at pp. 794-795.) It is also consistent with the purpose of the minimum earnings requirement. Making employers actually pay the required minimum amount of wages in each pay period mitigates the burden imposed by exempting employees from receiving overtime. This purpose would be defeated if an employer could simply pay the minimum wage for all work performed, including excess labor, and then reassign commission wages paid weeks or months later in order to satisfy the exemption‟s minimum earnings prong.

Id. at *7.  The Court also cautioned against conflated federal and state labor law in this area: Although it is true that the commissioned employee exemption has a federal counterpart in 29 U.S.C. section 207(i), “[w]e have previously cautioned against ‘confounding federal and state labor law’ . . .  ‘ . . . where the language or intent of state and federal labor laws substantially differ.’ ” (Martinez v. Combs, supra, 49 Cal.4th at p. 68.) Unlike state law, federal law does not require an employee to be paid semimonthly. (Olson v. Superior Pontiac- GMC, Inc. (11th Cir. 1985) 765 F.2d 1570, 1574-1575.) It also permits employers to defer paying earned commissions so long as the employee is paid the minimum wage in each pay period. (Id. at pp. 1578-1579.) In light of these substantial differences from California law, reliance on federal authorities to construe state regulations would be misplaced. Id. at *9.

By CHARLES H. JUNG

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California Supreme Court Prohibits Waiver of PAGA Representative Claims

In Arbitration, Class Waiver, PAGA on June 23, 2014 at 1:44 pm

This morning, the California Supreme Court issued its long-awaited opinion in Iskanian v. CLS Transportation Los Angeles, LLC, No. S204032, __ Cal.4th __ (Jun. 23, 2014).

The Court held that the U.S. Supreme Court’s opinion in Concepcion abrogated Gentry v. Superior Court, 42 Cal. 4th 443 (2007).  The Court decided that class action waivers are enforceable.  But it also held that an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.  Id. at *2.

[W]e conclude that the FAA’s goal of promoting arbitration as a means of private dispute resolution does not preclude our Legislature from deputizing employees to prosecute Labor Code violations on the state’s behalf. Therefore, the FAA does not preempt a state law that prohibits waiver of PAGA representative actions in an employment contract.

Id. 

Facts

Plaintiff Iskanian worked as a driver for CLS.  Id. He signed an arbitration agreement providing that “any and all claims” arising out of his employment were to be submitted to binding arbitration.  Id.  The arbitration agreement also contained a class and representative waiver that said:

[E]xcept as otherwise required under applicable law, (1) EMPLOYEE and COMPANY expressly intend and agree that class action and representative action procedures shall not be asserted, nor will they apply, in any arbitration pursuant to this Policy/Agreement; (2) EMPLOYEE and COMPANY agree that each will not assert class action or representative action claims against the other in arbitration or otherwise; and (3) each of EMPLOYEE and COMPANY shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person.

Id. at *2-3.  After briefing on the motion to compel arbitration, the California Supreme Court decided the Gentry case, holding that a class action waiver may be unenforceable in some circumstances.  Id. at *5.  In April 2011, the U.S. Supreme Court issued AT&T Mobility LLC v. Concepcion, 563 U.S. __ (2011), invalidating the California Supreme Court’s decision in Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005), which had restricted consumer class action waivers in arbitration agreements.

Holdings

 The Court held that Gentry was preempted by the FAA under the rule in Concepcion.  Iskanian, supra, __ Cal. 4th at *7.

It is thus incorrect to say that the infirmity of Discover Bank was that it did not require a case-specific showing that the class waiver was exculpatory.  Concepcion holds that even if a class waiver is exculpatory in a particular case, it is nonetheless preempted by the FAA.  Under the logic of Concepcion, the FAA preempts Gentry’s rule against employment class waivers.

The Court also distinguished its recent holding in Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109 (Sonic II), which “established an unconscionability rule that considers whether arbitration is an effective dispute resolution mechanism for wage claimants without regard to any advantage inherent to a procedural device (a Berman hearing) that interferes with fundamental attributes of arbitration.”

By contrast, the Gentry rule considers whether individual arbitration is an effective dispute resolution mechanism for employees by direct comparison to the advantages of a procedural device (a class action) that interferes with fundamental attributes of arbitration.  Gentry, unlike Sonic II, cannot be squared with Concepcion.

Iskanian, supra, __ Cal. 4th at *10.

PAGA

The Court carved out an exception for PAGA claims:

In sum, the FAA aims to promote arbitration of claims belonging to the private parties to an arbitration agreement.  It does not aim to promote arbitration of claims belonging to a government agency, and that is no less true when such a claim is brought by a statutorily designated proxy for the agency as when the claim is brought by the agency itself.  The fundamental character of the claim as a public enforcement action is the same in both instances.  We conclude that California‘s public policy prohibiting waiver of PAGA claims, whose sole purpose is to vindicate the Labor and Workforce Development Agency‘s interest in enforcing the Labor Code, does not interfere with the FAA’s goal of promoting arbitration as a forum for private dispute resolution.

Id. at *43.

Attorneys

Glenn A. Danas of Capstone Law argued for Plaintiff and Appellant.

David F. Faustman of Fox Rothschild argued for Defendant and Respondent.

By CHARLES H. JUNG

Ninth Circuit Avoids Broad Ruling, Leaving Question of Viability of Broughton-Cruz to Another Day

In Arbitration, Class Waiver, Concepcion, Public Claims on April 12, 2013 at 11:09 am
U.S. Court of Appeals for the Ninth Circuit

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The Ninth Circuit’s en banc ruling yesterday in Kilgore v.Keybank, N.A. (you can read more here) was a decidedly restrained opinion.  The court could certainly have held, as many expected, that the Broughton-Cruz public injunction exception to the general rule that the “FAA requires state courts to honor arbitration agreements” does not stand in light of Concepcion, particularly in light of the Supreme Court’s reaction to state courts taking a narrow read of Concepcion.

But while some reports justifiably see Kilgore as a narrow victory for the plaintiff’s bar, the Ninth Circuit arguably took a narrow read of the public injunction exception.  The court held that the claim for injunctive relief fell outside Broughton-Cruz because the “requested prohibitions against reporting defaults on the Note and seeking enforcement of the Note plainly would benefit only the approximately 120 putative class members.”  Slip op. at 17 (emphasis supplied).

In Kilgore, defendant withdrew from the private school loan business, and accordingly the court concluded that the “injunctive relief sought thus, for all practical purposes, relates only to past harms suffered by the members of the limited putative class.”

The central premise of Broughton-Cruz is that “the judicial forum has significant institutional advantages over arbitration in administering a public injunctive remedy, which as a consequence will likely lead to the diminution or frustration of the public benefit if the remedy is entrusted to arbitrators.” Broughton, 988 P.2d at 78. That concern is absent here, where Defendants’ alleged statutory violations have, by Plaintiffs’ own admission, already ceased, where the class affected by the alleged practices is small, and where there is no real prospective benefit to the public at large from the relief sought.

This suggests an argument for defendants in class action cases where there is a mandatory arbitration agreement: where the company has stopped an alleged unlawful practice, and the proposed private attorney general action affects only the class members, then a defendant might argue that the Broughton-Cruz rule does not apply.  It’s worth noting that 120 putative class members is not an unusually small class in an employment case, and if the Ninth Circuit sees a class of that size as only a “limited putative class”, then it might arguably see many wage and hour cases as affecting only a limited portion of the public.

If this is a victory for the plaintiff’s bar, it is indeed a very narrow one.  And it highlights the importance of the California Supreme Court’s upcoming decision in Iskanian.

By CHARLES H. JUNG

Press Quotes About Analysis of Second District’s Compton Case

In Arbitration on March 25, 2013 at 4:22 pm
California Supreme Court

California Supreme Court (Photo credit: Jamison Wieser)

Law360 published an article today quoting the blog author’s analysis of the Compton v. Superior Court case.  Compton v. Superior Court of Los Angeles County, No. B236669, — Cal.Rptr.3d —-, 2013 WL 1120619 (2d Dist. Mar 19, 2013):

“In both cases, the First and Second districts applied Armendariz and invalidated arbitration agreements for lack of mutuality,” said Charles Jung, a Nassiri & Jung LLP attorney. “At least as far as California courts are concerned, Armendariz is alive and well, and it appears that this is going to continue to be the case until the California Supreme Court overrules it.”

In light of the latest ruling, plaintiffs and their attorneys looking to defeat mandatory arbitration agreements will keep an eagle eye out for any type of one-sidedness, according to Jung.

“The Compton ruling creates an avenue for employees to argue that mandatory agreements are unlawfully one-sided and that under Armendariz, they should be stricken,” he said. “For employers, it suggests the way to make arbitration agreements enforceable is by making them simple and even-handed. Employers can’t have their cake and eat it too.”

“The California Supreme Court really has its work cut out for it,” Jung said. “The challenge for the California Supreme Court is to try to preserve what it can of California’s public policy, yet not fall afoul of and directly contradict or simply ignore the U.S. Supreme Court. It’s a very tricky position for the court to be in.”

Fourth District Holds That a Prevailing Employer Can Recover Costs in a Wage Case

In Costs on August 16, 2011 at 12:53 pm
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Defendant United Parcel Service, Inc. prevailed against plaintiff employee on various wage and hour causes of action including failure to pay overtime and failure to provide breaks.  Plancich v. United Parcel Service, Inc., — Cal. Rptr. 3d —-, 2011 WL 3506066, No. E050631 (4th Dist. Aug. 11, 2011). UPS won on all six counts, and the trial court awarded costs but then granted Plaintiff Plancich’s motion to strike costs.  Id. *1.  The Fourth District reversed the order granting the motion to strike costs, holding that a prevailing employer may recover costs in a wage suit.

Background

Plancich worked for UPS as an on-road supervisor.  Id.  He asserted in his complaint that he worked more than eight hours a day and more than 40 hours a week.  Id.  He also alleged that UPS misclassified him as exempt under the executive, administrative, or professional exemptions. Id.  The jury found Plancich was an exempt employee. Id. As to the unfair competition cause of action, the trial court found in favor of UPS. Id. The trial court ordered that UPS recover its costs from Plancich, in an amount to be determined. Id.

After UPS filed its memorandum of costs in the amount of $38,387.20, Plancich filed a motion to strike and tax costs based on Earley v. Superior Court, 79 Cal. App. 4th 1420 (4th Dist. 2000). Read the rest of this entry »

Sixth District Holds Reverses Summary Judgment on Question of Whether Leave Policy Was Sabbatical or Regular Vacation

In Class Actions, Vacation on August 15, 2011 at 6:50 am
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California’s Sixth District Court of Appeal held that a genuine issue of material fact existed as to whether eight-week leave was a sabbatical or regular vacation precluded summary judgment in former employee’s class action against the former employer.  Paton v. Advanced Micro Devices, — Cal. Rptr. 3d —-, 2011 WL 3369346, No. H034618 (6th Dist. Aug. 5, 2011).

Background

Plaintiff Eric Paton sued defendant Advanced Micro Divices, Inc. on behalf of himself and a class of others, alleging that Defendant had failed to pay him for an eight-week sabbatical he earned but had not used when he retired. Id. *1 Salaried employees who served for seven years were eligible for an eight-week fully paid sabbatical.  Id. Plaintiff argued that the sabbatical was extra vacation and, pursuant to Labor Code section 227.3, the employer could not require an employee to forfeit vacation pay.  Id.  Plaintiff cited Suastez v. Plastic Dress-Up Co., 31 Cal. 3d 774 (1982), to support his claim that the sabbatical had vested over the seven years he had worked for defendant and he was entitled to the pay when he resigned.  Id.   Read the rest of this entry »

Northern District Rejects Stay of Meal and Rest Break Action Pending California Supreme Court’s Decision in Brinker v. Superior Court

In Meal and Rest Breaks, Stay on October 11, 2010 at 6:56 am
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The Northern District rejected defendant’s motion for stay of a meal and rest break action where the primary focus of complaint was unrelated to the break claims.  Murphy v. J.B. Hunt Transport Services, Inc., No. C 10-01568 WHA, 2010 WL 3911786 (N.D. Cal. Oct. 5, 2010) (slip op.).  Defendant J.B. Hunt Transport, Inc., moved to stay a case alleging three claims for discrimination and one claim for nonpayment of wages for regular meal-and-rest periods.  Id. *1.  Defendant’s stay motion sought a stay pending the resolution of a case pending before the California Supreme Court, Brinker Restaurant Corp. v. Superior Court, 196 P.3d 216 (Oct. 22, 2008), in which the court will decide whether the California Labor Code requires employers to affirmatively ensure that employees take rest and meal breaks. Id.

The court recited the standard for a stay of federal court proceedings as follows:

The proponent of a stay bears the burden of establishing its need. Clinton v. Jones, 520 U.S. 681, 708 (1997). Read the rest of this entry »

California Supreme Court Rejects Challenge to Governor’s Furlough Program

In Other Cases of Interest on October 6, 2010 at 10:15 pm
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On Monday, the California Supreme Court held that the California “Legislature’s 2009 enactment of the revisions to the 2008 Budget Act operated to ratify the use of the two-day-a-month furlough program as a permissible means of achieving the reduction of state employee compensation mandated by the act.”  Professional Engineers in California Government v. Schwarzenegger, No. S183411, — Cal.Rptr.3d —-, 2010 WL 3835132, *2 (Cal. Oct. 4, 2010).  Accordingly, the Court concluded that the “2009 budget legislation validated the Governor’s furlough program here at issue, and rejected plaintiffs’ challenge to that program.  Id.

On December 1, 2008 Governor Arnold Schwarzenegger declared a fiscal emergency, called the Legislature into special session, and submitted to the Legislature a comprehensive plan to address the budget problem.  Id. *1.  The Governor’s budget plan included, among many other cost-saving features, two proposed statutory provisions that would impose a mandatory one-day-a-month unpaid furlough of most state employees employed by the executive branch.  Id. The Legislature later passed its own proposed comprehensive budget legislation, but the Legislature’s alternative plan did not include the Governor’s recommended furlough provision.  Id. Read the rest of this entry »

Second District Compels Arbitration of Individual’s Overtime Claims Even Where Arbitration Agreement Included Unenforceable Class Arbitration Waiver

In Arbitration, Class-wide Arbitration on October 4, 2010 at 8:55 am
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The Second District compelled a class action plaintiff to arbitrate his individual claims in Maiorano v. Professional Community Management, Inc., No. B220127, 2010 WL 3786721 (Cal. Ct. App. 2d Dist. Sept. 30, 2010).  Defendant, Professional Community Management, Inc., appealed from an order denying its petition to compel arbitration of a putative class action filed by plaintiff, Ray A. Maiorano.  Id. *1.  The Second District held that “based solely on the parties’ agreement, we conclude they cannot be compelled to arbitrate on a class basis”, but it directed the trial court to compel arbitration of plaintiff’s individual claims. Id. The court reasoned that the “presence of a provision limiting arbitration to individual rather than joined or representative claims did not present a basis upon which the trial court could conclude the present arbitration agreement was permeated by an unlawful purpose.”  Id. *4.

Background

Plaintiff brought a class action complaint alleging violations of statutory meal and rest breaks, wage reporting and overtime requirements, and unlawful and unfair business practices.  Id. *2.  Plaintiff also asserted a cause of action for penalties under the Labor Code Private Attorneys General Act of 2004–Labor Code sections 2698 and 2699.  Id. Defendant filed a petition to compel arbitration. The trial court denied defendant’s petition, ruling that: Read the rest of this entry »

Eastern District Finds Class-Wide Arbitration Agreement Unenforceable

In Arbitration, Class-wide Arbitration on September 27, 2010 at 5:20 am
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United States District Court for the Eastern District of California rejected defendant’s argument that Stolt-Nielson preempted Gentry, and the court held that a class-wide arbitration agreement was unenforceable as against an unpaid wage and overtime plaintiff.  Mathias v. Rent-A-Center, Inc., Civ. No. S-10-1476 LKK/KJM, 2010 WL 3715059 (E.D. Cal. Sept. 15, 2010) (slip op.).

Background

Ryan Mathias (“Mathias” or “plaintiff”) was employed by Rent-A-Center, Inc. (“RAC” or “defendant”) as an Assistant Manager, a position that was classified as a non-exempt or hourly position. Id. *1. As a condition of employment, plaintiff executed an arbitration agreement (“Agreement”), which Agreement contained a class action waiver and excluded arbitration private attorney general actions.  Id. Plaintiff filed a class action alleging eight claims arising from his employment with defendant, including claims for unpaid wages and overtime, unpaid rest and meal period premiums, and penalties arising from non-compliant wage statements under the California Labor Code and California Business and Professions Code. Id. Read the rest of this entry »