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PAGA Claims on the Rise

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A recent California Supreme Court ruling could bring a flood of plaintiff claims against employers under California's Private Attorney General Act (PAGA).

PAGA Overview

PAGA provides employees with a private right of action for Labor Code violations against their employers in order to collect penalties on behalf of the State's Labor and Workforce Development Agency (LWDA). PAGA was enacted because the LWDA did not have adequate resources to enforce the Labor Code. Labor Code violations are grouped into three categories under PAGA: category 1 encompasses Labor Code violations such as waiting time penalties, meal and rest break premiums, and wage order violations; category 2 consists of health and safety violations, and; category 3 claims consist of "all other" claims.

Each category contains different notice provisions before a plaintiff can file suit but generally the employee must give notice to the LWDA, the employer, and in some circumstances the employee must give notice to the Division of Occupational Safety and Health. PAGA contains a "safe harbor" provision with respect to category 3 claims: employers can cure a violation under this category within 33 days of being notified of the violation. Under PAGA employee (s) bringing the suit are entitled to 25% of the penalties and the remaining 75% is to be paid to the LWDA.

If the Labor Code section at issue does not provide a civil penalty, the PAGA penalty is $100 per employee per pay period for the initial violation and $200 per employee per pay period for each subsequent violation. Plaintiffs bringing successful suits under PAGA are entitled to fees in addition to the penalties, making such suits extremely enticing to plaintiff's attorneys.

In PAGA's first five years of existence it was unclear if class certification was necessary for a plaintiff to pursue claims on behalf of other aggrieved employees. The class certification step in multi-plaintiff actions is a powerful tool for employers because if class certification fails the value of the suit is greatly diminished: the plaintiffs' bar is less interested in litigating claims on an individual basis.

In 2009 the California Supreme Court decided in Arias v. Superior Court that class certification requirements "need not be met when an employee's representative action against an employer is seeking civil penalties under the Labor Code Private Attorneys General Act . . ." While the Arias decision settled the certification in State court, there is a split of authority in federal courts: some federal courts follow Arias and others require class certification.

Iskanian Ruling and Class Action Waivers

Many employers require their employees, as a condition of employment, to agree to arbitrate employment related disputes and waive their ability to bring or participate in class actions suits. In June 2014 the California Supreme Court strengthened the enforceability of class action waivers generally in Iskanian v. CLS Transportation Los Angeles, LLC.

In Iskanian, a limousine driver brought a wage and hour class action lawsuit against his employer and included PAGA claims. The employer attempted to enforce its arbitration agreement which contained a class waiver provision. The lower court ordered the entire matter to arbitration pursuant to the agreement.

On appeal, the Supreme Court ruled that while mandatory class action waivers in arbitration agreements are generally enforceable in light of the U.S. Supreme Court's Concepcion ruling, class waivers are not enforceable with respect to PAGA claims because such waivers are counter to public policy. The difference, according to the Court, is that PAGA claims are brought on behalf of the State (LWDA) against an employer and therefore not preempted by the Federal Arbitration Act, which was the case in Concepcion.

The Court remanded the matter to the lower court to decide whether the individual claims will go to arbitration while the PAGA claims proceed in court (bifurcated), whether the PAGA claims will proceed in arbitration on a class basis, or whether the parties can agree on a single forum. If the suit is bifurcated it is unclear whether the court will stay one of the matters.

Counsel to Management: The Iskanian decision will no doubt encourage plaintiff's attorneys to file claims under PAGA in order to avoid class waiver provisions in arbitration agreements and to avoid the Concepcion ruling. Employers should not underestimate the value PAGA claims can have in a dispute both in terms of subverting class waiver provisions and in monetary value. The $100 or $200 penalty per employee per pay period for each violation over the course of a year can add up to significant liability.

Managers are advised to keep abreast of labor laws and remediate any violations immediately. Please contact The Saqui Law Group if you have questions pertaining to the enforceability of your company's employee arbitration agreement.

Apple Facing New Class-Action Lawsuit From Hourly Employees

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The following was written by Jeff Elder and featured on The Wall Street Journal

Apple Inc. is now facing another class-action lawsuit from its workers, as 20,000 hourly wage employees claim the computer company didn’t give them lunch breaks, rest breaks or final paychecks in accordance with California law.

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BACK UP THE TRUCK: EXEMPT DRIVERS ENTITLED TO MEAL AND REST PERIODS

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The transportation industry is reeling from bad news issued recently by the Ninth Circuit Court of Appeals that overtime exempt truck drivers are entitled to meal and rest periods under California’s wage and hour laws. In Dilts v. Penske Logistics, LLC (9th Cir. 2014) U.S. App. LEXIS 12933, the employer argued that the meal and rest period provisions required by California law are preempted by the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”). The Ninth Circuit, joining ranks with several other courts, disagreed and ruled that the FAAAA does not preempt California’s meal and rest period requirements.

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PAGA Representative Actions (Class Actions) Cannot be Waived in Arbitration Says California Supreme Court

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It seems California’s High Court has successfully steered the runaway class action truck to the gravel road by allowing class action waivers in employment arbitration agreements to be enforced. However, is the same decision pay dirt for the state because it endorses class actions under the Labor Code Private Attorneys General Act of 2004 (PAGA)?

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SEATTLE RAISES MINIMUM WAGE TO $15 PER HOUR WHILE CALIFORNIA PROPOSES AN INCREASE TO $13

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Seattle voted to increase the minimum wage to $15 per hour. Following suit, California also proposed a minimum wage increase to $13 per hour.

 

Last week, the Seattle City Council unanimously voted to approve an increase in the minimum wage to $15 per hour. The state of Washington already has the highest state minimum wage in the country at $9.32 per hour. (San Francisco has the highest city minimum wage at $10.74.)

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Exceedingly Rare Beast

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Last week the California Supreme Court reversed a $15 million verdict for 260 plaintiffs ($57,000 per person) in a wage and hour class action for unpaid overtime. The class action lawsuit alleged employees were misclassified as outside salespersons exempt from overtime. In the first line of its opinion the court astutely points out that:

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ON-DUTY MEAL PERIODS: WHAT EMPLOYERS SHOULD KNOW

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The foreman starts his workday at least 1 hour before (5:30 a.m.) the general laborers (6:30 a.m.) because he has to transport people. He then takes his lunch with the general laborers (11:00 a.m.) and is not allowed to leave. Is this legal?

No. Generally, California law provides that every employer shall authorize and permit all employees to take a thirty (30)-minute meal period after no more than five (5) hours of work.

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Class Action Epidemic: Are You a Target?

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As most of you are aware the Labor Commissioner has established a calculation for a separate special hourly rate for the nonproductive time that is associated with rest breaks and recovery periods different from the rate that should compensate employees for “regular” nonproductive time.  Despite the fact that employers were already paying a specific hourly rate to piece rate employees, the compensation for nonproductive time, including rest breaks and recovery periods, must be compensated separately. Moreover, according to the Labor Commissioner, there is a difference between "regular" nonproductive time and special nonproductive time associated with rest breaks and recovery periods. In other words, not all nonproductive time is treated equally. CLICK HERE to view previous article regarding piece rate, rest periods and nonproductive time.

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BLOCKING CLASS ACTIONS: WHAT ARE YOU WAITING FOR?

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For those of you that attended the Ag Employer Conference presented by The Saqui Law Group you are painfully aware of the class-action epidemic impacting the Agricultural Industry. These class actions are primarily based on the recent court rulings requiring separate compensation for nonproductive time of piece rate employees. Plaintiff attorneys are lining up to take advantage and cash in on the retroactive effect of the courts’ rulings.

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Staples Sued Over Security Checks

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A class action lawsuit was filed recently against a Staples, Inc. subsidiary for allegedly failing to compensate their warehouse workers for time spent undergoing mandatory security checks.

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