Key California Employment Law Cases: February 2021

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Donohue v. AMN Services., LLC, No. S253677, 2021 WL 728871 (Cal. Feb. 25, 2021)

Summary:  Employers cannot engage in the practice of rounding time punches in the meal period context.

Time records that show noncompliant meal periods create a rebuttable presumption of liability at the summary judgment stage.

Read our in-depth analysis HERE. 

Crestwood Behavioral Health, Inc. v. Superior. Court., No. A160523, 2021 WL 613700 (Cal. Ct. App. Feb. 17, 2021)

Summary:  Venue for a representative action under PAGA is proper in any county in which an aggrieved employee worked and Labor Code violations allegedly occurred.

Facts:  Plaintiff Maricris Fragoza filed an enforcement action under the California Labor Code Private Attorneys General Act (“PAGA”) against her former employer, Defendant Crestwood Behavioral Health, Inc. The enforcement action was filed in the Superior Court for the County of Alameda, where Defendant operated a facility, but not where Plaintiff was employed or where Defendant had its principal place of business. Defendant filed a motion to transfer venue to Sacramento County, where its principal place of business was located, arguing that venue was not proper in Alameda County. The trial court denied the motion, concluding that Alameda County was a proper venue.  Defendant timely filed a petition for writ of mandate.

Court’s Decision:  The California Court of Appeal denied the petition, finding that in a PAGA action venue is proper in any county in which an aggrieved employee worked and Labor Code violations allegedly occurred. The court of appeal distinguished between Plaintiff’s standing to bring the PAGA action and the venue analysis, and noted that Plaintiff’s personal allegations regarding her employment are necessary to establish standing, not venue. The court saw no reason why the Legislature would restrict the proper venue to the location of the representative plaintiff when suing on behalf of all aggrieved employees. Under the plain meaning of the relevant venue statutes, Defendant’s “liability” (California Code of Civil Procedure section 395.5), and “some part of the cause” (section 393), arose in Alameda County because Labor Code violations allegedly occurred there.

Practical Implications:  Employers are now on notice that they may be subject to a PAGA claim in any county in which they operate and where any of the Labor Code violations allegedly occurred, regardless of where the representative plaintiff resides or works.

Bernstein v. Virgin America., Inc., No. 19-15382, 2021 WL 686281 (9th Cir. Feb. 23, 2021)

Summary:  An employer is not subject to heightened penalties for “subsequent” violations under PAGA until it is notified by the California Labor Commission or any court that it is violating the Labor Code.

Labor Code sections 201 and 202 apply to California-based workers whose work is not performed predominantly in any one state, provided that California is the state that has the most significant relationship to the work.

California’s meal and rest break laws are not preempted by the Federal Aviation Act or Airline Deregulation Act.

Facts:  Plaintiffs, California-based flight attendants, filed a wage and hour class action lawsuit against their former employer, Defendant Virgin America, Inc., alleging violations of a host of California labor laws. Plaintiffs also sought compensation under the California Labor Code Private Attorneys General Act (“PAGA”). Defendant argued California law did not apply because (1) the dormant Commerce Clause precluded application of California labor law in the context of this case, and (2) California’s meal and rest break laws were preempted by the Federal Aviation Act (“FAA”) and the Airline Deregulation Act (“ADA”). Defendant also argued that, in the alternative, California law did not apply because the class did not work exclusively or principally in California and could not benefit from its laws. Defendant also argued that it should not be subject to heightened penalties for “subsequent” violations under PAGA. The district court rejected Defendant’s arguments, found that Defendant violated the Labor Code, and awarded PAGA penalties for “initial” and “subsequent” violations of the Labor Code.

Court’s Decision:  The Court of Appeals for the Ninth Circuit affirmed in part and reversed in part, holding that California law applied to the class’s claims but that the district court erred in awarding heightened penalties for “subsequent” violations under PAGA. First, the Ninth Circuit held that the dormant Commerce Clause was not implicated, and that neither the FAA nor the ADA preempt California’s meal and rest break requirements in the aviation context. Second, the court rejected Defendant’s “job situs” test, instead applying the “significant relationship” test from Ward v. United Airlines, Inc., 9 Cal. 5th 732 (2020), to conclude that California law applied to Plaintiff’s wage and hour claims. In Ward, the California Supreme Court concluded that the Legislature intended for Labor Code section 226 to apply to workers whose work is not performed predominantly in any one state, provided that California is the state that has the most significant relationship to the work. The Ninth Circuit reasoned that it did not matter that the California-based employees spent the majority of their time working outside of California because there was no evidence suggesting that these employees spent more than 50 percent of their time working in any other one state, or that they worked in any other state more than they worked in California. In addition, Defendant’s fleet of aircraft is registered with the Federal Aviation Administration at Defendant’s California headquarters. The court noted that California’s public policy goals of protecting health and safety and preventing the evils associated with overwork would be thwarted by permitting residents to work outside of California for a California employer without the protection of its laws. The court further stated that although there is no California Supreme Court decision specifically interpreting the reach of Labor Code sections 201 and 202 (which govern timely payment of final wages) for interstate employers, it found an analogy to section 226 compelling. Using Ward’s language, the kinds of California connections that will suffice to trigger the two provisions are the same. Because the California Supreme Court held section 226 to apply under these circumstances, the Ninth Circuit held that sections 201 and 202 apply as well. Finally, the Ninth Circuit found that the trial court erred in awarding heightened penalties for “subsequent” violations under PAGA. The court reasoned that Defendant was not notified by the Labor Commissioner or any court that it was subject to the California Labor Code until the district court partially granted Plaintiffs’ motion for summary judgment. Prior to that, Defendant could not be presumed to be aware that its continuing conduct was a violation subject to penalties.

Practical Implications: As we previously reported, the California Supreme Court’s recent decisions in Ward and Oman established that choice-of-law analysis can vary depending on which Labor Code provision is at issue, creating a substantial amount of confusion for employers operating across state lines. With Bernstein, employers now have an additional case addressing which state’s law applies to an interstate employee relationship. Employers with interstate employment relationships should reevaluate whether California’s Labor Code sections governing the timely payment of final wages may be applicable to any members of their workforce based on the Ward “principal place of work” test. 

In addition, employers have additional ammunition for limiting PAGA penalties now that the Ninth Circuit has limited the heightened penalties scheme to those situations where the employer was put on notice that it was subject to and had violated the California Labor Code by either the California Labor Commissioner or any court. While the California Supreme Court has not yet ruled that such notice is a prerequisite for heightened penalties, this is a welcome ruling for employers.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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