Court of Appeal: Wages Earned at "Inferior" Job Do Not Count as "Mitigation" of Damages

Employee was a maintenance planner earning  $65,699 per year.  His employer lays him off. 

He moves to another town to be closer to his wife's job.  Employee finds new employment, but 2-3 hours from his new location.  So, he pays $500 per month for a room an hour away from the new job and he saees his family on days off. The new position is maintenance supervisor, paying $69,300 per year.  In all, employee was out of work 8 months.

Employee sues for discrimination, wrongful termination, etc.  He wins his case.  How much is the lost wages? Yes, about $44,000, which is about 8 months' salary.  I know this because that's how much the employee's lawyer asked for during closing argument.  

But the jury awarded $198,000 in lost wages, about 3 years' pay.  That happened to be equivalent to his prior annual salary from the termination date until the trial. 

The employer challenged the verdict on appeal, arguing that the jury did not take into account the employee's mitigation efforts and his actual earned wages.  

The court of appeal decided that the jury had the right to conclude that the longer commute rendered the replacement job "inferior," and that wages earned from an "inferior" job need not be counted against lost wages.

The evidence in the instant case reflects Villacorta’s job at National was located two to three hours away from the home where his family resided. As a result, Villacorta rented a room Lancaster, which was one hour away from National’s plant in Lebec. Villacorta could not find a closer rental because Lebec was “kind of a remote area.” As a result, Villacorta was only able to see his family on weekends. Villacorta’s family consisted of his wife and two daughters, who were seven and 11 years old at the time of trial. Based upon the foregoing evidence, a jury could reasonably conclude the job at National was inferior to the job at Cemex because of the burden placed on Villacorta by the location of the job. The burden included not seeing his family during workdays and having to pay for a second residence. Since the jury could reasonably conclude the National job was inferior, it was reasonable for the jury to not use Villacorta’s National wages to mitigate the Cemex losses.

This decision could lead to a lot of litigation over the quality of replacement employment.  In this case, the employee secured a new job for more money than he was earning at his old job.  Yes, it was far from his home. But he voluntarily moved his home to a remote location, making it more difficult to find replacement employment near his home.  Additionally, the court simply accepted the premise that a job that pays more, and that involves comparable work in a comparable industry still is inferior, but only because of a longer commute.  

It seems like the court is expanding plaintiffs' opportunity to recover damages for "back pay" when they did not actually suffer a financial loss. What is the role of damages for economic loss?  Is it to make a plaintiff "whole?" Or is it to provide a plaintiff with more money than he would have earned if he had stayed employed with the employer that fired him?  

This case is Villacorta v. Cemex Cement, Inc. and the opinion is here.

U.S. Senate Considering Ban on (Nearly) All Credit Checks

I just read that the U.S. Senate, via Senator Elizabeth Warren, is introducing a bill to ban the use of pre-employment credit checks altogether.  The proposed bill is here.

The bill (as introduced) simply would amend the Fair Credit Reporting Act to make it illegal for employers to rely on credit reports to take adverse actions.  Employees would no longer be able to consent to disclosure.

Any exceptions?  Certainly.  For example, credit checks will still be allowed when the position involves national security.  Wait a minute there.  How could credit checks possibly be relevant to national security?  Could it be that an applicant's credit report has something to do with integrity?  Well, Senators, maybe that's why employers find credit checks relevant to employer security.  Another exception - when credit checks are required by law.  Why would credit checks be required by law?  The EEOC says credit checks are discriminatory.  How could something discriminatory be required by law?

Anyway, that's it for exceptions. As written, this bill does not expressly create any exception for positions involving cash handling, banking, etc.  If this bill is passed, unless the job is one of "national security" or unless a credit check is "required by law," the rest of you employers will be out of luck.

Employers may desire to run investigative consumer reports, credit reports and criminal background checks in part to verify information that applicants provide on their applications.  Application fraud appears to be a big problem, according to surveys discussed here, and here, and here.  Hey - perhaps the Senate will also introduce a bill making it illegal for applicants to lie on their employment applications!  Fat chance.

This bill may not make it through either house, or it could be amended.  But the trend among state and local governments is to get rid of credit checks, criminal background checks, and other pre-employment tools that help employers determine who is a financial or other risk.   So, employers should keep abreast of this trend, and make plans to alter hiring practices as the law evolves.

Enjoy your holidays!  Humbug.

California Employers Must Timely Post Undertaking to Appeal Labor Commissioner Ruling

Must.   Igor Palagin was a welder.  He filed a labor commissioner claim for underpayment against Paniagua Construction. Paniagua claimed Palagin was not its employee; rather, he was a subcontractor.   The DLSE found in favor of Palagin.

Paniagua sought a "trial de novo" in superior court.  To obtain that new trial, the employer must post a bond or cash payment (called an "undertaking") in the amount of the labor commissioner's award.  The undertaking ensures the employee will be paid if the employer loses the appeal de novo and does not pay the adverse award.

Here's the thing - the "appeal" must be filed within 10 days of service of the Labor Commissioner's award (or 15 days if the award was served by mail).  AND, the undertaking must be submitted as a "condition" of filing the appeal.  So, employers must arrange for the undertaking quickly.  That means there is little time to deliberate over whether to appeal.

So, Paniagua did not post an undertaking when it filed its appeal.  Paniagua sought leave of court to submit the undertaking late, which the court granted.

Palagin appealed to the court of appeal, which decided the trial court had no jurisdiction to allow the filing of the undertaking late.  Why such an inflexible rule?  The court explained:

as long as a notice of appeal cannot be filed without an undertaking, the absence of an undertaking means the appeal does not come into existence, and thus there is no need for the employee to move to dismiss and no delay in obtaining a dismissal; further, by not allowing the posting deadline to be extended, the employer does not have time to hide or transfer assets.

So, if you plan to appeal an adverse ruling of the labor commissioner, submit the undertaking on time or the right to appeal will be lost.

The case is Palagin v. Paniagua Construction, Inc.  and the opinion is here.

San Francisco Flexible Family Friendly Fully Fabulous Foster!

Sorry. I meant "Pabulous!"  Looks like I almost ran out of F-words to describe the new San Francisco Flexible Family Friendly Ordinance.  

Never fear. The poster is here:  POSTER.  Download, copy to your heart's content, and get that on the wall by 1/1/14.  

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(Guess who's been hitting the egg nog)

IRS Announces 2014 Standard Mileage Rate

The IRS made its annual determination of the standard mileage rate link is here.

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 56 cents per mile for business miles driven
• 23.5 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

Last year's business rate was 56.5 cents.  So, this is actually a small reduction.

This change will affect employers' expense reimbursement policies.

Court of Appeal Finds Way to Certify Exempt / Overtime Class Action

In recent months, some California courts of appeal appear to have changed their analysis of how to analyze the class certification question.  In the most recent example, the court reversed an order denying certification of a proposed class of restaurant managers.

This case involved all salaried employees of Joe's Crab Shack, including the general managers and assistant managers.  The plaintiffs submitted evidence that class members performed non-exempt work, and that they lacked sufficient discretion and independent judgment.  They relied on corporate policies, as well as declarations from 27 of the management employees.  However, named plaintiffs could not testify how much time they spent on exempt or non-exempt tasks, and admitted that their time spent on different tasks varied from day to day.  The employer put on evidence showing that management employees uniformly spent more than 50% on exempt duties.

The way class certification has appeared to work in the past is that courts certify a class if common questions predominate over individual ones.  In an exemption classification, if the proof shows that a common issue does not determine the liability to the entire class, then individual issues predominate over common ones.  Thus, it may be that an employer classifies all managers as exempt.  That uniform policy and a uniform job description are some evidence of commonality.  If that job description said "all managers are exempt and earn less than 2X minimum wage" then that would be a predominant common question.  Why?  Because the salary is too low to qualify for exempt treatment.  Similarly, if a job description requires employees to perform non-exempt work > 50% of the time, that's an issue that potentially could lead to liability in favor of everyone covered by the job description.

In a case like this one, though, the evidence before the trial court seemed to demonstrate that there would be too many individual issues pertaining to how the managers spent their time, such that it would be impossible to say that all managers in the class were mis-classified as non-exempt.   Only mis-classification is illegal.  Uniform classification is not.

I wasn't on the panel, though.  The court of appeal appeared to reject this analysis.  The court did not cite to the case law that says a common issue must decide liability for the entire class, or that common questions must predominate in a way that affects liability.

In fact, the court seems to say that it is appropriate to certify a class action even if there are putative class members who were properly, lawfully deemed exempt:

even if there were individual managerial employees whose work remained more than 50 percent managerial in nature, if CAI’s and Landry’s policies as implemented across California resulted in managerial employees being undercompensated for performing exempt work, class relief is appropriate.

Well, that just doesn't make any sense.  The lawsuit asserts the company unlawfully classified a class of managers as exempt.  The class, therefore, should not include people who were lawfully classified.  If you cannot discern the lawful from the unlawful, you do not have a liability issue that is common to the entire class.  As the court noted,  “‘As a general rule if the defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages.’”

The court of appeal seemed to say that Brinker v. Superior Court requires courts to "prefer" class treatment for nearly all wage-hour issues:

We have not ignored the substantial case authority, including our own, upholding trial court decisions not to certify class actions for claims similar to those raised here (see, e.g., Dailey v. Sears, Roebuck & Co. (2013) 214 Cal.App.4th 974; Mora v. Big Lots Stores, Inc., supra, 194 Cal.App.4th 496; Arenas v. El Torito Restaurants, Inc. (2010) 183 Cal.App.4th 723); nor do we express any disagreement with the outcome of those cases. However, we understand from Brinker, supra, 53 Cal.4th 1004, a renewed direction that class-wide relief remains the preferred method of resolving wage and hour claims, even those in which the facts appear to present difficult issues of proof.

So, despite the evidence that there is no common proof of liability, the Court sent the case back to superior court.

Perhaps the Supreme Court will once again review class certification standards.  Brinker does not require certification of a class action if there are "any" common questions.  In every case involving one employer, there are common issues - whether all employees worked for the same corporation, whether they all wore the company logo, whether they worked at a restaurant.   The key issue is whether the plaintiff presents a common issue that is dispositive of liability.  And that's not the analysis that the court of appeal has presented in this case.

If this trend continues, there will be many more class actions certified. Employers will have to try their cases as class actions or settle.  Settlements of class actions often occur because of fear of class wide liability.  Settlement of a class action like this means paying managers who were not mis-classified.  Therefore, making it easy to certify class actions simply encourages payouts to undeserving putative class members.  At least for now, the courts do not seem to be losing sleep over this injustice.  Have a nice day!

This decision is Martinez v. Joe's Crab Shack Holdings and the opinion is here.

Court of Appeal Reverses Order Decertifying Class

Allstate employs auto insurance field adjusters. They track work  time via a computerized system. The system "assumes" that the arrival at the first job site for the day is the beginning of the work day. Therefore, there is the potential that adjusters performing work for the company before the arrival is "work off the clock."

Among the overtime tasks those adjusters declared they performed outside their eight-hour shifts were (1) logging onto their work computers, (2) downloading their assignments, (3) making courtesy calls to auto repair shops and car owners to confirm appointments, (4) checking their voice mail, and (5) traveling to and from their first and last appointments of the day.

Allstate claimed it had a policy prohibiting work off the clock.  It had a policy requiring approval for overtime.  If an adjuster worked before the start of the day, there was a means to claim the work time.

The Allstate workers filed a class action, in part alleging that Allstate's timekeeping system was illegal because Allstate permitted off the clock work.  The trial court initially granted certification.  After Wal-Mart v. Dukes came out, though, the company filed a motion to "decertify" the class.  The trial court granted decertification, which prompted the plaintiff to appeal.

The Court of Appeal here reversed the trial court and decided that the class should have been certified.  Here are the key points:

-  A motion to "decertify" a previously certified class action can be brought only when there has been a significant change - newly discovered facts or new law.

- On review of a motion to decertify, the court of appeal evaluates the trial court's stated rationale.  If the trial court's stated rationale is wrong, the appellate court will reverse.

- The court will ignore individual issues regarding how to calculate damages for individual employees if there is a common question applicable to all class members regarding liability:

Damage calculations have little, if any, relevance at the certification stage before the trial court and parties have reached the merits of the class claims. At the certification stage, the concern is whether class members have raised a justiciable question applicable to all class members. Although Allstate may have presented evidence that its official policies are lawful, “this showing does not end the inquiry.” (Jimenez, supra, 2012 WL 1366052, *8.) Here, the question is whether Allstate had a practice of not paying adjusters for off-the-clock time. (Ibid.) The answer to that question will apply to the entire class of adjusters. If the answer to that question is “yes” – which is the answer the trial court initially assumed when it first certified the Off-the-Clock class, and is the answer we must presume in reviewing decertification (Brinker, supra, 53 Cal.4th at p. 1023) – then, in Duke’s phrase, that answer is the “glue” that binds all the class members. (Dukes, supra, 131 S.Ct. at p. 2552 [a class requires the “glue” of a single answer for a question applicable to all class members].) If some adjusters had more uncompensated time off the clock than other adjusters, that difference goes to damages.

- The court's analysis of whether common questions predominate - usually the central issue on a motion for class certification is notable because it is part of a recent trend of holding that the absence of commonality does not preclude a finding of commonality:

Commonality exists when the class claim poses a question for which the answer advances the litigation. As Dukes explained, class “claims must depend upon a common contention . . . . That common contention, moreover, must be of such a nature that it is capable of classwide resolution – which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” (Dukes, supra, 131 S.Ct. at p. 2551.) * * *

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Allstate disputes whether a company-wide practice existed of adjusters working off the clock. According to Allstate, it instructs adjusters not to begin work before they arrive at their first appointment. Allstate asserts that at most “the evidence shows that reactions differed from manager to manager and from employee to employee, purportedly leading some adjusters to work off-the-clock, while others did not.” Allstate also asserts its policy is to pay for all overtime that adjusters work, and indeed, appellant concedes he received overtime pay 70 times.

But the Court of Appeal wasn't hearing it:

We need not, however, address the accuracy of Allstate’s assertions because doing so goes to the merits of the class claims. As our Supreme Court said in Brinker, supra, 53 Cal.4th at page 1024, inquiries into the merits as part of a certification motion are “closely circumscribed.” We instead assume based on the evidence appellant and other adjusters put to the trial court that Allstate had a company-wide practice of adjusters working off-the-clock. (Id. at p. 1023 [court assumes claims have merit].) An unlawful practice may create commonality even if the practice affects class members differently. “[C]lass treatment does not require that all class members have been equally affected by the challenged practices—it suffices that the issue of whether the practice itself was unlawful is common to all.”

So, this means that to defeat class certification, it is necessary to establish through evidence the absence of an unlawful practice. Yet, the court says that the employer's evidence that a practice is not unlawful as to all potential class members is part of the "merits" and, therefore, not part of the certification inquiry. That seems like a rather one-sided ruling, says Captain Obvious.

Anyway, this case is an important warning to employers with timekeeping systems that "assume" that hours worked start at a given time.  Employers should ensure timekeeping systems are not based on automatic punching and allow a worker to clock in or out based on when the work day (or meal breaks) actually starts and stops.

This case is Williams v. Superior Court and the opinion is here.