While the Stakes At Issue In Actions Before the DLSE Continue to Grow, So Do The Deterrents And Obstacles to Pursuing Appeals of DLSE Orders in Court

By John R. Giovannone

Last week, the DLSE dropped a bomb.  On April 3, 2014 the California Division of Labor Standards Enforcement (“DLSE”) issued a News Release on its website with the tag line “California Labor Commissioner orders Southern California Company to return over $336,000 to janitorial workers for unpaid wages.”  The order, which also imposed over $33,000 in penalty assessments, addressed claims of wage and meal/rest break violations on behalf of roughly 115 hourly workers over a three year period.  Setting aside the merits of the action, a liability finding of that magnitude in court would ordinarily result in the employer running to appeal.  But, the chances of an appeal are considerably lower here because the liability finding was issued by the DLSE.     

Why don’t more employers appeal adverse DLSE Decisions?  Historically, employers facing adverse orders, decisions, or awards of from the DLSE wouldn’t appeal those decisions in court for reasons that have little to do with the merits of their would-be de novo appeal, such as:

  • This might cost me, even if I win?  If the employer’s appeal is unsuccessful, the court may award the employee attorneys’ fees and costs incurred in defending the appeal.  Worse still, even if an employer’s appeal is partially successful and the award is reduced, there is authority for the position that the court may still award attorneys’ fees and costs to the employee provided the DLSE award has not been completely negated, as the Labor Code categorizes the employee as “successful if the court awards an amount greater than zero.”  (LC § 98.2(c)) 
  • My case looks like this now, but it can get bigger?  While highly controversial, there is a risk that the court will allow the Plaintiff to add new claims to the action on de novo appeal as the California Supreme Court has held that “whether an employee should be permitted to raise additional claims in the de novo proceeding is best left to the sound discretion of the trial court.”  Murphy v. Kenneth Cole Productions, Inc., 20 Cal. 4th 1094, 1118 (2007).
  • I want to appeal but I can’t afford to litigate and pay for the bond at the same time.  The Labor Code requires that an employer has only 10 days from service of the DLSE order to file a notice of appeal in state court, but the employer “shall first post an undertaking with the reviewing court in the amount of the … award [which] shall consist of an appeal bond issued by a licensed surety or a cash deposit with the court in the amount of the … award.”  (LC § 98.2(b))

Ten days is nothing!  If I get my bond money in a little late, no harm, no foul, right?  Nope.  As unreasonable as it may seem, an untimely bond or cash deposit nullifies a timely notice of appeal.  Prior to December 2013, employers would sometimes file timely appeals of DLSE orders within the ten-day statutory deadline, but not post the requisite bond or cash deposit until sometime later due to financial constraints and/or difficulty procuring an adequate bond.  However, on December 16, 2013, in the published Palagin v. Paniagua Construction, Inc. decision of the California Court of Appeal, the court made clear that the ten-day deadline applies to the undertaking requirement as well as the notice of appeal.  Specifically, the court reversed a defense verdict in favor of an employer following a bench trial on the de novo appeal of a DLSE order because the employer received a court-approved extension of its deadline and therefore did not post the $34,000 undertaking until 66 days after the date of the order.  

The ramifications of Palagin to the janitorial company addressed in the DLSE’s April 3 News Release are stark:  if you want to appeal, you have ten days to come up with $369,000 in cash or a bond—no extensions.  For some employers, that would be a difficult burden to meet in several months, let alone ten days. 

Workplace Solution.  The takeaway at this juncture, particularly for employers without access to significant liquid assets and facing a high stakes DLSE investigation, is to identify a bonding company that is willing to and capable of issuing a bond in the amount at issue even before receipt of the DLSE decision.  Then, if confronted with an adverse award, employers can proactively assess their options, and be positioned to quickly and effectively appeal the action de novo, if that is the preferred course.

Edited by Chelsea Spuck