First California Court Pushes Back Against AT&T Mobility v. Concepcion -- Brown v. Ralphs Grocery Company

The U.S. Supreme Court decision in AT&T Mobility v. Concepcion held that the Federal Arbitration Act preempts California's rule against waiving class action rights in consumer arbitration contracts.  As we previously posted, if the reasoning of Concepcion were extended to the arbitration of employment claims it would overrule a vast body of well settled California law.   

It was thus inevitable that California state courts would begin pushing back on this federal takeover of state contract and arbitration law.  And Brown v. Ralphs Grocery Company may be the first shot in that campaign.  

Brown ducks the big issue of whether Concepcion effective overruled the California Supreme Court's decision in Gentry v. Superior Court, which generally prohibits class action waivers in employment arbitrations.  But Brown nevertheless creates a firebreak against the spread of the Concepcion rule to the employment context.  It did this by holding that Concepcion does not allow the enforcement of an arbitration provision that waives the right of an employee to pursue a representative action on behalf of similarly situated employees under the Labor Code Private Attorney General Act, or "PAGA."  

What is significant about the Brown Court's analysis, however, is that it utterly ignores the policy concerns stated in Concepcion regarding the need to enforce arbitration agreements exactly as written.  Instead, it bases its conclusion on the public policies favoring the enforcement of PAGA on a representative basis.  As the Court explained:

The purpose of the PAGA is not to recover damages or restitution, but to create a means of “deputizing” citizens as private attorneys general to enforce the Labor Code. Here, the relief is in large part for the benefit of the general public rather than the party bringing the action.  And, a representative action has significant institutional advantages over a single claimant arbitration. The representative action is a means for public enforcement of the labor laws. Thus, assuming it is authorized, a single-claimant arbitration under the PAGA for individual penalties will not result in the penalties contemplated under the PAGA to punish and deter employer practices that violate the rights of numerous employees under the Labor Code.  That plaintiff and other employees might be able to bring individual claims for Labor Code violations in separate arbitrations does not serve the purpose of the PAGA, even if an individual claim has collateral estoppel effects.  Other employees would still have to assert their claims in individual proceedings. In short, representative actions under the PAGA do not conflict with the purposes of the FAA. If the FAA preempted state law as to the unenforceability of the PAGA rep-resentative action waivers, the benefits of private attorney general actions to enforce state labor laws would, in large part, be nullified.

All of this policy analysis is equally applicable to non-PAGA class actions.  Indeed, this is almost the identical reasoning employed by the California Supreme Court in Gentry.   Thus, notwithstanding its stated reservation of the issue, Brown has to be read as a strongly suggesting that Gentry is still good law in California and that Concepcion should be limited as closely as possible to its facts -- i.e., as applying only in the consumer context.

Shades of O.J. -- Casey Anthony Verdict May Affect Settlement Negotiations In Jury Cases

For years it was a common refrain for mediators and attorneys in L.A. to persuade clients to settle before trial with statements to the effect that "remember, your case will be decided by the same jury pool that decided O.J. Simpson wasn't guilty -- no matter how good you think your case is absolutely anything can happen in a jury trial."

It wasn't a Los Angeles jury this time but it appears that Casey Anthoy may be the new poster child for jury irrationality.  In fact, O.J. prosecutor Marcia Clark thinks the Casey aquittal is even worse.  I think she may be right. 

Court Clarifies Pay Stub Requirements -- McKenzie v. FedEx

 The federal district court decision in McKenzie v. FedEx, provided some useful guidance to employers and employees regarding what information must be included in pay statements under Labor Code section 226(a).  For example, in fulfilling the requirement to show "all hours worked," a wage statement doesn't necessarily have to contain a separate line item listing that number.  However, the wage statement must contain sufficient information for an employee to easily add up the total hours from the other lines.  

In McKenzie, the court granted summary judgment to the employee on the ground that FedEx's "idiosyncratic" wage statements were not self-explanatory and therefore failed the test.  

[T]he total regular and overtime hours listed in FedEx's wage statements, when added together, do not sum up to the total hours worked by the employee during the pertinent time period. Without additional information regarding the wage statement, an employee cannot simply “arrive at the sum of hours worked.”  Evidence of this can be seen in the sample wage statement provided by FedEx for McKenzie's pay period ending on March 21, 2009. When the total overtime categories and the regular rate hours listed in that document are added together, the sum of these figures is 58.24, which represents a total of 40 regular hours and 18.24 overtime hours. However, because information provided by FedEx (and not disclosed on the wage statement itself) explains that the overtime hours are always listed twice, the sum of all of the figures on the wage statement during the relevant period is actually 49.12, not 58.24.  Thus, the Morgan rationale, which contemplates that an employee can determine his or her total hours worked by summing up the figures on a wage statement without need to reference any other time records or other documents, does not apply to FedEx's somewhat idiosyncratic wage statement.  Accordingly, the Court finds that FedEx violated Section 226(a)(2) by failing to state the “total hours worked by [an] employee” in its wage statements.

The Court also found that FedEx's wage statements violated Section 226(a)(6) because they listed only the end date and not the start date of the covered pay period, and violated Section 226(a)(9) because they failed to separately list the applicable overtime rate of pay.   The Court further held that these violations would trigger penalties on behalf of all similarly situated employees under the Private Attorney General Act of 2004 ("PAGA"), regardless of whether the employees had suffered any specific injury.

It is surprising how many employers, even large employers like FedEx, will incorrectly assume that the design and content of their pay stubs is a trivial issue.  In reality, the Labor Code recognizes that supplying employees with the information necessary to review their own wages and hours for legal compliance is a crucial part of the overall enforcement scheme. 

As a result, Labor Code Section 226(a) requires the issuance of accurate, itemized wage statements that contain the specific categories of information spelled out in the Labor Code. The good news for employers is that Section 226(a) sets up clear, bright-line requirements which should be easy to follow.  The bad news is that Section 226(e) and PAGA impose penalties for issuing defective statements.  And due to the typically uniform nature of a wage statement program these penalties claims are likely to be assessed on behalf of every employee who ever received a statement.