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Tag Archive for wage and hour

CA Appellate Court Admonishes Trial Judges to “Stay Classy” in Certifying Wage and Hour Claims

In Martinez v. Joe’s Crab Shack Holdings (Nov. 10, 2014), the Court of Appeal for the Second District of California reinforced the importance of the class action as a preferred means of adjudicating wage and hour cases. “Litigation by class action has long been recognized as a superior method of resolving wage and hour claims in California, including those seeking redress for unpaid overtime wages.”

In September of 2007, Roberto Martinez filed a class action seeking to represent a class of salaried managerial employees who worked at different Joe’s Crab Shack (JCS) restaurants in California and had been misclassified as exempt employees and denied overtime compensation. In June 2011, Martinez and other former managers moved for certification of a class consisting of “[a]ll persons employed by Defendants in California as a salaried restaurant employee in a [JCS] restaurant at any time since September 7, 2003.”

The plaintiffs presented training and operation manuals demonstrating JCS’ uniform hiring and training practices throughout its stores. Specifically, the operations manual applied to all restaurants and every employee; each restaurant offered the same menu; and all managerial employees were evaluated using the same form and procedure. Plaintiffs also introduced declarations from twenty two (22) current and former salaried, managerial employees who (1) claimed they routinely worked more than the 50-55 hours they were told they would be working and (2) estimated performing hourly employee tasks between 50 percent to 95 percent of the time. Under the executive employee exemption to overtime compensation, an exempt employee must spend at least half of his or her time performing managerial functions.

Though the Appellate Court acknowledged obstacles in certifying certain cases, it ultimately reversed the trial court’s order denying class action status: “[W]e understand from Brinker, Duran and Ayala that classwide relief remains the preferred method of resolving wage and hour claims, even those in which the facts appear to present difficult issues of proof. By refocusing its analysis . . . the trial court may in fact find class analysis a more efficient and effective means of resolving plaintiffs’ overtime claim.”

Amen.

Von Nothdurft Decision a Game Changer for California Resident Managers

Residential apartment managers in California just can’t seem to catch a break. As licensees, they are not afforded the broad legal protections of tenants living at the same property. They are required to be on call 24/7 but are only entitled to compensation for actual hours worked. And they often work far more hours than they are paid for but lack the documentation to prove it.

Until recently, Industrial Wage Order No. 5-2001 (“IWO 5-2001), which regulates the wages, hours, and working conditions of resident managers, was their one saving grace. Under Section 10(C) of the order, an employer cannot credit the value of a resident manager’s apartment “against the minimum wage without a voluntary written agreement between the employer and the employee.”

On June 26, 2014, however, the California Court of Appeal in Von Nothdurft v. Steck, ___ Cal.App.4th ___, significantly weakened this protection. Von Nothdurft is the first state court case certified for publication that addresses what language needs to be included to qualify as a “voluntary written agreement” under IWO 5-2001. The court’s ruling? Far less than previously thought and less than the plain language of the order seems to require.

In Von Nothdurft, Plaintiff Brenda Leigh Von Nothdurft (“Ms. Von Nothdurft”), an apartment manager for a property owned by Defendant John Steck (“Mr. Steck”), signed a management agreement stating her compensation would include “free rent for her apartment.” At the time of the agreement, neither Ms. Von Nothdurft nor Mr. Steck was aware of the requirements of IWO 5-2001.

Ms. Von Nothdurft argued the agreement did not satisfy the requirements of IWO 5-2001 because it did not reference the minimum wage or any apartment rent credit. This interpretation of “voluntary written agreement” was adopted by the Department of Labor Standards and Enforcement (2002 Update of the DLSE Enforcement Policies and Interpretations Manual, at § 45.4.5) and a California federal district court in Brock v. Carrion, Ltd. (E.D. Cal. 2004) 332 F.Supp.2d 1320, 1330 (2004).

The Van Nothdurft court didn’t buy it:

Wage Order 5 does not define the phrase “voluntary written agreement” as used in subdivision 10(C) or otherwise specify that any particular terms must be included in such an agreement to permit a valid lodging credit – it requires only a “voluntary written agreement between the employer and the employee” without qualification. Under its plain terms, no express reference to a credit toward minimum wage, statement that the employee is entitled to minimum wage for every hour worked, or the precise amount to be credited, need be included as long as the parties understand and agree – as they did here by entering into the management agreement – that lodging is to be credited toward the employee’s compensation. Since the wage order’s language is clear, we apply it without further interpretation.

Interestingly, the court in Brock read the same “plain” language to reach the opposite conclusion: “Consistent with the statutory language, the DLSE requires that the written agreement explicitly reference that such credits are being applied toward the minimum wage obligation of the employer.” Brock v. Carrion, Ltd. (2004) 332 F. Supp. 2d 1320, 1330.

The interpretation adopted by the DLSE and the Brock court is the far more sensible one. Under IWO 5-2001, a voluntary written agreement is a condition precedent to validly crediting the employee’s lodging against the minimum wage (“…lodging may not be credited against the minimum wage without…”). This language clearly implies that the agreement must in some way relate to the employer’s minimum wage obligation.

Under Von Nothdurft, an agreement between employer and employee having nothing to do with the employment relationship would qualify as a “voluntary written agreement” as long as it was in writing and signed by the parties. The holding defies common sense and undermines the very purpose of the wage order—to inform the resident employee of her rights under the Labor Code and to protect those rights.

California’s Minimum Wage Increases, Now Slightly Less Unlivable

Well, it’s better than nothing.

Beginning July 1, 2014, the minimum wage in California will increase from $8.00 per hour to $9.00, the first such state increase since January 1, 2008. On January 1, 2016, the minimum wage will rise again to $10.00. These changes were enacted pursuant to Assembly Bill 10, which California Governor Jerry Brown signed into law on September 25, 2013. On the municipal level, low-wage earners in the City and County of San Francisco have enjoyed the highest minimum wage in the country since the start of 2014. Employers must pay these workers at least $10.74 per hour.

Though the legislation does not apply to properly classified independent contractors, it will affect the compensation owed to employees classified as “exempt,” i.e., employees who are paid a monthly salary equivalent to twice the minimum wage and spend more than half their work time performing professional, administrative, executive duties or other functions requiring the use of independent discretion and judgment.

The minimum monthly salary owed to exempt employees is calculated based on a 40-hour workweek over the course of 52 weeks a year. As of July 1, 2014, employers will need to pay their exempt employees at least $3,120 a month, or $37,440 annually. On January 1, 2016, the minimum wage for exempt employees will increase to $3,467 a month, or $41,600 annually.

The federal minimum rate for nonexempt employees is and has remained at $7.25 since July 24, 2009. According to the U.S. Department of Health & Human Services’ Office of the Assistant Secretary of Planning and Evaluation, the sole earner of a family of four working full-time at this rate would be making less than the federal poverty line. By comparison, comparable California minimum wage earners are living in the lap of luxury, still living below the poverty level but only barely so.

And more changes may be coming. On May 29, 2014, the California State Senate approved a bill that would raise the minimum wage to $11.00 in 2015 and $12.00 in 2016; by 2017, the minimum wage would reach $13.00. The bill would need to be approved by the State Assembly and signed by Governor Brown to become effective as law.

Let the revolution begin.