Summary: Employer did not violate California law by selecting a method of calculating the regular rate of pay that most benefitted its employees, even though that method was contrary to the method endorsed by the DLSE.
Facts: When an employee works at different rates of pay during a single workweek (a “dual-rate” employee), two methods of determining the regular rate of pay, for purposes of calculating overtime, have been approved by different courts in certain circumstances: (1) the “weighted average method,” which establishes the regular rate by adding all hours worked by the dual-rate employee in the pay period and dividing that number into the total compensation for that pay period; and (2) the “rate-in-effect method,” in which the regular rate of pay is the hourly rate in effect at the time the overtime hours begin. Defendants, owners and operators of several Buffalo Wild Wings restaurants, adopted the rate-in-effect method, which was the method that most benefited dual-rate employees. Plaintiffs argued, however, that an employer must always use the weighted average method because only that method has been endorsed by the California Division of Labor Standards Enforcement (“DLSE”). Following a bench trial, the trial court approved Defendants’ use of the rate-in-effect method, and on that basis decertified the dual-rate subclass and entered judgment in favor of Defendants on Plaintiffs’ California Labor Code Private Attorneys General Act dual-rate claim. Plaintiffs appealed.
Court’s Decision: The California Court of Appeal affirmed, concluding that the DLSE’s adoption of the weighted average method is not binding or exclusive and that employers are not obligated to accept the weighted average method as the only method of calculating overtime for dual-rate employees. Rather, in evaluating the use of the rate-in-effect method, the court borrowed from its time-rounding jurisprudence. That is, the court looked to whether the policy was “neutral on its face” and “neutral in application.” To be neutral on its face, the policy must apply to all employees without regard to whether the employer or employee benefits from the policy’s operation. To be neutral in application, the policy must not systematically undercompensate employees. The court concluded that Defendants’ use of the rate-in-effect method was neutral on its face, and that in this case, Defendants’ use of the rate-in-effect method resulted in their employees receiving more overtime pay, overall, than they would have received under the weighted average method.
Practical Implications: While this case provides some flexibility for employers, it is critical that employers not read this case as a wholesale approval of the rate-in-effect method. Whether the rate-in-effect method is permissible will depend on whether the policy adopted by the employer is neutral on its face and neutral in application. Just like in the time-rounding context, this will require a careful analysis of how the rate-in-effect method impacts employees on the whole to ensure that there is no systematic under compensation.
Brighton Collectibles, LLC v. Hockey, 65 Cal. App. 5th 99 (2021)
Summary: Plaintiff’s anti-SLAPP motion seeking to strike Defendant’s cross-claim for fraud failed because Defendant showed a probability that it would prevail on its cross-claim. Facts: Plaintiff Natalie Hockey was a model who directed her modeling agency to negotiate a contract on her behalf with Defendant Brighton Collectibles, LLC. The agency agreed that Plaintiff would perform a one-day (10-hour) modeling shoot for Defendant for $3,000, payable on receipt of the agent’s invoice. After she modeled as agreed, Plaintiff sued Defendant, claiming Defendant was her employer and violated Labor Code section 201 by not paying her the total amount due at the end of her modeling shoot day, and asserting she was entitled to $90,000 in waiting time penalties. Defendant cross-claimed for fraud, claiming that Plaintiff had represented that she was to be paid the $3,000 upon the agent’s invoice, that Defendant had relied on that representation, and that Defendant was damaged by being subjected to the risk of liability to Plaintiff for the $90,000. Plaintiff filed an anti-SLAPP motion, seeking to strike Defendant’s cross-claim. The trial court granted Plaintiff’s motion. Defendant appealed.
Court’s Decision: The California Court of Appeal reversed. The court held that even if it were to assume that Plaintiff met her burden of showing that Defendant’s cross-claim for fraud arose from protected conduct, reversal was necessary because Defendant showed a probability that it will prevail on its claim. The court determined that the evidence submitted demonstrated that Defendant would probably be able to show that Plaintiff made a misrepresentation when she told the company to pay the agency for her services during the photoshoot upon receipt of an invoice, rather than immediately upon her “termination” as an employee upon the conclusion of the shoot; that it could be inferred that Plaintiff knew the misrepresentation was false based on her actions; that Plaintiff intended for Defendant to rely on her misrepresentation; that Defendant justifiably did so; and that reliance on Plaintiff’s misrepresentation damaged Defendant by exposing it to $90,000 in waiting-time penalties plus attorney’s fees and costs.
Practical Implications: This case is part of a growing trend. Many employers have lately found themselves faced with the type of lawsuit that Brighton Collectibles faced here. This case is welcome news for employers and provides them with a template for aggressively defending against these claims.
Cedar Point Nursery v. Hassid, 141 S. Ct. 2063 (2021)
Summary: A California labor regulation that allows union representatives a “right to take access” to an agricultural employer’s property constitutes a per se violation of the Takings Clause of the Fifth Amendment.
Facts: Plaintiffs were agricultural employers who filed suit for declaratory and injunctive relief against members of the state Agricultural Labor Relations Board (the “Board”) in their official capacity. Plaintiffs argued that a California regulation promulgated by the Board, Cal. Code Regs., tit. 8, § 20900(e)(1)(C), which grants union organizers a “right to take access” to their private property (for a total of three hours per day, 120 days out of the year) to solicit support for unionization, is an unconstitutional per se physical taking under the Fifth and 14th Amendments to the United States Constitution. The district court denied the Plaintiffs’ motion for preliminary injunction and granted the Board’s motion to dismiss, reasoning that the regulation did not “allow the public to access their property in a permanent and continuous manner for whatever reason,” and that the access regulation was instead subject to evaluation under the multifactor balancing test set forth in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), which the growers did not attempt to satisfy. On appeal, the Court of Appeals for the Ninth Circuit agreed, reasoning that because the regulation placed restrictions on who could access the private property and when, and because the growers did not contend that they were deprived of all economically beneficial use of their property, the regulation was not a per se physical taking. Plaintiffs filed, and the United States Supreme Court granted, a petition for a writ of certiorari.
Court’s Decision: The Supreme Court reversed, holding that the district court and Ninth Circuit had applied the wrong standard. The Court reasoned that “[t]he essential question is ... whether the government has physically taken property for itself or someone else—by whatever means—or has instead restricted a property owner’s ability to use his own property.” The Court held that the “access regulation appropriates a right to invade the growers’ property and therefore constitutes a per se physical taking” as it “appropriates for the enjoyment of third parties the owners’ right to exclude.” The Court noted that, “[g]iven the central importance to property ownership of the right to exclude, it comes as little surprise that the Court has long treated government-authorized physical invasions as takings requiring just compensation.”
Practical Implications: While the immediate effect of this case is limited to Agricultural Labor Relations Board regulation at issue, employers can expect to see attempts to expand the holding of this case to other similar union access statutes and regulations.
Levanoff v. Dragas, Nos. G058480, G058709, 2021 WL 2621360 (Cal. Ct. App. June 25, 2021)