Real Estate Appraisers and Review Appraisers Should Be Paid Overtime, According to Conditionally Certified Collective Action

Appraisers are not exempt "administrators" or "learned professionals" – they are production employees entitled to overtime pay, according to a class and collective action lawsuit against Bank of America brought by Bryan Schwartz Law. On December 11, the United States District Court for the Central District of California, Hon. David O. Carter, ruled in favor of Plaintiff residential appraisers Terry Boyd and others by granting Plaintiffs’ motion for conditional class certification under the federal Fair Labor Standards Act ("FLSA"). The case is Boyd, et al. v. Bank of America Corp., LandSafe, Inc., et al. (No. 13-CV-561-DOC), and the Court's order is available here.

Bryan Schwartz Law, along with co-counsel Schonbrun DeSimoneSeplow Harris & Hoffman LLP, represents the Plaintiffs, who are current and former residential appraisers and review appraisers for Bank of America / LandSafe ("BofA"). They claim that BofA misclassified them as "exempt" from the overtime requirements of federal law – the FLSA – and California state law (see our earlier posts regarding this and a similar case brought by Bryan Schwartz Law, here and here).

Residential appraisers inspect properties (usually single-family homes) day in and day out, churning out appraisal reports that provide an estimated value of the property as a necessary step in issuance of mortgages or other financial products sold by BofA. BofA appraisers are compensated under a plan that is designed to incentivize their increased production of appraisal reports, and appraisers are evaluated and paid based on their productivity. Review appraisers apply established criteria in making sure appraisal reports comply with regulatory and company requirements. Many BofA appraisers and review appraisers often work upwards of 60 hours per week, including weekends and holidays, without receiving overtime pay.

The Court’s ruling in December considered whether BofA appraisers and review appraisers across the United States are sufficiently "similarly situated" that they should be conditionally certified as a "collective action" under the FLSA, so that over 1,000 appraisers nationwide should receive a Court-approved Notice of the case, giving them an opportunity to join the suit. In concluding that BofA appraisers were entitled to certification, the Court relied on declarations from appraisers across the country demonstrating that their compensation plans and their duties are extremely similar, if not identical, throughout the company.

As the lawsuit progresses, the dispute will likely focus on whether appraisers fall within the exemptions to the federal overtime laws for "administrative" or "professional" employees. Plaintiffs maintain that the "administrative" exemption is not intended to cover employees like appraisers, but is meant to apply to personnel who are determining the strategic decisions of the company, who advise the company's top managers directly, who act in a supervisory or managerial role, or who bind the company to major financial or policy decisions. BofA appraisers do not supervise anyone. They do not have the power to bind the company. They do not set policy or advise management.

In addition, federal regulations state that in order to fall within the administrative exemption, an employee must exercise "discretion and independent judgment with respect to matters of significance." Although appraisers are legally required to have some level of independence from the Bank's underwriting department when arriving at the valuation of a home, their discretion is closely restricted by BofA and regulatory requirements about the manner in which appraisal reports must be completed. In addition, each appraisal that an appraiser conducts relates only to an appraisal report costing several hundred dollars, for a single mortgage transaction, not to "matters of significance" to the "administration" of the Company -- as contrasted, for example, with the policy-makers who decide on BofA/LandSafe's appraisal practices generally.

Likewise, the "learned professional" exemption under California and federal law is meant to apply to individuals -- like lawyers, doctors, certified public accountants, and teachers -- who undergo a prolonged course of specialized instruction (typically, a year or longer) necessary to performing their job duties. Although appraisers undoubtedly acquire a lot of training in their years working in the field, the sort of apprenticeship and on-the-job learning they do, paired with just several weeks of classroom instruction, does not entitle BofA to deprive appraisers of overtime pay. In fact, many appraisers have a high school diploma -- not an advanced post-graduate degree -- and becoming an appraiser requires no specialized degree.

Because Plaintiffs believe these exemptions do not apply, they expect to prove that BofA misclassified them as exempt, and owes them back-wages for unpaid overtime work.

For more information about this case, or if you are interested generally in class actions seeking wages, please contact Bryan Schwartz at Bryan@BryanSchwartzLaw.com.

Federal Court Deals Setback to Employers Seeking to Strip Employees’ Class Claims Through Arbitration

Today, the United States District Court for the Central District of California, Hon. Josephine Staton, ruled in favor of Plaintiffs Kenneth Lee and Mark Thompson, denying Defendant JP Morgan Chase & Co.’s motion to compel arbitration on an individual basis. The Court’s decision is a victory for employees generally who seek to challenge improper pay practices on a class or collective basis. The case is Lee, et al. v. JPMorgan Chase & Co., et al. (No. 13-CV-511-JLS).

JPMorgan Chase’s motion arose after both parties had agreed that the merits of the case – whether Appraisers in the commercial lending division of JPMorgan Chase were improperly denied overtime pay – should be decided by an arbitrator. The arbitration agreements signed by some of the Plaintiffs stated that “[a]ny and all disputes that involve or relate in any way to [the employee’s] employment” would be submitted to arbitration, but the agreements did not discuss class-wide or collective claims. The issue presented to the Court was who should decide whether the Plaintiffs’ arbitration claims could proceed on a class-wide basis: the Court itself, or the arbitrator. JPMorgan Chase argued that the Court should decide the issue and should hold that the language of the Arbitration Agreements required each of the Plaintiffs to pursue his claims in an individual arbitration, rather than as part of a class-wide arbitration. The Court rejected JPMorgan Chase’s argument.

In ruling for Plaintiffs, the Court held that whether the Plaintiffs could proceed on a class-wide basis was a “procedural” question within the scope of the arbitrator’s authority to decide, not a question of “arbitrability” (i.e., whether the dispute was subject to arbitration in the first place), which would have been a question for the Court to decide. The Court noted that the U.S. Supreme Court had recently described this particular issue as an open question, see Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 1068 n.2 (2013), but the Court found guidance in an earlier Supreme Court decision, Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003) (plurality), and a decision from the Third Circuit Court of Appeals, Vilches v. Travelers Companies, Inc., 413 F. App’x 487 (3d Cir. 2011).

Today’s decision reinforces this blog’s prior view (expressed here and here) that employers that seek to compel class cases into arbitration should be careful what they wish for: they may escape Court litigation only to find themselves bearing the considerable cost of class-wide and/or multiple individual arbitrations.

Bryan Schwartz Law represents the Plaintiffs in Lee, along with the firm of Goldstein, Borgen, Dardarian & Ho.

The Court’s order is available here. For more information about this case on behalf of commercial appraisers and review appraisers, or generally about class actions seeking wages, please contact Bryan Schwartz at Bryan@BryanSchwartzLaw.com.

Disability Issues in the Workplace: Bryan Schwartz Law Principal Appears on NPR Talk Show Discussing New Disability Laws and Regulations

The Americans with Disabilities Act (ADA) Amendments Act of 2008 (link to the EEOC's guidance), followed by the promulgation of new disability regulations adopted by California's Fair Employment and Housing Council this year (link to the regulations), have broadened protections for workers with disabilities, especially in California.

Today, Bryan Schwartz Law's Principal discussed the impact of these new laws and regulations on NPR, along with John Hyland of Rukin Hyland Doria & Tindall, and host Chuck Finney, on the "Your Legal Rights" radio show, on KALW 91.7 FM in the Bay Area, with a syndicated version broadcast around California and available online.

Listen to the show here.

Click on "Listen" to hear the illuminating discussion of this complex area of law that affects so many workers and employers.

Sonic-Calabasas v. Moreno: California Supreme Court Holds the Unconscionability Doctrine Survived the U.S. Supreme Court's Concepcion Assault

Workers, consumers, and regular folks of all stripes have some hope, if they live in California. Though the U.S. Supreme Court has marched relentlessly toward completely eviscerating our rights to challenge big corporations when they discriminate or retaliate against us unlawfully or steal from us in various ways, "states' rights" still carry some sway in applying basic contract law. And, California's basic contract law recognizes that some contract terms are just unconscionable, and thus unenforceable.

Today, Justice Goodwin Liu, writing for the Supreme Court, in Sonic-Calabasas v. Moreno, S174475 (Sonic II), in a seventy-page majority opinion, joined by Chief Justice Cantil-Sakauye, and Justices Kennard, Werdegar, and Corrigan, gave new life to our right to challenge contracts that are unconscionable - that is, so unfair, they cannot be enforced. Read the decision here.

Though this Supreme Court (unlike the U.S. Supreme Court) has had a high number of unanimous decisions and harmony, not so, in this case. Justice Corrigan added a three-page concurrence with her two cents, and Justice Chin (joined by Justice Baxter) wrote a 29-page dissent that would not have found the agreement in this case unconscionable.

The Supreme Court in Sonic-Calabasas was reconsidering its prior decision, in Sonic-Calabasas, Inc. v. Moreno (2011) 51 Cal.4th 659 (Sonic I), in light of AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ [131 S.Ct. 1740] (Concepcion). In Concepcion, as I have written and spoken about previously on this blog here and here, the U.S. Supreme Court rejected California's presumption of unconscionability concerning class action waivers in arbitration agreements (the Discover Bank rule), holding the presumption was discriminatory against arbitration, in violation of the Federal Arbitration Act (FAA). Concepcion drastically undermined our rights as workers and consumers to challenge big companies' indiscretions on a level playing field.

In Sonic I, California's Supreme Court had held that the Federal Arbitration Act did not preempt a state law rule allowing employees to have a hearing with California's Labor Commissioner at the Division of Labor Standards Enforcement (DLSE) (a Berman hearing, as it is called). In light of Concepcion, that holding of Sonic I is dead, according to today's decision. If you signed an arbitration agreement with your employer, you do not have a right to a Berman hearing anymore.

But, that is not the end of the story, fortunately. Today's decision holds:

"Although we conclude that the FAA preempts a state-law rule categorically requiring arbitration to be preceded by a Berman hearing, our holding does not fully resolve the unconscionability claim in this case." Slip Op. at p. 27. "After Concepcion, courts may continue to apply unconscionability doctrine to arbitration agreements." Slip Op. at p. 32.

In Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, California's Supreme Court laid out the unconscionability doctrine in the context of arbitration agreements - describing what sorts of arbitration terms go too far in tilting the playing field toward the more powerful party. Armendariz survives, the Supreme Court held today.

The decision by Justice Liu gives several examples of unconscionable terms which are still unacceptable:

• one that effectively gives the more powerful party (which is imposing its own arbitration agreement - called an "adhesion contract") the right to choose a biased arbitrator (Slip Op. at p. 29, citing Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 826–827);
• where "an equal division of costs between employer and employee has the potential in practice of being unreasonably one-sided or burdening an employee's exercise of statutory rights" (citing Armendariz);
• where there is a high threshold for an arbitration appeal that decidedly favors defendants in employment contract disputes (citing Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1076);
• "an arbitration agreement with a damages limitation clause under which the customer does not
  even have the theoretical possibility he or she can be made whole" (citing Harper v. Ultimo (2003) 113 Cal.App.4th 1402, 1407);
• "an arbitration agreement that, among other things, impos[ed] upon [the employee] the obligation to pay [the employer's] attorney fees if [the employer] prevails in the proceeding, without granting her the right to recoup her own attorney fees if she prevails" (citing Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 799–800);
• and "where a consumer enters into an adhesive contract that mandates arbitration, it is unconscionable to condition that process on the consumer posting fees he or she cannot pay" (citing Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77).

As the Court explained:

Unconscionability doctrine ensures that contracts, particularly contracts of adhesion, do not impose terms that have been variously described as "overly harsh" (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1532), "unduly oppressive" (Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 925), "so one-sided as to shock the conscience" (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (2012) 55 Cal.4th 223, 246), or unfairly one-sided (Little, supra, 29 Cal.4th at p. 1071). All of these formulations point to the central idea that unconscionability doctrine is concerned not with "a simple old-fashioned bad bargain" (Schnuerle v. Insight Communications Co. (Ky. 2012) 376 S.W.3d 561, 575), but with terms that are "unreasonably favorable to the more powerful party" (8 Williston on Contracts (4th ed. 2010) § 18.10, p. 91).

Slip Op. at p. 31.

Significantly, the Court maintained the stance rejecting arbitration agreements that "impair the integrity of the bargaining process or otherwise contravene the public interest or public policy" (Slip Op. at pp. 31-32), though such public policy-driven arguments seemed threatened by American Express, Inc. v. Italian Colors, from June 20, 2013.

Ultimately, Sonic II is a major victory for employees, consumers, and their advocates. The California Supreme Court's analysis, while allowing arbitration agreements to eliminate the Berman hearing right, maintained everything the Berman hearing was designed to accomplish, saying:

The Berman statutes include various features designed to lower the costs and risks for employees in pursuing wage claims, including procedural informality, assistance of a translator, use of an expert adjudicator who is authorized to help the parties by questioning witnesses and explaining issues and terms, and provisions on fee shifting, mandatory undertaking, and assistance of the Labor Commissioner as counsel to help employees defend and enforce any award on appeal. Waiver of these protections does not necessarily render an arbitration agreement unenforceable, nor does it render an arbitration agreement unconscionable per se. But waiver of these protections in the context of an agreement that does not provide an employee with an accessible and affordable arbitral forum for resolving wage disputes may support a finding of unconscionability. As with any contract, the unconscionability inquiry requires a court to examine the totality of the agreement‘s substantive terms as well as the circumstances of its formation to determine whether the overall bargain was unreasonably one-sided. In the present case, we remand to the trial court to conduct this fact-specific inquiry.

Slip Op. at p. 33(emph. added).

These days, with a U.S. Supreme Court overtly hostile to workers' and consumers' rights, this is about the best we can hope for.

If you have questions relating to your rights as an employee, or about an arbitration agreement you signed, contact Bryan Schwartz Law today.

Ninth Circuit Holds that Your Disability Leave Application May Not Deprive You of the Right to Reasonable Accommodations

Disabled employees are sometimes caught between the desire to work and the practical need to apply for disability leave through the Social Security or State Disability Insurance (SSDI or SDI) systems, the Family Medical Leave Act (FMLA) or California Family Rights Act (CFRA), or a disability retirement plan through a public employer. For example, an employee who becomes disabled on the job may find her employer denying her reasonable accommodation, thereby leaving her with no better choice than to seek some form of disability leave. FMLA leave is available for temporary conditions that make an employee unable to perform the essential functions of her job. In the past, an employee had reason to fear that statements made about her inability to perform essential job functions in an application for FMLA leave would be used against her if she later sued her employer for failure to provide reasonable accommodation in the workplace.

Fear no more. Last month, the Ninth Circuit provided a green light for disabled employees to apply for FMLA leave while asserting their right to reasonable accommodation under the Americans with Disabilities Act (ADA). In Smith v. Clark County School District, D.C. No. 2:09-civ-02142-RLH-LRL (9th Cir. Aug. 21, 2013), the Ninth Circuit made it clear that bringing a claim under the ADA does not inherently conflict with making a claim for FMLA disability leave. The Court of Appeals explained that this is because FMLA applications do not account for an employee’s ability to work with reasonable accommodation.

In Smith, the Court also provided guidance for employees seeking to apply for FMLA leave while preserving their reasonable accommodation claims. Smith involved an elementary school employee who aggravated her back while on the job, and applied for medical leave under the FMLA, as well as state retirement and private insurance disability benefits. The Court reasoned that the FMLA and the other claims were not inconsistent with the plaintiff’s ADA cause of action because the statements made on her applications did not account for her ability to perform her job with reasonable accommodation, or her ability to work in the future. The Court held that the teacher had given sufficient explanation for the inconsistencies between her ADA claims and her benefits applications to survive summary judgment, and genuine issues of material fact remained regarding whether the teacher or school district proposed a reasonable accommodation that would allow the teacher to retain her employment. Thus, an employee who becomes disabled on the job may apply for FMLA leave, and maintain a reasonable accommodation claim, if statements made in her FMLA application do not directly conflict with the conclusion that the employee could either perform her job with “reasonable accommodation,” or her ability to work in the future.

In arriving at its conclusion, the Ninth Circuit applied a two part test set forth in Cleveland v. Policy Management Systems Corporation, 526 U.S. 795 (1999). In Cleveland, an employee’s application for SSDI was at issue. Subsequently, other appeals courts have determined that Federal Employee Retirement System (FERS) benefits and state-police pension benefits do not conflict with ADA claims. In Smith, the court denied summary judgment as to not only the FMLA issue, but also Nevada Public Employees’ Retirement Systems disability retirement and private insurance benefits. A general pattern seems to be emerging, and employees should note and take heart.

If you have questions about disability discrimination under the ADA or California’s Fair Employment and Housing Act (FEHA), contact Bryan Schwartz Law today.

NOTE: Nothing in this posting is intended to provide legal advice about your particular case and it does not form an attorney-client relationship with any reader. It is intended to be information about a subject of general interest for the general public. In order for Bryan Schwartz Law  to represent you, you must have a signed representation agreement with the firm.

California Courts Split on Exhausting Whistleblower Claims Under Labor Code

Better to exhaust than be sorry.

This week, California’s Third Appellate District issued a decision dealing with whistleblower-retaliation claims under Labor Code that begs for a judicial or legislative response. In MacDonald v. State of California, Case No.C069646, the court held that an employee must exhaust the administrative remedy set forth in section 98.7 before filing suit in superior court for retaliatory discharge in violation of Labor Code sections 1102.5 and 6310. The court recognized that its decision directly and deliberately conflicts with the Second Appellate District’s decision in Lloyd v. County of Los Angeles (2009) 172 Cal. App. 4th 320, which holds that no such requirement exists.

Labor Code section 98.7 provides a statutory scheme that allows any person to file a complaint with the Labor Commissioner if that person “believes that he or she has been discharged or otherwise discriminated against in violation of any law under the jurisdiction of the Labor Commissioner.” The plain language of the code is discretionary, allowing that an aggrieved employee “may file a complaint” within six months of the alleged adverse action.

Over the years, federal district courts have taken conflicting positions on whether an employee who has been a victim of whistleblower retaliation under section 1102.5 must first file a complaint with the Labor Commissioner under section 98.7. See MacDonald, Slip op. 6, n.4. But federal courts can only speak persuasively regarding the requirements of California Law.

Some employees and their counsel have treated the complaint process as permissive, and for good reason. In 2007, the DLSE issued an opinion letter advising that: “The DLSE’s position is that the wiser course is not to require exhaustion of Labor Code section 98.7 procedures prior to raising a statutory claim in a civil action.” Later, in Lloyd v. County of Los Angeles (2009) 172 Cal. App. 4th 320, the Second Appellate District held that “[t]here is no requirement that a plaintiff pursue the Labor Code administrative procedure prior to pursuing a statutory cause of action” for retaliation; rather, section 98.7 “merely provides the employee with an additional remedy, which the employee may choose to pursue.”

According to the court in MacDonald, the Second Appellate District got it wrong in Lloyd (and by extension, so did the DLSE in its 2007 opinion letter), by failing to consider Campbell v. Regents of University of California (2005) 25 Cal.4th 311. The Third Appellate District held:

The rule of exhaustion of administrative remedies is well established in California jurisprudence. “In brief, the rule is that where an administrative remedy is provided by statute, relief must be sought from the administrative body and this remedy exhausted before the courts will act.” (Campbell, supra, 35 Cal.4th at p. 321, quoting Abelleira [v. District Court of Appeal (1941)] 17 Cal.2d [280], 292). This is so even where the administrative remedy is couched in permissive, as opposed to mandatory, language. (See Williams v. Housing Authority of Los Angeles (2004) 121 Cal.App.4th 708, 734.) Here, an administrative remedy is provided in section 98.7. Thus, in accordance with Campbell, we conclude that plaintiff was required to exhaust that remedy prior to pursuing the underlying action.

Slip op. at 6.

With conflicting decisions in the Third and Second Appellate Divisions, cautious employees and counsel will take care to file a complaint with the Labor Commissioner before they consider filing section 1102.5 or 6310 claims in court. The DLSE can expect to process an increased volume of retaliation complaints going forward.

The Supreme Court or the State Legislature would be wise to speak decisively on the issue of exhaustion raised by MacDonald and Lloyd, as well as related issues arising from the conflict, so as to provide clarity for employees, lower courts, and the DLSE.

NOTE: Nothing in this posting is intended to provide legal advice about your particular case and it does not form an attorney-client relationship with any reader. It is intended to be information about a subject of general interest for the general public. In order for Bryan Schwartz Law to represent you, you must have a signed representation agreement with the firm.

The Need for Clarity on Joint Employer Liability for Wage Claims Against Owners of Closely-Held Companies

Workers must answer a threshold question in any employment lawsuit: who is their legal employer? Frequently, several people or companies control various aspects of a worker’s employment. For example, Company A might send a worker her paycheck and create the policies that affect the worker’s compensation, while Company B might set the hours of her employment while the owner of Company B controls the worker’s workplace conditions, such as how the worker performs her work.

Currently, the case law is unclear on how a court should determine joint employer status, and thus who can be held accountable.  However, employees and their advocates faced with such a situation should argue that the worker is employed by joint employers, which means that both Companies A and B may be held liable if the worker’s rights are violated. In addition, the owner of Company B who controls the worker’s workplace conditions may also be liable as a joint employer.
The tests for joint employer status appear to vary depending on the causes of action.
Labor Code Claims

In Martinez v. Combs, the California Supreme Court provided some clarity on who should count as a joint employer when workers assert a wage claim by adopting the definition of the “employment relationship” promulgated by California’s Industrial Wage Commission (IWC). Martinez, 49 Cal.4th at 52. The IWC defines “to employ” as satisfying one of the following:

(a) to exercise control over the wages, hours or working conditions, or
(b) to suffer or permit to work, or
(c) to engage, thereby creating a common law employment relationship. 

Id. at 64.

While Martinez provided some clarity on how to determine if an individual is an employer, it also created ambiguity because the court excluded corporate agents merely acting within the scope of their agency from liability for violations of Labor Code § 1194 (minimum wage and overtime violations). Id. at 66. This means that if plaintiffs attempt to sue both the company that employed them and also a manager strictly acting as an agent of the employer company, the individual agent likely would not be personally liable for minimum wage or overtime violations.

The Martinez court did not address whether a sole owner of a closely held entity is insulated against liability. Reynolds v. Bement, 36 Cal. 4th 1075, 1082 (2005), overruled by Martinez to the extent it relied solely upon agency theory, instead of the three-prong IWC test, involved corporate agents rather than a sole owner.

The control and suffer/permit tests embraced by Martinez raise the possibility that individual owners can now be liable for Labor Code, minimum wage and overtime violations, where they are involved hands-on in running their business, hiring/firing, setting wages, making policies, etc.

No California appellate court has yet addressed the issue, but Bryan Schwartz Law has recently filed a writ on the issue of joint employer liability for Labor Code violations to the Court of Appeal, available at here.

Federal courts deciding the issue have split. Compare Garcia v. Bana, C 11-02047 LB, 2013 WL 621793 (N.D. Cal. Feb. 19, 2013) with Guifu Li v. A Perfect Day Franchise, Inc, 281 F.R.D. 373, 396 (N.D. Cal. 2012). Stay tuned! For more information about the 2010 Martinez decision, please read our blog article when it was first decided here.

Private Attorneys General Act of 2004 (PAGA)
The Private Attorneys General Act of 2004 (PAGA) allows workers to collect civil penalties for violations of the California Labor Code. Again, workers with multiple supervisors, perhaps from different companies, must determine whom they can hold accountable under PAGA. The text of the statute provides that “[a]ny employer or other person acting on behalf of an employer who violates, or causes to be violated, a section of this chapter or any provision regulating hours and days of work in any order of the Industrial Welfare Commission…” will be subject to civil penalties. Cal. Lab. Code § 558(a) (West). In Reynolds, Justice Moreno, in his concurrence, raised the possibility that the then-new PAGA statute would permit individual liability for corporate officials, saying, “the Private Attorneys General Act…which authorizes civil penalties for violations of the wage laws that include unpaid wages from “any employer or other person acting on behalf of an employer,” a phrase conceivably broad enough to include corporate officers and agents in some cases.” Reynolds v. Bement, 36 Cal. 4th 1075, 1094 (2005) abrogated by Martinez v. Combs, 49 Cal. 4th 35 (2010).

A federal court in McDonald v. Ricardo’s on the Beach, Inc., concluded that there was a genuine issue of material fact as to whether a defendant “violate[d], or cause[d] to be violated,” Labor Code 510 (overtime wages) on the basis that he owned and operated the company which issued checks to the plaintiffs, signed the checks that plaintiffs received, and occasionally brought the checks to the workplace to be distributed. McDonald v. Ricardo's on the Beach, Inc., CV 11-9366 PSG MRWX, 2013 WL 153860 at *4 (C.D. Cal. Jan. 15, 2013). McDonald relied upon prior federal precedent in Ontiveros v. Zamora, which reached the same conclusion. CIV S-08-567LKK/DAD, 2009 WL 425962 at *6 (E.D. Cal. Feb. 20, 2009).

Though California appellate authorities have not yet reached the issue, workers should argue that PAGA extends liability for Labor Code violations beyond mere corporate entities to individual agents and owners, depending on the circumstances, because PAGA explicitly creates liability for a “person acting on behalf of an employer who violates, or causes to be violated” a section of the Labor Code.

Business and Professions Code § 17200 et seq.
California’s Business and Professions Code § 17200 et seq. allows workers to recover unpaid wages and other property unlawfully taken from them by their employer. Section 17200 provides that a “person” shall be required to “restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.” Bus. and Prof. Code § 17203. “Person” includes “natural person.” Cal. Bus. & Prof. Code § 17201 (West). This broad definition can also extend to personal liability for individual owners for wage violations. See, e.g., Troyk v. Farmers Grp., Inc., 171 Cal. App. 4th 1305, 1340 (2009) (“The UCL ‘requires only that the plaintiff must once have had an ownership interest in the money or property acquired by the defendant through unlawful means.’”); Aleksick v. 7-Eleven, Inc., 205 Cal. App. 4th 1176, 1185 (2012) (UCL claims under § 17200 are derivative of wage claims).

California’s appellate courts should confirm soon that owners of closely held corporations may be held personally liable for a variety of wage claims under appropriate circumstances. At stake in many cases is whether or not workers cheated of their wages will be able to recover at all. Often the individual owners are the only ones with resources to make good on their company’s debts. They should not be able to hide behind corporate formalities in dodging wage laws.

If you question why you are not receiving compensation to which you believe you are entitled, and do not know who to hold accountable, and you want advice from an attorney, please contact Bryan Schwartz Law today.