Employers take note! A Court held an employer’s ignorance of a higher minimum wage set by local ordinance can constitute a “willful failure to pay”, resulting in waiting time penalties. California courts are permitted to award an employee a waiting time penalty (of up to 30 days’ worth of the employee’s wages), if the employer “willfully fails to pay” the employee her full wages immediately (if discharged/terminated), or within 72 hours (if she quits)¹. A waiting time penalty can also be awarded when the employee’s final paycheck is for less than the proper wage (minimum wage, prevailing wage, or living wage).

In Diaz v Grill Concepts Services², the appellate court found that the restaurant’s failure to pay the required living wages to terminated employees amounted to a willful failure to pay, justifying waiting time penalties. The restaurant was located in a special zone by the airport that was subject to an ordinance requiring a living wage that was higher than California’s minimum wage. What constituted a living wage was determined by the ordinance and when the ordinance was amended, the required wage increased. The restaurant was sued by terminated employees who sought waiting time penalties.

A failure to pay is willful if the employer knows what it is doing and intends to do what it is doing³. The restaurant’s HR director suspected it might be underpaying its employees as she saw a newspaper article that referenced a higher wage. The restaurant made one inquiry to try to determine the requisite wage, but was told that an amendment to the ordinance was “in process.” The restaurant purportedly took no further action beyond periodically searching the internet to see if the ordinance had been amended. The Court found the employer’s ignorance coupled with a failure to determine the wage was a willful failure to pay, justifying waiting time penalties.

A link to UC Berkeley Labor Center’s Inventory of Minimum Wage Ordinances is here. According to the Berkeley Inventory, some municipalities with living wage ordinances include: Albany, Berkeley, Davis, Emeryville, Fairfax, Hayward Los Angeles, Los Angeles Airport Hospitality Enhancement Zone, Marin County, Oakland, Oxnard, Pasadena, Petaluma, Port Hueneme, Port of Los Angeles, Port of Oakland, Richmond, Sacramento, San Diego, San Francisco, San Jose, San Leandro, San Mateo County, Santa Barbara, Santa Clara County, Santa Cruz, Santa Cruz County, Santa Monica, Santa Monica Hotel Worker Living Wage, Sebastopol, Sonoma, Sonoma County, Ventura, Vernon, Watsonville and West Hollywood.

 


¹California Labor Code section 203.
²Diaz v Grill Concepts Services, Cal. Ct. App. 2nd District, 05/24/18 Case No. B280846.
³In re Trombley (1948) 31 Cal.2d 801, 807.

The health care industry has long allowed employees to voluntarily waive one of the 2 meal periods on shifts greater than 12 hours. Plaintiffs in Gerard v. Orange Coast Memorial Medical Center argue, however, that such a waiver violates Labor Code section 512, which does not allow waivers on shifts longer than 12 hours. Defendants argue that section 11 of Wage Orders 4 and 5 control their meal period obligations, notwithstanding section 512. (Section 11 applies to union employees, but not the state and its political subdivisions). This case has already been decided twice by the Court of Appeal, with the last decision finding the waivers valid. The Supreme Court granted review.

The case is fully briefed and awaiting oral arguments before the California Supreme Court, after which time an opinion is due within 90 days.

While still new enough that most employers don’t yet know what a “PAGA” claim is, a claim under PAGA (the four letter acronym for Private Attorney General Act) can indeed be a curse to those employers unlucky enough to have made its acquaintance. You see, under the Labor Code PAGA, aggrieved employees are allowed to file suit on behalf of the State of California Labor and Workforce Development Agency, themselves, and other employees to collect penalties for any violation of the California Labor Code.

If the Labor Code already specifies a civil penalty for violation of a specific provision, then an employee may attempt to collect that penalty for themselves and on behalf of other aggrieved employees. If the underlying Labor Code section does not specify the civil penalty, the PAGA penalty is equal to $100 for each employee per pay period for the initial violation, and $200 for each employee per pay period for each subsequent violation. Cal. Lab. Code §2699(f)(2).  Thus, given the breadth of the California Labor Code and the numerous opportunities for unintentional violations, the potential penalties are staggering. Even more, a successful employee will be awarded their attorney fees and costs.

Not only is there monetary incentive to assert PAGA claims (75% of the monies go to the State, and 25% to the employees), but plaintiff’s attorneys will often assert a PAGA claim as a backup in a class action because unlike class actions, a PAGA class does not have to be certified.  Additionally, PAGA claims are not waivable, whereas rights to assert class action are. Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014).

In July 2017, the PAGA claim became even more powerful.   In Williams v. Superior Court, 3 Cal.5th 531 (2017) the Supreme Court of California unanimously reaffirmed the broad scope of discovery in civil litigation, and held that plaintiff was entitled the name and contact information of all of the employer’s 16,500 employees, not just those of the workers in plaintiff’s store. In doing so, the Supreme Court rejected the notion that plaintiff must first show good cause or some likelihood of success on the merits before receiving such information. It reversed the trial court’s order that plaintiff must first answer deposition questions to establish some merit to plaintiff’s action before seeking that discovery.

The upshot of Williams is that a single employee, even on a weak or frivolous case, can force an employer to engage in extensive and costly discovery, and can expand the potential liabilities to such an extent that most employers cannot bear the risk of not settling.

With respect to PAGA, the saying “the best defense is a good offense” couldn’t be more true. Some Labor Code violations are considered “not serious” and are subject to a 33 day cure period before the employee may sue. Employers should contact their counsel immediately to ensure that the violations are properly corrected within that period. But even before a suit is filed, employers can mitigate their exposure to a PAGA suit by carefully examining their policies, procedures, and practices to preemptively spot any potential Labor Code violation and take corrective action.

Whether you have been sued under PAGA, or are simply looking to avoid a PAGA suit, we can help you.

There was a time when a work day ended at 5:00.  When the little hand reached 5 and the big hand found its way to 12 two things happened – workers headed home and bosses stopped paying their hourly employees.  How times have changed.   In the age of smart phones and constant e-mail connection a new issue arises – if an hourly employee is performing work from their personal phone does an employer have to chip in on the bill?

A large number of small businesses in California do not have any sort of employee cell phone policy in place and are unaware that they may be required to reimburse their employees for at least a portion of their personal cell phone bills.  As illustrated below, this is quickly becoming yet another issue California small business owners need to start thinking about.

pexels-photo-261628

In the recent decision¹, a California Court of Appeal held that when an employee uses their personal cell phone for work-related calls, Labor Code section 2802 requires the employer to reimburse them.  In reaching this conclusion, the Court of Appeal found that certain provisions of the Labor Code required reimbursement by employers for “all necessary expenditures or losses incurred by the employee in direct consequence” of their work, or in “obedience to the directions of the employer.”   This would be true despite the fact an employee is paying for an unlimited data package.  The Court held that despite the form of cell phone plan the employee selected or is paying for on their own, employers must pay some reasonable percentage of the employee’s cell phone bills – if not they would be receiving a windfall because it would pass on this business expense directly to the employee.

While the dust has yet to settle on the Cochran decision it appears that employers in California are required to compensate employees who use their personal phones for work purposes.  This is true even if they have unlimited data/minutes.

This decision creates the potential for new areas of litigation.  In an effort to avoid this, businesses should take a close look at their cell phone polices to ensure they are in compliance with the Labor Code (or, if you do not have a cell phone policy, prepare one!).  If an employee is expected to be accessible by phone or email outside of work – or if they are required to carry a cell phone as a part of the job – then it is necessary either to provide a work device or to pay a reasonable percentage of their bill.


¹Cochran v. Schwan’s Home Serv., Inc., 228 Cal. App. 4th 1137

California Labor Code § 925 went into effect on January 1, 2017, limiting an employer’s ability to require employees who “primarily reside and work in California” to enter into employment agreements that include out-of-state choice of law and/or forum selection clause.  The section effects employment contracts entered into on or after January 1, 2017.  This section, however, will not apply if the employee is represented by counsel in negotiating the terms of the employment contract.

image004Section 925 may have an immediate impact on employment contracts with covenants not to compete (“non-compete clauses”).  California Business & Professions Code § 16600 generally prohibits such clauses in employment contracts, favoring a public policy of a worker’s right to pursue any lawful trade or profession.  In the past, employers have utilized choice of law and/or forum clauses with selection of states that allow non-compete clauses to protect against competition by ex-employees based in California.

Labor Code section 925 will frustrate those efforts by employers to enforce choice of law and/or forum selection clauses by providing employees with the ability to preemptively challenge those clauses as unlawful.  There is some debate as to the enforceability of section 925 on a court in a different state, but Labor Code section 925 provides employees another tool to undermine an employer’s attempt to prevent competition by ex-employees.