New Ruling On Meal Breaks and Itemized Wage Statements: Brinkley v. Public Storage, Inc.

A recent case, Brinkley v. Public Storage, Inc. (October 28, 2008) is getting quite a bit of attention due to its ruling on employers’ duty to provide meal breaks. The court in Brinkley (out of the Second Appellate District), agreed with the holding of the appellate court in Brinker v. Superior Court that employer only had to provide meal breaks and not ensure that they were taken. Since the California Supreme Court granted review of Brinker, it is not controlling law, and this is why Brinkley is getting a lot of attention. (While Brinkley is good law for now, the issue will be ultimately decided by the Supreme Court in the Brinker case, and as many commentators have stated, it is likely that the Supreme Court will issue an order granting and holding Brinkley making it un-citable law until Brinker is decided.)

The Brinkley decision also addressed another hotly litigated wage and hour issue involving itemized wage statements, which is being overlooked given the meal break drama. Labor Code 226 requires employers to place certain information on the employee’s pay stub. In Brinkley, the Plaintiff alleged that defendant violated Labor Code section 226, subdivision (a), which requires employers to provide pay stubs that list (among other items): “(1) gross wages earned, (2) total hours worked by the employee . . . and (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee.” Plaintiff alleged that Public Storage violated this statute because certain pay stubs listed a mileage reimbursement rate that was different than the actual rate employees received.

In regards to section 226, the court noted that:

Section 226, subdivision (e) provides that an employee “suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a)” is entitled to recover the greater of actual damages or specified statutory penalties. The trial court found that defendant did not knowingly and intentionally violate section 226, subdivision (a). We agree.

Defendant met its burden of production by filing a declaration stating that the misstatement of the associated mileage rate was inadvertent and, when discovered, corrected. This evidence showed that plaintiff could not establish an essential element of his claim, namely that defendant intentionally and knowingly failed to provide required information on its paystubs. The burden of production thus shifted to plaintiff. Plaintiff, however, produced no evidence of knowing or intentional conduct by defendant.

The court also found that Plaintiff failed to show that he or any other proposed members of the class action suffered any injury. The court stated:

Plaintiff argues that the receipt of an inaccurate paystub ipso facto constitutes injury within the meaning of section 226, subdivision (e). This interpretation, however, renders the words “suffering injury” surplusage and meaningless. Such an interpretation is disfavored. We hold that section 226 means what it says: a plaintiff must actually suffer injury to recover damages or statutory penalties.

The present case is distinguishable from Wang v. Chinese Daily News, Inc. In Wang, the paystubs stated that the employees worked 86.66 hours regardless of the number of hours actually worked, the length of the pay period, or the number of work days in the pay period. This caused the employees to suffer injury because they might not be paid for overtime work to which they were entitled and they had no way of challenging the overtime rate paid by the employer. Here, by contrast, plaintiff was not underpaid or given insufficient information to challenge the payments he received. This inadvertent technical violation of section 226 caused no resulting damages.

(citations omitted).

Breaking News: CA Supreme Court Grants Review In Brinker v. Superior Court

The California Supreme Court announced today that it will be reviewing the much analyzed case Brinker v. Superior Court (Hohnbaum).  The lower court ruling in the case was favorable to California employers, in holding that employers did not have to "ensure" that meal breaks were taken, but only that employers had to provide meals breaks.  Click here for further analysis on the lower court's ruling. 

This much awaited decision by the Supreme Court makes the lower court's ruling in the case non-citable, which means that it is not binding on courts in California.  Therefore, California employers will have to wait for the Supreme Court decision to have some finality on this issue. 

Bad Job Design Is The Cause of Many Bad Sales Compensation Plans

We have previously blogged about some of the ways in which a bad sales compensation plan can result in legal liability.  However, as Ann Bares points out in her Compensation Force blog, many bad sales plans are caused by vague or ill-defined job responsibilities

Sales jobs that require constant shifting from prospecting to account management to order administration/tracking to installation/set-up and then back to prospecting may not be the best use of your available sales talent. Particularly if you've staffed the jobs with hunters. And, for a profession where variable pay can be a significant piece of the overall compensation package, jobs like this can present real challenges for sales incentive design.

Ann's analysis strikes me as generally correct.  Thus, at the risk of overstepping our area of legal expertise and venturing into management advice -- if an employer finds itself with a compensation structure that is convoluted, difficult to administer, and perceived as unfair, it should honestly consider whether the source of the problem lays with its management rather than its sales force.

Can Employers Monitor Employee's Text Messages Sent Through Company Owned Devices?


In Quon v. Arch Wireless Operating Company, Inc., (June 2008), City of Ontario police department employees, and one employee's wife, brought a Fourth Amendment action against their employer, in connection with the department's review of employees' text messages, and asserted claim against wireless communications provider under Stored Communications Act (SCA). 

The facts of the case would seem to dictate that the City/employer was acting within its rights to review the employees’ text messages sent and received through the employer-issued PDA. While the City did not have a policy on point with regards to the pagers issued to the officers, the City did have a general “Computer Usage, Internet and E-mail Policy” applicable to all employees.  The policy stated that “[t]he use of City-owned computers and all associated equipment, software, programs, networks, Internet, e-mail and other systems operating on these computers is limited to City of Ontario related business. The use of these tools for personal benefit is a significant violation of City of Ontario Policy.” The Policy also provided:

C. Access to all sites on the Internet is recorded and will be periodically reviewed by the City. The City of Ontario reserves the right to monitor and log all network activity including e-mail and Internet use, with or without notice. Users should have no expectation of privacy or confidentiality when using these resources.

D. Access to the Internet and the e-mail system is not confidential; and information produced either in hard copy or in electronic form is considered City property. As such, these systems should not be used for personal or confidential communications. Deletion of e-mail or other electronic information may not fully delete the information from the system.

E. The use of inappropriate, derogatory, obscene, suggestive, defamatory, or harassing language in the e-mail system will not be tolerated.

Furthermore, the plaintiff signed an Employee Acknowledgement that he “read and fully understand the City of Ontario's Computer Usage, Internet and E-mail policy.” The Employee Acknowledgment also stated that “[t]he City of Ontario reserves the right to monitor and log all network activity including e-mail and Internet use, with or without notice,” and that “[u]sers should have no expectation of privacy or confidentiality when using these resources.” Furthermore, two years later, the plaintiff attended a meeting during which a supervisor informed all present that the pager messages “were considered e-mail, and that those messages would fall under the City's policy as public information and eligible for auditing.” 

These steps sound like they should protect the City and allow the employer to review the contents of the messages – right? Wrong.

The Ninth Circuit appellate court held that while the written policies lowered the employee’s expectation of privacy in regards to the content of the text messages, the “operational reality” (i.e., the supervisor’s laziness) change this expectation. The court reasoned that the employer established an “informal” standard of not reviewing the contents of the text messages as long as the employees paid for any overages that were incurred under the wireless plan. In fact, Plaintiff exceeded the texting plan on four occasions, he paid for the overages out of his own pocket, and the employer did not audit the content of the messages. Therefore, the court reasoned, this provided an expectation of privacy for the employees in the contents of the text messages. 

What are employers to do?

While the employer in the Quon case was the government, implicating a heightened privacy interest of the employees under the Fourth Amendment, the case still provides some good lessons for private employers:

  • Employers should have well drafted written policies that are up-to-date and deal with any new technologies that are being used in the workplace. 
  • Once appropriate written policies are in place, audit the content of employee’s communications over company-owned devises and document these audits to avoid the trap the employer fell into in this case. The employer should take steps to ensure that there is not an “informal” policy established due to the hardship of conducting audits that would give the employees an expectation of privacy in communications conducted over company-owned devises. 


IRS Offers Whistleblower Informant Awards

As if employers don't have enough to worry about . . . the IRS is now offering money to individuals who tip them off about suspected non-payment of taxes.   According to the IRS website, they are "looking for solid information, not an 'educated guess' or unsupported speculation."  However, if the information is on-point and leads to the recovery of substantial penalties, the snitch (er . . . whistleblower) could be in line for a substantial recovery.  As the IRS website explains: 

The law provides for two types of awards. If the taxes, penalties, interest and other amounts in dispute exceed $2 million, and a few other qualifications are met, the IRS will pay 15 percent to 30 percent of the amount collected. If the case deals with an individual, his or her annual gross income must be more than $200,000. If the whistleblower disagrees with the outcome of the claim, he or she can appeal to the Tax Court. These rules are found at Internal Revenue Code IRC Section 7623(b) - Whistleblower Rules.

The IRS also has an award program for other whistleblowers - generally those who do not meet the dollar thresholds of $2 million in dispute or cases involving individual taxpayers with gross income of less that $200,000. The awards through this program are less, with a maximum award of 15 percent up to $10 million. In addition, the awards are discretionary and the informant cannot dispute the outcome of the claim in Tax Court. The rules for these cases are found at Internal Revenue Code IRC Section 7623(a) - Informant Claims Program, and some of the rules are different from those that apply to cases involving more than $2 million.

If you decide to submit information and seek an award for doing so, use IRS Form 211. The same form is used for both award programs.


Power Point for RSA Talk

Thanks to all those who attended the Fall seminar sponsored by Research Security Administrators (RSA) in Fountain Valley yesterday.  As always, it was a class act and very well put together with lots of current, useful information for security professionals.  Congratulations to Bob Iannone and everyone else involved.

Anyway, I know I promised to attach a copy  of my Power Point Presentation for "Legal Considerations: Privacy & Security in the 21st Century."   So here it is . . .   

Employment Related Bills Signed (and Vetoed) by Governor

It is a bit anticlimactic, but the Governor vetoed many more employment related bills than he approved recently. The following is a list of employment and litigation related bills that were signed by the Governor:

AB 2075 Wages: execution of release of claim or right.
Modifies Labor Code section 205.6 to make it a misdemeanor for an employer to require an employee to sign a release that the employee has been paid for all hours worked, when the employer knows the hours listed are not correct. The law takes effect on January 1, 2009. We previously posted about this bill here.

AB 2619 Civil actions and proceedings.
This bill corrects an erroneous cross-reference in the regulations governing discovery in civil actions.

AB 2193 Civil discovery: out-of-state proceedings.
The bill establishes the Interstate and International Depositions and Discovery Act that sets forth discovery rules for obtaining discovery in California during out-of-state litigation. The law takes effect on January 1, 2010.

SB 1173 Unemployment insurance: employers: motion picture industry.
This bill extends the time period within which a motion picture payroll services company that quits business must notify the motion picture production companies and allied motion picture services of its intent to quit business to 45 days (from 30 days previously).  It also allows a motion picture payroll services company that has elected to be treated as an employer to apply to the director to extend an existing voluntary plan for the payment of disability benefits to motion picture production workers of the company's affiliated entities.

AB 10 Employment: overtime compensation.  Existing law exempts a professional employee in the computer software field from overtime compensation requirements if the employee is primarily engaged in work that is intellectual or creative, the employee's hourly rate of pay is not less than $36, and the employee meets other
requirements.  This bill modifies Labor Code section 515.5 and provides that the exemption applies to an employee who is paid on an hourly basis at an hourly rate of not less than $36 and, if an employee is paid on a salaried basis, the employee earns an annual salary of not less than $75,000 for full-time employment, which is paid at least once a month and in a monthly amount of not less than $6,250. The bill makes related changes, and takes effect immediately as an urgency statute.

Also interesting are the bills that were passed by the legislature, but vetoed by the Governor. There is a good chance that these vetoed bills, or something very similar, will make their way to the Governor’s desk again.  Here is a list of employment related bills that were vetoed:

AB 419 Workers' compensation: public employees: leaves of absence.
Expanded the group of public employees entitled to a paid leave of absence at full salary for up to one year.

AB 1107 Unemployment compensation benefits: drought-related unemployment.
Expanded the group of employees affected by the June 2008 “drought” that would be considered “unemployed” in order to receive unemployment insurance.

AB 1656 Personal information: security breaches.
Imposed stricter requirements on any “agency, person, or business that maintains computerized data that includes personal information” for any breach of security of the personal data.

AB 2369 Apprenticeship programs: prevailing wage enforcement.
Proposed to change the enforcement of the prevailing wage laws for certain public works projects.

AB 2386 Employment: Agricultural labor.
The bill would have required the Agricultural Labor Relations Board to include information related to the status of the Agricultural Employee Relief Fund in its yearly report to the Legislature and the Governor. Also would have provided two methods by which agricultural employees could select a representative for collective bargaining purposes, and would have authorized the board to impose a civil penalty of up to $20,000 for each violation if the board finds that an employer has engaged in specified unfair labor practices.

AB 2918 Employment: usage of consumer credit reports.
The proposed bill would have prohibited the user of a consumer credit report from obtaining a consumer credit report for employment purposes unless the information was: (1) substantially job related, or (2) required by law to be disclosed to or obtained by the user of the report.

AB 3062 Employment: termination: garnishment of wages.
This bill would have prohibited an employer from terminating an employee because garnishment of the employee's wages has been threatened or the employee's wages have been subjected to garnishment.

AB 3063 Employment: criminal history.
Proposed bill would have prohibited an employer from asking an applicant for employment to disclose, or using in an employment-related decision, information concerning a criminal conviction when the record of which has been judicially ordered sealed, expunged, or statutorily eradicated. The bill also proposed to protect information concerning a misdemeanor conviction which probation has been successfully completed or otherwise discharged, and the case has been judicially dismissed.

SB 1113 Attorney's fee and costs.
The Legislative Counsel’s Digest for SB 1113 explains the proposed purpose as:
Existing law authorizes a court, upon motion, to award attorney's fees to a successful party against one or more opposing parties in any action that has resulted in the enforcement of an important right affecting the public interest, if certain conditions are met. This bill would authorize the court to award attorney's fees and costs, including expert witness fees, pursuant to this provision.

SB 1661 Unemployment compensation: family leave: good cause.
Proposed an increased the pool of potential recipients of payments from the Unemployment Fund.

AB 926 Civil discovery.
Proposed to amend the Civil Discovery Act to place more regulations on the production of electronically stored data, such as how parties are to produce such data in litigation, and when sanctions would be appropriate if a party no longer possessed such data.

AB 1666 Meal and rest periods: stage assistants.
The bill would have extended the protections afforded to employees covered by the IWC Wage Order to stage assistants who are employed by a city, county, or special district, to the extent not in conflict with the provisions of a memorandum of understanding reached between an employer and a recognized employee organization.

Oh, one last bill was vetoed by the Governor:  AB 1519 Human remains: commercial display. Only in California…. 

To view all of the bills vetoed and signed by the Governor, visit his website here

New California Law Further Restricts Employee Release Agreements

Governor Schwarzenegger recently signed a bill amending Labor Code Section 206.5, which restricts the enforceability of agreements purporting to release wage claims. 

Labor Code section 206.5 currently provides that an employee cannot be required to sign an agreement releasing the employer from liability for wages "unless payment of such wages has been made."  The new bill, AB 2075, amends the statute to clarify that the prohibitions on the "execution of a release” also extend to any requirement that the employee "execute a statement of hours he or she worked during a pay period which the employer knows to be false.”

In response to wage and hour class actions a growing number of employers have implemented policies requiring employees to sign periodic statements certifying that their wage statements are accurate.  The new statute, which takes effect January 1, 2009, appears to be aimed at preventing employers from arguing that such certifications are binding on the employee.