CDF Labor Law LLP

Earlier this week, the California Court of Appeal reached a decision that may ease employers’ worries when presented with a wage and hour lawsuit.

California’s plaintiff-friendly laws provide avenues for plaintiffs to fill their pockets with penalties and attorneys’ fees, in addition to any wages they claim are owed. However, as decided on Monday in Naranjo v. Spectrum Security Services, Inc., plaintiffs will have to work a little harder to prove they are entitled to additional penalties and fees.

When an employee claims that they have not been paid all the wages they were entitled to both during and after their employment, they typically seek additional penalties and fees under Labor Code sections 203 and 226. To prevail on these claims, the employee must prove that the employer’s failure to pay certain wages was either “willful” under Labor Code Section 203, or “knowing and intentional” under Labor Code Section 226. In Monday’s decision, the Court held that an employer’s “good faith dispute” can prevent the employee from collecting penalties and attorneys’ fees for “willful” or “knowing and intentional” violations.

In this decision, the Court recognized that California Code of Regulation Section 13520 applies to Labor Code Section 203. Under this regulation, if the employer has a “good faith belief” that it complied with the law at the time final wages were due, then the employer’s violation is not considered “willful.” As a result, an employer who presents evidence establishing a good faith dispute can prevent the employee from collecting penalties under Labor Code Section 203.

Labor Code Section 226 allows plaintiffs to collect both penalties and attorneys’ fees if the employee can successfully demonstrate that the employer knowing and intentionally failed to provide compliant wage statements. In this case, the plaintiff argued that the employer’s mere knowledge that meal period premiums were not included on his wage statements demonstrated a knowing and intentional violation. However, the employer demonstrated that it had a good faith belief that it was not violating any laws when it did not include meal period premiums on its wage statements, therefore the Court held that it could not have knowingly and intentionally violated Labor Code Section 226.

Unfortunately, a minority of federal district courts in California do not hold that an employer’s good faith belief is sufficient to preclude a finding of knowing and intentional violation. These courts adopted the standard the plaintiff argued that “knowing and intentional” can be satisfied by simply showing that an employer provided an inadequate wage statement that was not a result of clerical error or inadvertent mistake. However, this Court disagreed with this interpretation, concluding that a good faith dispute can preclude plaintiffs from being entitled to penalties and attorneys’ fees under Labor Code Section 226.

Many large California employers have been granted significant state and local tax incentives to establish the physical locations of their businesses in California, or within certain municipalities in California. These can come in the form of enterprise zone tax incentives, direct tax incentives, or other similar programs. The purposes of these tax incentives are to (a) spur economic growth and activity in the area; and (b) increase the tax base in the area by bringing in well-paid jobs, where the income is taxed. However, this economic growth does not happen if the majority of the workforce is working remotely. The tax incentives disappear when employees work remotely in a different state or jurisdiction.

When these arrangements were contemplated, well before the COVID-19 pandemic, the concept of large portions of the workforce working remotely was never considered (although New Jersey may have been ahead of its time requiring workers to show up at least 80% of the time – but paused this requirement during the pandemic). Now state and local governments, including those in California, are starting to realize that the fluidity of where workers are located is a problem, and are looking at this issue more closely as it could influence the future of remote and hybrid work.

By: Final Privacy Regulations Anticipated To Go Into Effect In April 2023 – Enforcement Scheduled to Start July 1, 2023

By: Final Privacy Regulations Anticipated To Go Into Effect In April 2023 – Enforcement Scheduled to Start July 1, 2023

On February 14, 2023, the California Privacy Protection Agency (CPPA) submitted its

Last week, former CDF Labor Law attorney, and current CEO of the California Chamber of Commerce (“Cal Chamber”), Jennifer Barrera, published a compelling argument surrounding the issues concerning the California Private Attorney General Act and a ballot measure on the Act coming up next year. California Law Helping Workers File Labor Claims Needs Reform – Advocacy – California Chamber of Commerce (calchamber.com). According to Ms. Barrera’s article, over the last six years, attorneys representing employees on PAGA claims obtained an eight billion dollars in PAGA settlements from California employers– an astonishing amount. Ms. Barrera’s article also indicates that despite this number, individual employees receive a pittance from these actions. The article cited to a 2019 report from former California Labor Commissioner Julie Su and other officials of the California Labor Commissioner’s office that expressly provided that “The substantial majority of proposed private court settlements in PAGA cases review by [the Labor Commissioner’s office] fell short of protecting the interests of the state and workers.“

The Ninth Circuit gave California employers a belated Valentine’s Day present by upholding the District Court’s injunction against enforcement of California Assembly Bill 51 (“AB 51”) because it inhibited arbitration contrary to the Federal Arbitration Act’s (“FAA”) policy of encouraging arbitration of disputes.

In an attempt to avoid federal preemption, AB 51 provided that employment arbitration agreements would be enforced but it created a criminal offense and civil liability against employers who required existing employees or applicants for employment to consent to arbitration as a condition of employment. Chamber of Commerce v. Bonta relied on Supreme Court precedent that concluded that states’ rules burdening the formation of arbitration agreements, or making arbitration agreements more difficult to enforce, ran afoul of the FAA. Chamber of Commerce v. Bonta concluded that AB 51 discouraged the formation of arbitration agreements because the criminal penalties and civil liability presented a severe burden to the formation of arbitration agreements, all antithetical to the Federal policy favoring arbitration. As a result, it held that AB51 was federally preempted by federal law.

By: California Court of Appeal Curbs “I Do Not Recall Signing” Defense to Arbitration Agreements

By: California Court of Appeal Curbs “I Do Not Recall Signing” Defense to Arbitration Agreements

Employers face many challenges when enforcing employment arbitration agreements, including employees disavowing their handwritten signature on the arbitration agreement, claiming that they