Source: http://cawageandhourlaw.blogspot.com/2009/
Timestamp: 2019-04-19 13:09:59+00:00

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This case arises out of Nevada, but it has parallels in California law that make it worth reading. In Boucher v. Shaw (9th Cir. July 27, 2009), the Ninth Circuit looked at whether an employer's individual managers could be held liable for unpaid wages under Nevada law or the Fair Labor Standards Act (FLSA). The Ninth Circuit certified the first issue to the Nevada Supreme Court, which held that the managers could not be held liable under Nevada law. The Ninth Circuit held that the managers could be held liable under FLSA.
Plaintiffs sued three individuals: the employer's chairman and CEO; the CFO; and the person responsible for handling labor and employment matters. Between them, the CEO and CFO owned 100% of the employer. The plaintiffs alleged that each defendant had custody or control over the “plaintiffs, their employment, or their place of employment at the time that the wages were due.” The District Court granted the individuals' motions to dimiss, and the plaintiffs appealed.
Where an individual exercises “control over the nature and structure of the employment relationship,” or “economic control” over the relationship, that individual is an employer within the meaning of the Act, and is subject to liability.
With these principals in mind, and accepting the complaint's allegations as true, the Court held that the District Court erred in granting the motions to dismiss. The Court further held that the employer's bankruptcy filing had "no effect" on the claims against the individual managers under the FLSA, a point that the individuals tried to rely on. "[T]he managers are independently liable under the FLSA, and the automatic stay has no effect on that liability."
Given Reynolds v. Bement and its progeny and the fact that we still don't have a ruling in Martinez v. Combs, employees left holding the bag when their employer goes out of business or files for bankruptcy should carefully consider whether the employers individual managers can be held liable under the FLSA.
Although not every case on independent contractor status has gone in favor of the employees, the list of such cases is long and growing. This testifies in part to the efforts of employers to avoid their obligations by calling their employees independent contractors. It also testifies to the broad efforts by employees and government agencies to fight this growing trend.
In Messenger Courier Assn. of the Americas v. Cal. Unemployment Ins. Appeals Bd. (July 15, 2009), the Fourth District Court of Appeal held that the Appeals Board got it right when it assessed unemployment insurance employer contributions and penalties against a courier service that designated its drivers as independent contractors, rather than employees. NCM Direct Delivery v. Employment Development Department, Precedent Tax Decision No. P-T-495 (2007). The Court held that the Board properly applied the mutli-factor test found in SG Borello and Sons and other cases to the unemployment insurance case at issue, rather than relying only on the common law right of control test.
We conclude the PWL does not address matters of statewide concern and therefore Vista, as a charter city, is not required to comply with the PWL with respect to public works contracts which are financed solely from city revenues. Rather, such contracts are municipal affairs over which Vista has paramount power under article XI, section 5, subdivision (a) of the California Constitution.
Amazingly, the Court of Appeal did not mention a long line of cases holding that the prevailing wage law is a minimum wage law ﻿that guarantees a minimum cash wage for employees on public works contracts and that ﻿serves the important public policy goals of protecting employees on public works projects, competing union contractors, and the public. See cases cited in ﻿Road Sprinkler Fitters Local Union No. 669, v. G & G Fire Sprinklers, Inc. (2002) 102 Cal. App. 4th 765, 778-779.
It will be interesting to see where the Court comes down on this one. The Court's docket is here.
Kim Kralowec obtained a copy of the complaint discussed in my post yesterday. She added an interesting discussion of standing, class certification, and recovery issues arising under 17200 and In re. Tobacco II, which I discussed here. Kim's post is here.
No business which depends for existence on paying less than living wages to its workers has any right to continue in this country. By living wages I mean more than a bare subsistence level -- I mean the wages of decent living.
President Franklin Delano Roosevelt in 1933, urging the passage of federal minimum wage legislation.
In Sanders Construction Co, Inc. v. Cerda (2009) 175 Cal.App.4th 430, the Court of Appeal held that a general contractor ("GC") who hires an unlicensed subcontractor ("sub") is responsible for the wages of the sub's employees.
In Sanders, ﻿the GC’s contract with the sub included the costs of labor and materials: the GC paid the sub, and the sub paid its employees. When the GC stopped paying, the sub's employees filed DLSE wage claims against the GC for wages, interest, and “waiting time” penalties.
These same public policy considerations concerning the subterranean economy [applied in the worker’s comp context] could apply in the present circumstances. For example, an unscrupulous general contractor could collude with an unlicensed subcontractor to cheat workers hired by the subcontractor out of their wages, plus all the related benefits...We discern no meaningful distinction exists between being paid wages and receiving other benefits based on wages. In both instances, the same policy reasons militate against allowing a general contractor to escape liability for the obligations of an unlicensed subcontractor.
The GC argued that the employees, as unlicensed persons performing work for which a license was required, lacked standing to bring their claims, pursuant to Business and Professions Code Section 7301. The court rejected this argument, noting that Section 7503 limits the reach of Section 7301, excluding employees who do not have independent businesses and who do not have the right to control the manner of their work.
Thanks to Leonard H. Sansanowicz for his contribution to this post.
﻿Do not unjustly withhold that which is due your neighbor.
Do not let a worker’s wages remain with you overnight until morning.
Some employers complain about California wage law being too strict, but at least we don't have to pay wages every night!
I've been wanting to note these cases for a couple of weeks, but haven't had the chance. Both deal with the class action settlement approval process. As everyone knows, it's a two-step process. If the Court makes a preliminary determination that the settlement is fair, it orders notice to be sent to the parties and holds a final approval hearing where it hears any objections and determines whether the settlement is fair.
In In re Consumer Privacy Cases (June 30, 2009), the First District Court of Appeal considered objections to the settlement of consolidated actions against Bank of America. The settlement provided up to $10.75 million in various fee waivers and other benefits to class members, $3.25 million to cy pres beneficiaries, and up to $4 million in fees and costs to class counsel.
The settlement agreement here met the four Kullar requirements entitling it to a presumption of fairness. Experienced counsel negotiated the settlement after seven years of litigation, including extensive investigation and discovery. The court found that the settlement was ―the product of arm‘s-length negotiations, and only a very low percentage, approximately .000454 percent, of the over 35 million class members objected. ... The court, moreover, contrary to the [objectors'] claim, conducted an extended analysis of the fairness of the settlement.
With regard to attorney fees, the Court approved use of the lodestar method, and noted that the trial court may, but need not, cross-check the lodestar against the total common fund, including the attorney fee award.
We conclude the order approving the settlement must be vacated because the trial court lacked sufficient information to make an informed evaluation of the fairness of the settlement. This was due to the court's apparent reliance on counsel's evaluation of the class's overtime claim as having "absolutely no" value, without regard to the objectors' claim that counsel's evaluation was based on an allegedly "staggering mistake of law." While the court need not determine the ultimate legal merit of a claim, it is obliged to determine, at a minimum, whether a legitimate controversy exists on a legal point, so that it has some basis for assessing whether the parties' evaluation of the case is within the "ballpark" of reasonableness. We further conclude that the court abused its discretion in finding that the $25,000 enhancements for [the class representatives] were fair and reasonable, and that it erred in awarding costs greater than the maximum amount specified in the notice given to the class.
With this new increase to $7.25 an hour, a full-time worker still only earns $15,080 a year. At the nationwide work-week average of 33 hours, the worker would earn only $12,441. The United States government sets the poverty level at $10,830 for one person or $22,050 for a family of four in 48 states and D.C. A worker who is above this low poverty level would not be eligible for certain welfare-related assistance. Thereby, the new federal minimum wage will just barely put many Americans above the poverty level, exempting them from certain assistance, yet barely allowing them to live comfortably.
You can find more information on the federal minimum wage increase here. California minimum wage remains unchanged at $8.00 per hour.
is one of your brethren or a proselyte living in a settlement in your land.
him call out to God, causing you to have a sin.
Do you remember Emily Litella? The brilliant and amazing Gilda Radner played her on Saturday Night Live's Weekend Update. She would come in and say things like, "What's all this fuss about Soviet Jewelry?" or "What's all this fuss about violins on television?"
On pages 2 and 3, the last sentence: "After several years of litigation, the parties in the Sekly action agreed to a class action settlement totaling $1.2 million." The sentence should read: "after several years of litigation, the parties in the Sekly action agreed to a class action settlement totaling $120 million."
This seems evident to me, but it's surprising how many employees think that employers must provide vacation time. In Owen v. Macy’s Inc. (June 29, 2009, Second District, Div. Two), the employer had a policy that new employees would not earn vacation time during their first six months of employment. After termination, an employee alleged that this policy violated California Labor Code Section 227.3. The trial court disagreed and granted summary judgment for the employer.
An employer is entitled to adopt a policy specifying "the amount of vacation pay an employee is entitled to be paid as wages," depending on length of service. (Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, 783.) The law permits an employer to offer new employees no vacation time: If an express written company policy forewarns new employees that their compensation package does not include paid vacation during their initial employment, then no vacation pay is earned and none is vested. When such a policy is in place, as it is in this appeal, employees cannot claim any right to vested vacation during their initial employment, because they know in advance that they will not earn or vest vacation pay during this period. The trial court correctly determined that plaintiff was not unlawfully denied vacation pay when her employment ended.
Owen includes a good explanation of the limits on LC 227.3 and Suastez. The full text of the opinion is here.
In In re Wells Fargo Home Mortg. Overtime Pay Litigation (2009) --- F.3d ---, the Ninth Circuit Court of Appeals considered "whether the court abused its discretion in finding that the predominance requirement of Federal Rule of Civil Procedure 23(b)(3) was satisfied, based-in large part-on an employer's internal policy of treating its employees as exempt from overtime laws." Slip op. at 1. The Court held that while "such uniform exemption policies are relevant to the Rule 23(b)(3) analysis," "it is an abuse of discretion to rely on such policies to the near exclusion of other relevant factors touching on predominance." Ibid.
In her most excellent blog, The UCL Practitioner, Kim Kralowec notes that Governor Schwarzenegger on Monday signed into law A.B 5, the Electronic Discovery Act. The Act takes effect immediately, so everyone should read up. The full text of the Act is here. Kim's post is here.
Does a worker's assignment to the worker's union of a cause of action for meal and rest period violations carry with it the worker's right to sue in a representative capacity under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, sec. 2698 et seq.) or the Unfair Competition Law (Bus. & Prof. Code, sec. 17200 et seq.)?
That was the question I thought the Court would answer in the affirmative. In any case, you can read the full text of Arias here and Amalgamated here.
I predicted that "the Court is likely to answer: (1) Yes; (2) No." I can't wait to see how good my crystal ball is.
Class counsel filed a motion seeking incentive awards for the class representatives after preliminary approval of the settlement and dissemination of the Settlement Notice, but before the final fairness hearing. It turns out that, as part of their retainer agreement, the named plaintiffs ... had entered into an incentive arrangement with [class counsel]. The incentive agreements obligated class counsel to seek payment for each of these five in an amount that slid with the end settlement or verdict amount: if the amount were greater than or equal to $500,000, class counsel would seek a $10,000 award for each of them; if it were $1.5 million or more, counsel would seek a $25,000 award; if it were $5 million or more, counsel would seek $50,000; and if it were $10 million or more, counsel would seek $75,000.
It seems pretty obvious that such an agreement is a bad idea for everyone involved, even if the Court did call it harmless error.
Los Angeles Superior Court Judge Judith Chirlin recently sanctioned an employer/defendant and its counsel $1,200 for seeking information related to an employee/plaintiff's immigration status.
Our clients worked at a car wash. The employer paid them $40 to $50 for a ten-hour day. After the employer ignored our pre-litigation offer to negotiate a resolution, we filed suit for wage and hour violations.
Employer's counsel propounded discovery seeking information regarding our clients' immigration status, including seeking their green cards and social security cards. We repeatedly advised counsel that such discovery is off limits in a wage and hour matter, but he persisted.
At deposition, counsel attempted to question our client regarding a resident alien card and social security card. We objected on grounds of our client's constitutional and statutory privacy rights and instructed him not to answer. Employer's counsel moved to compel our client to answer, arguing that he had the right to know whether our client was the same person shown on the cards. He also sought $1,090 in fees and costs.
The Court denied the motion, correctly holding that the employer has no right to information on our clients' immigration status. (Go here for an extensive post on this issue.) The Court held that defendant and its counsel made the motion in bad faith and ordered both to pay plaintiffs' attorney fees in the amount of $1,200.
Paul Matheson is a member of the Puyallup Tribe. The Puyallup Tribe is a Pacific Northwest Indian tribe that has a reservation in the State of Washington. Paul Matheson owns and operates a retail store known as Baby Zack’s Smoke Shop “Baby Zack’s”), located on trust land within the Puyallup Indian Reservation. Baby Zack’s sells tobacco products and sundries to Indians and non-Indians. Some of the goods sold by Baby Zack’s have been shipped in from locations outside the State of Washington. Baby Zack’s accepts credit card and debit card payments and uses electronic or telephonic means of communication to banks and credit card companies located outside of the State of Washington. Baby Zack’s regularly employs both Indian and non-Indian workers.
Indian tribes have a special status as sovereigns with limited powers. Indian tribes are dependent on, and subordinate to the federal government, yet retain powers of selfgovernment. However, those powers may be limited, modified, or eliminated by Congress.
The tribes’ retained sovereignty reaches only that power needed to control internal relations, preserve their own unique customs and social order, and prescribe and enforce rules of conduct for their own members. Toward this end, the Supreme Court has recognized that a tribe may regulate any internal conduct which threatens the political integrity, the economic security, or the health or welfare of the tribe.
Indians and their tribes are equally subject to statutes of general applicability, just as any other United States citizen. However, a statute of general applicability that is silent on the issue of applicability to Indian tribes, like the FLSA, does not apply to Indian tribes if: (1) the law touches exclusive rights of selfgovernance in purely intramural matters; (2) the application of the law to the tribe would abrogate rights guaranteed by Indian treaties; or (3) there is proof by legislative history or some other means that Congress intended the law not to apply to Indians on their reservations. In any of these three situations, Congress must expressly apply a statute to Indians before we will hold that it reaches them.
The Ninth Circuit held: (1) FLSA does not touch exclusive rights of selfgovernance in purely intramural matters (in part because the Puyallup Tribe had not enacted its own wage and hour laws); (2) the 1850 Treaty of Medicine Creek, by which the Puyallup Tribe agreed to free all slaves, does not address employment rights and the payment of overtime compensation; (3) the Puyallup Tribe's right to exclude non-Native Americans from their land does not prevent the Department of Labor from entering the reservation to investigate FLSA violations.
I have mixed feelings about this decision. Far be it from me to argue against extending minimum wage protections to any employee, but there's a part of me that believes that decisions like this one render Native American "sovereignty" illusory.
9th Circuit Holds FLSA Collective Action Rep. May Not Settle Individual Case and Still Appeal Denial of FLSA Conditional Cert.
In ﻿Smith v. T-Mobile USA Inc., 570 F.3d 1119 (C.A.9 (Cal.), 2009), two plaintiffs filed suit against T-Mobile, alleging violations of the California Labor Code, the Fair Labor Standards Act (FLSA), and the Unfair Competition Law, Bus. & Prof. Code 17200 (UCL). The District Court denied their Section 216 motion for conditional certification. No other employees had opted into the suit. The plaintiffs settled their individual claims with T-Mobile, signing a stipulated judgment that purported to reserve the plaintiffs' right to appeal the District Court's denial of conditional certification.
The Ninth Circuit dismissed the appeal as moot. It held that a plaintiff in a FLSA collective action may not settle his or her individual claims and still appeal a denial of conditional certification. The Court did not reach the question of whether a plaintiff in a Rule 23 class action may do so.
That will be the next issue when these plaintiffs try to file their Rule 23 motion.
Does Labor Code section 351, which prohibits employers from taking "any gratuity or part thereof that is paid, given to, or left for an employee by a patron," create a private right of action for employees?
Our post on the Court of Appeal decision is here. The Supreme Court's docket is here.
Alltop.com Calls Our Blog a "Gold Nugget"
We do this by collecting the headlines of the latest stories from the best sites and blogs that cover a topic. We group these collections — “aggregations” — into individual web pages. Then we display the five most recent headlines of the information sources as well as their first paragraph.
Put differently, they give you the "gold nuggets" on any given topic. Alltop now lists The California Wage and Hour Blog for Employees on its "California" and "Law" web pages.
On April 22, the Supremes agreed to review the case.
This is a fascinating case. Questions one and two seem to be gimme's for the employees. California has an overwhelming interest in applying California law to work done in California, whether the emploee typically resides within or outside California.
Question three is more complicated. Does 17200 apply to extra-territorial acts? I have not researched the issue and don't know the answer, but I'm eager to see what the Court has to say.
Stay tuned. The Court's docket sheet is here.
Good news for all the potal inspectors out there. In Nigg v. USPS, the Ninth Circuit held that postal inspectors are entitled to overtime compensation under the Fair Labor Standards Act ("FLSA"). I won't go into all the details, but anyone who's interested can read the opinion here.
Great news! President Obama's proposed 2010 federal budget would boost the U.S. Department of Labor's discretionary budget authority to $13.3 billion in fiscal year 2010, in what the administration says is a bid to restore the agency's ability to enforce worker protection laws.
News outlets are reporting that the Senate has confirmed California Representative Hilda L. Solis to be the Obama administration's Secretary of Labor, after several weeks of delays by Republican Senators. The fight over Rep. Solis's nomination foreshadows the larger fight that is expected over the Employee Free Choice Act, legislation that would make joining a union easier.
After eight years of an administration that was hostile to this mission, I look forward to changes that the new Secretary of Labor undoubtedly will bring to office.
Amanza Smith was working as a salesperson in a Beverly Hills boutique when a representative of L’Oreal approached her and asked if she would like to be a “hair model” at an upcoming show featuring L’Oreal products and a hair stylist. After she attended a modeling call, L'Oreal agreed to pay her $500 for one day’s work at the show. Ms. Smith worked at the show, where her hair was colored and styled, and she then walked a runway a few times. Ms. Smith stayed at the show until she was told she could leave. L'Oreal did not immediately pay her the $ 500 in wages it owed her, but waited over two months to do so.
Ms. Smith filed a class action law suit against L'Oreal, alleging that she worked for one day, that her employment was terminated at the end of the day, that L'Oreal violated its obligation to pay earned wages promptly upon separation, and that it should pay her and all similarly situated temporary employees "waiting time" penalties under Labor Code Section 203.
In Smith v. L'Oreal USA, Inc. (2006) 39 Cal. 4th 77, the California Supreme Court agreed. The Court held that the discharge element of Section 201 can be satisfied either when an employee is involuntarily terminated from an ongoing employment relationship or when an employee is released after completing the specific job assignment or time duration for which the employee was hired. An employee who works on a job assignment of short duration is not excluded from the protective scope of Sections 201 and 203.
if an employee of a temporary services employer is assigned to work for a client, that employee's wages are due and payable no less frequently than weekly, regardless of when the assignment ends, and wages for work performed during any calendar week shall be due and payable not later than the regular payday of the following calendar week. A temporary services employer shall be deemed to have timely paid wages upon completion of an assignment if wages are paid in compliance with this subdivision.
Assembly Bill 10 was passed effective October 1, 2008, to extend the exemption for employees in the computer software field to those paid on a salary basis.
(4) be paid an "hourly rate" of "not less than $41.00."
$49.77 per hour ($103,521) effective January 1, 2007.
That was it. I think the idea that a programmer earning $100,000 per year would not be exempt from the overtime law drove businesses nuts, and they worked hard to change the law. Effective January 1, 2008, the legislature brought the "hourly rate" of pay down to $36.00 ($74,880 per year).
But this still left a question about whether salaried employees could be exempt. Those of us who represent employees argued that the language of the statute meant what it said: that only employees who were paid on a hourly basis could be exempt, leaving salaried employees eligible for overtime compensation. And the legislative history backed that up. Defendants, of course, argued that it didn't matter whether someone was paid on an hourly or salary basis, as long as the math worked out.
Effective October 1, 2008, any employee meeting the other requirements of Section 515.5 is exempt from the overtime requirements as long as her or she earns not less than $36.00 per hour or not less than $75,000 per year, paid at not less than $6,250 per month.
Effective January 1, 2009, this rate started to climb back up. For year, anyone who meets the other requirements is overtime exempt as long as he or she earns an hourly rate not less than $37.94 or annual salary of not less than $79,050 for full-time employment, and paid not less than $6,587.50 per month.
While businesses were unable to obtain rollbacks in labor provisions related to meal breaks and overtime pay, they scored victories on tax code changes. A major shift in how the state calculates each company's sales could save businesses an estimated $650 million in state taxes. Republicans also have asked for a $2,000 tax credit per each new employee hire.
This is good news for all Californians. Congratulations to those who worked very, very hard to defeat the administration's efforts.
Will the Economy Turn Juries Against Employers?
A recent article from the National Law Journal says ... maybe.
Some attorneys believe that increased lay-offs will bring more sympathy for employees who have been terminated or suffered discrimination or harassment, and that corporate mis-management scandals have eroded the public trust in corporate America. Others believe that jurors will take into account how badly companies are doing, and that all the news about lay-offs will lead jurors to believe that terminations are justified.
I believe that the cases that are most likely to increase in value are whistle-blower cases in which an employee raises concerns about an employer's management and suffers retaliation or termination as a result. These cases will raise juries' sympathy for the terminated employee and their anger at corporate mismanagement.
Los Angeles City Attorney Rocky Delgadillo today announced that he has filed a 176-count criminal complaint against two Los Angeles car wash owners, a manager, and their four car wash businesses, for repeatedly and willfully violating labor laws and creating a work environment that bordered on indentured servitude.
The complaint, filed Monday in Los Angeles County Superior Court, alleges car wash owners Benny and Nissan Pirian, their four car wash businesses, and manager Manuel Reyes, routinely ignored wage, hour, and rest break laws, forced workers to drink non-potable water, and required employees to purchase uniforms and equipment from their bosses, in violation of numerous laws.
The four car wash businesses named in the criminal complaint are: Celebrity Car Wash, Inc. (901 N. Vine Street, Hollywood), Five Star Car Wash, Inc. (9240 Reseda Blvd, Northridge), Hollywood Car Wash, Inc. (6200 Sunset Blvd, Hollywood), and Vermont Hand Wash, Inc. (1666 N. Vermont, Los Feliz).
The owners, Benny and Nissan Pirian, are each charged with 172 counts of California Labor and Penal Code violations. If convicted on all counts, the Pirians each face nearly 86 years in county jail, and $136,000 in fines. The manager, Manuel Reyes, faces 2 counts each of witness intimidation and brandishing a deadly weapon, which carries a maximum penalty of 2 ½ years in county jail, and $3,000 in fines.
"With this lawsuit, the City Attorney is sending a clear message: wage theft is a crime, and it won't be tolerated in Los Angeles," said Kevin Kish, Director of the Employment Rights Project at Bet Tzedek Legal Services the legal-aid organization. Bet Tzedek attorneys are representing employees of Pirian-owned car washes in a class-action suit in Los Angeles County Superior Court.
The City Attorney's press release can be found here.
The 7th U.S. Circuit Court of Appeals has made it tougher for plaintiffs to keep securities class actions in state court by holding that the 2005 Class Action Fairness Act's preference for federal jurisdiction trumps the Securities Act of 1933.
The decision, issued on Jan. 5, stems from a disputed real estate investment trust merger and splits with a 9th Circuit interpretation of conflicting terms between the 1933 Act's anti-removal provisions and the Class Action Fairness Act's terms that allow removal of state class actions to federal court.
The 7th Circuit held that an anti-removal provision in Section 22 of the Securities Act of 1933 does not prevent removal when other requirements of the CAFA are met. The CAFA is more recent and thus generally allows removal, despite the 1933 Act bar, so long as terms of the CAFA are met. Katz v. Gerardi, 08-8031 (7th Cir.).
This breaks with a 2008 decision in the 9th Circuit that held that the more specific terms of the 1933 Act, applying to securities cases, can trump the generalized terms of the 2005 act applying to all civil actions, Luther v. Countrywide Home Loans Servicing, 533 F.3d 1031 (9th Cir. 2008).
The use and enforcement of choice of law and forum selection clauses has become a very important issue in wage and hour law.
In Doe 1 v. AOL, LLC (Jan. 16, 2009) the plaintiffs filed a class action against AOL after AOL made public information regarding its users' search records. The plaintiffs sued in federal court in California for violation of a federal privacy law, and the California plaintiffs sued for violation of the Consumer Legal Remedies Act ("CLRA"). California Civil Code Section 1770.
AOL moved to dismiss the case, relying on its member agreement, which designated the courts of Virginia as the proper venue for any dispute between AOL and its members, and designated Virginia law to govern such disputes. The District Court granted the motion without prejudice to plaintiffs' right to file in the Virginia state or federal courts.
The Ninth Circuit Court of Appeals reversed the trial court's decision. First, the Ninth Circuit held that the Member Agreement's clause designating the "courts of Virginia" as the proper fora for any dispute meant the Virginia state courts, and not the federal courts located in Virginia.
(1) enforcement of the forum selection clause violated California public policy that strongly favors consumer class actions, because consumer class actions are not available in Virginia state courts, id. at 712;12 and (2) enforcement of the forum selection clause violates the anti-waiver provision of the Consumer Legal Remedies Act (CLRA), id. at 710, which states “[a]ny waiver by a consumer of the provisions of this title is contrary to public policy and shall be unenforceable and void.” Cal. Civ. Code § 1751.
Accordingly, the Court held that the forum selection clause in AOL's member agreement is unenforceable as to California resident plaintiffs bringing class action claims under California consumer law.
Judge Nelson wrote the Court's opinion. Judges Reinhardt and Bea joined, with Judge Bea writing a separate concurring opinion.
The California Court of Appeal recently reversed a decision denying class certification, holding that the trial court had abused its discretion. In Ghazaryan v. Diva Limousine, Ltd. (December 22, 2008, ordered published January 12, 2009) 169 Cal.App.4th 1524, the plaintiff challenged his employer's policy of "paying its drivers an hourly rate for assigned trips but failing to pay for on-call time between assignments ('gap time')." The plaintiff, like his co-workers, frequently had substantial periods of gap time for which he was not compensated. After a run-in with his employer over his right to eat during this "gap time," the plaintiff filed suit, alleging failure to pay overtime and earned wages, failure to provide meal and rest periods, failure to provide timely and accurate wage and hour statements, and violation of the Unfair Competition Law.
The plaintiff sought to certify two classes of employees: "(1) based on Diva’s alleged failure to pay earned overtime and straight time, 'All current and former employees of Defendant who worked as Limousine Drivers during the period of May 10, 2002 to the present'; and (2) targeting Diva’s failure to provide mandatory rest breaks, 'All current and former employees of Defendant who work as Limousine Drivers at any time during the period of May 10, 2002 to the present, worked one or more four hour increments of time without being given a rest break for each such increment and who were not properly compensated therefor.'"
The employer used a very common strategy in defending class certification, focusing on purported differences in the way that its drivers used their gap time. The employer emphasized that some members of the putative class were paid for their gap time and submitted declarations from others who stated that they used gap time for personal business and did not support the law suit.
The trial court found the declarations "convincing" and denied class certification. The trial court held that it could not determine how many people would be in the class (and thus whether the numerosity requirement was satisfied) without first determining whether the employer's gap time policy was legal, which the court said it could not do at the certification stage. Similarly, the court held that it could not tell who would fit into the class unless it determined the legality of the policy, and thus found that ascertainability was lacking.
The Court of Appeal held that the trial court utilized "improper criteria" in analyzing the class certification motion.
Having set forth the proper standard for evaluating the class certification motion, the Court went on to hold that the case satisfied all requirements for class certification.
Regarding ascertainability and numerosity, the Court held that the plaintiff had properly identified the class. The Court stated, "a class is properly defined in terms of 'objective characteristics and common transactional facts,' not by identifying the ultimate facts that will establish liability." The plaintiff's proposed class, consisting of all drivers employed during a particular time, was perfectly appropriate. Any drivers who had been paid for their on-call time, the Court held, could be excluded from the class without destroying ascertainability. "Alternatively, the class can be modified to specify only those drivers who were not paid for their on-call or gap time." Either way, the proposed class satisfied "the purpose of the ascertainability requirement to ensure notice to potential class members who at some time during their employment by Diva accumulated gap time."
Diva dictates to a large extent how drivers use their on-call time. Diva distributes an official “Chauffeur’s Handbook” to all drivers that expressly bars personal use by drivers of Diva’s vehicles (albeit Diva appears to ignore incidental errands within a geographically proximate area), requires drivers to respond promptly to dispatch calls and accept trip assignments absent pre-arranged circumstances, requires drivers to be in full uniform while in or proximate to their vehicles and requires drivers to clean and maintain their vehicles during their on-call time. Those limitations apply across the board to all drivers who have on-call time during the course of a day. Although individual testimony may be relevant to determine whether these policies unduly restrict the ability of drivers as a whole to utilize their oncall time for personal purposes, the legal question to be resolved is not an individual one. To the contrary, the common legal question remains the overall impact of Diva’s policies on its drivers, not whether any one driver, through the incidental convenience of having a home or gym nearby to spend his or her gap time, successfully finds a way to utilize that time for his or her own purposes.
There is no question class treatment constitutes the superior mode of resolving Ghazaryan’s claims in this action. Based on the evidence submitted by Diva in opposition to the motion, its compensation policy has been carefully drafted; and Diva very well may find its policy upheld as reasonable under the existing DLSE standard. We see no advantage to either party to resolution of this question on a piecemeal basis and agree with Ghazaryan such a prospect would jeopardize the ability of employees to find competent representation if restricted to their own individual claims.
Judge Perluss wrote the Court's opinion. Judges Zelon and Jackson joined.
I am speaking at the Los Angeles County Bar Association's Twenty Ninth Annual Labor and Employment Law Symposium on March 31, 2009, at the Millennium Biltmore Hotel in Los Angeles. I am speaking on the increasingly common practice of employers classifying their employees as independent contractors.
Why would an employer classify its employees as independent contractors? I don't know, but maybe it has something to do with the fact that employers don't have to pay independent contractors overtime compensation, don't have to provide them with meal periods, rest periods, or proper wage statements, don't have to pay them promptly on termination or quitting, and don't have to follow the other laws that protect employees, but don't protect independent contractors.
Oh yeah, and they don't have to pay their fair share of employment taxes to the government, either. Sounds like a great deal for the employer, and a bad deal for everyone else.
Go here for more information on the Symposium.
California's Unfair Competition Law ("UCL"), Business and Professions Code Section 17200 et seq., "was enacted to protect consumers as well as competitors from unlawful, unfair or fraudulent business acts or practices, by promoting fair competition in commercial markets for goods and services." Over the years, the UCL has been used to stop such practices as stores selling cigarettes to underage kids or selling re-packaged meat as new. It has been used succesfully in countless wage and hour cases.
On November 2, 2004, California voters passed Proposition 64, amending the UCL in several important ways. Among other changes, Prop. 64 amended Section 17204 to provide that only the Attorney General, district attorney, city attorney, or "any person who has suffered injury in fact and has lost money or property as a result of such unfair competition" could prosecute a UCL action.
(1) In order to bring a class action under Unfair Competition Law (Bus. & Prof. Code, section 17200 et seq.), as amended by Proposition 64 (Gen. Elec. (Nov. 2, 2004)), must every member of the proposed class have suffered "injury in fact," or is it sufficient that the class representative comply with that requirement?
(2) In a class action based on a manufacturer's alleged misrepresentation of a product, must every member of the class have actually relied on the manufacturer's representations?
In a typical wage and hour case, all class members will have suffered "injury in fact," so the Tobacco case will not be as important in wage and hour litigation as in other areas, but the case remains of interest.

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