Commissioned Employees: Cal. Sup. Ct. Holds Commissions Are Counted in the Pay Period Actually Paid

Today the California Supreme Court issued an opinion regarding whether an employer may attribute commission wages paid in one pay period to other pay periods in order to satisfy the requirements of California's commissioned sales exemption.  Peabody v. Time Warner Cable, Inc., Case No. S204804, __ Cal. 4th __ (July 14, 2014).  The court concluded that commissions are counted in those pay periods in which they are actually paid:

[A]n employer satisfies the minimum earnings prong of the commissioned employee exemption only in those pay periods in which it actually pays the required minimum earnings. An employer may not satisfy the prong by reassigning wages from a different pay period.

Id. at *9.  You can read more here. 

Five-Three Majority of Supreme Court Upholds Class Waiver

In a five-to-three ruling today, the U.S. Supreme Court issued its opinion in American Express Co. v. Italian Colors Restaurant, No. 12-133, 570 U.S. __ (June 20, 2013).  The Court considered whether a contractual waiver of class arbitration is enforceable under the Federal Arbitration Act ("FAA") when the plaintiff's cost of individually arbitrating a federal statutory claim exceeds the potential recovery.  The Court held that it was.

"Respondents argue that requiring them to litigate their claims individually—as they contracted to do—would contravene the policies of the antitrust laws. But the antitrust laws do not guarantee an affordable procedural path to the vindication of every claim."  Slip Op. at 4.

Unanimous U.S. Supreme Court Upholds Arbitrator's Finding of Agreement to Classwide Arbitration

Today, the U.S. Supreme Court unanimously affirmed an arbitrator's interpretation of an arbitration clause to permit class proceedings.  Oxford Health Plans LLC v. Sutter, No. 12-135, 569 U.S. __ (June 10, 2013).  The Court considered whether an arbitrator, who found that the parties' contract provided for class arbitration, "exceeded [his] powers" under §10(a)(4) of the Federal Arbitration Act, 9 U. S. C. §1 et seq.  Delivering the opinion of the Court and citing Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662, 684 (2010), Justice Kagan concluded that the arbitrator’s decision survives the limited judicial review §10(a)(4) allows.

The agreement provided:

No civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration in New Jersey, pursuant to the rules of the American Arbitration Association with one arbitrator.

Slip Op. at 2.

The state court granted Oxford's motion to compel arbitration, and the parties agreed that the arbitrator should decide whether their contract authorized class arbitration.  Id.  The arbitrator determined that it did. Id.  Oxford filed a motion in federal court to vacate the arbitrator's decision on the ground that he had exceeded his powers under §10(a)(4), but the District Court denied the motion, and the Third Circuit affirmed.  Id.

While the arbitration proceeded, the Supreme Court Court held in Stolt-Nielsen that “a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” 559 U. S. at 684. The parties in Stolt-Nielsen had stipulated that they had never reached an agreement on class arbitration.

The Supreme Court in Oxford Health Plans LLC distinguished Stolt-Nielsen:

The contrast with this case is stark. In Stolt-Nielsen, the arbitrators did not construe the parties’ contract, and did not identify any agreement authorizing class proceedings. So in setting aside the arbitrators’ decision, we found not that they had misinterpreted the contract, but that they had abandoned their interpretive role. Here, the arbitrator did construe the contract (focusing, per usual, on its language), and did find an agreement to permit class arbitration. So to overturn his decision, we would have to rely on a finding that he misapprehended the parties’ intent. But §10(a)(4) bars that course: It permits courts to vacate an arbitral decision only when the arbitrator strayed from his delegated task of interpreting a contract, not when he performed that task poorly. Stolt-Nielsen and this case thus fall on opposite sides of the line that §10(a)(4) draws to delimit judicial review of arbitral decisions.

Id. at 7.

The Court decided that Oxford must live with its choice of arbitral forum and the arbitrator's construction of the contract, "however good, bad, or ugly":

So long as the arbitrator was “arguably construing” the contract—which this one was—a court may not correct his mistakes under §10(a)(4). Eastern Associated Coal, 531 U. S., at 62 (internal quotation marks omitted). The potential for those mistakes is the price of agreeing to arbitration. As we have held before, we hold again: “It is the arbitrator’s construction [of the contract] which was bargained for; and so far as the arbitrator’s decision concerns construction of the contract, the courts have no business overruling him because their interpretation of the contract is different from his.” Enterprise Wheel, 363 U. S. at 599. The arbitrator’s construction holds, however good, bad, or ugly.

Id. at 8 (emphasis supplied).

In sum, Oxford chose arbitration, and it must now live with that choice. Oxford agreed with Sutter that an arbitrator should determine what their contract meant, including whether its terms approved class arbitration. The arbitrator did what the parties requested: He provided an interpretation of the contract resolving that disputed issue. His interpretation went against Oxford, maybe mistakenly so. But still, Oxford does not get to rerun the matter in a court. Under §10(a)(4), the question for a judge is not whether the arbitrator construed the parties’contract correctly, but whether he construed it at all.Because he did, and therefore did not “exceed his powers,”we cannot give Oxford the relief it wants. We accordingly affirm the judgment of the Court of Appeals.

Id. at 8-9.

PAGA Claims Excluded From Arbitration, Says Sixth District

Yesterday, the Sixth District reversed an order granting arbitration of an employee's PAGA claims.  Brown v. Superior Court (Morgan Tire & Auto, LLC), No. H037271, __ Cal. App. 4th __ (6th Dist. June 4, 2013).  This is a hotly contested issue that is currently before the California Supreme Court in Iskanian v. CLS Transportation of Los Angeles.  In Brown, the Sixth District sided with employees with respect to the arbitrability of PAGA claims, holding that “When applied to the PAGA, a private agreement purporting to waive the right to take representative action is unenforceable because it wholly precludes the exercise of this unwaivable statutory right.”  

The question presented in this case is whether the Federal Arbitration Act (9 U.S.C. §§ 1-16) (FAA) permits arbitration agreements to override the statutory right to bring representative claims under the Labor Code Private Attorneys General Act of 2004 (PAGA). (Lab. Code, § 2698 et seq.) We conclude that the FAA does not demand enforcement of such an agreement. A plaintiff suing for PAGA civil penalties is suing as a proxy for the State. A PAGA claim is necessarily a representative action intended to advance a predominately public purpose. When applied to the PAGA, a private agreement purporting to waive the right to take representative action is unenforceable because it wholly precludes the exercise of this unwaivable statutory right. AT&T Mobility LLC v. Concepcion (2011) 131 S.Ct. 1740 (Concepcion) does not require otherwise.

Slip Op. at 1-2.

Second District Invalidates Arbitration Agreement in Auto Sales Contract

Yesterday the Second District invalidated an arbitration agreement pre-printed on the back of an auto sales form contract.  Vargas v. SAI Monrovia B, Inc., No. B237257, __ Cal. App. 4th __ (2d Dist. June 4, 2013).  The Second District revisited its holding in Sanchez v. Valencia Holding Co., LLC, 201 Cal. App. 4th 74 (2012), review granted March 21, 2012, S199119.  In Sanchez the court held that a “Retail Installment Sale Contract” used to purchase an automobile is unconscionable and unenforceable.  In Vargas, the court again concluded that the identical sale contract does not require the arbitration of disputes between a purchaser and a car dealer because it is permeated by unconscionability.  You can read more here. 

Sixth District Holds That Hours-Based Compensation, With No Guaranteed Minimum, Is Not a Salary

The Sixth District held on Thursday that an hours-based compensation scheme that failed to guarantee a minimum cannot be considered a salary, and therefore cannot meet the Labor Code's "salary-basis" test.  Negri v. Koning & Associates, No. H037804, __ Cal. App. 4th __ (6th Dist. May 16, 2013).  California Labor Code § 515(a) requires that to be exempt, the employee must earn a "monthly salary equivalent to no less than two times the state minimum wage for full-time employment."

Plaintiff was an insurance claims adjuster who was paid $29 per hour with no minimum guarantee.  Slip Op. at 1.  When he worked more than 40 hours in a week, he was still paid at $29 per hour.  He brought a claim for overtime pay, and the trial court issued a defense verdict, concluding that plaintiff was an exempt employee.  Id. at 3.

Defendant argued that plaintiff was properly classified as exempt because plaintiff's workload was not subject to reduction or variation, and he worked substantially the same number of hours each week of his employment.  The Court of Appeal disagreed:

The problem here is that defendant stipulated to the fact that it “never paid [plaintiff] a guaranteed salary”; if he worked fewer claims “he made less money than if he worked more claims.” That is the same thing as saying that plaintiff was not paid “a predetermined amount” that “was not subject to reduction based upon the quantity of work performed.” He was not paid a salary. For that reason, defendant did not prove that the administrative exemption of Wage Order 4 applies in this case.

Slip Op. at 8-9.

Meal & Rest Break Class Certified in Light of Brinker

On Friday, a panel of the Court of Appeal for the Fourth District reversed a denial of certification of a meal and rest break class action.  Faulkinbury v. Boyd & Associates, Inc., No. G041702, __ Cal. App. 4th. __ (4th Dist. May 10, 2013).  Reconsidering in light of Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004 (2012), the court concluded that the primary issue was the legality of certain company policies, which could be determined on a class-wide basis, even if the application of the policies varied by individual.

Challenge to Court Reporter's Transcript Copy Costs Must Be Raised in the Present Action

The Second District held yesterday that a non-noticing party in a deposition, who does not move for an order in the pending case for a determination of the “reasonable rate” a court reporter may charge, may not bring a subsequent action to obtain restitution or obtain injunctive relief.  The Las Canoas Company, Inc. v. Kramer, No. B238729, __ Cal. App. 4th. __ (2d Dist. May 7, 2013).  The parties in the prior action did not agree on the reasonable rates to be charged for deposition transcript copies, but Las Canoas did not challenge the court reporter’s rate until filing a subsequent class action.

The trial court in the subsequent case sustained a demurrer to the putative class action complaint, holding that it lacked “subject matter jurisdiction” since La Canoas failed to bring a motion in the prior case.

The Second District agreed: 

The superior court does not have subject matter jurisdiction to determine this action for equitable relief from alleged excessive court reporter’s fees because Las Canoas did not enforce its right to a reasonable copy rate by motion to the judge presiding over the Santa Barbara action. (§ 2025.510, subd. (c) ["any . . . party or the deponent, at the expense of that party or deponent, may obtain a copy of the transcript"]; Serrano, supra, 162 Cal.App.4th at p. 1038.) A non-noticing party has a statutory right to obtain a copy of deposition transcripts and exhibits at a “reasonable rate.” (§ 2025.510, subd. (c); Serrano, supra, 162 Cal.App.4th at p. 1036.) The non-noticing party may challenge the “reasonableness” of the rate by motion in the court in which the action is pending. (Serrano, at p. 1020.) That court has authority to set the rate under its inherent authority to control the conduct of ministerial officers in pending actions in order to protect the administration of justice. (§ 128, subd. (a)(5); Serrano, at p. 1029.)

Slip Op. at 3.

The court further concluded that “absent extraordinary circumstances, the court in the action in which the dispute arises is the only court to resolve the issue.” Slip Op. at 4 (emphasis supplied).

Second District Reverses Discharge of Former Los Angeles County Deputy Sheriff

Today, the Second District issued its ruling in Shirey v. Los Angeles County Civil Service Commission (Los Angeles County Sheriff's Department), No. B238355, __ Cal. App. 4th __ (May 6, 2013).  Plaintiff was a former deputy sheriff discharged by the Los Angeles County Sheriff's Department.  Plaintiff disputed whether the federal Gun Control Act of 1968, as amended in 1996 (18 U.S.C. § 921, et seq.) prohibited plaintiff from possessing a firearm because of his conviction of misdemeanor battery upon a domestic partner.  Slip Op. at 2.

The Second District reversed, finding the trial court incorrectly concluded the United States Supreme Court opinion in United States v. Hayes, 555 U.S. 415 (2009) established plaintiff‘s battery conviction qualifies as a "misdemeanor crime of domestic violence" under the Gun Control Act.  Accordingly the Commission abused its discretion in determining the federal gun possession ban applied to plaintiff.  Slip Op. at 2.

Collective Bargaining Exception to Immediate Vacation Pay Law Requires Clear and Unmistakable Waiver

The Second District today articulated a "clear and unmistakable" standard for a waiver of the right to immediate payment of vacation time, under the collective bargaining exception to Labor Code section 227.3.  Choate v. Celite Corporation, No. B239160, __ Cal. App. 4th __ (2d Dist. May 2, 2013).  Labor Code section 227.3 requires full payment of vested vacation time upon termination:

Unless otherwise provided by a collective-bargaining agreement, whenever a contract of employment or employer policy provides for paid vacations, and an employee is terminated without having taken off his vested vacation time, all vested vacation shall be paid to him as wages at his final rate in accordance with such contract of employment or employer policy respecting eligibility or time served . . . .

(Emphasis supplied.)

The court rejected an implied waiver standard, instead holding that for the exception to apply, the CBA must clearly and unmistakably waive the right to immediate payment:

We hold that a collective bargaining agreement "otherwise provide[s]" and thereby abrogates an employee's statutory right under section 227.3 to immediate payment for vested vacation time only if the agreement clearly and unmistakably waives that right. 

(Emphasis supplied.)

​You can read more in California Wage & Hour Law.