Labor Code and Wage Order compliance can be one of the human resource department’s most tedious tasks. The requirements of the Labor Code and the Wage Orders are detailed, based on working environments that no longer exist and, as a result, are often counter-intuitive. Nonetheless, the penalties for noncompliance are high and employers are well-served by documenting compliance with all the rules, including meal periods, rest breaks, overtime requirements and wage statements. Those employers who have faced charges filed with the local office of the Labor Commissioner understand that the hearing officers at the Labor Commissioner’s offices are strongly oriented toward finding in favor of employees and have no trouble awarding penalties against employers based on scant evidence. So what options does an employer have if an award by the hearing officer is grossly incorrect?
Labor Code section 98.2 allows an employer ten days to appeal an unfavorable decision by the Labor Commissioner and to receive a trial de novo in superior court. This sounds like good news for an employer who receives an unfavorable ruling after a hearing and anticipates getting a more favorable outcome in the more neutral forum of superior court. Unfortunately, section 98.2 also requires that the employer post an undertaking with the superior court in the amount of the award being appealed within the ten day time frame for appeal. In Palagin v. Paniagua Construction Inc., the court found that the language of section 98.2 plainly requires the undertaking and failure to post that undertaking within the ten day appeal period defeats the superior court’s jurisdiction and the appeal must be dismissed. In the Palagin case, the outcome for the employer was particularly frustrating because the employer missed the deadline by only a few days and took immediate steps to correct the failure.
The Palagin opinion and the requirements for appeal of an unfavorable decision from the Labor Commissioner’s office set forth in section 98.2 underscore the seriousness with which claims filed by employees with the Labor Commissioner’s office should be taken. Correcting an unfavorable award through appeal to superior court is an expensive and potentially difficult process. Employers who receive a claim for unpaid wages or other Wage Order or Labor Code violations should take the following steps:
1. Evaluate the claim thoroughly and neutrally to determine whether good evidence in the form of documents and witnesses exist to defeat the claim;
2. Determine whether the claim has implications for the employer in terms of other similarly situated employees who could make similar claims;
3. If the claim is without merit, set aside the time and resources to aggressively defend against the claim both at the initial conference and at the hearing;
4. If the claim has merit, analyze and consider the possibilities for resolving the claim and correcting practices so that exposure is minimized going forward.
Dealing with the Labor Commissioner’s office is often a disheartening and unpleasant experience for employers. However, notwithstanding the difficulty involved, it is extremely important that employers take seriously the consequences of an unfavorable outcome at the Labor Commissioner’s office given the difficulty and costs associated with an appeal.