Key California Employment Law Cases: May 2020
Betancourt v. OS Rest. Servs., LLC, No. B293625, 2020 WL 2570839 (Cal. Ct. App. Apr. 30, 2020)
Summary: A plaintiff is not entitled to recover penalties for waiting time and wage statement violations based on claims of non-provision of rest or meal periods, and likewise cannot obtain attorney’s fees based on those claims.
Facts: Plaintiff, a former waitress at Defendants’ restaurant, sued Defendants alleging that they regularly failed to provide her lawful rest breaks and meal periods and that she was wrongfully terminated for complaining about the same, as well as food safety issues. Based on these allegations, Plaintiff asserted claims of whistleblower retaliation and wrongful termination. Plaintiff’s complaint prayed for, among other forms of relief, unpaid premium wages for the meal and rest break violations, penalties, costs, attorney’s fees, and waiting time penalties. A year after the complaint was filed, the parties reached a settlement. Plaintiff accepted monetary relief for the failure to provide meal and rest periods, failure to provide accurate itemized wage statements, and waiting time penalties in exchange for Plaintiff dismissing her retaliation and wrongful termination claims with prejudice. The parties, however, also agreed to litigate the sole issue of whether Plaintiff was entitled to recover reasonable attorney’s fees based only on her wage-and-hour claims. Plaintiff filed a motion for attorney’s fees seeking more than $500,000 in fees, but failed to support her motion with her attorney’s time records. Nevertheless, the trial court awarded approximately $280,000 in fees, reasoning that all of the wage-and-hour claims were “premised” on timekeeping and payroll schemes. Defendants appealed.
Court’s Decision: The California Court of Appeal reversed. The court first noted that under the California Supreme Court’s decision in Kirby v. Immoos Fire Protection, Inc., 53 Cal. 4th 1244 (2012), Plaintiff could not obtain attorney’s fees based directly on her claims for non-provision of meal or rest breaks because such an action is not brought for “nonpayment of wages” within the meaning of California Labor Code section 218.5. The court of appeal then held that, by extension, Plaintiff similarly could not recover penalties or attorney’s fees for derivative waiting time and wage statement violations based on the same claims of non-provision of meal or rest periods.
Practical Implications: Though this case is a win for employers, a case presenting the same issue – whether violation of California’s meal and rest break laws gives rise to derivative claims for waiting time and wage statement penalties – is currently before the California Supreme Court. See Naranjo v. Spectrum Security Services, Inc., No. S258966. The California Supreme Court’s decision, which likely will not come out until next year, will be the final word on this issue.
Jarboe v. Hanlees Auto Grp., No. A156411, 2020 WL 2791445 (Cal. Ct. App. May 8, 2020)
Summary: Without robust evidence that the arbitration provision was made expressly for their benefit or that there is a close and integral relationship between them and the signatory entity, affiliated entities cannot enforce an arbitration provision as third-party beneficiaries or on grounds of equitable estoppel.
A trial court does not abuse its discretion when, after compelling arbitration of individual wage-and-hour claims, it denies to stay a related PAGA claim pending the outcome of the arbitration.
Facts: Plaintiff was hired by an auto dealership where he worked for short time before being transferred to a different location that was part of a larger group of affiliated dealerships. Following his termination, Plaintiff sued for wage-and-hour violations naming the first dealership, the auto group, and each of the affiliated dealerships (12 in total) as defendants. Defendants moved to compel arbitration based on the employment agreement between Plaintiff and the first dealership. The trial court granted the motion as to all of Plaintiff’s individual causes of action against the first dealership, but denied it as to the other defendants, and denied it as to Plaintiff’s claim under the Private Attorneys General Act (“PAGA”). The trial court reasoned that the operative arbitration provision applied only to the “Company” — defined in the agreement as only one dealership — and not any other related entities. The court also determined that Plaintiff’s PAGA cause of action could proceed in court while his individual claims were being arbitrated, reasoning that an employee bringing a PAGA action is not acting on his or her own behalf, but on behalf of the state, which is not bound by the employee’s prior agreement or any waiver of his right to bring a representative action. On that basis, the trial court allowed all of the claims against the auto group and the affiliated dealerships to proceed, along with the PAGA claim against all defendants, notwithstanding Plaintiff’s pending arbitration against the first dealership. Defendants appealed.
Court’s Decision: The California Court of Appeal affirmed, rejecting Defendants’ arguments that they were entitled to enforce the agreement between Plaintiff and the first dealership as third-party beneficiaries, or under the doctrine of equitable estoppel. On the former argument, the court of appeal determined that Defendants did not show the arbitration agreement between Plaintiff and the first dealership was made “expressly” for the benefit of any other entity. The court highlighted that the agreement specifically defined “Company” as the single dealership, and neither identified nor included any other party. As for equitable estoppel, the court found no evidence that the auto group and dealerships had common ownership; to the contrary, the facts showed they operated separately. As a result, the court agreed with the trial court’s conclusion that there was no “integral” relationship to support the application of equitable estoppel. The court of appeal also held that the trial court did not abuse its discretion in declining to stay the PAGA claim while the arbitration against the first dealership proceeded. The court observed that, because a PAGA claim is representative, it would be unfair to allow an employer to dictate how and where it proceeds. The court further noted that the similarity of claims against the entities and their shared “nucleus of facts” did not militate toward staying the PAGA claim, as the PAGA claim had nothing to do with the employee/employer contractual relationship and was a dispute between an employer and the state.
Practical Implications: This case presents an obstacle to the common practice of seeking a stay of PAGA claims pending arbitration of individual wage-and-hour claims. Because a stay may no longer just be a matter of course, employers should be prepared to argue persuasively to the court why a stay is warranted.
Fleming Distrib. Co. v. Younan, No. A157038, 2020 WL 2511680 (Cal. Ct. App. Apr. 23, 2020)
Summary: An employer waives the right to arbitrate by unreasonably delaying in filing a petition to compel arbitration until after a hearing on the merits before the California Labor Commissioner’s Office.
Facts: Plaintiff filed a complaint with the Labor Commissioner’s Office against his employer, Fleming Distribution Company (“Fleming”), seeking unpaid commissions, penalties, and interest. Fleming’s counsel sent a letter to the Labor Commissioner asserting that Plaintiff’s complaint should be dismissed because the parties signed an arbitration agreement. Fleming enclosed a copy of the signed arbitration agreement and threatened to file a petition to compel arbitration in court if the Commissioner did not dismiss Plaintiff’s complaint. The Commissioner did not dismiss the complaint and Fleming did not file a petition to compel arbitration. Instead, Fleming filed an answer to Plaintiff’s administrative complaint and participated in the merits hearing before the Commissioner. The Commissioner ultimately awarded Plaintiff $22,000 in commissions and $5,412.60 in interest. After it filed a notice of appeal in the superior court and a de novo trial was scheduled, Fleming filed for the first time a petition to compel arbitration and to stay proceedings. The trial court denied Fleming’s petition to compel arbitration finding, in relevant part, that Fleming had waived its right to arbitration by taking steps inconsistent with an intent to invoke arbitration, including delaying its request to the trial court until after a full hearing took place before the Commissioner. Fleming appealed.
Court’s Decision: The California Court of Appeal affirmed, concluding that the evidence overwhelmingly supported a finding of waiver. Relying on well-established California case law, the court noted that to properly invoke the right to arbitrate, mere announcement of the right to compel arbitration is not enough. Instead, a party must demand arbitration within a reasonable time, take affirmative steps to implement the process, and engage in conduct consistent with the intent to arbitrate. The court explained that, in a case where a Labor Commissioner proceeding has been initiated, the proper procedure is to petition to compel arbitration and request a stay of the Commissioner proceedings in the trial court. Fleming was well aware of its option to file a petition to compel arbitration in court, as reflected in Fleming’s letter and other submissions to the Commissioner, but repeatedly chose not to do so until 20 months after Plaintiff had filed his administrative complaint — after full participation in the Commissioner’s proceedings and after the Labor Commissioner had issued a decision on the merits. Finally, the court found that Plaintiff had suffered prejudice as a result of Fleming’s delay in seeking to compel arbitration.
Practical Implications: This case is an important reminder for employers to promptly petition to compel arbitration of arbitrable claims. To the extent possible, employers should avoid engaging in other litigation activities or administrative proceedings before filing such a petition.