Seyfarth Synopsis: Employment-related cases pending before the California Supreme Court concern various questions that sometimes seem technical, but the answers they elicit will have big consequences. Questions raised by the current crop of cases include standing to sue, the availability of certain claims and remedies, federal preemption of California laws, what counts as compensable time, and—that perennial favorite—how to interpret the infernal PAGA statute.

We expect the California Supreme Court in 2019 to issue decisions addressing many important issues in private employment. Some topics easily warrant their own article or blog post, and will receive that treatment as the Supreme Court’s decisions emerge. But it’s not too soon to highlight some coming attractions.

Anti-SLAPP and Alleged Employer Motive

  • Is an employer’s anti-SLAPP motion to strike an employee’s suit affected by the employer’s alleged discriminatory motive? In Wilson v. Cable News Network, Inc., the Supreme Court has agreed to decide “whether an employee’s claims for discrimination, retaliation, wrongful termination, and defamation arise from protected activity for purposes of a special motion to strike,” and “what is the relevance of an allegation that the employer acted with a discriminatory or retaliatory motive?”

Application of CA Wage-Hour Law to Out-of-State Employers

  • Does California employment law apply to non-California residents who work in California on a transitory basis? In Ward v. United Airlines and Oman v. Delta Air Lines, the Supreme Court has accepted the Ninth Circuit’s request to address five questions:
    • (1) “Does California Labor Code section 226 apply to wage statements provided by an out-of-state employer to an employee who resides in California, receives pay in California, and pays California income tax on her wages, but who does not work principally in California or any other state?”
    • (2) Does the exemption in Wage Order 9 for collective bargaining agreements (CBA) under the Railway Labor Act bar a wage statement claim brought under California Labor Code section 226 by an employee who is covered by such a CBA?
    • (3) “Do California Labor Code sections 204 and 226 apply to wage payments and wage statements provided by an out-of-state employer to an employee who, in the relevant pay period, works in California only episodically and for less than a day at a time?”
    • (4) “Does California minimum wage law apply to all work performed in California for an out-of-state employer by an employee who works in California only episodically and for less than a day at a time?”
    • (5) “Does the Armenta/Gonzalez bar on averaging wages apply to a pay formula that generally awards credit for all hours on duty, but which, in certain situations resulting in higher pay, does not award credit for all hours on duty?

Arbitration

  • When is an arbitration remedy broad enough to preclude an employee’s resort to a Berman hearing? Under existing law, employers cannot necessarily compel employees to arbitrate wage claims unless and until employees have had the chance to bring those claims before the Labor Commissioner in a “Berman hearing.” In OTO, L.L.C. v. Kho, the Supreme Court has agreed to decide these issues:
    • “(1) Was the arbitration remedy at issue in this case sufficiently affordable and accessible within the meaning of Sonic-Calabasas A, Inc. v. Moreno (2013) … to require the company’s employees to forego the right to an administrative Berman hearing on wage claims?
    • (2) Did the employer waive its right to bypass the Berman hearing by waiting until the morning of that hearing, serving a demand for arbitration, and refusing to participate in the hearing?”

Compensability

  • Does an employee engage in compensable work while waiting for the employer to inspect a bag the employee chose to bring to work? In Frlekin v. Apple, Inc., the Supreme Court has accepted the Ninth Circuit’s request to decide this issue: “Is time spent on the employer’s premises waiting for, and undergoing, required exit searches of packages or bags voluntarily brought to work purely for personal convenience by employees compensable as ‘hours worked’ within the meaning of California Industrial Welfare Commission Wage Order No. 7?”
  • Is walking to and from a time clock compensable hours worked? In Stoetzl v. State of California, the Supreme Court has agreed to decide this issue: “Does the definition of ‘hours worked’ found in the Industrial Wage Commission’s Wage Order 4, as opposed to the definition of that term found in the federal Labor Standards Act, constitute the controlling legal standard for determining the compensability of time that correctional employees spend after signing in for duty and before signing out but before they arrive at and after they leave their actual work posts within a correctional facility?”

Liability for Wage Payment

Preemption—By the FAA and the LMRA

  • Is a PAGA suit for unpaid wages immune from arbitration? In its 2014 Iskanian case, the California Supreme Court acknowledged that the Federal Arbitration Act (FAA) preempts state laws against class-action waivers in arbitration agreements, but also held that representative PAGA actions are not subject to mandatory arbitration. Now, in Lawson v. Z.B., N.A., the Supreme Court has decide to whether a representative action under PAGA, seeking recovery of individualized lost wages as civil penalties under Labor Code section 558, falls within the preemptive scope of the FAA.
  • Does federal labor law preempt a claim for termination wages? In Melendez v. San Francisco Baseball Associates, the Supreme Court has agreed to decide this issue: “Is plaintiffs’ statutory wage claim under Labor Code section 201 subject to mandatory arbitration pursuant to section 301 of the Labor Management Relations Act because it requires the interpretation of a collective bargaining agreement?”

Remedies

  • Can an employee seeking unpaid wages use the tort of conversion? In Voris v. Lampert, the Supreme Court has agreed to decide this issue: “Is conversion of earned but unpaid wages a valid cause of action?”

Rest Breaks & Meal Periods

  • Rest breaks for ambulance attendants on 24-hours shifts. In Stewart v. San Luis Ambulance, Inc., the Supreme Court accepted the Ninth Circuit’s request to decide these issues: (1) “Under the California Labor Code and applicable regulations, is an employer of ambulance attendants working twenty-four hour shifts required to relieve attendants of all duties during rest breaks, including the duty to be available to respond to an emergency call if one arises during a rest period?: (2) “Under the California Labor Code and applicable regulations, may an employer of ambulance attendants working twenty-four hour shifts require attendants to be available to respond to emergency calls during their meal periods without a written agreement that contains an on-duty meal period revocation clause? If such a clause is required, will a general at-will employment clause satisfy this requirement?” (3) “Do violations of meal period regulations, which require payment of a ‘premium wage’ for each improper meal period, give rise to claims under sections 203 and 226 of the California Labor Code where the employer does not include the premium wage in the employee’s pay or pay statements during the course of the violations?”

Standing for PAGA Claims

  • Can a PAGA plaintiff settle his individual wage and hour claims and still pursue his PAGA action as an “aggrieved employee”? In Kim v. Reins International California, Inc., the Supreme Court has agreed to decide whether an employee bringing an action under PAGA loses standing to pursue representative claims as an “aggrieved employee” by dismissing his or her individual claims against the employer.

Workplace solution. Some of the issues raised by the above cases may seem relatively minor, technical, or limited to particular industries. Yet many a significant class action has turned upon issues no more monumental. We will keep our eyes and ears on the Court’s progress and keep readers updated with the latest developments.

By Brian P. Long

When you dismiss an employee for poor performance, or when he beats you to the punch by quitting on you, you rarely feel the urge to rush that slacker his final check. But you should. Under the California Labor Code, you must pay all wages due at the time of an involuntary termination. And you must pay resigning employees within 72 hours if they suddenly quit on you. Further, if they are kind enough to toss at least 72 hours’ notice of resignation your way, then you must pay final wages to the resigning employee on the last day of employment.

Because these rules sometimes get lost in the heat of a termination moment, now seems the time to provide some reminders:

If an employee is terminated mid-pay period, can’t I just treat the former employee like everyone else and pay him in the regular payroll cycle?

No. Welcome to another California peculiarity; employers must pay wages to terminated employees on their last day of employment, even if that’s smack dab in the middle of the payroll cycle, or even the very next day after the last paycheck.

This may seem like an unnecessary trouble, but recall that Labor Code Section 203 imposes daily penalties for any willful failure to pay according to the schedule we described above. The penalty is measured in terms of the amount of daily wages, from the date the final wages were due until the date they are paid, up to a total of 30 days.

What kind of money are we talking about?

Suppose an employee who made $20 per hour is fired after working only two hours into the new payroll period. And suppose the employer then observes the normal payroll cycle and waits 13 days to pay the $40 in earned wages. The penalties for this seeming trivial infraction could be a startling $2,080 ($20 per hour x 8 hours per day x 13 days). In other words, waiting less than two weeks in this situation to pay the final wages could ultimately cost more than 50 times what the employee was actually owed. And yes, all days of delay are counted, including weekend days. The penalties just keep on rolling.

I fired an employee and now she claims she is due additional wages for dates that she did not actually work. I don’t want to face these pesky waiting time penalties, but do I have to pay?

Not necessarily. You need only pay the wages you concededly owe. If you have a good faith dispute as to whether you actually owe wages, then you have a defense to a claim for waiting time penalties. This is because assessment of the penalty is not automatic, and a “good faith dispute” that any wages are due is a defense to a penalty claim.

An employee on his way out the door just handed me 27 pages of business expense reimbursements. There’s no way I can verify and process these in 72 hours! Will I owe waiting time penalties?

No. The penalty is for failing to pay “wages.” A wage is money owed for labor performed. Expense reimbursements are not wages. Obviously, you don’t want to drag your heels on paying any expenses you owe. But no waiting time penalties should accrue while you work that number out.

An employee who just quit says, “Oh, by the way, I was denied meal breaks.” Will waiting time penalties accrue if I do not pay premium wages for missed meal breaks?

Some might argue Yes, but the best answer is No. While some argue that waiting time penalties can accrue solely for a failure to make premium payments for missed meal or rest breaks, the California Supreme Court, in Kirby v. Imoos Fire Protection, Inc., 53 Cal. 4th 1244, 1255 (2012), undermined that argument. The Kirby court said that meal and rest payments are not “wages” for the purpose of Labor Code section 218.5, which permits recovery of attorney’s fees in an action brought for nonpayment of wages. Rather, Kirby said, those payments are a form of a penalty, for purposes of that statute. Kirby’s language supports an argument that premium payments, if not “wages” for purposes of Section 218.5, are also not “wages” for purposes of Section 203. At least some courts have recognized the common sense of applying Kirby’s language in this context. Accordingly, employers have at least a good-faith argument that non-payment of meal and rest premiums would not be non-payment of “wages,” and a good-faith argument is all you need to avoid penalties under Section 203.

Workplace solutions:  If it’s been a while since you’ve checked in on those who process your California terminations, it’s a good idea to remind them of the rules and the consequences for ignoring them. Also, ensure you have a practice in place whereby you can process a payroll the same day, just in case an immediate termination occurs. And, of course, if you have any questions about any final pay issues, reach out to your favorite member of the California Workplace Solutions team.

Regarding the Title: In apologizing for this obscure temporal allusion, we invite the culturally challenged to consult http://en.wikipedia.org/wiki/Time_Is_on_My_Side.

Edited by Chelsea Mesa