Key California Employment Law Cases: July 2017

by Payne & Fears

This month’s key California employment law cases involve wage and hour (payment of wages) and civil procedure (class and representative actions).

Wage and Hour - Payment of Wages: Minnick v. Auto. Creations, Inc., 2017 WL 3203265 (Cal. Ct. App. July 28, 2017)

Summary: Vacation policy, which required one-year waiting period before vacation time could be earned and accrued, did not violate prohibition against forfeiture of wages upon termination.

Facts: Plaintiff Minnick sued his former joint employers, defendants Automobile Creations, Inc. and Dynamic Auto Images, Inc., alleging their vacation policy violated California law because it required employees who worked for less than one year to forfeit vested vacation pay upon termination.  Plaintiff brought the action individually and on behalf of all similarly situated employees, and sought penalties under the California Private Attorneys General Act of 2004.  Plaintiff alleged that defendants’ vacation policy, which provided that employees do not begin to earn and accrue vacation time until after their first year, violated state law because it required employees who worked for less than one year to forfeit vested vacation pay.  Defendants demurred to plaintiff’s second amended complaint because he was terminated during his first year and thus did not have any vested or accrued vacation pay.  The trial court sustained defendants’ demurrer without leave to amend.

Court’s Decision: The California Court of Appeal affirmed.  First, an employer may provide a waiting period before an employee becomes eligible to earn vacation, and if the employer’s policy is clearly stated, the waiting period policy is enforceable.  Second, such a policy does not contract around the rule against forfeiture of wages.  An employer may lawfully decide it will not provide vacation and, by logical extension, can decide it will not provide paid vacation until after a specified waiting period.  Here, defendants’ vacation policy clearly provided for a waiting period and reasonably informed employees that their vacation accrual began after the completion of their first year.  Plaintiff could not create an ambiguity in the policy by construing a single sentence out of context that an employee is entitled to one week of vacation after a year of service.

Practical Implications:  With the expansion of paid sick leave and other time off benefits, many employers are implementing waiting periods for employees to accrue paid vacation.  A waiting period is lawful if the policy is clear and unambiguous.  The vacation policy should explicitly state that vacation time is not earned and does not begin to accrue until after the waiting period is completed.  

Civil Procedure - Class and Representative Actions: Williams v. Superior Ct., 3 Cal. 5th 531, 220 Cal. Rptr. 3d 472 (2017)

Summary: Plaintiff in PAGA action can discover contact information of other employees without good cause or compelling interest, while privacy interests and burden to employer can be factors affecting scope of discovery.

Facts: Plaintiff employee brought a putative class action against defendant employer, Marshalls, under the California Private Attorneys General Act (“PAGA”) alleging statewide wage and hour violations.  During discovery, plaintiff sought contact information for all California employees.  When defendant resisted, plaintiff filed a motion to compel production of the information.  The trial court granted the motion as to the store where plaintiff worked, but denied it as to every other California store, conditioning any renewed motion for discovery on plaintiff sitting for a deposition and showing some merit to his claims.  Plaintiff petitioned the California Court of Appeal to compel the trial court to vacate its discovery order.  The court of appeal denied the writ, finding that plaintiff failed to set forth specific facts showing good cause justifying the discovery.

Court’s Decision: The California Supreme Court reversed, holding that in the absence of privilege, the right to discovery is broad and to be construed liberally so that parties may ascertain the strength of their cases at trial and the truth may be determined.  First, a PAGA plaintiff’s request for information about other statewide employees cannot be overbroad or irrelevant because PAGA permits an aggrieved employee to recover on their behalf.  Nothing in the characteristics of a PAGA suit, which is essentially a qui tam action filed on behalf of the state to assist it with labor law enforcement, affords a basis for restricting discovery more narrowly.  Even in non-PAGA class actions, the contact information of those a plaintiff purports to represent is routinely discoverable as an essential prerequisite to effectively seeking group relief.  Second, defendant made no showing of the burden disclosure would impose, and the statutory scheme imposes no good cause requirement for seeking information by interrogatory.  Finally, the right to privacy is subject to a shifting standard depending on the nature of the information sought.  Courts should consider whether a legally recognized privacy interest exists, the existence of a reasonable expectation of privacy in the circumstances, and the seriousness of any invasion of the privacy.  The privacy interests of other employees can be addressed with a protective order or by conditioning discovery on a notice to putative class members with an opportunity to opt out from disclosure.

Practical Implications:  Limiting broad discovery in PAGA actions now will be much more difficult for employers, as an employee working in one location has a path to discover information about all other employees working in California.  This will significantly increase the cost of defending PAGA actions and the risk that a plaintiff’s lawyer will be able to contact employees about how they are paid.

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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