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Gonzales v. San Gabriel Transit, 40 Cal.App.5th 1131 (Oct. 8, 2019)

Plaintiff filed a wage and hour case for misclassification of drivers as independent contractors who worked for a transit company that provided transportation services to passengers of public and private entities. Plaintiff moved for class certification, which the trial court denied for lack of commonality and typicality. While this matter was pending, the California Supreme Court issued its seminal decision in Dynamex Ops. West, Inc. v. Super. Ct. (2018) 4 Cal.5th 903 regarding independent contractor analysis. The Court of Appeal here found: (1) Dynamex’s “ABC” test applied retroactively to pending wage and hour litigation (Defendant did not address the issue on appeal, and this case did not involve a new standard or law that affected public policy); (2) The ABC test applied equally to Labor Code sections, not just the wage order under the “suffer or permit” standard, so long as the Labor Code provision sought to enforce the same fundamental protections afforded by the wage order; and (3) Labor Code claims not covered by the applicable wage order were appropriately analyzed under the common law “control” test.[i]

The Court cited the high court’s rationale in Dynamex, which referenced that different wage and hour standards exist under the FLSA in noting that California followed a federal model when it determined it could provide broader coverage of workers related to the “fundamental protections afforded by wage and hour laws and wage orders.” Dynamex, 4 Cal.5th at 948.

 

Martinez v Combs, Not Dynamex, Determines Joint Employer Liability.

Henderson v. Equilon Enterprises, LLC, 40 Cal.App.5th 1111 (Oct. 8, 2019)

Plaintiff alleged he was employed as the station manager for several Shell gas stations owned and operated by defendant Danville Petroleum, Inc. (“Danville”) and did not receive all overtime, meal period, and rest period premium wages to which he was entitled. Plaintiff also named Equilon Enterprises, LLC, dba Shell Oil Products US (“Shell”), Danville’s franchisor, as his joint employer. Plaintiff settled his claims with Danville. Shell successfully moved for summary judgment that it was not liable as a joint employer.

The Court of Appeal held that the Dynamex “ABC” test, decided while this case was on appeal, did not apply to the issue of joint employment because it did not fit analytically with the joint employer analysis. The Court noted that, at its heart, Dynamex focused on businesses gaining unfair competitive advantages by saving money (owed to both employees and the government) by intentionally misclassifying employees as independent contractors and further depriving workers of their full protections under the law. Here, by contrast, the issue was not whether a worker was properly classified as an employee but rather who should be liable for potential wage and hour violations, i.e., as part of the remedial network of worker protection. Thus, analyzing whether Plaintiff’s work was “outside [Shell’s] usual course of business” (Dynamex’s “B” prong) or whether Plaintiff was “customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed” for Danville (Dynamex’s “C” prong) makes little sense in determining whether Shell controlled Plaintiff’s employment. Thus, Martinez v. Combs (2010) 49 Cal.4th 35, not Dynamex, is the proper inquiry for joint employment analysis.

 

Wage Status in California Turns on Whether the Employer Exercises Control, Not Whether the Employee Actively Works.

Ridgeway v. Wal-Mart Stores, Inc., 2020 WL 55073 (Jan. 6, 2020)

Plaintiffs, long-haul truckers with hubs in California, alleged a minimum wage violation for Defendant’s failure to pay at least minimum wage for each hour “worked,” i.e., time Plaintiffs and similarly situated truckers were subject to Defendant’s control during required continuous 10-hour layover periods. Defendant argued layover periods are not compensable as a matter of law because the company cannot control an employee when he is on a legally-mandated break, and that even if layover periods were compensable, the company did not exercise control over layovers in this case.

The Court of Appeals for the Ninth Circuit acknowledged the logic behind the company’s argument that it should not have to compensate drivers for time they are legally required to not work. But the Ninth Circuit held the evidence showed the company exercised control over truckers even when the truckers took legally required breaks, and that the time therefore was compensable under California law, and that Defendant’s policies did not account for paying for that time. For example, Defendant restricted truckers’ movement during layover breaks by preventing them from going home during the layover without prior approval from management and reserved the right to discipline employees who did not comply with this policy. In other words, the default policy was to not allow employees to use their free time as they desired, which meant they were subject to Defendant’s control during that time, regardless of whether they were performing labor. Further, substantial evidence showed other indicia of control during layovers, such as testimony that truckers understood they were supposed to sleep in the truck and needed permission to sleep elsewhere, that they could not have guests in the tractor or pets in the cab, that they were prohibited from consuming alcohol, and that they were not allowed to carry a personal weapon.

 

Franchisor Not Liable for Franchisee’s Wage and Hour Violations.

Salazar v. McDonald’s Corp., 944 F.3d 1024 (9th Cir. Oct. 1, 2019, amended 12/11/19)

Plaintiffs alleged Defendant and the franchisee (“Haynes”) jointly employed them and others in eight McDonald’s franchises. The Ninth Circuit held McDonald’s was not the joint employer of Haynes’s employees.

Plaintiffs argued McDonald’s’ In-Store Processor (“ISP”) computer system, which it required Haynes and other franchisees to use, inflexibly failed to account for overtime hours as calculated in California (any time worked over 8 hours in a workday), causing workers to miss out on payment for many overtime hours, and that the ISP system did not schedule any rest breaks or flag when they were missed, nor did the system require second meal periods after 10 hours of work.

The Ninth Circuit found McDonald’s did not fit the Martinez definition of employment, as it did not exercise control over the day-to-day operations of Haynes’ employees, nor did it have the power to prevent Plaintiffs from working (the “suffer or permit” prong). The majority further held that the question was whether McDonald’s employed Plaintiffs and other Haynes employees, not whether it had caused the true employer to commit wage and hour violations “by giving the employer bad tools or bad advice.” The majority derisively dismissed Plaintiffs’ interpretation of “suffer or permit” definition as having the potential to yield “absurd” results, proposing hypothetically that if an IT specialist had designed the ISP system (and not McDonald’s) then the specialist would be liable for Haynes’ wage and hour violations.

Chief Judge Thomas dissented, arguing, “Reasonable inferences can be drawn that McDonald’s had the ability to prevent wage-and-hour violations caused by its ISP system settings yet failed to do so.”

 

Plaintiff Properly Pled Labor Code 226 Claim Where Employer’s Name Was Only an Acronym on the Wage Statement, Also Satisfied PAGA Notice Requirements.

Noori v. Countrywide Payroll & HR Solutions, Inc. 2019 WL 7183403 (Dec. 26, 2019)

Defendant Countrywide Payroll & HR Solutions, Inc., issued wage statements to its employees listing the entity “CSSG,” which stood for “Countrywide Staffing Solutions Group,” as the employer, yet “Countrywide Staffing Solutions Group” was not registered to do business with the State of California but rather was a fictitious business name for Defendant in other states. Defendant operated in California under the fictitious name “Countrywide HR,” or “CWHR,” and Plaintiff further alleged he worked for and reported to a business called Restoration Hardware.

Defendant argued (1) the use of the fictitious name on the wage statement was proper, and the full name was not necessary, (2) the employer’s complete name was on the checks attached to the wage statements, and (3) Plaintiff could not allege damages, because a claim under Labor Code section 226 claim requires a showing of injury, and since the use of the fictitious name supposedly was proper Plaintiff could not have suffered any injury.

The Court of Appeal rejected Defendant’s arguments, reasoning that “CSSG” was not merely a minor truncation, and that using such an acronym would render the employer’s name so confusing and unintelligible that violated Section 226(a). It further held that the fact that the complete fictitious name appeared on the check did not cure the violation, as subdivision (a) requires the wage statement to be “a detachable part of the check” and therefore is not modified by what is on the check itself.

The Noori court also held that PAGA does not require plaintiff-employees to specify in the notice to the LWDA whether the Labor Code violations are for Code sections that are curable or not curable, nor does the statute have an express requirement to notify the employer that the alleged violation may be cured. Because Plaintiff stated the Labor Code sections he alleged Defendant had violated and provided facts and theories in support, Plaintiff properly pled his PAGA notice.

 

An Employment Task is Not Inherently Exempt Simply Because a Manager Undertakes it to Try to Make the Store Operate More Smoothly.

Safeway Wage and Hour Cases, 2019 WL 6954322 (Dec. 18, 2019)

Plaintiff, as assistant manager at one of Defendant’s stores, lost at trial when the jury found the store had properly classified him as exempt. Plaintiff appealed that the trial court had erred by instructing the jury (in two separate jury instructions) to classify any given task as exempt work whenever a manger engages in such activity “because it contributes to the smooth functioning of the store…” The Court of Appeal clarified that a work task is not made exempt simply because the manager performs it in trying to contribute to the smooth functioning of the store. Ultimately, however, the Court held that the instructions did not affect the jury’s verdict.

At trial, the main issue was whether Plaintiff had spent more than 50% of his time on nonexempt duties or exempt managerial tasks. Per the federal regulations, certain tasks are easily identifiable as exempt or nonexempt, whereas others require examining the manager’s purpose in performing such a task. Tasks that are “directly and closely related” to the management and supervision of employees may include time spent performing both exempt and nonexempt work.[ii] A jury instruction (such as the ones at issue in this case) regarding a manager’s purpose would be relevant only if the actual tasks the employee performs were not disputed and the defense theory invoked the “work directly and closely related” defense. Yet if that defense is asserted, it would be improper for a trial court to instruct the jury that any task is exempt simply because it “contributes to the smooth functioning of the store.”

Plaintiff alleged he was little more than a glorified stocker. Thus, the factual dispute was limited to which activities he performed and how much time he spent on each of them rather than his reasons for doing so. Despite the contested jury instructions, the jury rendered its verdict in less than two hours and sent no questions regarding the instructions. The Court of Appeal concluded that although the instructions at issue were largely irrelevant, there was no reasonable probability that Plaintiff would have prevailed had the instructions been omitted.

 

Plaintiff’s Appeal from a Second Order Dismissing Class Allegations Denied Under the Death Knell Doctrine.

Williams v. Impax Laboratories, Inc., 41 Cal.App.5th 1060 (Nov. 8, 2019)

Plaintiff filed a class action and the trial court granted Defendant’s motion to strike class allegations, holding Plaintiff was not an adequate class representative but granting leave to amend the complaint with a new representative. Instead, Plaintiff re-filed the class allegations. The court again struck down the class allegations. Plaintiff appealed the second order striking class allegations. The Court of Appeal denied the appeal under the death knell doctrine, holding it only had jurisdiction to review a first order extinguishing class claims.

The doctrine, a “tightly defined and narrow” exception to the one-final-judgment rule, provides that an order is immediately appealable when it is tantamount to a dismissal of a class action for all members other than the plaintiff when the order effectively terminates the entire action. However, a plaintiff who fails to directly appeal such an order waives the right to later appeal and the order becomes final and binding. Orders that qualify for the death knell doctrine include a trial court’s sustaining of a demurrer to class allegations without leave to amend, a denial of class certification, or a grant of a motion to decertify a class.[iii]

Plaintiff argued the first order was not subject to the death knell doctrine because the trial court granted her leave to amend her complaint and the class claims were not completely extinguished until the second order. The Court of Appeal held Plaintiff mischaracterized the effect of the first order, that by striking class allegations the trial court had already removed them from the case, which left Plaintiff as the sole plaintiff in an individual action. Because Plaintiff failed to appeal the first order, and it was properly subject to the death knell doctrine, she waived her right to appeal the second order.

 

Class Certification Not Suitable in Meal and Rest Break Classes.

Cacho v. Eurostar, Inc., 2019 WL 7180349 (Dec. 24, 2019)

Plaintiffs brought a class action that included meal and rest periods claims. Defendant contended its policies complied with the applicable wage order.

The two named plaintiffs worked at two retail stores (out of 69 total stores) yet failed to offer admissible witness testimony from any other employee (of a putative class of over 2,500 members). The judge also found deficiencies with Plaintiffs’ expert’s report as to meal periods. The trial court further found that Defendant’s policy in the 2007 handbook as to rest breaks was deficient but that Plaintiffs had failed to present any evidence that Defendant, which had corrected the deficiency in the 2013 handbook, had a companywide practice of denying rest breaks. The trial court denied class certification for lack of commonality or typicality.

The Court of Appeal affirmed the decision, finding that Plaintiffs had failed to meet their burden and that individual issues predominated. Further, the trial court had correctly identified six separate bases for finding Plaintiffs’ claims were not typical, including: (1) the anecdotal nature of the evidence; (2) the failure to produce more than a single non-plaintiff declaration (which was stricken after the declarant repeatedly failed to appear for deposition); (3) a failure to establish other class members were affected by the policies and practices at issue; (4) most of the alleged misconduct occurred in only two stores; (5) one plaintiff complained of policies that the other (management) plaintiff was in charge of enforcing; and (6) the non-managerial plaintiff had been disciplined for failure to comply with company policies, including timekeeping.

[i] See S.G. Borello & Sons, Inc. v. Dept. of Indus. Relations (1989) 48 Cal.3d 341.

[ii] See 29 C.F.R. §541.108(a).

[iii] Naranjo v. Spectrum Sec. Servs., Inc. (2019) 40 Cal.App.5th 444, 478.

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