Employees Win Victory in California Supreme Court Ruling on Meal and Rest Break Compensation

California law provides non-exempt employees with meal and rest periods. If an employer does not provide compliant meal or rest periods, employees are entitled to “one additional hour of pay at the employee’s regular rate of compensation.” (Cal. Lab. Code Section 226.7(c).) But are forms of pay such as incentives or commissions included in this calculus, or is it limited to hourly pay? In a victory for employees, the California Supreme Court decided earlier this month that other non-discretionary pay must be included in calculating an employee’s regular rate.

The case was filed by Jessica Ferra, a former bartender at the Loews Hollywood Hotel. Ferra claimed Loews had underpaid her and a class of similarly-situated employees for non-compliant meal and rest breaks because she and the other class members’ incentive payments were excluded from the calculation of missed breaks premiums. These payments were part of the pay Ferra expected and Loews promised, so Ferra contended that they should be factored into the formula for the “regular rate of compensation” used to calculate missed break premiums. In Ferra v. Loews Hollywood Hotel, LLC (2021) No. S259172 , the California Supreme Court agreed. 

 

“Regular rate of compensation” versus “regular rate of pay”

The decision came down to whether the “regular rate of compensation” for meal and rest break premiums is calculated the same way as is the “regular rate of pay” for overtime purposes. Loews contended that the calculations were different because the legal phrases were different, arguing that when the legislature uses different terms, it intends their meaning to differ. The court was not persuaded, noting that “compensation” and “pay” are synonyms. Regardless, the key phrase was “regular rate,” which applies to the calculations for both overtime and meal and rest break premiums. The court reasoned that the “regular rate” calculation follows that of the federal Fair Labor Standards Act (“FLSA”), looking to California case law and legislative history. Therefore, the “regular rate of pay” under California law must follow the same method of calculation as the “regular rate” in the FLSA, both for overtime calculations and for meal and rest break premium calculations. The court further opined that even if “compensation” and “pay” had different meanings in a relevant way, compensation covers a broader range of employment benefits than pay, such as wages, commissions, medical benefits, and other benefits.

Retroactive application

Sweetening the victory for employees, the Court determined that its decision applies retroactively to violations that came before the July 15 decision. The Court reasoned that its ruling rested on statutory interpretation, which merely clarifies a statute’s meaning, rather than setting forth new law. The Court rejected Loews’s misguided argument that this decision would put employers on the hook for millions of dollars, pointing out that “it is not clear why we should favor the interest of employers in avoiding ‘millions’ in liability over the interest of employees in obtaining the ‘millions’ owed to them under the law.” Consequently, employees may have a legal claim for non-compliant meal and rest break premiums, even if they were denied compensation before Ferra was decided.  

If you believe you have been wrongly denied meal or rest breaks or premiums paid at the correct rate of pay, please contact Bryan Schwartz Law here.

Settling for More: 9th Circuit Rules on Standards for Class Action Settlements

In most circumstances, opposing parties can resolve a legal dispute among themselves out of court until a court case is over. Class cases are different. To settle a class case, the parties have to ask the court hearing the case for approval.

This is because in class action settlements, absent class members waive their claims in exchange for the benefits of the settlement. Without notice of the settlement and its key terms, class members could waive their legal claims without realizing it, having a say in the terms of the agreement, or having the opportunity opt out of the agreement. This implicates absent class members’ due process rights.

To protect absent class members’ rights, the hearing court has a special duty to ensure that sufficient notice is provided to class members. The court must also take care that the settlement itself is fair. While courts usually balance and adjudicate competing interests in an adversarial context, the settling parties are in agreement in the context of a class action settlement. Especially concerning is the prospect that the parties could bargain away absent class members’ rights in order to secure a quick resolution that may not be in the class’s best interest.

Earlier this month, the 9th Circuit Court of Appeals rejected a class action settlement agreement in the high-profile class action case Murphy v. SFBSC Management. A pair of erotic dancers filed a class action case on behalf of 4,681 putative class members who currently or previously worked as erotic dancers for SFBSC Management’s 11 adult entertainment clubs in San Francisco, alleging that they had been misclassified as independent contractors when they should have been classified as employees. Bryan Schwartz Law has blogged about the distinction between employees and independent contractors here and here.

The parties settled and sought court approval. The trial court preliminarily approved the settlement, providing for notice of the settlement agreement to be sent to the class members’ last known mailing addresses, posted at the nightclubs’ dressing rooms, and posted online on a website created for this purpose. Initially, 1,546 notices were returned as undeliverable; after the settlement administrator performed address traces and resent notices, 560 notices remained undeliverable. Many class members lodged objections on several bases, but the court approved the settlement. The objectors appealed.

On appeal, the 9th Circuit agreed with almost all of the objectors’ complaints about the settlement agreement and the notice process.

I.                    Adequacy of the Notice

The objectors attacked the notice of class settlement in two ways. First, they argued that the notice did not inform class members that other similar lawsuits had been filed by other erotic dancers. The 9th Circuit rejected this claim—the only argument the objectors raised that the court rejected—holding that the class notices did not need to provide information to class members regarding related cases. Likewise, the notice did not need to describe any objections to the settlement agreement that had been raised.

Second, the objectors argued that the process of distributing the notice was insufficient. In particular, the objectors argued that the failure to provide any electronic notice (besides the website) was not the best practicable notice under the circumstances. The 9th Circuit agreed, noting that as many as 12% of the class received no notice by mail. In addition, the posters hung in the dressing rooms could only be viewed by current employees, whereas the class included former employees as well. Importantly, electronic notice may have been warranted if “reasonably calculated to appraise all class members of the settlement,” including email or even social media or “relevant online messaging boards.”

II.                 Standard of Review

Before the court examined the fairness of the agreement, the court first clarified the standard for courts to assess class action settlements. A court reviewing a class action settlement before the class has been certified requires a higher standard of fairness and a more probing inquiry. Reviewing courts should be on the lookout for subtle signs of collusion between the parties. The trial court in this case had begun its analysis with a presumption of fairness where a settlement was the product of arms-length negotiations between experienced attorneys. This standard was incorrect. The 9th Circuit also stated that it would not accept the mere presence of a neutral mediator as conclusive proof that the settlement was fair.

III.              Fairness of the Agreement

Next, the court examined several aspects of the settlement agreement that indicated possible unfairness. One of these was a clear sailing agreement with regards to attorneys’ fees. Under the provision, SFBSC Management agreed not to contest class counsel’s request for up to $1,000,000 in attorneys’ fees. The 9th Circuit observed that such agreements could be indicia that the agreement was reached at the expense of the class’s interests, especially in light of the high amount of attorneys’ fees requested.

The free sailing provision in this case called for attorneys’ fees greater than the net $864,115 to be distributed to the class. The parties arrived at the high amount of attorneys’ fees as a percentage of the total benefit of the settled claims, including the estimated value of two other areas of relief provided in the settlement agreement: (1) a Dance Fee Payment Pool, and (2) injunctive relief. Objectors challenged the sufficiency of the valuations for each, which had been set at $1,000,000 each.

Under the settlement agreement, class members could elect to receive payment from the Dance Fee Payment Pool of up to $1,000,000 in lieu of a lump sum cash settlement share. This money would come from the charges that the nightclubs would ordinarily retain from customer payments per dance. Dancers who selected this option could receive up to $8,000, but dancers had a limited amount of time in which to accrue payments from the Dance Fee Payment Pool.  

The court likened the Dance Fee Payment Pool to coupons, with reduced value to the class. This option had an expiration date, was not transferable, and required class members who no longer worked with SFBSC Management to do business with it again in order to claim the value. The 9th Circuit held that a court approving a class action settlement could not rely on such valuations except in the rare instance when non-monetary relief could be valuated exactly. Here, the parties did not put forth any evidence to support their valuation of the coupons.

Similarly, the 9th Circuit was troubled by the $1,000,000 valuation of the injunctive relief. The settlement agreement provided that SFBSC Management would allow dancers to elect whether to work as employees or independent contractors, each with its own form of compensation and employment structure. The court faulted the trial court for failing to make any findings specifically justifying the valuation of this benefit at $1,000,000.

The court was also wary of the enhancement awards called for in the settlement agreement for the named plaintiffs, to be taken from the general settlement fund. While the court was not concerned by the $5,000 enhancement payments in recognition of the plaintiffs’ efforts to represent the class and prosecute the case, the court found suspect the $20,000 enhancement payment for the general release the plaintiffs signed. The court saw no service to the class compensated by this enhancement. As such, the court viewed the enhancement as evidence of a potential side deal between the named plaintiffs and the employer, at the class’s expense, giving rise to a potential conflict of interest.

The court also looked at the settlement agreement’s reversionary effect. If class members did not cash their checks, those amounts would have reverted to SFBSC Management, rather than being redistributed to the class or a charitable organization that furthers the beneficial goals of the litigation. The 9th Circuit observed that reversionary agreements can indicate unfairness to the class, especially when coupons are involved. Combined, these factors drove the 9th circuit to reverse the trial court’s approval of the settlement agreement and remand for further proceedings.

If you have a dispute with your employer, contact Bryan Schwartz Law today.

SCOTUS Allows Millions of Transportation Workers to Have Their Day in Court.

In recent decades, the U.S. Supreme Court has largely sided with big business over workers, consumers, and small businesses when victims of wage theft, fraud, and monopolist market abuses[1] band together to prove their case in open court. This past week was a rare exception for potentially millions of transportation workers across the United States.

Brief Background

The FAA generally requires courts to enforce arbitration clauses according to the terms of such clauses, which businesses have forced on individuals in the workplace, in consumer contracts, and in many other contexts (e.g., nursing homes that allegedly cause their residents to die from substandard care). However, Section 1 of the FAA provides an important exception to this general rule, exempting “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” from the otherwise strict enforcement of arbitration agreements. 9 U.S.C. § 1.

Upshot of the New Prime Decision

Writing for an 8-0 majority, Justice Gorsuch’s opinion in New Prime Inc. v. Oliveira contains two key takeaways: (1) transportation workers are entitled to their day in court even if both sides signed an arbitration agreement and the transportation workers are classified (or arguably misclassified) as independent contractors, and (2) before ordering workers, consumers, and others to secret, one-on-one binding arbitration under the Federal Arbitration Act (“FAA”), courts still have the power to decide whether any exceptions apply that would allow these groups to have their day in open court.

The Majority’s Reasoning in New Prime

The New Prime majority relied heavily on the text and structure of Sections 1-4 of the FAA to hold that a business cannot take away a court’s authority to decide whether the exception contained in Section 1 applies to a particular dispute. No. 17-340, 2019 WL 189342, at **3-4 (U.S. Jan. 15, 2019). The Court noted that Section 3’s mandate to enforce arbitration agreements according to their terms is limited by Section 1’s exclusion for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Id. at *4 (citing 9 U.S.C. § 1).[2] Based on the FAA’s “terms and sequencing” of its statutory provisions, the Court concluded that “a court should decide for itself whether § 1's ‘contracts of employment’ exclusion applies before ordering arbitration.” Id.

Finding that it has authority to review whether the exception in Section 1 applies to Mr. Oliveira’s arbitration agreement with his former employer, the Court went on to address whether Mr. Oliveira’s written agreement with New Prime was a “contract[] of employment” as the term is used in Section 1 of the FAA. Here, the Court determined that the original meaning of “contracts of employment” in 1925 included both the modern idea of an employer/employee relationship and also true independent contractors. Id. at **6-7. The Court swatted down the company’s attempt to argue that the Court should ignore the plain text of the FAA, and instead make from whole cloth a general federal policy of compelling all disputes to arbitration. (“Unable to squeeze more from the statute's text, New Prime is left to appeal to its policy. … By respecting the qualifications of § 1 today, we respect the limits up to which Congress was prepared to go when adopting the Arbitration Act.”) (internal citations and quotation marks omitted). Id. at *9.

If you are a transportation worker like the lead plaintiff in the New Prime, Dominic Oliveira,[3] know that you are entitled to your day in court to recover your lost wages and expenses.

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[1] Justice Kagan’s dissent in this case, Italian Colors, sums up the state of play well:

Here is the nutshell version of this case, unfortunately obscured in the Court's decision. The owner of a small restaurant (Italian Colors) thinks that American Express (Amex) has used its monopoly power to force merchants to accept a form contract violating the antitrust laws. The restaurateur wants to challenge the allegedly unlawful provision (imposing a tying arrangement), but the same contract's arbitration clause prevents him from doing so. That term imposes a variety of procedural bars that would make pursuit of the antitrust claim a fool's errand. So if the arbitration clause is enforceable, Amex has insulated itself from antitrust liability—even if it has in fact violated the law. The monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse.

And here is the nutshell version of today's opinion, admirably flaunted rather than camouflaged: Too darn bad.

Am. Exp. Co. v. Italian Colors Rest., 570 U.S. 228, 240 (2013) (emph. added).

[2] The Court also drew upon the then-contemporary 1925 legal landscape in which “Congress had already prescribed alternative employment dispute resolution regimes for many transportation workers. And it seems Congress “did not wish to unsettle” those arrangements in favor of whatever arbitration procedures the parties' private contracts might happen to contemplate.” Id.

[3] You can learn more about Mr. Oliveira’s personal story here.

Epic Fail: U.S. Supreme Court Rules that Employers May Require Employees to Waive Right to Bring a Class Action as a Condition of Employment

On Monday, the Roberts Court took another significant step in its ongoing project to hobble class actions and impose barriers to employees seeking redress against their employers by holding that class action waivers within arbitration agreements do not violate the National Labor Relations Act (“NLRA”). The employees, seeking to recover unpaid wages on behalf of themselves and other employees under the Fair Labor Standards Act (“FLSA”), had argued that the NLRA’s Section 7, which guarantees employees’ “right to self-organization, to form, join, or assist labor organizations, to bargain collectively . . . , and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” prohibits employers from requiring that employees agree to individual, binding arbitration as a condition of continued employment.

The case, Epic Systems Corp. v. Lewis, comes on the heels of series of Roberts Court cases expanding the ability of companies to impose individual arbitration on their employees and customers, thus preventing employees and consumers from filing lawsuits in open court or filing class actions anywhere. Bryan Schwartz Law has written extensively about the Court’s decisions expanding the Federal Arbitration Act (“FAA”) at the expense of the rights of employees and consumers: here, here, here, here, here, and here. In 2001, the Rehnquist Court ruled in Circuit City Stores, Inc. v. Adams that the FAA’s express exclusion of “the contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” meant to remove only the employment disputes of transportation workers from binding arbitration, notwithstanding the broad “any other class of workers” language in the Act. Then, in 2011, the Roberts Court approved of class action waivers in consumer arbitration contracts in AT&T Mobility v. Concepcion.

The Court’s opinion in Epic Systems, while hardly a surprise given this Court’s expressed disregard for the rights of workers and consumers in its recent arbitration jurisprudence, is notable for the sheer level of its intellectual dishonesty. Justice Gorsuch, writing for the five-Justice majority, feigns confusion as to why the National Labor Relations Board did not address the apparent conflict between the NLRA (enacted 1935) and the FAA (enacted 1925) until 2012, when the obvious answer is that no one thought that the FAA had anything to do with employment disputes in the late 1930s when Congress passed both the NLRA and the FLSA, which permits employees to bring “collective actions” to recover unpaid wages.

Gorsuch counsels judicial restraint in admonishing the employees for asserting a conflict between the FAA and NLRA – “This Court is not free to substitute its preferred economic policies for those chosen by the people’s representatives” – but fails to mention that the current regime making compulsory, pre-dispute arbitration a ubiquitous requirement for employees and consumers is a recent, judicial invention. Given the low value of most individual employment and consumer claims, the right-wing innovation is tantamount to a get-out-of-jail-free card (or out-of-liability-free card, at least) for companies engaging in wage theft and other insidious business practices, undermining fair competition with companies that play by the rules.

Completely absent from Court’s opinion is any discussion or concern as to how forced individual arbitration undermines the substantive rights enshrined in laws like the FLSA and Title VII of the Civil Rights Act of 1964 (prohibiting employment discrimination). The success of these Acts has depended greatly on the ability to bring group actions challenging policies and practices that injure large numbers of workers. For instance, the landmark 1971 discrimination case Griggs v. Duke Power Co. involved a class of African-American employees who successfully challenged high school diploma and IQ-testing requirements that were unrelated to their jobs, but had the effect of keeping African-Americans out of the most desirable positions. In Gorsuch’s world, these sorts of fundamental statutory protections must give way to the Roberts Court’s arbitration regime, under which its expansive reading of the FAA trumps all.

Justice Ginsburg penned a fiery and forceful dissent, joined by Justices Breyer, Sotomayor, and Kagan, in which she blasts the majority opinion for trampling on the ability of employees to exercise their statutory rights. Ginsburg traces the history of the Court’s labor jurisprudence, noting that New Deal legislation like the NLRA and the FLSA arose from an understanding that individual employees lacked the bargaining power to demand fair working conditions, and that only through acting collectively could employees “match their employers’ clout in setting the terms and conditions of employment.” In that sense, the majority’s opinion, premised on the fanciful notion that most employees have any ability to negotiate when their employers demand they sign an arbitration agreement, reflects a return to the pre-New Deal Lochner era, when the Court routinely struck down worker protections as violating the supposed freedom to contract.

Ginsburg further notes that the result of Epic Systems “will be the underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers.” Low-wage employees, especially, may be reluctant to take on their employers alone for fear of retaliation, since the costs and risks of proceeding individually often dwarf the potential recoveries. Of course, this is not an accidental outgrowth of the Roberts Court’s arbitration jurisprudence, but its central design: to insulate companies from liability for harm to their employees and customers.

After Epic Systems, employees, consumers, and those who advocate on their behalf have an increasingly limited toolbox to confront corporate abuse on a class-wide basis, so long as employers can demand individual arbitration. At this point, the only comprehensive solution is likely a legislative one, highlighting the importance of who Americans elect to the next Congress. When most Americans know victims of corporate overreaching – a day we fear is coming soon – the tide will turn, and the Roberts Court will be seen in its true light, on the wrong side of history.

Revisiting Evidentiary Standards in Gender Discrimination Class Actions

On Monday April 2, 2018, the U.S. District Court, Southern District of New York, excluded arbitrary expert testimony and accepted generalized proof of statistical evidence to grant, in part, Plaintiffs’ class certification motion in Chen-Oster, et al. v. Goldman Sachs, 2018 WL 1609267, at *1 (S.D.N.Y. Mar. 30, 2018).

The Class, consisting of approximately 2,300 female current and former Associates and Vice Presidents in the Investment Banking, Investment Management, and Securities Divisions of Goldman Sachs, are challenging the company’s practices of paying women less, giving them worse reviews, and passing them over for promotion. Specifically, Plaintiffs allege that Goldman’s “360 review” performance evaluation process, “forced ranking,” and “cross ruffing” (i.e., cross-checking procedure that involves teams of Goldman partners interviewing each other about potential candidates) are policies and practices that inherently discriminate against women, particularly when those policies and practices are exercised within a “boy’s club” culture, where for example, managers/decision-makers exclude women from events such as barbeques, drinks, and golf outings, hire scantily dressed female escorts to attend holiday parties, etc.

The Court first addressed Goldman Sachs’ attempt to use “experts” in the financial industry to explain custom and practice for evaluation and promotion; however, the Court rejected Goldman’s expert. In United States v. Dukagjini, 326 F.3d 45, 54 (2d Cir. 2003), the Second Circuit, interpreting the Daubert expert-certification approach and applying Rule 702, held that expert testimony should be excluded if the witness is not actually applying expert methodology. The Honorable Judge Analisa Torres, writing in Chen-Oster for the District Court, stated “[u]nder Daubert, the Court must exercise its gatekeeping function accordingly, and ‘exclude unreliable expert testimony and junk science from the courtroom.’” Chen-Oster, 2018 WL 1609267, at *8 (citing, inter alia, Almeciga v. Ctr. for Investigative Reporting, Inc., 185 F. Supp. 3d 401, 415 (S.D.N.Y. 2016)). Judge Torres went on to state, “[g]eneral knowledge about the financial services industry (or, indeed, uninformed speculation about Goldman Sachs) could hardly be relevant or reliable on the question of whether a statistician’s methodology is sound or supported.” Chen-Oster, 2018 WL 1609267, at *8. Judge Torres specifically cited SEC v. Tourre, 950 F. Supp. 2d 666, 677–78 (S.D.N.Y. 2013), in which the Court had excluded testimony because the expert’s knowledge and expertise was in “so broad a category as to become meaningless when particularized” to the issues of the case. Judge Torres, was emphatic: “Defendants cannot circumvent the requirements of Rule 702 and Daubert by labeling a statistical expert’s statistical exercises a ‘real world check.’ A wolf in sheep’s clothing is still a wolf.” Chen-Oster, 2018 WL 1609267, at *8.

The Court also, recognizing the realities of large class actions, allowed Plaintiffs to use “generalized proof” of statistical evidence to show causation prima facie that Goldman Sachs’ policies and practices have a disparate impact on women. Relying on Dukes v. Walmart, Goldman Sachs attempted to argue that individual managers applied Goldman’s practices in “highly individualized ways,” such that Plaintiffs could not show that Defendants used a “common mode of exercising discretion.” Id. at *12. But the Court “decline[d] to indulge in Defendants’ semantic somersaults.” Id. Hitting at the root, the District Court made clear that in Dukes the plaintiffs lost because they had not identified a “common job evaluation procedure.” Here, Plaintiffs did. Id.

Defendants also, relying on a disaggregated business unit argument, contended that gender disparities were the result of “anomalies specific to individual Business Units.” Id. at *14. However, the Court rejected this argument, reasoning that “business units” at Goldman Sachs were not fixed. Id. For years, Goldman had transferred business units to different divisions, and moreover, the personnel in those units regularly transferred to other units and/or divisions. Id. Ultimately, the Court found the Class expert’s cross-unit modelling of the correlation between the performance/promotion process and gender to be persuasive, as it controlled for, among other things, division, year, office, education, and experience. Id. at *15. The expert’s report thereby provided significant proof of commonality for the purposes of showing the disparate impact of Goldman Sachs’ practices on women.

The Court also certified the disparate treatment claim, but not based on the Goldman Sachs “boy’s club” culture. Interestingly, the Court applied a “statistics and anecdotal evidence” approach in which it considered internal complaints, external complaints, survey answers, emails, articles, business records, and declarations from class members to ground its disparate treatment analysis. While Courts may not be recognizing the “boy’s club” phenomenon as evidence in and of itself, they are putting the pieces together to show that misogynist attitudes and practices continue to pervade certain workforces and injure women’s careers.

Although Dukes still presents challenges, the Chen-Oster analysis is a boon to class certification in discrimination cases.

If you have experienced discrimination based upon your gender, and need help, contact Bryan Schwartz Law.

The California Supreme Court Holds PAGA Representative Plaintiffs are Entitled to Robust Discovery

Today, the California Supreme Court issued an important decision, holding that workers prosecuting wage violations under California’s Private Attorneys General Act of 2004 (“PAGA”) are entitled to receive witnesses’/class members’ contact information without having to prove their entire case first. As explained in Williams v. Superior Court (Marshalls of CA), “California law has long made clear that to require a party to supply proof of any claims or defenses as a condition of discovery in support of those claims or defenses is to place the cart before the horse.”[1] The entire decision is required reading for any wage and hour and/or class action practitioner in California, but a few points are worth highlighting here.

I.            PAGA Plaintiffs Are Not Required to Prove the Merits of Their Case Before Receiving State-wide Contact Information for Witnesses/Potential Class Members.

For California employees, the biggest win from the Williams decision is the California Supreme Court’s holding that a worker bringing a representative PAGA enforcement action, like any other plaintiff in a civil state court lawsuit, is not required to prove their case before receiving the information and documents needed to prove their case on behalf of themselves and their co-workers.

The outcome in Williams flows from a plain reading of PAGA and California’s discovery statute, neither of which impose the “modicum of substantial proof” standard MarshallsCA advanced, i.e., “a PAGA-specific heightened proof standard at the threshold, before discovery.”[2] To the contrary, “to insert such a requirement into PAGA would undercut the clear legislative purposes the act was designed to serve” because it would necessarily undermine a representative plaintiff’s ability “to advance the state‘s public policy of affording employees workplaces free of Labor Code violations, notwithstanding the inability of state agencies to monitor every employer or industry.”[3]

Of course, a trial court retains discretion for a “special reason to limit or postpone a representative plaintiff‘s access to contact information for those he or she seeks to represent, but the default position is that such information is within the proper scope of discovery, an essential first step to prosecution of any representative action.”[4]

II.             High Court Reaffirms the Broad Scope of Discovery in California.

The California Supreme Court also used the Williams case to reaffirm the broad scope of civil discovery in California state court. While broad discovery requests may result in “a defendant’s inevitable annoyance,” the Court recognized that the California Legislature “granted such a right anyway, comfortable in the conclusion that ―[m]utual knowledge of all the relevant facts gathered by both parties is essential to proper litigation.”[5]

The Court also clarified that the three-step framework established in Hill v. National Collegiate Athletic Assn.[6], not the “compelling interest” analysis in White v. Davis, should be applied to resolve most parties’ privacy objections to discovery requests unless a request constitutes an “obvious invasion[] of interests fundamental to personal autonomy.”[7] The Court made clear that routine requests for witnesses’/class members’ contact information typically do not warrant “compelling interest” scrutiny, and strongly implied that the Hill test should frequently result in the production of witness/class member contact information, particularly where the parties agree to use a Belaire-West notice and opt-out process.[8]

III.            Defendants Asserting “Burden” Objections to Discovery Requests Must Provide Specific Facts About the Cost and/or Administrative Difficulty of Complying.

The Court also underscored that a defendant may not refuse to produce discovery merely because a defendant disagrees with a plaintiff’s legal theory. In so holding, the Court emphasized that “the way to raise” a perceived legal deficiency in a plaintiff’s case “is to plead it as an affirmative defense, and thereafter to bring a motion for summary adjudication or summary judgment, not resist discovery until a plaintiff proves he or she” can overcome the defendant’s affirmative defense.[9] This aspect of the Williams decision will hopefully go a long way towards incentivizing defendants to defend against plaintiffs’ claims on the merits instead of engaging in discovery gamesmanship, typically resulting in unnecessary and costly motion practice.

Moreover, if responding to a discovery request poses a genuine burden for a company, then the company must provide “evidence of the time and cost required to respond” to support its burden objection.[10] While unsurprising, this portion of the opinion should be used by workers’ advocates who receive generalized “burden” objections from defendants which lack any specific facts regarding the nature of the supposed burden to respond. 

In Williams, the Court illustrated its point with an example: “depending on the nature of any computer database Marshalls might maintain, providing information for 10,000 employees might prove little different than for 1,000, or 100.” If Marshalls had shown that, for example, each store had its own computer database of employees’ information unconnected to any other store’s database and no other centralized employee database existed, then the company might have had solid grounds to assert that coordinating data retrieval between “approximately 130 stores” in California would have been too costly and time-consuming.[11] In that case, the trial court might have ordered cost sharing between the parties, or a narrower production of information.[12] On the other hand, if Marshalls had been able to produce contact information relatively easily regardless of whether it produced employee information for one store as opposed to all of its stores, then Marshalls’ burden objection likely would not have been sustained. 

In the actual case, Marshalls provided no “supporting evidence” regarding the nature of the “time and cost required to” produce contact information for the witnesses/potential class members.[13] Accordingly, the company’s “burden” argument lacked any legal merit.[14]

IV.            Conclusion

Williams will be cited by wage and hour practitioners for years to come because it both provides much needed clarification regarding the scope and operation of California’s civil discovery rules as applied to PAGA representative actions, and also affirms the common sense principle that a worker should not have to prove his or her case before receiving the basic information he or she needs to do so.

Workers and workers' advocates should celebrate this tremendous victory weighing in favor of access to justice, and ultimately, robust enforcement of California’s vital labor laws.

***

If you have believe that you and your co-workers are or have been subject to unlawful pay practices, then please contact Bryan Schwartz Law.

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[1] Williams v. S.C. (Marshalls of CA), No. S227228, 2017 WL 2980258, slip op. at 20 (Cal. July 13, 2017) (“Williams”)

[2] Williams slip op. at 12, 14.

[3] Williams slip op. at 13.

[4] Williams slip op. 11.

[5] Williams slip op. at 20.

[6] 7 Cal. 4th 1, 35. (1994).

[7] Williams slip op. at 29.

[8] Williams slip op. at 25-29.

[9] Williams slip op. at 31 (citing Union Mut. Life Ins. Co. v. Superior Court, 80 Cal. App. 3d 1, 12 (1978)).

[10] Williams slip op. at 18 n. 6.

[11] Williams slip op. at 4.

[12] Williams slip op. at 18 n. 5.

[13] Williams slip op. at 18.

[14] Williams slip op. at 19 (citing Sinaiko Healthcare Consulting, Inc. v. Pacific Healthcare Consultants, 148 Cal. App. 4th 390, 402 (2007)).

Defeating Chindarah v. Pick Up Stix Releases

California employers sometimes seek to nip wage and hour class actions in the bud by buying off individual class members for nominal payments. At least one poorly-reasoned California appellate decision, Chindarah v. Pick Up Stix, 171 Cal. App. 4th 796 (2009), seems to permit it. In a recent independent contractor misclassification class action brought by Bryan Schwartz Law, Marino v. CAcafe, the primary defendant tried just such a tactic, mere weeks after the case was filed late last year. The corporate manager asked each employee-former employee to sign a release based upon a supposed “restructuring” but failed to disclose the existence of the workers’ just-filed lawsuit. The U.S. District Court for the Northern District of California issued a strongly-worded opinion, invalidating all releases improperly obtained from putative class members by the defendants, despite Chindarah, and ordering related relief because the employer’s “communications with the putative class members concealed material information and were misleading.” Marino v. CAcafe, Inc. et al., Case No. 4:16-cv-06291-YGR, slip op. at 3 (filed Apr. 28, 2017) (full opinion available here).

The court explained that “[w]hile the evidence does not indicate the high degree of coercion present in other cases, the fact remains that [the defendants] communicated with putative class members after the lawsuit was filed, but before they had received any formal notice and before plaintiff’s counsel had been given an opportunity to communicate with them.” Id. at 3. Importantly, the defendants’ “communications did not inform putative class members that there was a lawsuit pending that concerned their legal rights, the nature of the claims, plaintiff’s counsel’s contact information, the status of the case, or any other information that might have permitted them to allow them to make an informed decision about the waiver of their rights.” Id. at 4. This conduct “undermine[d] the purposes of Rule 23 and require[d] curative action by the court.” Id. at 3. To correct the harmful effects of defendants’ improper communications, the court:

·     invalidated all releases obtained from putative class members,

·     prohibited the defendants from requesting any reimbursement of payments made,

·    ordered curative notice be issued to all putative class members regarding their rights and the court’s intervention on their behalf (paid for by the defendants),

·    enjoined the defendants responsible for making the communications from engaging in any further ex parte communications with putative class members regarding the litigation or any release of claims until the court has the opportunity to rule on the issue of conditional certification of the FLSA collective action, and

·   ruled that class members who signed releases in exchange for payments could keep those payments, regardless of the outcome of the case.

Id. at 5.

Workers’ advocates should not hesitate to bring motions for corrective action when defendants attempt to subvert the rights of workers and Federal Rule of Civil Procedure 23 (governing class actions) by embarking on a Chindarah campaign. A court need not find a high degree of coercive conduct on the part of an employer to warrant invalidation of releases obtained from putative class members. If the employer uses misleading tactics to obtain releases from putative class action members – like omitting the fact that a class action has been filed against the defendant for wage violations, and failing to disclose contact information of the plaintiffs’ lawyers – then you may have strong grounds to remedy the defendant’s misconduct. See generally Gulf Oil Co. v. Bernard, 452 U.S. 89 (1981); Retiree Support Grp. of Contra Costa Cty. v. Contra Costa Cty., 2016 WL 4080294, at *6 (N.D. Cal. July 29, 2016) (collecting 8 cases).

Contact Bryan Schwartz Law with any questions about questionable releases of wage and hour claims.