The first week of April brought with it more than showers; it also brought an employer-friendly ruling from the Supreme Court of the United States (“SCOTUS”) regarding overtime pay exemptions!

In Encino Motorcars, LLC v. Navarro et al. (US 16–1362 4/2/18), current and former service advisors at Encino Motorcars, LLC (“Encino Motorcars”), a car dealership in California, sued Encino Motorcars for backpay in 2012, claiming that it had violated the Fair Labor Standards Act (“FLSA”) by misclassifying them as exempt from overtime pay.

Sound the Alarm: California Company Ordered to Pay $211,405 in Back Wages for Violating Cal-WARN

Earlier this month, employees at a San Diego shipyard were awarded $211,405 in back pay and lost pension benefits after a California Appellate Court affirmed a lower court decision which ruled that the employer violated the California WARN Act by not providing employees with a 60-day notice of an impending temporary layoff of 90 employees.

NASSCO Holdings Incorporated and National Steel and Shipbuilding Company (collectively “NASSCO”) employs thousands of workers in its shipbuilding and repairing business. NASSCO employees are represented by The International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths Forgers and Helpers, Local 1998 (the “union”). NASSCO’s staffing requirements change frequently and its collective bargaining agreement (“CBA”) with the union contains detailed rules regarding the handling of terminations and short-term unpaid work stoppages, which the CBA refers to as a “layoff.”

As we previously reported here, Prudential Overall Supply (“Prudential”) filed a petition with the Supreme Court of the United States (“SCOTUS”) seeking a review of an unfavorable decision denying Prudential’s ability to force arbitration on an employee’s claims under the Private Attorneys General Act (“PAGA”).

In that case, Prudential was sued by a former employee for alleged failure to pay overtime and denying meal and rest breaks under state labor statutes and PAGA. The PAGA is a powerful tool for Plaintiffs, as it allows an “aggrieved employee” to step into the shoes of the Attorney General and seek penalties on behalf of the state against the Company. In a PAGA action, an employee will recover only 25% of the total PAGA award, but employees oftentimes pursue parallel individual or class claims in addition to claims under PAGA. 

Prudential petitioned to have the PAGA claim moved to arbitration, as the employee had signed an arbitration agreement when he was hired. The Fourth Appellate District found that the State of California was not bound by an arbitration agreement between an employee and employer. Thus, the court could not force the employee to arbitrate PAGA claims he was bringing on behalf of the state.

In August, Prudential asked the SCOTUS to hear the case, arguing that the appellate court got the decision wrong.  Prudential claims the appellate court ignored the Federal Arbitration Act (“FAA”), a federal law that favors the use of arbitration agreements and which Prudential argues preempts the PAGA.  Unfortunately, the SCOTUS denied Prudential’s request and will not hear the case.


Until the preemption issue gets resolved, the law for California employers is that PAGA claims cannot be forced into arbitration. However, it is still important to note that arbitration agreements remain a powerful tool in the litigator’s tool belt. Companies should not let decisions like this make them shy away from arbitration agreements in their entirety.  Employers with questions regarding arbitration agreements should contact the experts at The Saqui Law Group.

Court Dismisses Lawsuit Alleging AB 1513 Payments Were Unlawful

 By: Gregory Blueford

On August 9, 2017, the United States District Court for the Central District dismissed a lawsuit against the Secretary of the California Labor and Workforce Development Agency, the Director of the Department of Industrial Relations and the California Labor Commissioner (“Defendants”) challenging the constitutionality of AB 1513’s safe harbor provision. As employers know, the AB 1513 safe harbor allowed employers to choose to pay either the actual sums owed or 4% of the employee’s gross earnings in pay periods where any piece rate was worked with offsets allowed for nonproductive time (“NPT”) already paid – even if this was less than the actual sums owed. Plaintiffs, who sought to represent all non-exempt piece-rate agricultural workers in California, argued that the State of California violated the U.S. Constitution by allowing employers to utilize the 4% method to settle employee claims for less than the amounts actually owed to Plaintiffs.

Earlier this month, a California company petitioned the United States Supreme Court (“SCOTUS”) to reverse a California Appellate Court ruling that claims made under the Private Attorneys General Act of 2004 (“PAGA”) cannot be arbitrated. Under PAGA, individuals are empowered to stand in the shoes of the State of California and can sue over workplace violations, such as meal and rest violations, individually as well as on behalf of other current or former employees.

A recent California Court of Appeal decision serves as an important reminder of the importance of properly classifying employees and adhering to other wage and hour requirements under the law.  In Ming-Hsiang Kao v. Joy Holiday the Court clarified when an employee can be treated as a “trainee,” addressed what benefits may be used to determine if an employee is exempt from overtime requirements, and stressed that the requirement that employers pay employee immediately upon termination is a strict one.

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