Labor Employment Law Blog

By Brian Murphy and Jonathan Sokolowski

On May 29, 2013, the United States Court of Appeals for the Second Circuit issued its opinion in Cuevas v. Citizens Financial Group, Inc. and RBS Citizens, N.A., Case No. 12-2832, reversing the Eastern District of New York’s grant of Rule 23 class certification to a putative class of Assistant Branch Managers (“ABMs”) alleging that they were denied overtime. In a summary order, the Court held that the District Court failed to resolve factual disputes concerning the duties performed by putative class members, which were material to its ability to issue a ruling concerning commonality under Rule 23(a) and predominance under Rule 23(b)(3).

By Thomas Kaufman

On Tuesday, the Ninth Circuit decided Leyva v. Medline Industries, Inc., reversing an order denying class certification in a wage and hour case.  The decision represents the first interpretation from the Ninth Circuit of the scope of the Supreme Court’s decision in Comcast Corp. v. Behrend that addressed the requirements for class certification under Rule 23(b)(3) of the Federal Rules of Civil Procedure.   As discussed below, the Ninth Circuit squarely rejected the interpretation of Comcast that some commentators had advanced that the requirement to individually calculate damages for each class member generally should preclude class certification.  Beyond that, the decision does not break substantial new ground.

By Sean Kirby

On May 8, 2013, the New York City Council, by a 45-3 vote, passed the New York City Earned Sick Time Act which will require employers with 20 or more employees to provide paid sick leave to their employees (the “Sick Leave Act”). While Mayor Bloomberg has stated his intention to veto the Sick Leave Act, the 45-3 vote was more than sufficient to overcome the two-thirds majority needed to override the Mayor’s veto. In passing the Sick Leave Act, New York City has joined Connecticut, the District of Columbia, Portland, San Francisco and Seattle as the latest municipality requiring paid sick leave for employees.

By Thomas Kaufman

On Friday afternoon, the Fourth Appellate District, Division 3 (Orange County) decided Faulkinbury v. Boyd & Associates (Faulkinbury II). This was a meal period, rest period, and overtime class certification decision in which the trial court had previously denied certification and the Court of Appeal had previously affirmed the denial (in Faulkinbury I).   However, the California Supreme Court issued a grant/hold review on the decision in light of its grant of review in Brinker Restaurant Corp. v. Superior Court (Brinker), and the case was remanded to the court of appeal to consider in light of the Brinker decision.

The new decision reverses the previous denial of class certification and mandates class certification of the meal period, rest period, and overtime claims. Although that is unfortunate for the security guard employer, the decision is actually written fairly narrowly and should not open the door to easy certification in the typical meal and rest period cases.  As explained below, while the court of appeal got the analysis half-right, it still appeared to gloss over the existence of individualized issues that should raise doubts about the ability to try the meal or rest period claims in the case as a class action.

By Lisa Lewis and Rachel Tischler* 

On Friday, March 29th, New York State passed the 2013-14 budget. The budget includes, among other things, a significant increase to the state’s minimum wage over the next two years. Pursuant to the budget, on December 31, 2013, the minimum wage will increase from $7.25 to $8.00/hour. On December 31, 2014, the minimum wage will increase from $8.00 to $8.75/hour. On December 31, 2015, the minimum wage will increase from $8.75 to $9.00/hour.

By Thomas Kaufman

As many readers of this blog know by now, last week the Supreme Court issued yet another anti-class certification decision in Comcast Corp. v. Behrend (“Comcast”). While the full scope and meaning of the Court’s holding is subject to interpretation by the lower courts, a central holding is that a district court errs if it certifies a class for purposes of liability and damages where the plaintiff lacks collective proof capable of calculating damages to the class consistent with Plaintiff’s theory of liability.

Furthermore, Justice Scalia’s decision repeatedly invoked Wal-Mart Stores, Inc. v. Dukes (“Dukes”) and, at least as a matter of tone, appeared to admonish lower courts to be more hesitant in granting class certification than they have been under past precedent.  Indeed, Justice Scalia announced that the “predominance” analysis under Rule 23(b)(3) is even more rigorous than the strict Rule 23(a) “commonality” analysis announced in Dukes. 

As explained below, the Court’s subsequent orders issued this week that summarily reversed and remanded class certification decisions in two other cases cast serious doubt on the arguments from the plaintiff’s bar that Comcast was limited to its facts and that Comcast will have no impact on class certification jurisprudence.

By Eric Raphan and Jonathan Sokolowski 

In Lundy v. Catholic Health System of Long Island Inc., No. 12-1453 (2d Cir. Mar. 1, 2013), the Second Circuit Court of Appeals, resolving what had previously been an unsettled issue in the Circuit, held that the Fair Labor Standards Act (“FLSA”) does not permit a cause of action for “gap-time,” even when an employee has worked overtime, provided that the employee is paid at least minimum wage. A gap-time claim seeks compensation for unpaid work below the 40-hour overtime threshold. For example, if an employee alleges that he or she was not paid for hours 35 to 40 in a given week, the employee has asserted a “gap time” claim for those five unpaid hours. Separately, the court also discussed the pleading requirements necessary to state a claim for failure to pay overtime under the FLSA.

By Thomas Kaufman

On March 19, 2013, the U.S. Supreme Court handed down Standard Fire Insurance v. Knowles, a short, narrow, and unanimous opinion addressing removal of class actions to federal court under the Class Action Fairness Act (“CAFA”).  The central holding of the case is that a district court should “ignore” representations by the plaintiff that the amount in controversy is under $5 million and instead consider the actual evidence concerning the number of class members and potential claims.  Although the Court did not expressly address Lowdermilk v. U. S. Bank Nat'l Ass'n, 479 F.3d 994 (9th Cir. 2007)—a 9th Circuit case that held that the defendant must establish with "legal certainty" that the amount in controversy exceeds $5 million when the plaintiff pleads that the amount in controversy is lower—the Supreme Court's reasoning effectively reverses the Lowdermilk line of cases.

By Thomas Kaufman

On March 4, 2013 the Ninth Circuit issued a second opinion in the action, Wang v. Chinese Daily News (Wang II), in which it reversed the class certification it had previously affirmed and remanded the matter for further consideration of Rule 23(a) commonality and Rule 23(b)(3) predominance.  The Wang II decision follows a remand from the United States Supreme Court which had reversed the original Wang judgment in light of the inconsistencies between the lower courts' rulings and the certification standards the Supreme Court announced in Dukes v. Wal-Mart (“Dukes”).  As explained below, except for the last paragraph of the case, this mostly just restates holdings of other cases  But there is one highly significant holding at the end of the case concerning the application of “Trial by Formula” to wage/hour class actions that defense lawyers should be expected to cite in almost every class action they defend.

As previously reported (click here), the payment of certain severance benefits may be exempt from FICA taxes. Under the Sixth Circuit’s decision in Quality Stores (click here), severance pay made in connection with an involuntary separation from employment due to a reduction in force, plant shutdown or similar condition (“supplemental unemployment compensation benefits”) are not subject to FICA taxes. The request by the IRS for an en banc review of the Quality Stores decision was denied by the Sixth Circuit last month.

By Lisa Lewis and Brian Garrett* 

In January 2013, Democratic Assemblywoman, Annette Robinson, introduced a bill that would allow employees who are underpaid to recover up to twice the amount of wages due in liquidated damages and to seek such damages through a class action lawsuit.

By Sean J. Kirby

As widely anticipated, on Monday, January 28, New Jersey Governor Chris Christie vetoed a bill that would have increased the state’s minimum wage to $8.50 an hour, with future increases tied to the Consumer Price Index (“CPI”). In vetoing the bill, Governor Christie instead proposed a phased-in $1 increase which he feels will better protect the state’s economic recovery post Hurricane Sandy. Specifically, Governor Christie’s proposal would increase the current minimum wage rate by 25 cents this year, by 50 cents in 2014, and by another 25 cents in 2015.

By Thomas Kaufman

On February 4, 2013 in Espenscheid v. DirectSat USA, LLC a Seventh Circuit panel unanimously affirmed a Wisconsin District Court judge's decision to decertify a large off-the-clock overtime class action. Judge Richard Posner wrote the opinion affirming the decertification and, in his inimitable style, he provides an easy-to-read dissertation on the limits of the class action device, proper standards for class certification, and the requirement for the plaintiff to propose a manageable trial plan if he wants to avoid having his class decertified. As discussed below, this case is chock full of notable points.

By Thomas Kaufman and Jason Guyser

On January 28, 2013, Hon. George King of the United States District Court for the Central District of California issued an order in Pedroza v. PetSmart, Inc. denying class certification of exempt misclassification claims brought by a former PetSmart store manager. The opinion is interesting in that it contains a detailed examination of certification requirements pursuant to Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011). The analysis Judge King employed would lead to denial of certification in many exemption cases. However, Judge King separately ruled that the case could proceed as an uncertified PAGA collective action, leaving open the possibility that PAGA penalties could somehow be determined notwithstanding the Court’s finding that common issues predominated on the underlying exemption issue.

By Rebecca Hirschklau

The New York State Wage Theft Prevention Act (“WTPA”) is still in effect, which means that the February 1, 2013 deadline to provide written notice to employees is fast approaching. Pursuant to the WTPA, New York employers must provide New York employees with a written notice and acknowledgment of pay rate and payday on an annual basis, on or before February 1st. In particular, the WTPA requires the following:

By Lisa Lewis and Brian Garrett

On Monday, December 17, 2012, the New Jersey Assembly approved separate legislation addressing (1) increases in the state’s minimum wage and (2) stricter enforcement against employers who withhold employee wages or benefits. 

By Rebecca Hirschklau and Eric Raphan

On December 4, 2012, Southern District of New York District Judge Barbara S. Jones, granted a motion to compel arbitration on an individual basis in a class and collective action brought pursuant to, among other things, the Fair Labor Standards Act (“FLSA”) in Cohen v. UBS Financial Services, Inc., Docket No. 12 Civ. 2147 (BSJ)(JLC).

By Thomas Kaufman Follow me on Twitter

The battle for how the landmark arbitration decision Concepcion v. AT&T Mobility (“Concepcion”) should be construed in California continues with Monday’s issuance of Franco v. Arekelian Enterprises, Inc. (“Franco II”). Division One of the Second District Court of Appeal (in Los Angeles) has developed a troubling reputation among the class action defense bar because it has issued a series of decisions that stake out pro-plaintiff positions in Labor Code class action cases, including such decisions as Jaimez v. Daiohs USA, Inc., 181 Cal. App. 4th 1286 (2010) (reversing denial of class certification in a wage hour case) and the two depublished Harris v. Superior Court decisions (attempting to establish an exceedingly narrow administrative exemption in California).

By Thomas Kaufman Follow me on Twitter

On November 7, 2012, the First District Court of Appeal published an order affirming the denial of class certification entered in favor of Sheppard Mullin’s client, Wet Seal, Inc, in a case alleging that Wet Seal forced its employees to purchase clothing as a condition of employment and denied them certain mileage reimbursements.  As explained below, the decision, Morgan v. Wet Seal, Inc., is noteworthy on multiple levels, including (1) that it rejects this plaintiff’s attempt to obtain class certification based on an alleged “unlawful policy”; (2) that it clarifies the scope of the requirement to reimburse under Labor Code Section 2802; and (3) that it provides a good framework for an employer to use to establish predominant individualized issues.

By Thomas Kaufman (follow me on Twitter)

In See's Candy Shops v. Superior Court, the Fourth District Court of Appeal, Division One (San Diego) reversed an entry of summary adjudication that had been entered in the plaintiff's favor in a certified wage/hour class action. The key issue for the Court of Appeal was whether employers in California lawfully may round their employees' time clock entries to the nearest tenth of an hour for purposes of calculating the employees' work hours— a common practice across the U.S. As explained below, the Court of Appeal did not set a hard and fast rule that it is always lawful to have automatic rounding, but it clearly held that California has adopted the federal standard which generally permits such time clock rounding, as long as the rounding is mechanically to the nearest increment.

By Matthew Richardson

In a recent case, United States v. Quality Stores, the Sixth Circuit ruled that certain severance payments paid to involuntarily terminated employees pursuant to an employer’s reduction in workforce are not “wages” for FICA tax purposes. This decision creates a conflict in the circuits, as the Federal Circuit, in CSX Corp. v. United States, 518 F.3d 1328, 1344 (Fed. Cir. 2008), previously held in favor of the government’s position that such payments are “wages” subject to FICA taxes. The government is likely to request a rehearing or petition for certiorari to the Supreme Court.

By Thomas Kaufman

On August 13, 2012, the California Court of Appeal for the Fourth District (San Diego), published its decision from a few days earlier in Truly Nolen of America v. Superior Court. The case is yet another example where an appellate court considered the impact of the landmark United States Supreme Court decision in Concepcion v. AT&T Mobility on California courts. The Truly Nolen court did not go so far as to say that Concepcion reversed the California Supreme Court's decision in Gentry v. Superior Court, which had effectively required that arbitration agreements provide for class arbitration to be enforceable, but it reinterpreted Gentry to try to make it consistent with Concepcion, and did so in a manner that is likely to make arbitration agreements containing class action waivers enforceable in most cases. Moreover, it did so with creating any sort of circuit split with the execrable Brown v. Ralphs decision, that would be likely to trigger review from the California Supreme Court.

By Thomas Kaufman; (follow me on Twitter)

Deleon v. Verizon Wireless (Deleon II) is another pro-employer case that is in many ways a carbon copy of Steinhebel v. Los Angeles Times Communications, 126 Cal. App. 4th 696 (2005),  one of my favorite cases (I argued it successfully in the Court of Appeal).  The two cases address the lawfulness of agreements in which employers advance commissions to sales employees when a sale occurs, but the commission is subject to being "charged back" (recouped) if the customer cancels the sale within a certain period of time.

As explained below, Deleon II clarifies earlier precedent and effectively expands the universe of proper chargeback agreements.

By Thomas Kaufman; (follow me on Twitter)

A First Appellate District decision from May 31, 2012, Sotelo v. Medianews Group, Inc.; was published yesterday.  The opinion contains an in-depth discussion on class action concepts arising out of a case alleging misclassification of newspaper carriers as independent contractors.  The opinion cuts back on some pro-certification precedents, sets forth some anti-certification law for independent contractor cases, and contains some interesting observations about class certification in general.

By Thomas Kaufman and Robert Mussig

On June 25, 2012, in Coito v. Superior Court, S181712, the California Supreme Court held that witness statements procured by an attorney, either directly or through an agent, are entitled at least to qualified work product protection, and in some cases absolute work product protection.

At the outset, understanding the distinction between "absolute" and "qualified" work product protection is critical to any analysis of the Coito decision. A writing containing an attorney's impressions, conclusions, opinions, legal research, or legal theories receives absolute protection under the law, meaning the opposing party is not entitled to discovery of the writing under any circumstances. A writing containing any other attorney work product receives qualified protection, meaning the opposing party may be entitled to discovery of the writing if he or she can show that denial of discovery will result in unfair prejudice or injustice. What constitutes unfair prejudice or injustice is determined on a case-by-case basis, but it could include, for example, situations where witnesses are unavailable because of death or illness. The term "writing" is broadly defined to include any form of recorded information.

By Thomas Kaufman (follow me on Twitter)

On June 18, 2012, the U.S. Supreme Court issued a 5-4 decision Christopher v. SmithKline Beecham, holding that pharmaceutical sales representatives ("pharma reps") generally meet the FLSA's outside sales exemption. While there are differences between California and the FLSA concerning the elements of the outside sales exemption, this case dealt with the definition of "selling" under the exemption, which is an area where the two statutes have generally been interpreted as parallel. Accordingly, if Christopher is adopted in California, then pharma reps will qualify as outside salespersons under California law as well. The case is helpful to employers both with respect to the outside sales exemption and with efforts to combat the Obama Administration Department of Labor ("DOL") when it intervenes in wage and hour cases on behalf of the employees.

By Thomas Kaufman  (follow me on Twitter)

On June 4, 2012, the California Court of Appeal, Second District, Division Two, issued Iskanian v. CLS Transportation Los Angeles, LLC ("Iskanian"), a sweeping pro-employer decision that endorses every defense-side argument on the proper interpretation of the 2011 U.S. Supreme Court decision in AT&T Mobility LLC v. Concepcion ("Concepcion"). If the holdings of this decision ultimately survive as controlling law in California, then employers will be able to enforce arbitration agreements that require all employment related disputes to be resolved through individual arbitration. Unfortunately, the case creates a clear split of authority with last year's decision in Brown v. Ralphs Grocery Co. ("Brown"), which makes California Supreme Court review likely.

By Thomas Kaufman  (follow me on Twitter)

This week, the Seventh Circuit issued a decision in Schaffer-Larose v. Eli Lily & Company, in which it held that pharmaceutical reps are exempt under the FLSA's administrative exemption.  This is separate from the issue pending before the United States Supreme Court in Christopher v. SmithKline Beecham of whether these types of employees are exempt under the outside sales exemption.  This decision is contrary to the Second Circuit's 2010 Novartis decision and could, in theory, create a separate Supreme Court decision to address the discrete exemption issue. 

As discussed below, the most notable aspects of the opinion are that it (1) takes a narrow view of the (non-exempt) production side of the "administrative/production" dichotomy, (2) rejects the interpretation that the DOL advanced in amicus briefing in the Novartis case, implicitly finding the DOL brief was entitled to minimal deference, and (3) gives a broad interpretation of what qualifies as "discretion and independent judgment" for purposes of the exemption.

By Thomas Kaufman  (follow me on Twitter)

On April 30, 2012, the California Supreme Court handed down Kirby v. Immoos Fire Protection, Inc., a case that addresses the alleged right of an employer to recover attorney's fees when it prevails in an actions for meal or rest periods asserted under Labor Code Section 226.7. 

The employer prevailed in an action that asserted both a claim for unpaid overtime and a claim for failure to provide rest periods.  The employer was awarded attorney's fees attributable to the rest period claim under Labor Code Section 218.5, which allows a prevailing party to recover attorney's fees in an action "for nonpayment of wages."  By contrast, under Labor Code Section 1194, attorney's fees are available only to the prevailing plaintiff in an action for failure to pay "the legal minimum wage or the legal overtime compensation."  Section 218.5 expressly states that it does not apply "to any action for which attorney's fees are recoverable under Section 1194."  The plaintiff appealed the award of attorney's fees under Section 218.5, arguing that the employer could not recover under that section, and the case ultimately made its way to the California Supreme Court.

The California Supreme Court addressed three separate arguments directed to the question of whether the employer could recover attorney's fees:  (1) is a claim for rest periods a claim for "the legal minimum wage," which would bring it within Section 1194? (2) if no, is a claim for rest periods a claim "for nonpayment of wages," which would bring it within Section 218.5?; and (3) if yes, may the employer recover attorney's fees for a rest period claim when the action also includes an overtime claim that unquestionably is covered by Section 1194? As explained below, the court undertook a rather counter-intuitive analysis of the statutes to conclude that no party can recover attorney's fees for meal and rest period claims, regardless of who prevails.

The California Supreme Court gave the state’s employers a huge victory when it issued its ruling in Brinker v. Superior Court, stating that businesses do not have to force their employees to take a meal or rest break, only that they must - of course - provide one. To explain why things played out the way they did, LXBN spoke to Thomas Kaufman from Sheppard Mullin's Labor & Employment Law Blog.

By Thomas Kaufman  (follow me on Twitter)

As anticipated, today the California Supreme Court in Brinker v. Superior Court issued a far ranging decision that clarifies the standards for meal and rest period claims both substantively and with respect to class certification. The Court set forth fairly easy-to-follow guidelines for compliance with the law that most employers are already utilizing. The question that seemed to pose the greatest interest to the business community—whether an employer meets its obligation to "provide" a meal period by simply making one available for employees to take—was decided in the employer's favor.

The Court also further clarified the standards trial courts should utilize in considering class certification in wage and hour cases.  As a practical matter, the guidelines the Court set forth favor employers much more than employee plaintiffs. Probably the most encouraging aspect of the decision was the fact the California Supreme Court appeared to adopt much of the U.S Supreme Court's Wal-Mart v. Dukes interpretation of the "commonality" requirement for class certification.

The only dark lining in this otherwise silver cloud was the determination that the class rest period claim below was properly certified. Even there, however, the decision turned on a unique company policy that is not likely to be replicated in other cases. 

By Thomas Kaufman (follow me on Twitter)

Duran v. U.S. Bank, is notable because it is the first decision to analyze thoroughly the defendant's due process rights as they were handled in one of the "innovative" class trial procedures that Sav-On v. Superior Court encouraged trial courts to formulate.  Before this case, the only case that significantly addressed class trial procedure was Bell v. Farmers Insurance. Bell, however, involved only a trial on damages after a court held that the defendant had misclassified all of its insurance adjusters as exempt.  Because liability was already decided classwide, the only issue was how much of a recovery each class member was entitled to receive.  What is worse, the Bell defense counsel waived several defenses by attempting to be "cooperative" with opposing counsel and thereby could not assert several good arguments on appeal.  Much mischief has been made by courts since Bell applying it as some sort of a template on how to conduct a class trial on liability.

Duran is strikingly different because U.S. Bank was effectively dragged kicking and screaming to trial, and it repeatedly objected to the many "innovative" procedures the trial court implemented.  Accordingly, the case presented the court of appeal with numerous, solid examples of a trial court running roughshod over the defendant's due process rights in the spirit of attempting to formulate a "streamlined" trial procedure.  The case thus provides binding authority (assuming the California Supreme Court does not grant review) that employers can cite when arguing that the plaintiff's trial plan improperly deprives the defendant of due process. In fact, if the guidance of this decision is followed, it is hard to see how many wage hour class actions that are routinely certified could actually proceed to trial.

We write to remind you of your obligation to provide your New York State based employees with a written notice and acknowledgement of pay rate and payday in compliance with the New York State Wage Theft Prevention Act, as detailed below. This written notice must be provided and acknowledged as received, by February 1, 2012.

By Thomas Kaufman (follow me on Twitter)

On December 31, 2011, as a final act for the year, the First Appellate District of the California Court of Appeal issued a good appellate decision for employers on the issue of independent contractor status, Arnold v. Mutual of Omaha. The case creates a veritable roadmap for insurance companies on how to treat agents so that they maintain their status as independent contractors rather than employees.

By Thomas Kaufman

This morning, the California Supreme Court issued the long-awaited decision in Harris v. Superior Court, addressing how to interpret the administrative exemption under California law.  The case reverses a decision of the court of appeal that effectively narrowed the exemption to employees who make company policy. At its narrowest, the Harris decision addresses the limited question of whether insurance adjusters can qualify as exempt under California's administrative exemption as it has existed at least since 2001 with the issuance of Wage Order 4-2001. Even on that limited question, the Cal Supremes declined to provide a definitive answer except to say that the court of appeal's analysis had been wrong.

By Thomas Kaufman and Jonathan Barker

On December 21, 2011, a California Court of Appeal held in Aleman v. Airtouch Cellular that employees were not entitled to additional "reporting time" pay when they came into work for scheduled meetings. Additionally, when the employees worked split shifts, they were entitled only to the difference between what they actually earned for the day, and what they would have earned had they been paid the minimum wage for the day plus an extra hour. This ruling is the first published California appellate court opinion to address these issues.

By Thomas Kaufman and Travis Anderson

In Sky Sports, Inc. v. Superior Court, (2nd Dist., Div. 3, Dec. 15, 2011) Case No. B233820, the California Court of Appeal held that a defendant does not waive its right to compel arbitration of a class action by waiting to file a motion to compel arbitration until the class has been certified, where some of the class members, but not the class representative, signed arbitration agreements with defendant.

By Thomas Kaufman and Travis Anderson

On December 13, 2011, the Ninth Circuit issued its most recent decision in the Sullivan v. Oracle saga. See Sullivan, D.C. No. CV-05-00392-AHS (9th Cir. Dec. 13, 2011). The decision followed the June 30, 2011 opinion of the California Supreme Court, in which the Court answered a question that the Ninth Circuit had posed to it: whether employees of a California-based employer who worked entirely outside California could sue the employer under the California Unfair Competition Law ("UCL") for the employer's alleged failure to pay overtime to non-California employees as required under the federal Fair Labor Standards Act ("FLSA"). See Sullivan v. Oracle Corp., 51 Cal. 4th 1191 (2011). Upon remand of the case from the California Supreme Court, the Ninth Circuit held that the state court's opinion was "conclusive" and justified granting summary judgment to Oracle on the UCL claims of these non-California employees. Separately, the Ninth Circuit held that California overtime law applies to non-residents who perform work within the state, another question that it posed to the California Supreme Court to answer. This blog entry, however, focuses solely on the discussion of out-of-state employees' use of the UCL to vindicate FLSA rights.

Last week, the Ninth Circuit issued a decision in Solis v. State of Washington, Department of Social and Health Services, wherein it attempted to clarify the learned professional exemption's "specialized intellectual instruction" requirement. In Solis, the U.S. Department of Labor filed a complaint against the State of Washington, Department of Social and Health Services ("DSHS") wherein it alleged that DSHS had failed to pay overtime to certain of its social workers in violation of the Fair Labor Standards Act ("FLSA"). DSHS argued that the social workers were exempt under the learned professional exemption.

On July 1, 2011, Connecticut Governor Dannel P. Malloy signed into law Public Act No. 11-52 (the “Act”) which will make Connecticut the first state to mandate paid sick leave. The Act, which only narrowly passed through Connecticut’s Senate (18-17) and House of Representatives (76-65), is set to take effect on January 1, 2012, and requires employers to allow their “service workers” to earn one hour of paid sick leave for every 40 hours worked, capped at a maximum of 40 hours per year.

On June 30, 2011, the California Supreme Court handed down the decision in Sullivan v. Oracle Corporation, No. S170577 (June 30, 2011), tackling the issue of whether California wage law should apply to non-resident employees. By way of background, a class action settlement had eliminated all but a small portion of class claims concerning the exempt misclassification of Oracle "Instructors." The only remaining claims involved Instructors who were not California residents. While Oracle's headquarters are located in California, Oracle employed Instructors in 20 states, including California. The two claims at issue were claims for overtime arising (1) whether non-California resident Instructors who came to work in California for at least a full day or full week needed to be paid overtime under California rules governing daily and weekly overtime; and (2) whether Instructors who worked entirely outside California and were denied overtime under Fair Labor Standards Act ("FLSA") rules could recover FLSA overtime under the California Unfair Competition Law ("UCL"), Bus. & Prof. Code, § 17200 et seq.

On June 20, 2011, the United States Supreme Court released its widely-anticipated decision in Wal-Mart Stores, Inc. v. Dukes, et al., 564 U.S. ___ (2011) ("Wal-Mart"). In Wal-Mart, the Supreme Court reversed the Ninth Circuit Court of Appeals and held that the proposed nationwide gender discrimination class action against the retail giant could not proceed. In a decision that will come as welcome news to large employers and other frequent targets of class action lawsuits, the Supreme Court (1) arguably increased the burden that plaintiffs must satisfy to demonstrate "common questions of law or fact" in support of class certification, making class certification more difficult, especially in "disparate impact" discrimination cases; (2) held that individual claims for monetary relief cannot be certified as a class action pursuant to Federal Rule of Civil Procedure 23(b)(2), which generally permits class certification in cases involving claims for injunctive and/or declaratory relief; and (3) held that Wal-Mart was entitled to individualized determinations of each proposed class member's eligibility for backpay, rejecting the Ninth Circuit's attempt to replace that process with a statistical formula.

On June 15, 2011, the Ninth Circuit issued its long-awaited decision in Campbell v. PricewaterhouseCoopers, LLP, No. 09-16370 (June 15, 2011). In its ruling, the Ninth Circuit reversed the district court’s holding that unlicensed junior accountants could never meet the professional or administrative exemptions under California law, concluding that there is a triable issue of fact as to both exemptions.

On May 10, 2011, the Second Appellate District of California issued a favorable decision for employers in Flores v. Lamps Plus, Inc. This case serves as additional support that so long as California employers provide meal and rest breaks to employees, they have met their obligations as set forth in California Labor Code §§ 226.7 and 512 and the IWC Wage Orders.

In a recent decision having broad implications for employers, the First Appellate District of the California Court of Appeal in Seymore v. Metson Marine, Inc. (April 14, 2011, __ Cal.App.4th __, Case No. A 127489), reversed summary judgment for the employer after finding that the employer's designation of the workweek denied employees their right to overtime compensation under the Labor Code. The Court also found that the employees were due additional overtime pay for time spent "on call" because the employer exercised a sufficient level of control such that the time should qualify as "hours worked."

On April 9, the Wage Theft Prevention Act (“WTPA”) will officially take effect. In connection therewith, the New York State Department of Labor (“NYSDOL”) has issued model notices, as well as guidelines, instructions and frequently asked questions (“FAQ’s”), concerning the WTPA’s requirements.

On February 7, 2011, the California Court of Appeal in Arechiga v. Dolores Press, Inc., ___ Cal. Rptr. 3d ___, 2011 WL 359350 (Cal. App. 2nd Dist., Feb. 7, 2011) ruled that an employer and employee may enter into an explicit wage agreement under which a non-exempt employee may receive a guaranteed fixed salary for all work (including overtime hours) so long as the employer pays the employee for all overtime wages at the correct premium rate.

The New York State Department of Labor's "Hospitality Wage Order" ("wage order") took effect on January 1, 2011. The wage order brings the restaurant and hotel industries under a single set of laws and abolishes the former orders which dealt with these industries separately. While the wage order modifies a number of current requirements relating to wages, uniforms and employee meals, as set forth below in more detail, it also subjects gratuities to regulations for the first time in New York State.

On December 10, 2010, Governor David Patterson signed the Wage Theft Prevention Act (“WTPA”). The WTPA will take effect on April 9, 2011. As set forth in more detail below, the WTPA amends the New York Labor Law (“NYLL”) in a number of ways by providing additional protections for employees while subjecting employers who fail to comply with the WTPA’s requirements to more severe penalties.

Effective January 1, 2011, the Minimum Wage will increase from $9.79/hour to $9.92/hour.

In Taylor v. UPS (Dec. 9, 2010), a California Court of Appeal ruled that Plaintiff, a UPS supervisor, qualified under both the California executive and administrative exemptions in each of the three supervisory positions he had worked at UPS.

In a decision recently certified for publication, Hernandez v. Chipotle Mexican Grill, Inc., (October 28, 2010) __ Cal.App.4th __, 2010 WL 4244583, the Second Appellate District of the California Court of Appeal affirmed the trial court's order granting Chipotle's motion to deny class certification and denying the Plaintiff's motion for class certification. Chipotle is represented by Sheppard Mullin Richter & Hampton in the litigation.

In Louie Hung Kwei Lu v. Hawaiian Gardens Casino, Inc., et al., S171442, the California Supreme Court concluded that California Labor Code Section 351 does not provide a private cause of action for employees to recover any misappropriated tips from employers.

In two opinions published on July 7, 2010, the Second and Fourth Districts of the California Court of Appeal refused to allow two objectors to derail two different class action settlements. In these two wage and hour class actions, the objectors challenged the proposed settlements on fairness grounds, and the courts once again affirmed the deferential review standard while rejecting the objectors arguments.

In Narayan v. EGL, Inc., the employer, EGL, Inc. (“EGL”), is a global transportation company that provides “air and ocean freight forwarding, customs brokerage, [and] local pickup and delivery service.” EGL is incorporated and headquartered in Texas, but it operates through a network of over 400 facilities in 100 countries. The case was brought by three drivers who were engaged to provide freight pick-up and delivery services for EGL in California. All three drivers had entered into “Leased Equipment and Independent Contractor Services Agreements” (the “Agreements”) with EGL that were employer-drafted pre-printed form contracts. The Agreements contained acknowledgments by the drivers that they were independent contractors and choice-of-law clauses providing that the Agreements shall be interpreted in accordance with Texas law.

On April 21, 2010, the Ninth Circuit Court of Appeals confirmed that a putative class action removed to federal court under the Class Action Fairness Act (CAFA) does not lose federal jurisdiction just because the court denies class certification. The case, United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union, AFL-CIO, et al. v. Shell Oil Company, et al., No. 10-55269, ___ F.3d ____ (9th Cir. Apr. 21, 2010), began as a putative class action in California state court. Plaintiffs alleged that defendants' oil refineries violated California's Unfair Competition Law, Business & Professions Code § 17200, and failed to provide meal periods, rest periods, timely and accurate wage statements and wages due at the time of termination. Defendants removed the case to federal court under CAFA, 28 U.S.C. § 1332(d)(2), which provides removal jurisdiction if any member of the putative class is diverse from any defendant, if the amount in controversy exceeds $5,000,000.

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The Ninth Circuit Court of Appeals held on March 2, 2010 in Rutti v. Lojack Corporation, Inc. that some work performed by employees at home, as well as time spent commuting, may have to be paid in certain circumstances.

In Maria Pellegrino, et al. v. Robert Half International, Inc., the plaintiffs were former employees who sued for unpaid overtime, violation of meal and rest period rules, failure to pay commissions, and failure to provide accurate pay stubs. Each of the employees had signed an employment agreement providing that no claims against the company shall be valid if asserted more than six months after the employee’s termination. The employment agreement also provided that each employee expressly waived any statute of limitation to the contrary. The company asserted that the employees’ claims were time barred because they filed their lawsuit more than six months after termination. The employees argued that the contractual provision truncating the time frame in which to sue was invalid.

On October 26, 2009, Section 195.1 of the New York Labor Law took effect. Section 195.1 requires New York employers to notify employees in writing at the time that that they are hired of their rate of pay and of their regular pay day. Further, if the employee is covered by a provision of the applicable federal or state overtime laws, then the notice must also inform each employee of his/her overtime rate.

This week, a California Court of Appeal found that the plaintiff employee was entitled to a full trial on his wrongful termination claim, concluding that California public policy in favor of the employer's duty to pay overtime wages protects an employee from termination for a mistaken but good faith claim to overtime wages.

On November 2, 2009, the California Supreme Court handed down its decision in Schachter v. Citigroup, Inc.  At issue was Citigroup's voluntary employee incentive compensation plan that provided employees with shares of restricted company stock at a reduced price in lieu of a portion of the employee's annual cash compensation. Under the Plan, the employees voluntarily agreed that, should they resign or be terminated for cause before their restricted shares of stock vest, they would forfeit the stock and the portion of cash compensation they directed be paid in the form of the restricted stock.

Sheppard Mullin partner Douglas Hart achieved a major victory for employers everywhere when the U.S. Court of Appeal for the Ninth Circuit issued its long-awaited decision in the class action lawsuit entitled Parth v. Pomona Valley Hospital Medical Center on October 22, 2009. The Ninth Circuit ruled as a matter of first impression that it is permissible for an employer to reduce pay rates to achieve cost neutrality under the Fair Labor Standards Act ("FLSA") in conjunction with the implementation of a 12-hour shift program. This decision, issued in one of the most significant wage and hour cases to reach the U.S. Court of Appeal in years, is likely to be widely cited in other cases against California hospitals and should greatly benefit the entire health care industry.

Beginning on Friday, July 24, 2009, employees who are covered by the Fair Labor Standards Act must be paid a minimum of $7.25 per hour. This increase is the last of the three increases to the Federal minimum wage provided by the Fair Minimum Wage Act of 2007. The Department of Labor has announced that a new poster reflecting this increase will be available on its website.

On June 2, 2009, the California Court of Appeal in San Diego issued a decision clarifying California's rules regarding tip-sharing among employees. In doing so, the Court of Appeal reversed the trial court which had awarded the plaintiff class $86 million in restitution.

The Ninth Circuit Court of Appeals recently vacated its prior ruling in Sullivan v. Oracle Corp., which had held that the California Labor Code applies to work performed in California by non-residents of California. The Ninth Circuit has now decided to withhold any ruling pending the California Supreme Court’s decision on three questions.

In Ghazaryan v. Diva Limousine, the California Court of Appeal reversed a trial court's denial of a class certification motion in a wage and hour class action. The Court of appeal ordered the trial court to certify two subclasses.

In Sullivan v. Oracle Corp., the Ninth Circuit Court of Appeals recently ruled that the California Labor Code applies to work performed in California by non-residents of California.

On October 28, 2008, only six days after the California Supreme Court's decision to review Brinker Restaurant v. Superior Court of San Diego, a different California Court of Appeal reached the same conclusions about an employer's obligation to provide meal and rest periods.  In Brinkley v. Public Storage, Inc., a class of plaintiffs sued their employer alleging, among other things, that the company had failed to provide adequate meal and rest periods.

On October 22, 2008, the California Supreme Court agreed to review the closely followed case of Brinker Restaurant v. Superior Court of San Diego.  Brinker addressed compliance issues under California law relating to meal periods, rest periods, and off-the-clock work, as well as procedural issues raised in class action lawsuits based on these type of claims.

On July 21, 2008, Justice Carol Robinson Edmead of the New York County Supreme Court denied a motion to dismiss a claim for unequal compensation brought against the owners, operators and several individual employees of Cipriani restaurant in Manhattan by a female server.  Torres v. Vittoria Corp., 114667-07 (N.Y. Sup., July 21, 2008).  The Torres decision is particularly notable because the basis for plaintiff’s unequal compensation claim was that she and other female servers were consistently assigned to the breakfast shift, which generated lower tips, while male servers were given the more lucrative lunch and dinner shifts.

Last week, a California appellate court decided Advanced-Tech Security Services, holding that the Labor Code does not require an employer to compensate an employee at a rate higher than one and one-half times the regular rate of pay for overtime hours worked on a work day when an employee already receives a premium pay rate.

On April 16, 2008, a California Appellate Court decided Bradstreet v. Wong, holding that the shareholders, officers, or managing agents of the Employers could not be held personally liable for violations of the Labor Code arising out of the Employers' failure to pay wages.  The Court also held that individual defendants were not required to pay earned but unpaid wages as restitution under California's Unfair Competition Law.

On December 3, 2007, we reported that the California Supreme Court granted Sheppard Mullin Richter & Hampton's Petition for Review on behalf of Defendants Liberty Mutual Insurance Company and Golden Eagle Insurance Corporation in one of the biggest employment class action cases pending in California today.  When considering the Liberty Mutual case, the California Supreme Court may address several significant legal issues relating to the interpretation of the California Wage Orders, in particular the "administrative exemption" to California's overtime requirements.

On December 5, 2007, the United States District Court, Central District of California, granted Sheppard, Mullin, Richter & Hampton, LLP's Motion for Summary Judgment filed on behalf of Defendant Pomona Valley Hospital Medical Center ("PVHMC") in one of the most significant wage and hour class action lawsuits currently pending before any federal or California state court.  In Parth v. Pomona Valley Hospital Medical Center, the healthcare industry received a major victory against plaintiffs' counsel who have challenged 12-hour shift overtime pay practices.  The Parth decision is likely to be widely cited in other cases against California hospitals and should greatly benefit the entire healthcare industry.

On November 28, 2007, the California Supreme Court granted Sheppard Mullin Richter & Hampton's Petition for Review on behalf of Defendants Liberty Mutual Insurance Company and Golden Eagle Insurance Corporation in one of the biggest employment class action cases pending in California today.   In Harris v. Superior Court, the California Supreme Court may address several significant legal issues relating to the interpretation of the California Wage Orders that would be important to all California employers.  This could be one of the most significant employment cases addressed by the California Supreme Court in some time.

A California Court of Appeal has declared that Industrial Welfare Commission (IWC) Wage Order 16-2001 ("Wage Order 16"), regulating wages, hours and working conditions for employees in the on-site construction and mining industries, is valid.   If they have not already done so, employers in the construction industry should promptly ensure their practices comply with all of the requirements of Wage Order 16, including whether a new alternative workweek schedule election is necessary.  See Small v. Superior Court, 55 Cal. Rptr. 3d 410 (2007).

In California, once a bonus has been promised to an employee, and the employee performs all of the conditions necessary to receive the bonus, the bonus is considered wages that must be paid. Eligibility for a bonus payment is determined by the terms of the bonus plan. A recent Court of Appeal case, Neisendorf v. Levi Strauss & Co., has confirmed that employers are free to establish bonus plans which condition bonus payment on the employee's continued employment with the company as of the payout date.

In Koehl v. Verio, Inc., the California Court of Appeal, First District, reaffirmed two basic propositions under California law: (1) advances against commissions are not “wages” under Labor Code Section 200; and (2) chargebacks against excess advanced commissions are permissible when employees expressly agree, in writing, to a chargeback arrangement.

In Dunlap v. Superior Court (Bank of America, N.A.), the California Court of Appeal, Second District, held that an employee need not exhaust the administrative prerequisites of the Labor Code's Private Attorneys General Act of 2004 (Labor Code section 2698 et seq. or "PAGA") before bringing a civil action against an employer for certain Labor Code violations that already allowed for an employee to sue directly prior to PAGA's enactment. It marks the first published application of the "civil" penalty vs. "statutory" penalty dichotomy articulated in Caliber Bodyworks v. Superior Court, 134 Cal. App. 4th 365 (2005).

In a case of first impression, the Court of Appeal in Violante v. Communities Southwest Development and Construction Co. held that employees on public works projects may only sue their own employer for alleged prevailing wage violations.

On February 1, 2006, a California Court of Appeal issued a published decision in Overton v. Walt Disney Company. The Court of Appeal held that Disney did not need to compensate its employees for the time they spent riding on a shuttle from the employee parking lot to the employee entrance because the employees were not required to park in the employee parking lot.

On November 23, 2005, a California Court of Appeal issued the first appellate court decision regarding application of the Labor Code Private Attorney General Act of 2004 ("PAGA"), Cal. Labor Code §§ 2698 et. seq., in Caliber Bodyworks, Inc. v. Superior Court, Case No. B184120, ___ Cal.App.4th ____. PAGA, also not so fondly known by employers as the "Sue Your Boss Law," permits a current or former employee to initiate private civil actions on behalf of himself or herself and other current or former employees to recover civil penalties.

In the recent unanimous decision of IBP, Inc. v. Alvarez (November 8, 2005), the U.S. Supreme Court clarified what constitutes compensable time under the Fair Labor Standards Act ("FLSA"). Specifically, the United States Supreme Court addressed a split between the circuits as to whether time spent walking to the worksite after donning special protective equipment is compensable. The Supreme Court affirmed a Ninth Circuit opinion holding that such time is compensable.

On September 8, 2005, Governor Schwarzenegger signed Assembly Bill No. 1093 into law, making it easier for employers to remit payment of final wages to employees upon discharge or termination, and also expanding one of the exemption requirements for employees in the computer software field. AB 1093 will take effect on January 1, 2006.

In 2004, the U.S. Department of Labor ("DOL") issued new regulations regarding the federal overtime exemptions applicable to "white collar employees," such as executive, administrative and professional employees (29 C.F.R. Part 541). Many observers questioned the significance of the updated federal regulations in California because of the differences between federal and California regulations. In an August 2, 2005 opinion to Attorney Richard J. Simmons of Sheppard, Mullin, Richter & Hampton LLP, the DOL confirmed that several critical provisions of the 2004 regulations were clarifications and not substantive changes, thereby making them pertinent to an analysis of California's white collar overtime exemptions.

In a key victory for employers and their corporate officers, directors, and management, on August 11, 2005, the California Supreme Court ruled in Steven Reynolds v. Christian Bement that corporate directors and officers cannot be held personally liable for the Company's failure to pay wages to its employees. Plaintiff Steven Reynolds sued his former employer and eight officers and directors alleging that he and other "shop managers" and "assistant shop managers" of the Earl Scheib automotive painting chain were improperly classified as exempt from overtime. Plaintiff also alleged a number of other wage-related claims under the Labor Code and wage orders.

Q. Should I look at paying my computer professionals hourly?

In Steinhebel v. Los Angeles Times Communications, a California Court of Appeal recently held that an employer may legally charge back advanced commissions in the event agreed upon conditions are not satisfied.

Q. What are some of the business culture/organizational behavior issues about which I need to be aware when implementing an exempt/nonexempt (salary/hourly wage) reclassification and how can I deal with them?