Date: Aug 01, 2014
Magazine:
August 2014-Western Grower Ag Legal Network

Aside from a food contamination lawsuit, the biggest threat to agricultural producers may be a wage and hour class action on behalf of field or shed workers.  In 2012 Brinker v. Superior Court seemed to give some clarity in the area of meal and rest period class actions.  There was speculation that class actions in California would actually decrease.

Never underestimate the creativity of the plaintiffs’ bar to develop new ways of bringing wage class actions.  In the last year the plaintiffs’ bar has developed two new fertile grounds for bringing class actions, particularly against agricultural employers.

 

A.  Deficient Written Policies

Rather than concentrate on the employers’ practices, the focus has shifted to whether the employer’s written policies are compliant with the law.  Non-compliant policies give plaintiffs’ attorneys a big advantage from the outset.

In class actions, the most crucial battle is over whether the court will certify a “class” of affected workers.  Once a class is certified, the case often becomes a question of how much damages will be paid.  In order to defeat certification of the class claim, employers have submitted employee declarations stating, for example, that employees did take their breaks or that they were free to take their breaks but decided not to do so.  After all, Brinker stated that employers were not required to police breaks and force employees to take them.

Some examples are useful.  In agriculture this issue frequently arises after 10 hours of work when a crew is entitled to a second unpaid 30 minute meal period.  When there are only a few orders to complete, no crew is going to want to stop for a 30 minute unpaid break.  Yet, this common fact pattern has led to numerous claims which cannot be defended because the employer did not have a legally compliant written policy or did not adequately document the crew’s waiver of the required break.

The employer’s liability in such cases arises from adopting a uniform policy that violates the wage and hour rules or falls short of being legally sufficient.  Whether or not the employees were actually able to take required breaks goes to damages and class certification is mandated.

A simple omission in the written policy can have dire consequences.  Everyone knows that employees are entitled to 10 minute breaks every four hours.  It is amazing to find many employers fail to include the phrase “… or major portion thereof…” in their written break policy.  Since breaks do not have to be recorded by the employer, a rest period class will be certified in the absence of this critical phrase, and it is then up to the employer to prove that each of his employees took all of their rest periods.

 

B.  Piece-rate Class Actions

At last count, at least 30 class action lawsuits have been filed against harvesting companies with piece-rate compensation systems since the Bluford v. Safeway and Gonzalez v. Downtown L.A. Motors cases last year.  The lawsuits allege that any on duty time not producing pieces (cartons, pounds, miles, etc.) must be separately compensated over and above the rate paid for each piece.

Consistent with previous labor commissioner policies and opinion letters, piece-rate employers have never paid separately for paid rest periods.  Many did not pay for meetings, donning and doffing of safety gear, travel time or other “non-productive” time.

The number of class actions against piece-rate companies is limited only by the number of such employers and the capacity of the handful of plaintiff firms currently exploiting this new area of liability.

 

C.  Can Mandatory Arbitration of Employment Disputes be the Means to Stave off Class Action Lawsuits?

A mandatory arbitration agreement signed by an employee could require the employee to bring any wage dispute before an arbitrator.  If such an agreement includes a “class action waiver,” the employee would not be allowed to bring a representative action on behalf of himself and all “similarly situated” employees.

California courts have been traditionally hostile to mandatory arbitration of employment disputes.  The Federal Arbitration Act (FAA), which favors enforcement of private arbitration agreements, has caused California courts to carve out a number of exceptions to the FAA.  Slowly but surely, the U.S. Supreme Court has been overturning these California cases and closing these California exceptions which inhibit arbitration of employment disputes. 

The California Supreme Court finally appears to have gotten the message.  In Iskanian v. CLS Transportation Los Angeles, LLC, the court finally agreed that the FAA preempts California law and the class action waivers in employment arbitration agreements are valid as to traditional class actions.

The battle is not over, however, as the California Supreme Court held that such waivers are not applicable to Private Attorney General Act (PAGA) claims.  Under PAGA, an employee may claim Labor Code statutory penalties on behalf of herself and other aggrieved employees.  Because the employee is a substitute for the government itself (a private attorney general), the lawsuit is to protect the public and not to benefit individuals.  Based on this distinction, the Iskanian court would not bar PAGA claims for Labor Code violations as a result of a class action waiver in an arbitration agreement.  The California Supreme Court held that an individual may waive the advantage of a law intended solely for his benefit, but a law established for a public purpose may not be waived by a private agreement.

After Iskanian, California law permits class actions waivers in employment claims for individual damage claims, but not claims seeking penalties.  In this environment, does it make sense to implement an arbitration agreement with a class action waiver?  For a number of reasons, I think the answer is yes.

First of all, it is possible that the U.S. Supreme Court may restrict Iskanian based on the principles of the FAA.  (I would not count on this possibility.)

Secondly, traditional class actions which can be waived, allow much broader remedies including restitution of wages, interest, and injunctive relief unavailable under PAGA.  There is no specific class certification process under PAGA; the administration of the settlement and the amount of attorney’s fees are generally much less.  The greater expense and range of damages under a traditional class action can be avoided by an arbitration agreement.

The deterrence factor of an enforceable arbitration agreement with a class action waiver is significant.  Plaintiff law firms are unlikely to go after an employer with an arbitration agreement where there are dozens of piece-rate companies with no such hurdle to overcome.

Even if a class action waiver does not preclude PAGA claims, a diligent employer can use the PAGA 30-day waiting period to “cure” the violation through the Labor and Workforce Development Agency.  Labor Code section 2699.3 allows the agency to take jurisdiction over a PAGA claim and resolve it directly with the employer.  Since the agency is entitled to 75 percent of the penalties collected, there is motivation for the Labor Commissioner to intervene.  Without a “right to sue” letter from the agency, no private lawsuit can commence.

An employer who worked with the Workforce Agency to resolve such claims could avoid paying the plaintiff’s attorney fees and costs.  As in most settlements with labor agencies, the employer may be able to negotiate reduced penalties and payment terms in return for promised future compliance.

 

Conclusion

Because employment arbitration deprives an employee of a potentially sympathetic jury, both the implementation and content of agreements are carefully scrutinized by the court.  To pass muster, an arbitration agreement must be clear and understandable to the employee.  The process of introducing and explaining the agreement to employees must take into account the level of education and language of the workforce.

The agreement itself must be procedurally and substantively fair to employees.  The inherent inequality of bargaining strength between employee and employer requires an agreement that is otherwise favorable to the employee.

The requirements of a successful employment arbitration agreement are beyond the scope of this article.  Employers should contact competent employment counsel rather than simply adopt a commercial arbitration provision.

 

Terry O’Connor has a general employment practice with Noland, Hamerly, Etienne & Hoss that emphasizes counseling and representing business owners in employment practices to prevent or defend wage and hour claims before administrative agencies and in state and federal court.

 

This article is intended to address topics of general interest and should not be construed as legal advice, nor does it necessarily represent the opinion of Western Growers Association.

 

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