California Wage & Hour Series

Authored by Eric Lloyd

Seyfarth Synopsis: Minor league baseball players took a swing at class certification, and they missed—badly.

In Senne v. Kansas City Royals Baseball Corp., et al., minor league baseball players across the country asserted wage and hour claims under the Fair Labor Standards Act (“FLSA”) and various state laws against Major League Baseball (“MLB”), the Commissioner of MLB, and a number of MLB franchises. The players sought allegedly unpaid minimum wages and overtime for “work” performed during the baseball season (such as travel to and from games and pre-game activities) and during the offseason (such as participating in spring training and offseason conditioning). The U.S. District Court for the Northern District of California conditionally certified the Plaintiffs’ proposed collective under the FLSA in October 2015.

Plaintiffs moved to certify their state law wage and hour claims in April 2016. In support of their class certification motion, Plaintiffs submitted declarations and testimony from two experts. Plaintiffs proposed that one of their experts would offer a damages model at trial based on estimates of the number of hours worked by each player during each work week in the class period. They further posited that these estimates would be based upon players’ responses to a survey devised by another expert, which asked players to provide information concerning the amounts of time they spent performing purportedly work-related activities. The Defendants asked the court to exclude the experts’ declarations and testimony on the ground that the proposed survey was flawed and would collect unreliable data.

The court denied Plaintiffs’ motion to certify their state law claims, and, decertified the FLSA collective. While this was obviously a welcome development for class action-weary employers, Chief Magistrate Judge Joseph C. Spero’s opinion stands out from other recent certification decisions given its extensive discussion regarding the use of representative evidence in class actions.

Judge Spero granted the Defendants’ motion to exclude Plaintiffs’ experts’ declarations and testimony, finding the proffered survey evidence to be “fundamentally flawed.” The court was troubled that the players’ survey responses would be unreliable insofar as the survey asked players to provide information concerning “mundane events” that may have happened years in the past, such as when they arrived and departed from a baseball stadium on a given day, whether their baseball-related activities were “rained out,” or whether they missed a practice due to injury or illness. The fact that no time records which could verify the players’ responses existed cemented the court’s conclusion that the survey data would be unsound. In addition, the court expressed concern that the survey responses would be tainted by self-interest bias given that “virtually all minor league players have a vested interest in the outcome of this litigation.”

The court also rejected the Plaintiffs’ argument that the U.S. Supreme Court’s recent decision in Tyson Foods, Inc. v. Bouaphakeo permitted the use of survey evidence given the absence of time records for the players. As Judge Spero noted, the players who comprised the putative class were not at all similarly situated—for instance, they played for different organizations, with different work requirements, in different states, with different laws—making it inappropriate to “paper over significant material variations [among the plaintiffs] that make application of the survey results to the class as a whole improper.” In other words, Tyson Foods was inapplicable because the players’ working conditions were simply too different to draw any reliable conclusions about class members’ claims based on purportedly representative survey evidence.

Senne is the latest case showing that courts are reviewing trial plans based on representative evidence with increased scrutiny, as discussed previously here. Judge Spero’s thorough 104 page opinion exposes a number holes in the use of survey evidence to support a trial plan—for instance, that it may be unverifiable and contaminated by the respondents’ self-interest—and it therefore provides employers with strong arguments to present in opposition to class certification.

Authored by Simon L. Yang

When PAGA—California’s Labor Code Private Attorneys General Act of 2004—was first enacted, we knew it would take years to see how it would be applied. Twelve years (and over $30 million in penalties paid to the state) later, we thought we’d have more answers. But many California employers, attorneys, and judges, now all too familiar with PAGA, still are uncertain how to manage and litigate PAGA claims and continue to await guidance.

But we’re tired of waiting. And we might be waiting for Godot (since California legislators have those more than 30 million reasons to like the PAGA status quo). Nor can we expect California executives and agencies to assist, since they largely ignore their roles for overseeing and authorizing PAGA claims (as less than 1% of received PAGA notices are even reviewed in practice).

So the joy of addressing the uncertainty of PAGA is left for litigants and courts. Of course, courts can’t really be blamed for furthering confusion with inconsistent and contradictory rulings, since one of the few certainties is that the bounty hunter statute simply isn’t the California legislature’s finest work—meaning only that the statute’s text is the source of much PAGA confusion.

But wait no more, and add this to the list of certainties: The California Wage & Hour Series will include “PAGA Primer” posts returning to the basics, starting with the statute, and seeking to defuse PAGA misconceptions. It’s time to ask the stupid questions: What does PAGA actually say? When does PAGA create penalties? Does PAGA permit recovery of two penalties for a single violation? Does PAGA create substantive or procedural rights? Does Rule 23’s applicability to a PAGA claim vary on a case-by-case basis? Does PAGA exempt claims from manageability requirements? Does a right to a jury trial exist for PAGA claims? Asking stupid questions is the way to avoid stupid answers.

We’ll still blog on PAGA developments—including the California legislature’s response to the governor’s proposed amendments, the California Supreme Court’s ruling on the standard for and scope of PAGA discovery, and maybe even a final disposition in a case permitting the United States Supreme Court to weigh in on the Iskanian rule. And we’ll not only wait for answers but also take the proactive approach by addressing a series of basic but necessary questions.

If you have other PAGA questions that you want answered, well, good luck—you’re not alone. Joking aside, feel free to reach out to the author or any of the other 50+ members of Seyfarth’s California Wage & Hour Litigation team if you need assistance with PAGA, want to suggest questions, or just want to talk PAGA.

Authored by Jeffrey A. Berman, Julie G. Yap, and Michael Afar

Last week, the California Supreme Court issued a ruling on a California Wage Order requirement that employers provide “suitable seats” for employees when the “nature of the work reasonably permits the use of seats.” The consolidated decision says employers have to provide seating where employee tasks performed at a particular location reasonably permit sitting, and where providing a seat would not interfere with the performance of standing tasks.

Background: Taking a Stand for Seats

Nykeya Kilby worked as a Clerk/Cashier for CVS Pharmacy, Inc. Sometimes she moved around the store, gathered shopping carts, and restocked display cases, but she spent 90% of her workday at the cash register. Kemah Henderson worked as a teller at JPMorgan Chase Bank. Sometimes she escorted customers to safety deposit boxes, worked the drive-up teller window, and checked to ensure that ATMs were working properly, but she spent the majority of her time at her teller window. Neither company provided the plaintiffs with seats. CVS’s business judgment was that standing promotes excellent customer service.

Kilby and Henderson stood up for themselves—and others—by seeking to represent CVS cashier and JPMorgan teller classes in federal district court for violation of California’s “suitable seating” requirements. But the district court denied class certification and granted summary judgment to CVS, since the “‘nature of the work’ performed by an employee must be considered in light of that individual’s entire range of assigned duties” and that “courts should consider an employer’s ‘business judgment.’”

On appeal, the Ninth Circuit sat this one out. It noted the “lack of any controlling California precedent” and that the “nature of the work,” “reasonably permits,” or “suitable seats” language was not defined. So it asked for the California Supreme Court’s interpretation.

The Decision: It Definitely Depends

The California Supreme Court addressed the undefined terms:

First, it held that the “nature of the work” refers to tasks performed at a given location for which a right to a suitable seat is claimed. In rejecting both an “all-or-nothing approach” and a “single task” approach that would be “too narrow,” it said trial courts should look to the “actual tasks performed, or reasonably expected to be performed,” rather than “abstract characterizations, job titles, or descriptions that may or may not reflect the actual work performed.”

Second, the Cal Supremes concluded that whether the nature of the work “reasonably permits” sitting is determined objectively based on the “totality of the circumstances.” An employer’s business judgment, the physical layout of the workplace, and the “feasibility” of providing seats—including “whether providing a seat would unduly interfere with other standing tasks, whether the frequency of transition from sitting to standing may interfere with the work, or whether seated work would impact the quality and effectiveness of overall job performance”—all should be considered. The court did caution that whether an employer would “unreasonably design a workspace” to deny a seat that might otherwise be reasonably suited for certain tasks also should be considered.

Third, the court effectively suggested that what would be “suitable seating” depends, by ruling that “an employer seeking to be excused from the requirement bears the burden of showing compliance is infeasible because no suitable seating exists.”

The Takeaway: What It Means for California Employers

While Kilby/Henderson provides some guidance on “suitable seating” rules, the case now requires an inquiry focusing on each particular location where an employee works—as opposed to generally analyzing an employee’s entire set of job tasks. And while the California Supreme Court validated the employer’s position that “business judgment” and store layouts must be considered, those factors are relevant, but not dispositive.

So it’s all clear: “the nature of the work” depends on any individual employee’s actual work, whether it “reasonably permits” sitting depends on a totality of work factors, and what constitutes “suitable seating” depends on what is infeasible in a particular workplace.

In the end, although the California Supreme Court may have affirmed the viability of a cause of action for suitable seating, employers might stand and rejoice. The required location-specific analysis in seating may now be so individualized that class actions across classifications and locations are no longer “suitable.”

Edited by Simon L. Yang

Authored by Michael Kopp

Piece-rate employers in California have faced a surge of class action lawsuits in recent years seeking substantial sums for the failure to separately pay for rest breaks and nonproductive time. On January 1, 2016, California Labor Code section 226.2 went into effect, requiring employers to separately compensate piece-rate employees for rest break and nonproductive time. But the statute also offers piece-rate employers a safe harbor option to clear the decks of liability as to certain wage and hour claims, provided the employer makes the election by July 1, 2016. Before this deadline passes, piece-rate employers must take stock of their potential liability and the relative risks of accepting or declining this safe harbor.

The need for safe harbor? Wage and penalty claims for unpaid rest breaks and nonproductive time have proliferated against California piece-rate employers. A wave of California state and federal court decisions, including Bluford v. Safeway Stores, Inc. and Gonzalez v. Downtown LA Motors, have held that employers must make a separate payment for rest break and nonproductive time, in addition to piece-rate compensation. Labor Code 226.2 now provides employers an affirmative defense to these claims for unpaid rest breaks and nonproductive time, as well as the derivative claims for liquidated damages, penalties, premiums, and wage statement violations, for periods prior to December 31, 2015.

What is the price for safe passage? Employers have two alternate payment options. Under the first option, employers may pay the wages for all previously uncompensated rest and recovery periods and nonproductive time from July 1, 2012 through December 31, 2015, along with statutory interest. This option presents a challenge for most piece-rate employers, who are likely not to have tracked nonproductive time. It also invites ongoing challenges as to whether the full amount of nonproductive and rest break time was correctly paid. The safe harbor itself contains a safe harbor, which allows an employer to correct “good faith” miscalculations in the safe harbor payment within 30 days of notice. The employer has the burden of proving, however, that the mistake “was solely the result of good faith error.”

Under the second option, employers may pay a flat 4% of the employee’s gross earnings from July 1, 2012 through December 31, 2015, for pay periods in which a piece rate was paid. This option will generally be the safer, simpler, and cheaper option. For a 40- hour workweek, rest break wages alone will generally amount to slightly over 4% of the employee’s gross wages, even without including any nonproductive time. In addition, unlike the first option, there is no requirement to pay statutory interest. Finally, gross wage records should be accessible and less subject to dispute than estimates of untracked nonproductive time.

Regardless of which method is used, the employer must provide employees statements identifying the payment calculations. In addition, the employer must use due diligence (such as skip tracing) to locate and pay former employees. Payments must be made “as soon as reasonably feasible” after providing notice to the state of the safe harbor election, and must be completed no later than December 15, 2016. In addition, employers must preserve the records regarding payments and the calculations until December 16, 2020.

Get your pass stamped. As a deterrent to would be litigants and plaintiff’s attorneys, employers who have elected the safe harbor will be identified on the California Department of Industrial Relations’ website through March 31, 2017.

Carve outs? Employers currently mired in long-standing litigation of these claims may not qualify. If the complaint was filed prior to March 1, 2014, the claim will likely escape the safe harbor. Claims that are not based on unpaid rest breaks, but rather allege that rest breaks were not permitted, are not subject to the safe harbor. A specific type of wage claim, more commonly asserted in an agricultural context, is also excluded for claims filed prior to April 1, 2015. The defense also does not apply to claims accruing after January 1, 2016.

To the safe harbor or the unprotected seas? The impending deadline forces a risk calculation. For piece-rate employers who have not previously made separate payments for rest breaks and nonproductive time, the payment comes at a substantial discount to potential class litigation exposure. Depending upon the pay practices and specifics of the workforce, some employers are more at risk of wage and hour litigation than others. As the clock continues to tick toward the July 1, 2016 deadline, if you would like assistance in evaluating these risks, please do not hesitate to contact the authors or any other member of Seyfarth’s Labor and Employment Group.