Labor Commissioner’s Superior Court action pulls the rug out from under an employer’s writ petition

The recent decision in American Corporate Security, Inc. v. Labor Commissioner, case no. C070504 (3d Dist. Sept. 10, 2013, published Sept. 27, 2013) is an important demonstration of one of the obstacles to writ review of discriminatory discharge decisions of the Labor Commissioner under Labor Code section 98.7, subdivision (e)..

When an employer seeks writ review of such a decision, the employer must show that it has “no other plain, speedy and adequate remedy.” This is what ACS alleged, having exhausted its route of administrative appeal (the Acting Director of the Department of Industrial Relations had already upheld the decision). But while the writ petition was pending, the Commissioner filed a Sacramento Superior Court action under Labor Code section 98.7, subdivision (c) to enforce her determination. The Commissioner then demurred to the writ petition, arguing that ACS had a “plain speedy and adequate remedy” because it could assert the same arguments it was making in the writ proceedings as affirmative defenses in the Sacramento action. The trial court sustained the demurrer without leave to amend, and ACS appealed.

The Court of Appeal affirmed, rejecting arguments that the Sacramento action did not offer ACS a de novo procedure. The Labor Commissioner’s suit to enforce her determination is “by its very nature a de novo procedure.” It found no barrier to ACS raising its arguments as affirmative defenses to the Commissioner’s complaint, and noted that ACS had indeed pleaded those affirmative defenses.

BACKGROUND: ACS’s defenses included procedural ones. Though the labor Code required the Commissioner to make a determination within 60 days of the the employee’s complaint, the Commissioner did not issue her initial decision in this case until three years after the employee filed his complaint. During that time, one of ACS’s exculpatory witnesses had died and another had moved away, and the Commissioner’s determination that there was a Labor Code violation relied in part on ACS’s failure to provide its principal witness during the investigation.

Attorney Fees in a $44 Case?

What do you suppose the high end of “reasonable” is for attorney fees in a successful lawsuit based on about $44 in damages? Supposing that $44 claim settled for $10,500?

If you said attorney fees of $500 are about right, give yourself a gold star. In Harrington v. Payroll Services, Inc., case no. B198883 (2d Dist. Feb. 28, 2008), the trial court found that once class certification was denied, the case was so simple that plaintiff was not entitled to fees at all, let alone the $46k sought.

The court of appeal reverses on entitlement to fees, finding they are statutorily mandated, but that $500 is reasonable. It fixes fees in that amount rather than remand for determination in the trial court.

This case might seem contrary to Cruz v. Ayromloo, decided by another division of the same district, which awarded fees far in excess of the damages awarded and the fee schedule set out in the local rules. But there, the court found nothing unreasonable about the time spent on the case. By contrast, the court in Harrington found the hours unreasonable on their face: “At the risk of understatement, there is no way on earth this case justified the hours purportedly billed by Harrington’s lawyers.”

California Labor & Employment Law Blog has some commentary on how this “levels the playing field” in wage and hour cases.

I’m very curious how this $44 case settled for $10.5k. Any wage & hour practitioners out there — or anyone else — care to speculate?

You Can Still Be Fired for Marijuana Use — Even if It’s Medical Marijuana

As expected, Alex Coolman at Drug Law Blog is all over today’s Supreme Court decision in Ross v. Raginwire Telecommunications, Inc., case no. S138130 (Jan. 24, 2008), in which the divided Supremes hold that the Compassionate Use Act, which decriminalized medical use of marijuana, does not preclude an employer from terminating an employee for such use. Coolman’s analysis is detailed, and includes YouTube video of portions of the oral argument and commentary on the tension created with City of Garden Grove v. Superior Court, which I blogged about here.

Justice Kennard’s concurring and dissenting opinion in Ross notes Ragingwire’s argument that even Ross’s off-the-job use of marijuana might leave him under its influence at work, and her opinion also notes that Ross did not seek accommodation by permitting him to use marijuana at work. So, I got to wondering . . . .

If pain is chronic, you pretty much have it all the time, right? How do you forego marijuana use during working hours? If so, do you use a substitute pain reliever then or do you merely work with the pain? I’m genuinely curious about this. If anyone reading this uses medical marijuana for chronic pain, or at least is someone familiar with such use, could you answer those questions?

Employers Get Break on Reimbursement of Employee Expenses

Some of the employment law specialty blogs have been quick to provide detailed coverage of Gattuso v. Harte-Hanks Shoppers, Inc., case no. S139555 (November 5, 2007), in which the California Supreme Court, reversing the Court of Appeal, holds that an employer may meet its statutory obligation to indemnify employees for “all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties” (Labor Code, § 2802, subd. (a)) by increasing the employees’ pay or commissions instead of separately reimbursing them for their actual expenses. There are conditions, naturally.

You can read about this important case at WageLaw or at What’s New in Employment Law? Storm’s California Employment Law promises that if it has anything to add, it will be added this week.

Macabre Employment Case

“When it comes to bizarre fact patterns, nothing beats a good employment discrimination case. Today we have two prime examples from the Seventh Circuit.”  That’s how Robert Loblaw begins his post at Decision of the Day.  He’s putting it mildly with respect to the second case, which involves sexual harassment at a crime lab.  I’m rather glad its outside this blog’s usual jurisdiction.

The Legal Value of a TV Comedy

Ob-Ah271 Lb Car 20070214123651Thanks to this post at WSJ.com Law Blog, I (and you) know about the blog “That’s What She Said,” which follows the TV show “The Office,” a comedy featuring an outrageously inept, offensive, and politically incorrect boss. Here’s how WSJ.com describes the blog:

It has a clever gimmick: [blogger Julie Elgar, a labor lawyer at Ford & Harrsion in Atlanta] puts a price tag on each episode, estimating how much the politically incorrect behavior would cost real companies to defend. Last night her approximate legal bill came to $450,000.

Maybe there’s an HR Director or General Counsel out there trying to figure out how to work episodes of The Office and blog posts from That’s What She Said into their training programs.

Ninth Circuit: No Appeal from Order Denying Issuance of Notice of FLSA Collective Action

The collateral order exception to the final judgment rule allows a circuit court to exercise its jurisdiction, even in the absence of an appealable final judgment, if the order appealed from meets certain prerequisites.  Providing a good lesson in the Ninth Circuit’s application of the exception is today’s opinion in McElmurry v. U.S. Bank Nat’l Assoc., case no. 05-36407 (August 8, 2007), in which the plaintiffs, seeking unpaid overtime pay, appealed from an order denying their motion to issue notice of a collective action under the FLSA.

The Ninth Circuit explains the prerequisites for application of the exception (citations omitted):

Jurisdiction exists in only a “small class” of cases that are deemed “too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated.”  To qualify as a collateral order suitable for appellate review, an order must: 1) “conclusively determine the disputed question”; 2) “resolve an important issue completely separate from the merits of the action”; and 3) “be effectively unreviewable on appeal from a final judgment.”

The court finds that the order denying the motion to issue a notice of collective action would not be “unreviewable on appeal.”  This standard is met only where “the legal and practical value of [the right at stake will] be destroyed if [ ] not vindicated before trial.”  (Citations omitted.)  The court rejects plaintiffs’ claims that some employees may lose their chance to litigate:

Appellants argue that the statute of limitations will continue to run, and that some employees may lose their opportunity to participate in a collective action if they wait until after an appeal from final judgment. Although employees who may be similarly situated but have not opted in to the action are not bound by its conclusion, and may pursue their actions individually, [citation], we understand Appellants’ concern. However, these arguments have been made in the context of class action suits as well, and it is well established that there is no collateral order jurisdiction over a district court decision to certify or not to certify a class action under Rule 23.  [Citations.]  Although, as we have pointed out, there are differences between a collective action brought pursuant to § 216(b) and a class action brought under Rule 23, those differences are not relevant to whether we may exercise collateral order jurisdiction.

Another interesting point about the case is that the plaintiffs filed an appeal and a writ petition — a practical tactic when the appealability of the order is in doubt.  Here, however, it doesn’t pay off.  The same factors that defeat appellate jurisdiction also defeat the writ petition.

Great Lawyers Can Write Unenforceable Arbitration Agreements

I’m beginning to wonder if writing the perfect arbitration provision is something like understanding the rule against perpetuities. You all remember that case from torts class, don’t you? The court holds that an attorney can’t be liable for malpractice related to the rule against perpetuities because no one understands the rule against perpetuities. Hence, the attorney could not have violated the standard of care.

A little over a month ago, the Ninth Circuit ruled in Davis v. O’Melveny & Myers, case no. 04-56039 (9th Cir. May 14, 2007) that the arbitration provision in the employment contract of a prominent, powerful L.A.-based law firm was unenforceable. Not just unenforceable, but “shock the conscience” unenforceable. The case was blogged about at Workplace Prof Blog, the Adjunct Law Prof Blog, and Settle it Now Negotiation Blog, among many others.

Just as you’re asking yourself, “If a high-powered law firm can’t draft an enforceable arbitration provision for its own contracts, then who can?” comes Gatton v. T-Mobile USA, Inc., case no. A112082 (June 22, 2007), in which the arbitration provision in T-Mobile’s customer agreement gets similar treatment in California state court. The First District Court of Appeal holds that T-Mobile’s arbitration provision in its customer agreements is unenforceable because of the minimal degree of procedural unconscionability arising from its adhesive nature and the “high degree of unconscionability arising from the class action waiver.”

I’m going to go out on a limb and say that T-Mobile probably had pretty good lawyers draft its agreement, and that the lawyers who drafted the provision for O’Melveny were no slouches, either. Who will fall next?

California: Pay for Missed Breaks is a Wage Rather than a Penalty for Statute of Limitations Purposes (Updated)

A second important holding out of Murphy v. Kenneth Cole Productions, Inc., __ Cal.4th ___, 56 Cal.Rptr.3d 880, 155 P.3d 284 (April 16, 2007), is that the “one additional hour of pay” provided for in Labor Code section 226.7 constitutes a wage or premium pay, a claim for which is subject to a three-year statute of limitations (Code Civ. Proc., § 338) rather than a penalty subject to a one-year statute of limitations (Code Civ. Proc., § 340). The court finds the language of section 226.7 ambiguous and thus sets out on a lengthy and comprehensive analysis of:

extrinsic sources, such as the ostensible objectives to be achieved by the statute, the evils to be remedied, the legislative history, public policy, contemporaneous administrative construction and the statutory scheme of which the statute is a part.

The end result seems consistent with the policy that “statutes regulating conditions of employment are to be liberally construed with an eye to protecting employees.”

Update (5/16/07): In a post called “Defense Firms Weigh In on Murphy,” the Wage Law blog notes that the Supremes have denied a petition to modify the opinion in a way designed to head off negative consequences to employers that “will flow from the Supreme Court’s designation of the hour of pay as a wage.” The post includes a round-up of commentary on the case by “large firm” blogs.

De Novo Appeal from California Labor Commissioner “Berman Hearing” Can Include New Claims

An employee may bring a wage claim in superior court or before the Labor Commissioner. Where he does the latter, a “Berman hearing” is held and “the parties may seek review [of the labor commission order] by filing an appeal to the superior court, where the appeal shall be heard de novo.” Labor Code § 98.2(a).

In Murphy v. Kenneth Cole Productions, Inc., __ Cal.4th ___, 56 Cal.Rptr.3d 880, 155 P.3d 284 (April 16, 2007), the California Supreme Court unanimously holds that in a section 98.2 de novo appeal from a Berman order, the superior court may also hear claims not raised by the employee in the Berman proceedings. Taking into consideration (1) the nature of de novo review, (2) a trial court’s inherent discretion in adjudicating claims at trial, (3) the legislative policy of encouraging employees to use the Berman process, and (4) the legislature’s intent to discourage frivolous or unmeritorious appeals from orders after a Berman hearing, the court determines that it is within the discretion of the trial court to determine the scope of claims, including new claims, to be heard in the de novo trial.

Regarding the fourth factor, the court describes the risks of any appeal, not just frivolous appeals:

A party who appeals a Labor Commissioner award does so at its own peril. If the employer appeals, and the employee obtains representation, it is likely that the employee’s attorneys will uncover additional, related facts and claims not thoroughly examined at the administrative level when the claimant was unrepresented. Just as an employer is not bound by the defenses it raised in the Berman process, but rather is entitled to abandon, change, or add defenses not brought before the Labor Commissioner, [citation] , so may an employee raise additional wage-related claims in the de novo trial.

The employee always has the option of filing a new claim with the Labor Commissioner or in a superior court action, so the threat of additional claims is always there in any event. The court’s decision, however, makes it easier for the employee to consolidate the additional claims into a single proceeding with the existing claim, and it also suggests additional claims are more likely to lapse in the absence of an appeal.