(February 9, 2011) The California Chamber of Commerce and five other employer groups have asked the California Supreme Court to review a California Court of Appeal ruling that could open the door to class action lawsuits on working conditions, unless it is overturned.
In a January 27 letter, the CalChamber and other employer groups asked the Supreme Court to grant review of the 2nd District Court of Appeal decision in Bright v. 99¢ Only Stores, 189 Cal.App.4th 1472 (2010).
The Court of Appeal decision in Bright, when coupled with a similar decision in Harris v. Home Depot U.S.A., Inc., exposes all California employers to severe penalties, in addition to costly litigation, based on obscure provisions contained in California’s Wage Orders.
Background
The California Wage Orders establish minimum wage and overtime requirements in various industries. In addition, the orders describe in minute detail what employers must provide in the workplace. For example, Wage Order 7 requires retail employers to provide “suitable seats” where “reasonably permit[ted]” by the work.
In Bright, a retail cashier claimed to have been denied a chair while working. The plaintiff claimed that the failure to provide suitable seating also violated Labor Code Section 1198, and based upon this claim, sought penalties under the Private Attorney General Act (PAGA).
Despite the plaintiff’s contentions, the trial court ruled that such a failure was not a condition “prohibited” by Wage Order 7, and dismissed the case.
The Court of Appeal, however, reversed the trial court decision and reinstated the claim. No appellate court had ever recognized a monetary penalty for wage order requirements.
The appeal court said that suitable seating is a “standard condition of labor” established by Wage Order 7 and thus a failure to provide suitable seating is a violation of Labor Code Section 1198, which states it is unlawful for an employee to be employed “under conditions of labor prohibited by” the wage orders.
Penalties
What makes this case of particular concern is it opens the door for new PAGA claims. Section 1198 does not provide for civil penalties. As the letter points out, Wage Order 7 “wisely limits monetary recovery to those violations that result in the underpayment of wages. Thus, the penalty for a working condition violation is zero, presumably because the employee has suffered no actual economic loss, and can rely upon the Labor Commissioner to enforce the relevant working condition through injunctive relief.”
In Bright, the appeal court extended PAGA to create fallback penalties for all wage order working conditions, even though the Industrial Welfare Commission (IWC) had limited wage order penalties to the “underpayment of wages” and not to working conditions.
Impact on Business
PAGA establishes civil penalties of $100 per employee, per pay period for the first violation and $200 for each subsequent violation. The act also allows “representative actions” on behalf of similarly situated coworkers.
Under Bright’s extension of PAGA, a retail employer with 40 employees, biweekly pay periods, and five technical violations per pay period, could accrue $204,000 in penalties per year, in addition to potential liability for attorneys’ fees.
Even though Wage Order 7 applies only to retail employers and is the wage order at issue in Bright, similar working condition provisions apply to employers in all major industries in California.
Bright, therefore, opens the door to class action litigation of similar cases in all industries, with potential devastating results for many small to mid-size California employers
Letter of Support for Review
The amicus letter urged the Supreme Court to review the Bright decision, noting that the ruling “has created dire financial consequences for employers regarding obscure working conditions where no penalties were intended.”
The letter points out that the appeal court’s ruling and its mistaken interpretation of the Labor Code extends PAGA “beyond its intended purpose—the enforcement of important employment laws—into a weapon allowing employees and their lawyers to sue for large penalties for technical infractions that the IWC viewed as unworthy of penalties.”
Cases such as Bright, the letter commented, are only the beginning of “a wave of destructive class action litigation over hyper-technical wage order provisions—bathroom temperatures, clock placement, basement elevators, ‘clean’ changing rooms, extensive recordkeeping—that do not involve the underpayment of wages.”
For a more detailed discussion of this case, see the “Law in Brief” section of the February California Employer Update newsletter.
The letter was submitted on behalf of the CalChamber, the Employers Group, the California Employment Law Council, the California Hospital Association, the California Manufacturers & Technology Association, the California Restaurant Association and the California Retailers Association.
Staff Contact: Erika Frank