California Employment Law Report : Los Angeles Employment Lawyer & Attorney : Anthony Zaller Law Firm : California Employment Law Report

In Faulkinbury v. Boyd & Associates, Inc., Plaintiffs brought a case on behalf of about 4,000 current and former security guards of Boyd & Associates, Inc. Plaintiffs asserted that all guards had to sign an agreement to take on-duty meal periods and that they never took an uninterrupted, off-duty meal break. They also asserted that, while employed by Boyd, they were instructed not to leave their posts and never took any off duty rest breaks.

Meal Break Claim

Defendant Boyd argued that the on-duty meal periods at issue in this case created individualized issues that were not suitable for class-wide treatment by the court. In reviewing defendant’s argument, the court explained that on-duty meal periods are permissible if it meets the “nature of the work exception”:

Under the nature of the work exception, an employer is not required to provide off duty meal breaks “when the nature of the work prevents an employee from being relieved of all duty and when by written agreement between the parties an on the job paid meal period is agreed to.” (Cal. Code Regs., tit. 8, § 11040, subd. 11(A).) On duty meal period agreements are permitted under Wage Order No. 4 2001, California Code of Regulations, title 8, section 11040, subdivision 11(A). Based on the nature of the work exception, Boyd argues its liability to the Meal Break Class depends on individual issues regarding the nature of the work at each post and whether each employee did in fact take on duty meal breaks.

The court noted that Boyd did have a company-wide uniform policy of requiring security guard employees to take on duty meal breaks and required them to sign on duty meal break agreements. However, the court also recognized that individualized issues still existed. For example, Boyd submitted evidence that guards were able to take meal break “during periods of inactivity” and other guards stated that they are relieved of all duty in order to take a meal break. Boyd also submitted evidence showing that some of its guards were able to take off-duty meal breaks, it depended on the employees’ post they were assigned to, and other factors could make it possible for employees to take an off-duty break. Some employees submitted declarations saying that Boyd’s clients’ in-house security would relieve a Boyd security guard for a meal and rest break and on other occasions a second Boyd security guard would cover the other’s post to enable one of them to take a break.

The court also noted:

The ability of a Boyd security guard employee to take an off-duty meal break sometimes depended on whether the employee was training another employee (“When I am training another security officer we will relieve each other of all duty during meal and rest periods”). Some guards put out a sign saying “on a break” and took an off duty break.
The trial court held, and the appellate court agreed, that these issues were enough to create individual issues of liability predominate over common issues.

Rest Break Claim

The court held that to determine Boyd’s liability for failing to authorize and permit off duty rest breaks, individual determinations would have to be made for each security guard employee for each shift worked.

In at least one declaration, the employee stated he determined, based on the circumstances, when to take a rest break, and “[w]hen these periods occur I place a sign out to inform visitors that I am on break and will be back shortly.” Another employee declared she frequently took rest breaks at her post, but was able to “watch television, read magazines or books, or engage in other non security related activities.”

The court concluded that the evidence established that there was no common proof regarding a finding of Boyd’s liability for rest breaks. Boyd had no formal policy denying off-duty rest breaks, Boyd did not require employees to waive them, and whether a guard took a rest break depended on a number of individual circumstances.

Therefore, the court held that the trial court was correct in holding that the meal and rest break claims were not suitable for class-wide treatment. The opinion, Faulkinbury v. Boyd & Associates, Inc., can be read in full here.
 

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It may come as a surprise to many employers that employees cannot waive, or enter into contracts contrary to many of California’s Labor Code requirements. The rationale for this is pretty basic: if employees could waive the rights given to them under the Labor Code, every employer would simply require the employee to waive the rights on the first day of work, rendering the Labor Code meaningless.

A general rule for Courts is found in Civil Code section 3513, which provides: “Any one may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement.” California courts have found that many of the Labor Code provisions are for the public good, and therefore cannot be waived by an employee.  

Labor Code Provisions An Employee Cannot Waive:

• Minimum Wage & Overtime

Labor Code Section 1194 provides a private right of action to enforce violations of minimum wage and overtime laws. That statute clearly voids any agreement between an employer and employee to work for less than minimum wage or not to receive overtime:

Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney’s fees, and costs of suit.

In Gentry v. Superior Court, the Supreme Court further explained:

[Labor Code] Section 510 provides that nonexempt employees will be paid one and one-half their wages for hours worked in excess of eight per day and 40 per week and twice their wages for work in excess of 12 hours a day or eight hours on the seventh day of work. Section 1194 provides a private right of action to enforce violations of minimum wage and overtime laws.
…
By its terms, the rights to the legal minimum wage and legal overtime compensation conferred by the statute are unwaivable. “Labor Code section 1194 confirms ‘a clear public policy . . . that is specifically directed at the enforcement of California’s minimum wage and overtime laws for the benefit of workers.’”

• Expense Reimbursement

Labor Code section 2802 requires employers to reimburse its employees for “necessary expenditures or losses incurred by the employee” while performing his or her job duties. Labor Code section 2804, clearly provides that an employee cannot waive this right to be reimbursed for or liable for the cost of doing business. Section 2804 provides, “Any contract or agreement, express or implied, made by any employee to waive the benefits of this article or any part thereof, is null and void….”

Labor Code Provisions An Employee May Be Able To Waive:

While it is unclear, the following items could possibly be waived by an employee. However, these areas are very unsettled, and employers should approach with caution when seeking waivers from employees on these issues.

• Meal Breaks

The California Supreme Court is currently reviewing the case Brinker v. Superior Court, that should address, among other issues, the standard regarding how employers need to provide meals breaks. At issue is whether employers need to simply “provide” employees with meal breaks, or on the other hand, “ensure” that employees take meal breaks. If the Supreme Court rules that employers only need to provide meal breaks, then if the employee chooses not to take the meal break, then arguably there would be no violation. The Supreme Court will hopefully issue a ruling on this case in 2010.

• Waiver To Participate In A Class Action

Given the increase in wage and hour class actions, employers began seeking agreements from their employees that if a dispute would arise about any wage and hour issue, the employee would agree to only seek remedies on an individual basis, not through a class action. The California Supreme Court reviewed the issue if an employee could enter into such an agreement and found that, “at least in some cases, the prohibition of classwide relief would undermine the vindication of the employees’ unwaivable statutory rights and would pose a serious obstacle to the enforcement of the state’s overtime laws.” The Court therefore set out a number of factors that a trial court must look at to determine whether the class action waiver is enforceable or not. As of February 2010, there has not been a class action waiver that has been upheld by an appellate court in California. So while there is the possibility of enforcing such waivers, this possibility is very slight.
 

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I was quoted in this month's California Lawyer magazine regarding the steady persistence of wage and hour lawsuits here in California - even during these difficult economic times.  The article, No Break In Worker Suits, can be read here. 

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Start-up companies are usually saving every penny and operating on small margins. Simply the cost of defending an employment lawsuit could bring the entire venture into jeopardy. Here is a list of ten common California employment law mistakes made by start-ups:

1. Assuming everyone can be paid a salary, and not paying overtime for hours over 8 in one day or 40 in one week. For a company to not pay overtime, it has the burden of proof to establish that the employee meets an exemption to California’s overtime laws. The exemptions are based on the amount of pay the employee receives and the duties the employee performs.
2. Not researching particular laws that apply to the industry or city. For example, businesses in San Francisco have to provide for paid sick leave.
3. Not having a meal and rest break policy. It goes without saying, every company in California needs a meal and rest break policy – and evidence that this policy is regularly communicated to employees.
4. Not recording meal breaks. Employers are required to not only provide meal breaks, but also keep records of when the employee started and stopped the meal break.
5. Not paying accrued vacation when employment is severed. Accrued and unused vacation is considered wages under California law, and needs to be paid out at the end of employment regardless of whether the employee is fired or quits.
6. Overestimating the enforceability of covenants not to compete. Nine times out of ten, covenants not to compete are unenforceable in California.
7. Underestimating the importance of an employee handbook.
8. Assuming any worker can be classified as an independent contractor. Just like exempt employees, employers will bear the burden of proof when it comes to classifying independent contractors. Generally, the test is how much control the employer has over the worker.
9. Withholding the money necessary to hire an HR manager knowledgeable with California law.
10. Not reimbursing employees for business related expenses, such as travel expenses. Under Labor Code section 2802, employers are required to repay employees who pay for business related items out of their own pocket.

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The newly appointed Secretary of Labor, Hilda Solis, issued a statement on March 24, 2009 that the Department of Labor is renewing its efforts to enforce labor laws across the country. With the addition of 250 field investigators provided to the DOL under the American Recovery and Reinvestment Act, businesses can be assured of increased audits.

As the Ohio’s Employer’s Blog points out, a DOL audit can feel like an unpleasant medical exam and employers need to be proactive about compliance. Except, I must add, one difference between the medical exam and DOL audit is that you can buy insurance to cover the costs of the medical exam.

In California, employers should review their pay practices, including that employees are paid on time and receive at least the minimum wage for California. For example, employers should insure they are complying with meal and rest break requirements, properly recording meal breaks and the employees’ time worked, properly paying overtime, and reimbursing employees for all business related expenses. Employers employing minors should also carefully examine the child-labor laws applicable to their business, as these requirements are extremely detailed and many well-intentioned employers may still be in violation.

Businesses should also audit whether they have properly classified their exempt employees and independent contractors. A misclassified employee can create a huge amount of liability for a business, as the misclassified employee is entitled to damages for overtime pay, penalties, interest, and their attorney’s fees.

Employers need to be proactive about complying with these complex wage and hour laws. If cost is a concern, complete an in-house audit and then have an attorney double check the policies and practices. It will cost a lot more to contact an attorney after the DOL is in your workplace or the lawsuit has already been filed.

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Plaintiff, who was a trash truck driver for Athens Disposal Company, Inc., filed a class action against the company alleging violations of the Labor Code.  Plaintiff asserted the following causes of action against Athens:

1. Failing to pay overtime.
2. Failing to provide meal periods and to pay an additional hour of compensation per workday to employees who missed a meal period.
3. Failing to provide rest periods and to pay an additional hour of compensation per workday to employees who missed a rest period.
4. Failing to provide necessary payroll information to employees and failing to maintain records on each employee showing all hours worked and all meal periods taken.
5. Civil penalties authorized by the Private Attorneys General Act of 2004 (PAGA) for violating the Labor Code.
6. Violation of the California Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.).

Immediately after the lawsuit was filed, Athens filed a petition to compel arbitration based on a written agreement with plaintiff. The arbitration agreement contained a provision waiving class arbitrations and also precluded an employee from acting in “a private attorney general capacity,” which would bar plaintiff’s enforcement of the Labor Code on behalf of other employees.

The court held that the entire arbitration agreement was not enforceable:

We conclude that the class arbitration waiver is unconscionable with respect to the alleged violations of the meal and rest period laws given “the modest size of the potential individual recovery, the potential for retaliation against members of the class, [and] the fact that absent members of the class may be ill informed about their rights.” (Gentry v. Superior Court (2007) 42 Cal.4th 443, 463 (Gentry).) In addition, because the arbitration agreement prevents plaintiff from acting as a private attorney general, it conflicts with the Labor Code Private Attorneys General Act of 2004 (PAGA) (§§ 2698–2699.5) — an act that furthers Gentry’s goal of comprehensively enforcing state labor laws through statutory sanctions (see Gentry, supra, 42 Cal.4th at pp. 462–463).

The court noted that the class action waiver in the arbitration agreement by itself was unenforceable, which may have been severed from the arbitration agreement. However, when coupled with the employee’s waiver of action as a private attorney general, the entire agreement was unenforceable.

The case, Franco v. Athens Disposal Company, Inc., can be downloaded for a short period of time from the court’s website in PDF or Word.
 

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The WSJ recently reported, there is a trend that discrimination based lawsuits fair a lot worse than most other cases filed in federal court. A study found that discrimination cases lose at a higher rate and are more likely to be dismissed at early stages in the lawsuit. The article reports:

The odds against winning discrimination cases have some employee lawyers reluctant even to try. "We will no longer take individual employment-discrimination cases, because there's such a high likelihood of losing," New York plaintiffs' attorney Joe Whatley Jr. says. Job-discrimination case filings declined by 40% from 1999 to 2007, federal court records show.

The article also points out that discrimination cases are dismissed more often at the summary judgment stage:

Even the federal courts have detected the pattern of more dismissals in discrimination cases, though they surmise different reasons for it than do plaintiffs' lawyers. A report last year by the Federal Judicial Center, the research arm of the federal courts, found that judges nationwide terminated 12.5% of employment-discrimination cases through summary judgments, before the suits reached trial. In 90% of those cases, it was the employers who requested the summary judgment. In contrast, the study found, 3% of contract cases and 1.7% of personal-injury and property-damage suits were dismissed via summary judgments.

There can be a number of reasons for this as the article points out: employers settle bad cases before litigation and employers have implementing better policies and maintain better documentation to defend themselves against discrimination claims.

It is interesting to note that during this same time period that discrimination class are declining, there is a noticeable increased amount of wage and hour litigation. In fact, wage and hour lawsuits more than doubled in federal courts from 2001 to 2006.  No matter what the cause, discrimination cases are harder to bring, and harder to win. What replaced discrimination claims during this same time period? Wage and hour claims for violations of overtime pay, non-payment of wages, and not providing meal and rest breaks. 
 

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While California employers anxiously wait for the California Supreme Court’s opinion in Brinker v. Superior Court (Hohnbaum) (and also Brinkley v. Public Storage, Inc.), what steps should they in regards to meal and rest break policies?

Record meal breaks.

This is already an obligation of California employers, and the Brinker decision does not change this obligation. Failure to do so creates a negative inference against the employer during litigation.

Employers should continue to have a strict written policy on providing meal and rest breaks.

Brinker’s policies, which were found to be valid by the appellate court, are a good example of policies California employers should have in place. For example, Brinker had a written policy titled “Break and Meal Period Policy for Employees in the State of California.” Brinker also required its employees to sign a form stating “I am entitled to a 30-minute meal period when I work a shift that is over five hours” and that “If I work over 3.5 hours during my shift, I understand that I am eligible for one [10-]minute rest break for each four hours that I work.” Brinker’s policy also stated that an employee’s failure to abide by the policy could result in termination. The court held that this ultimately was sufficient under California law to “provide” meal and rest breaks, only if the defendant has taken steps to establish and communicate the policy. Then if an employee fails to take a meal or rest break voluntarily, the employer is not liable for damages.

Continue to monitor that employees are actually taking meal breaks.

A good example of what not to do was shown by the defendant in Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949. There, the defendant, a trucking company, had computerized systems on each truck that allowed it to track the driver’s location, speed, starts and stops, and time. The drivers had to input factors that the computers could not monitor independently, such as road conditions and traffic. The court held that by requiring its drivers to keep track of these factors, the defendant trucking company regulated the drivers’ activity, but failed to schedule meal breaks, did not include an activity code for meal breaks that would be an acceptable delay for deliveries. The company also did not monitor compliance. The court also noted that:

[W]here the employer has failed to keep records required by statute, the consequences for such failure should fall on the employer, not the employee. In such a situation, imprecise evidence by the employee can provide a sufficient basis for damages.

(citing Hernandez v. Mendoza (1988) 199 Cal.App.3d 721, 727). As a result of Cicairos’ failures, “most drivers at their meals while driving or skipped a meal nearly every working day” and the pressure from management made drivers feel that they should not stop for lunch. The court held that these facts negated defendant’s argument that the meal breaks were provided.

Make sure management knows about and enforces these rules.

Employers should have discussions with their front-line managers about meal and rest breaks to ensure that the policy is being effectively administrated.

Policies should require employees to come forward to report if they have been forced to work through a meal break.

This would help to some degree when the employees claim that they were forced to work through their meal and rest breaks.
 

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It appears that the California state politicians are close to finalizing a budget deal in Sacramento by this Friday. The Governor placed everything on the table during these negotiations, including attempting to bring some relief to businesses in regards to the meal and rest break laws and even revising California’s requirements that overtime is owed for all work performed over 8 hours in a day. However, by many reports it appears that there will be no change to the current meal and rest break laws, or the overtime requirements.

Many California businesses have been sued in wage and hour class actions alleging that they have not properly administered meal and rest breaks. Employers face large amounts of liability in these class actions in the form of premium pay of one hour of pay at the employee’s regular rate of pay for each violation for a period of four years.

The Press Democrat also reports that the deal will increase taxes:

Vehicle license fees would nearly double, going from the current rate of 0.65 percent to 1.15 percent of the value of a car or truck.
The sales tax would increase by 1 cent. Gas taxes would increase by 12 cents a gallon.
Californians would pay a new surcharge on their personal income taxes, amounting to 2.5 percent of their total tax bills. The state's dependent credit would be cut in half, raising taxes for parents and those who take care of elders.
The new and increased taxes would remain in effect for at least two years.
 

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Plaintiff filed a petition for review to the California Supreme Court in Brinkley v. Public Storage, Inc.  Shortly after the Supreme Court granted review of Brinker v. Superior Court, the Brinkley decision was issued by a lower appellate court (click here to read the opinion in Brinkley v. Public Storage, Inc.).  The appellate court in Brinkley held that:

• Meal periods need not be provided within the first five hours of the shift.
• Defendant must provide meal periods but need not ensure that they are actually taken.
• Defendant did not violate Labor Code section 226.7 because defendant made rest periods available.

This ruling basically agrees with the appellate court's decision in Brinker. The holdings in Brinkley and Brinker definitely make plaintiff's attempt to certify class actions in meal and rest break cases much more difficult.  If the standard is that employers only need to provide (and not ensure) meal breaks, then the inquiry into why employees did not take meal breaks becomes more individualized, which means a court probably cannot make these determinations on a class-wide basis.  For example, the court would have to determine if employees voluntarily worked through meal breaks, as opposed to whether the employee was required to work through the breaks. 

I expect the California Supreme Court will issue a grant and hold in Brinkley, making it non-binding on California trial courts until a final ruling is issued by the Supreme Court on similar issues in Brinker v. Superior Court.

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I recently conducted a webinar on new developments involving meal and rest breaks, expense reimbursement, paid time off pitfalls, and other wage and hour issues California employers should be aware of.  It is approximately 30 minutes.  Click here to download, or click here to listen via iTunes.

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