In January 2004, Amalgamated Transit Union, Local 1309, AFL-CIO (the union), filed a representative action on behalf of its member bus drivers who worked in and around National City, California, alleging that the various defendant employers had violated provisions of the Labor Code
After a bench trial, the trial court filed a statement of decision and entered a judgment imposing civil penalties, including unpaid wages, in the total amount of $358,588.22, against defendants under the Labor Code Private Attorneys General Act of 2004 (PAGA), section 2698 et seq. The court also awarded Thurman restitution in the amount of $28,605 under the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.), and prejudgment interest in the amount of $10,253. Both Thurman and defendants appeal from the judgment.
Thurman contends that the trial court committed reversible error in (1) denying his request to continue the trial to allow him to bring a noticed motion for class certification, after the California Supreme Court issued a decision that precluded the union from maintaining its representative action; (2) denying class certification;
Defendants contend that the trial court erred in (1) awarding unpaid wages under section 558 as a civil penalty; (2) awarding Thurman relief under the PAGA, because Thurman failed to exhaust his administrative remedies before he was named as a plaintiff in the third amended complaint; (3) allowing Thurman to recover PAGA penalties on behalf of other bus operators for missed rest periods under section 558, because that statute allows recovery for missed meal periods only, and not for missed rest periods; and (4) allowing Thurman to avoid the judicial admission, set forth in his complaint, that defendants had provided meal periods since July 2003, and permitting him to recover for missed meal periods after July 2003. We agree with defendants' last contention. Accordingly, we reverse the portions of the judgment awarding recovery for missed meal periods and remand for a redetermination of that recovery. In all other respects, we affirm the judgment.
NCT operated three bus routes in the National City area, designated as Routes 601, 602, and 603. Thurman began his employment with NCT as a bus driver in 1993. The union represented the NCT bus drivers, including Thurman, and negotiated two collective bargaining agreements with NCT that are relevant to this case. The first collective bargaining agreement was in effect from August 1, 1996, through July 31, 2002; the second collective bargaining agreement was in effect from August 1, 2002, through July 2007.
When the second collective bargaining agreement went into effect on August 1, 2002, NCT bus drivers were assigned to drive Route 601, 602, or 603 as either a "straight run" or a "split run." A driver who worked a straight run would drive continuously from the beginning of a shift until the end of the shift, with no break period or "split" during the shift. Drivers on straight runs were not provided a 30-minute meal period. Drivers who worked split runs would take an unpaid break of 30 minutes to an hour at some point during their shifts.
In January 2003, Stephen Keiper, a management employee of NCT,
Keiper never received a letter from Thompson. Keiper eventually called Thompson to inform him that NCT would have to implement a plan to provide meal periods for the drivers. Thompson told Keiper that he was unable to provide the letter that they had discussed because the union was now taking a different position. On July 6, 2003, NCT imposed split runs on all of its bus routes, despite objections voiced by local union representatives and individual bus drivers, in order to comply with the law that required that meal periods be provided. The trial court found that during the "straight run era" (prior to July 6, 2003), meal periods were provided on 13 percent of the NCT runs, and were not provided on 87 percent of the runs. The court found that between July 6, 2003, and March 3, 2007, NCT provided meal periods of at least 30 minutes to all drivers whose shifts had splits of 36 minutes or more.
In June 2004, NCT posted a memorandum reminding its bus drivers that they were permitted to take a 10-minute rest period for each four-hour period that they worked, and directing them to take their rest break during the "`recovery time' already `built in' at the start/end of [their] runs ...." The memorandum instructed drivers who worked schedules that provided less than the required rest time to make sure that they "allow[ed] for this rest
In March 2005, NCT complied with a request by then union president Steve Alcove to send him documentation showing NCT's route schedules and reflecting that NCT was providing the bus drivers with 10-minute rest periods and 30-minute meal periods. Alcove responded with an e-mail message stating that he had received the schedules and would show the union's attorney that "the 10-[minute] breaks were included in the schedule." In July 2005, Thurman, who was then the union steward, told Webster and NCT operations manager Gabriel Marquez that he had informed Alcove that the NCT drivers were taking their 10-minute rest breaks.
In January 2004, the union filed a verified complaint against NCT and other defendants
Defendants filed a demurrer and motion to strike portions of the third amended complaint. Defendants demurred to the first cause of action on the grounds that the union lacked standing to bring that cause of action on behalf of its members under the PAGA, and that all plaintiffs had failed to exhaust their administrative remedies, as required under section 2699.5, as a prerequisite to bringing a PAGA claim. As to the union, defendants demurred to the second cause of action on the ground that the union, itself, had not been injured by defendants' alleged improper meal and rest period practices, and that it therefore lacked standing to assert a cause of action under the UCL. Defendants also demurred to the second cause of action to the extent that it sought relief on a representative basis, arguing that a private person may bring a representative action under the UCL only if that person complies with
On December 6, 2005, the trial court overruled defendants' demurrer and denied their motion to strike, concluding that the union had standing to bring both causes of action because it had obtained assignments of claims from all of its members. The court's ruling did not address defendants' demurrer to the first cause of action on the ground that all plaintiffs had failed to exhaust their administrative remedies before bringing a PAGA claim. On December 16, 2005, defendants filed a motion for reconsideration based on the circumstance that on November 23, 2005, after the court had taken the demurrer and motion to strike under submission but before it issued its ruling, the Second District Court of Appeal held in Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365, 378 [36 Cal.Rptr.3d 31] (Caliber Bodyworks), that a plaintiff must exhaust administrative remedies under the PAGA before filing an action to recover civil penalties that the state could otherwise pursue. The Caliber Bodyworks court held that a demurrer on the ground of failure to exhaust administrative remedies must be sustained as to a cause of action that seeks only recovery of civil penalties, and that a motion to strike on that ground is appropriate if a cause of action seeks recovery of civil penalties and other relief. (Caliber Bodyworks, supra, at pp. 381-385.) Accordingly, defendants asked the court to strike the portions of the third amended complaint that sought civil penalties subject to the PAGA's exhaustion requirements.
After reconsidering its ruling on defendants' demurrer and motion to strike, the trial court declined to change the ruling. The court determined that Caliber Bodyworks did not apply to this action because the statutory amendments that created the administrative remedies that a plaintiff must exhaust in order to recover civil penalties under the PAGA were enacted after the action was filed.
In October 2006, the trial court stayed the case for six months, pursuant to the parties' stipulation. The purpose of the stay was "to give the parties and the Court the benefit of the California Supreme Court's consideration and resolution of the conflicting [appellate court] decisions concerning the applicable statute of limitations [for claims] of Labor Code [section] 226.7 violations." The stay was lifted by stipulation and order on June 1, 2007, and the case was set for trial on May 30, 2008.
In January 2008, the parties stipulated to continue the trial date to September 8, 2008. Among other reasons, the parties stipulated to the
In April 2009, the union and its coplaintiffs applied ex parte to continue the trial date to at least January 15, 2010, based on the unavailability of plaintiffs' counsel
On June 29, 2009, the California Supreme Court filed its decision in Amalgamated Transit. The court held that a labor union that has not suffered actual injury under the UCL and is not an "aggrieved employee" under the PAGA may not bring a representative action under those laws, either as an assignee of employees who have suffered actual injury and are aggrieved employees, or as an association whose members have suffered actual injury and are aggrieved employees. (Amalgamated Transit, supra, 46 Cal.4th at
On July 7, 2009, Thurman filed a formal request for a continuance of the trial, to permit him to bring a motion for class certification. Defendants filed an opposition to the request. At the trial readiness conference on July 10, 2009, the trial court denied Thurman's request to continue the trial. Thurman filed a petition for writ of mandate and request for stay with this court on July 13, 2009, challenging the trial court's denial of his request for a continuance of the trial date. This court denied Thurman's petition on July 14, 2009.
The bench trial began on July 24, 2009. On Friday, July 31, a week into the trial, Thurman filed a motion for class certification. The trial court denied the motion the following Monday. After the trial, the court filed a statement of decision and entered a judgment imposing civil penalties, including unpaid wages, against defendants under the PAGA in the total amount of $358,588.22, and awarding Thurman restitution under the UCL in the amount of $28,605 and prejudgment interest in the amount of $10,253.
"Under the Labor Code, the Labor and Workforce Development Agency (LWDA) and its constituent departments and divisions are authorized to collect civil penalties for specified labor law violations by employers. [Citation.] To enhance the enforcement of the labor laws, the Legislature enacted PAGA in 2003." (Home Depot U.S.A., Inc. v. Superior Court (2010) 191 Cal.App.4th 210, 216 [120 Cal.Rptr.3d 166] (Home Depot).) In doing so, the Legislature "declared that adequate financing of labor law enforcement was necessary to achieve maximum compliance with state labor laws, that staffing levels for labor law enforcement agencies had declined and were unlikely to keep pace with the future growth of the labor market, and that it was therefore in the public interest to allow aggrieved employees, acting as private attorneys general, to recover civil penalties for Labor Code violations, with the understanding that labor law enforcement agencies were to retain
Notwithstanding the trial court's earlier ruling that the union had standing to bring representative claims, Thurman's counsel's decision not to pursue a class action unless and until the California Supreme Court in Amalgamated Transit issued a decision contrary to the trial court's ruling was a dubious strategy, particularly in light of the procedural history of Amalgamated Transit. The trial court in Amalgamated Transit ruled that the plaintiff unions lacked standing under the UCL because they had not suffered actual injury, and that they also lacked standing under the PAGA because they were not "`aggrieved employees.'" (Amalgamated Transit, supra, 46 Cal.4th at p. 999.) The trial court further ruled that employee assignments of rights to the plaintiff unions did not confer standing, and that the UCL claims brought on behalf of others must be brought as a class action. (46 Cal.App.4th at p. 999.) The plaintiff unions petitioned the Second District Court of Appeal for a writ of mandate and a stay of the trial court's ruling. After issuing a stay and an order to show cause, the Court of Appeal denied the petition. (Ibid.)
Thurman's counsel in the present case represented the plaintiffs in Amalgamated Transit and was therefore well aware of the Second District Court of Appeal's decision in that case. Counsel should also have been aware of the distinct possibility that the California Supreme Court would uphold the Court of Appeal's decision. If Thurman's counsel's strategy was to pursue a class action in the event the Supreme Court decided against the union's representational standing in Amalgamated Transit, the prudent course would have been to amend the complaint in this case to allege a class action, and to move for class certification soon after the Court of Appeal filed its decision, rather than waiting until the eve of trial to do so. Counsel chose the latter course at its peril, particularly in light of the fact that the process of seeking
In denying Thurman's request for a continuance, the trial court stated that Thurman had not made an affirmative showing of good cause for a continuance, noting that the trial date had been continued "already at least once."
The trial court reasonably found that defendants would be unduly prejudiced by another continuance of the trial date. As defendants point out, cases are statutorily required to be brought to trial within five years (Code Civ. Proc., § 583.310), to "`prevent[] prosecution of stale claims where defendants could be prejudiced by loss of evidence and diminished memories of witnesses [and] to protect defendants from the annoyance of having unmeritorious claims against them unresolved for unreasonable periods of time.'" (Sagi Plumbing v. Chartered Construction Corp. (2004) 123 Cal.App.4th 443, 447 [19 Cal.Rptr.3d 835].) The trial court noted during posttrial proceedings that its decision to deny Thurman's request for a trial continuance was justified in hindsight by the fact that, in the court's words, "[t]here were many witnesses with faulty memories, and that situation would have gotten worse, not better, if I had adopted plaintiff's proposal to continue the trial again to allow for an amendment to the complaint and a motion to certify the case as a class action.... The foibles of memory are real, and they were repeated numerous times through the course of this trial."
Thurman essentially gambled that the Supreme Court would reverse the Court of Appeal on the standing issue in Amalgamated Transit, and lost. The trial court reasonably decided that Thurman should bear the consequences of that gamble rather than subject defendants to the prejudice that would result from continuing the trial again for the purpose of allowing Thurman to pursue class certification. Given the protracted history of the case, the prior continuances, and the prejudice to defendants that would result from an additional continuance, the trial court acted well within its discretion in denying Thurman's request for a trial continuance.
Despite the trial court's denial of a continuance and the absence of any class action allegations in the third amended complaint, Thurman filed a motion to certify the case as a class action on the fourth day of trial. We reject Thurman's contention that the trial court committed reversible error in denying that motion. A trial court is afforded great discretion in deciding whether to grant or deny class certification, and we review the trial court's ruling for abuse of discretion. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326 [17 Cal.Rptr.3d 906, 96 P.3d 194].) A reviewing court generally will not disturb a ruling that is supported by substantial evidence unless the trial court used improper criteria or made erroneous legal assumptions. (Ibid.) Any valid reason that the trial court provides in granting or denying certification is sufficient to uphold the order. (Ibid.)
The trial court stated numerous valid reasons for denying certification. In its minute order denying Thurman's certification motion, the court noted that the third amended complaint included neither the designation "CLASS ACTION" nor a separate section containing class action allegations, as required by rule 3.761.
The trial court further ruled that a class action was not a superior "mode of adjudication" in this case, based on evidence that at any given time there were between 20 and 25 drivers employed by defendants and that "the back pay claims, if established, would be substantial, in other words, one or two hours of pay at ... $7 and 14 per hour ... per workday for several years,
The trial court's concern that the due process rights of absent class members would be compromised if Thurman were allowed to obtain class certification during trial was, by itself, a valid reason to deny certification. Thurman's failure to plead a class action in the third amended complaint as required by rule 3.761, and his concomitant failure to put defendants on notice that he wished to proceed as a class action were additional valid reasons to deny certification, since these omissions prejudiced defendants' right to conduct discovery before the court ruled on a class certification motion. The trial court did not abuse its discretion in denying Thurman's class certification motion.
Thurman contends that the trial court erred in rejecting his claim that he may recover PAGA penalties under both Wage Order No. 9 and section 558.
Section 558 provides, in relevant part: "(a) Any employer or other person acting on behalf of an employer who violates, or causes to be violated, a section of this chapter or any provision regulating hours and days of work in any order of the [IWC] shall be subject to a civil penalty as follows: [¶] (1) For any initial violation, fifty dollars ($50) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages. [¶] (2) For each subsequent
Wage Order No. 9, section 20, entitled "Penalties" states, in relevant part: "(A) In addition to any other civil penalties provided by law, any employer or any other person acting on behalf of the employer who violates, or causes to be violated, the provisions of this order, shall be subject to the civil penalty of: [¶] (1) Initial Violation—$50.00 for each underpaid employee for each pay period during which the employee was underpaid in addition to the amount which is sufficient to recover unpaid wages. [¶] (2) Subsequent Violations—$100.00 for each underpaid employee for each pay period during which the employee was underpaid in addition to an amount which is sufficient to recover unpaid wages. [¶] (3) The affected employee shall receive payment of all wages recovered."
Thurman argues that the two penalty provisions are independent, and that he is entitled to recover under both because section 558, subdivision (c), states that "[t]he civil penalties provided for in this section are in addition to any other civil or criminal penalty provided by law," and section 20 of Wage Order No. 9 similarly states that the penalties provided therein are "[i]n addition to any other civil penalties provided by law."
The trial court ruled that Thurman could not recover civil penalties under IWC wage orders. The court reasoned that section 2699, subdivision (a), of the "PAGA allows the recovery of civil penalties only for violations of `this code,' meaning the California Labor Code,"
Only the Legislature, through enactment of a statute, can create a private right of action to directly enforce an administrative regulation, such as a wage order. (See, e.g., 47 U.S.C. § 227(b)(3)(A) of the Telephone Consumer Protection Act of 1991 (Pub.L. No. 102-243 (Dec. 20, 1991) 105 Stat. 2394) [specifically authorizing a private right of action "based on a violation of this subsection or the regulations prescribed under this subsection ...."].) The IWC has not created, and has no power to create, a private right of action for violation of a wage order, and we are aware of no statute that creates a private right of action for a violation of an IWC wage order when the violation at issue is not also a violation of the Labor Code. Absent statutory authorization, there is no right of action under the PAGA to enforce an IWC wage order.
Thurman cites Franco v. Athens Disposal Co., Inc. (2009) 171 Cal.App.4th 1277 [90 Cal.Rptr.3d 539] (Franco) as an example of a case in which "at least one court" has concluded that section 20 of Wage Order No. 9 provides for civil penalties for violations of section 226.7, and that a plaintiff may seek those penalties under the PAGA. Section 226.7 provides: "(a) No employer shall require any employee to work during any meal or rest period mandated by an applicable order of the [IWC]. [¶] (b) If an employer fails to provide an employee a meal period or rest period in accordance with an applicable order of the [IWC], the employer shall pay the employee one additional hour of pay at the employee's regular rate of compensation for each work day that the meal or rest period is not provided."
The plaintiff in Franco, a trash truck driver, sued his employer for, among other Labor Code violations, denying meal and rest periods in violation of section 226.7. (Franco, supra, 171 Cal.App.4th at pp. 1282-1283.) The employer successfully petitioned for arbitration under an arbitration agreement that contained a provision waiving class arbitration and precluding the plaintiff from seeking civil penalties on behalf of other employees in a "private attorney general" capacity. (Id. at pp. 1283-1285.) The Franco court reversed the order granting the petition to compel arbitration, concluding that the arbitration agreement as a whole was tainted with illegality and was unenforceable because it contained a class arbitration waiver and precluded the plaintiff from seeking civil penalties on behalf of other employees, contrary to the PAGA. (171 Cal.App.4th at p. 1303.)
In considering the arbitration agreement's waiver of the right to bring claims in a private attorney general capacity, the Franco court examined the purpose of the PAGA and noted that the default civil penalty established by section 2699, subdivision (f), applied to violations of "`all provisions of [the
We disagree with the Franco court's conclusion that the penalties set forth in section 20 of Wage Order No. 9 provide an independent basis for the assessment of civil penalties for violations of section 226.7. Because section 226.7 does not specifically provide for a civil penalty, the civil penalty for a violation of section 226.7 would be the default penalty established by section 2699, subdivision (f). (Home Depot, supra, 191 Cal.App.4th at p. 218; Bright v. 99¢ Only Stores, supra, 189 Cal.App.4th at pp. 1480-1481.)
The Franco court apparently assumed that the penalties provided by section 20 of Wage Order No. 9 are civil penalties that a plaintiff may recover in a PAGA action. However, the Franco court's focus was whether an arbitration agreement could validly preclude an employee from asserting claims on behalf of other employees under the PAGA; the court did not consider whether a PAGA plaintiff generally may recover a penalty provided in a wage order, as opposed to one provided in a Labor Code section. Franco thus does not support Thurman's claim that he is entitled to recover penalties under both section 558 and section 20 of Wage Order No. 9.
Section 2699, subdivision (e)(2) provides that "[i]n any action by an aggrieved employee seeking recovery of a civil penalty available under subdivision (a) or (f), a court may award a lesser amount than the maximum penalty amount specified by this part if, based on the facts and circumstances of the particular case, to do otherwise would result in an award that is unjust, arbitrary, oppressive, or confiscatory." The court calculated the maximum penalty amount that it could award under section 558 to be "$50 per pay period per employee for each pay period during which either a missed meal or rest period is identified in accordance with the findings of this Court, during the period between January 12, 2003 and March 3, 2007." The court then reduced that amount by 30 percent under section 2699, subdivision (e)(2), and assessed the reduced amount as a civil penalty, ruling that "[t]o do otherwise under the particular facts and circumstances of this case would be unjust, arbitrary, oppressive and confiscatory."
Thurman contends that the only proper inquiry under section 2699, subdivision (e)(2) in determining whether an award of the maximum penalty would be "unjust, arbitrary, oppressive, or confiscatory," is whether the defendant can afford to pay the maximum penalty amount, and that the defendant's conduct is irrelevant. Thurman maintains that because defendants did not present evidence that they could not afford to pay the maximum penalty amount, the trial court lacked discretion to award less than the maximum civil penalty under the PAGA.
In summary, the trial court stated that the evidence showed "that after January 1, 2003 for meal periods and after June 7, 2004 for rest periods, defendants took their obligations under Wage Order No. 9 seriously and attempted to comply with the law." In light of that undisputed finding, and the facts and circumstances that the trial court specified in its statement of decision in support of the finding, the trial court reasonably determined that imposition of the maximum statutory penalty amount against defendants would be unjust—if not also arbitrary, oppressive, or confiscatory.
The evidence supports the trial court's penalty reduction even under Thurman's view that section 2699, subdivision (e)(2) requires evidence of inability to pay, because the trial court made the undisputed finding that defendants' loss of the NCT contract in March 2007 rendered them unable to pay penalties from ongoing revenues. The trial court did not abuse the discretion afforded it by section 2699, subdivision (e)(2) to reduce the civil penalties it imposed against defendants.
Thurman contends that the trial court erred in ruling that liability for his UCL claims began on January 1, 2002, due to the collective bargaining exemption in the original version of section 514, rather than on October 1, 2000, the effective date of Wage Order No. 9's penalty provision for failure to provide meal and rest breaks. We conclude that the trial court was correct in ruling that liability for Thurman's UCL claims began January 1, 2002.
In 1999, in response to the IWC's elimination of certain daily overtime rules, the Legislature passed the Eight-Hour-Day Restoration and Workplace Flexibility Act of 1999 (the 1999 Act), which "established a new statutory scheme governing hours of labor and overtime compensation for all industries and occupations." (Bearden v. U.S. Borax, Inc. (2006) 138 Cal.App.4th 429, 434 [41 Cal.Rptr.3d 482] (Bearden).) The 1999 Act included section 512, which, with certain exceptions, requires employers to provide employees who work more than five hours per day a meal period of at least 30 minutes, and to provide employees who work more than 10 hours per day a second meal period of at least 30 minutes. (§ 512, subd. (a).)
The 1999 Act also included section 514, which originally provided: "This chapter [(§§ 500-558)] does not apply to an employee covered by a valid collective bargaining agreement if the agreement expressly provides for the wages, hours of work, and working conditions of the employees, and if the agreement provides premium wage rates for all overtime hours worked and a regular hourly rate of pay for those employees of not less than 30 percent more than the state minimum wage." (Italics added; Stats. 1999, ch. 134, § 8, pp. 1823-1824; see Lazarin v. Superior Court (2010) 188 Cal.App.4th 1560, 1570-1571 [116 Cal.Rptr.3d 596] (Lazarin).) In 2001, the Legislature amended section 514 by replacing its opening phrase, "This chapter does not apply ...," with the phrase: "Sections 510 and 511 do not apply ...." (Stats. 2001, ch. 148, § 1, p. 1438.) Section 510 sets forth general rules regarding overtime pay and section 511 sets forth rules regarding alternative workweek schedules.
The collective bargaining agreement exemption set forth in the original version of section 514 expressly applied to the entire chapter that includes section 512, whereas the collective bargaining agreement exemption in section 514 as amended in 2001, applies only to sections 510 and 511. Accordingly, resolution of the question of when liability under the UCL began for defendants' violations of section 512, or any wage order adopted pursuant to section 516 or 517, depends on whether the original version of section 514 exempted workers who were covered by a qualifying collective bargaining agreement from the entire chapter containing section 514, or rather, exempted them from sections 510 and 511 only.
Thurman argues that despite the language of the original version of section 514 pertaining to its scope, it was never the Legislature's intent that the collective bargaining agreement exemption in section 514 apply to anything other than the overtime provisions of section 510 and the alternative workweek provisions of section 511. As support for this argument, Thurman relies in large part on Valles v. Ivy Hill Corp. (9th Cir. 2005) 410 F.3d 1071 (Valles) and Lazarin, supra, 188 Cal.App.4th 1560, in which the reviewing courts gave effect to language in an uncodified section of the 2001 legislation amending section 514, stating that the amendment was "declarative of existing law." (Stats. 2001, ch. 148, § 4, p. 1439; see Valles, at pp. 1079-1080; Lazarin, at pp. 1575-1576.)
A statutory amendment that merely clarifies, rather than changes, existing law is deemed to not operate retrospectively, even if applied to actions that predate its enactment, "`because the true meaning of the statute remains the same.' [Citation.] In that event, personal liability would have existed at the time of the actions, and the amendment would not have changed anything.
The legislative statement in Senate Bill No. 1208 (2001-2002 Reg. Sess.) that the amendment was "declarative of existing law" is insufficient to overcome the strong presumption against retroactivity. McClung supports the proposition that "an erroneous statement that an amendment merely declares existing law is [insufficient] to overcome the strong presumption against retroactively applying a statute that responds to a judicial interpretation." (McClung, supra, 34 Cal.4th at p. 476.) The Legislature's assertion that the amendment was intended to clarify existing law does not show "clear and unavoidable intent to have the statute retroactively impose liability for actions not subject to liability when taken. `Requiring clear intent assures that [the legislative body] itself has affirmatively considered the potential unfairness of retroactive application and determined that it is an acceptable price to pay for the countervailing benefits.' [Citation.]" (Ibid., italics added.) Retroactive application of the 2001 amendment to section 514 would impose liability for actions that were not subject to liability when taken. Although the Legislature expressed its intent that the amendment be construed as a clarification rather than a change in the law, there is no showing that it considered, let alone that it clearly and unequivocally intended, to impose such after-the-fact liability.
Defendants contend that the trial court erred in awarding unpaid wages as a part of the civil penalty provided for in section 558. Section 558, subdivision (a), states: "Any employer or other person acting on behalf of an employer who violates, or causes to be violated, a section of this chapter or any provision regulating hours and days of work in any order of the [IWC] shall be subject to a civil penalty as follows: [¶] (1) For any initial violation, fifty dollars ($50) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages. [¶] (2) For each subsequent violation, one hundred dollars ($100) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages. [¶] (3) Wages recovered pursuant to this section shall be paid to the affected employee." (Italics added.)
Defendants contend that section 558 draws a clear distinction between civil penalties and restitution for unpaid wages, and that the recovery of unpaid (or "underpaid")
Our construction of section 558, subdivision (a), is in accord with the California Supreme Court's reading of that subdivision in Reynolds v. Bement (2005) 36 Cal.4th 1075 [32 Cal.Rptr.3d 483, 116 P.3d 1162] (Reynolds). The Reynolds court held that corporate agents such as officers and directors cannot be held liable as "employers" in an action under section 1194 for unpaid overtime wages. (Reynolds, supra, at pp. 1087-1088.) The Reynolds court rejected an argument by the Division of Labor Standards Enforcement (DLSE) that its holding would pose an obstacle to the Labor Commissioner's recovery of wages owed to California workers, noting that there were other means of seeking recovery against a corporate agent, and that "pursuant to section 558, subdivision (a), any `person acting on behalf of an employer who violates, or causes to be violated' a statute or wage order relating to working hours is subject to a civil penalty, payable to the affected employee, equal to the amount of any underpaid wages." (Reynolds, supra, at p. 1089, italics added, fn. omitted, disapproved on another point in Martinez, supra, 49 Cal.4th at pp. 50, fn. 12, 66.) In his concurring opinion in Reynolds, Justice Moreno similarly stated that the PAGA "in time, may provide workers with a mechanism for recovering unpaid overtime wages through private enforcement of section 558, which authorizes civil penalties for violations of the wage laws that include unpaid wages from `[a]ny employer or other person acting on behalf of an employer,' a phrase conceivably broad enough to include corporate officers and agents in some cases." (Reynolds, supra, at p. 1094 (conc. opn. of Moreno, J.).) These statements show that the Supreme Court viewed the recovery of underpaid wages under section 558, subdivision (a) as being part of, rather than in addition to, the civil penalty provided by that subdivision.
Defendants cite Beebe v. Mobility, Inc. (S.D.Cal., Feb. 20, 2008, No. 07CV1766 BTM (NLS)) 2008 WL 474391 (Beebe) in which the federal district court, in an unpublished decision, concluded that the recovery of underpaid wages under section 558 "is not included in the penalty to be collected by the Labor Commissioner but rather constitutes wages which the Commissioner collects on behalf of previously underpaid employees," and that "the plain language of [section] 558 clearly indicates that the ... underpaid wages [are not] a penalty which can be recovered by Plaintiff in lieu of the Labor Commissioner." However, the district court in Yadira v. Fernandez (N.D.Cal., June 14, 2011, No. C-08-05721 RMW) 2011 WL 2434043 (Yadira), declined to follow Beebe and held that an action to recover unpaid wages under section 558 was subject to a one-year statute of limitations applicable to the recovery of penalties. The Yadira court stated: "The Reynolds decision indicates that unpaid wages under [section] 558 are part of the civil penalty recoverable under PAGA. Because the California Supreme Court's interpretation of the California Labor Code is controlling, the court agrees with plaintiff that unpaid wages are part of [section] 558's civil penalty and are therefore recoverable under PAGA.... It does not
Defendants argue that Arias supports their construction of section 558, citing the Arias court's observation that if a plaintiff prevails in a PAGA action for civil penalties, nonparty employees may invoke collateral estoppel and use the judgment against the employer to obtain remedies other than civil penalties for the same Labor Code violations—one such remedy being the recovery of lost wages and work benefits under section 98.6, which prohibits retaliation against an employee for exercising rights protected by the Labor Code. According to defendants, this analysis in Arias makes it, "abundantly clear that a plaintiff may only bring a representative lawsuit for civil penalties under PAGA, and that the definition of civil penalties does not include restitution remedies such as one additional hour of pay or lost wages."
Because an aggrieved employee who brings a PAGA action sues "as the proxy or agent of the state's labor law enforcement agencies" (Arias, supra, 46 Cal.4th at p. 986), the logical extension of defendants' argument that wages cannot be recovered as a civil penalty is that the LWDA could not seek
The trial court did not err in awarding underpaid wages as a part of the civil penalty provided by section 558, subdivision (a).
Defendants contend that the trial court should not have awarded Thurman any relief under the PAGA because he failed to exhaust his administrative remedies before he was named as a plaintiff in the third amended complaint.
The PAGA "was amended shortly after its effective date, as of August 11, 2004, to, among other things, require exhaustion of administrative procedures before an action may be filed to allow the LWDA the initial opportunity to investigate and cite employers for Labor Code violations. According to its legislative history, the amendment was the `result of an agreement reached between the [LWDA], business and labor representatives' and `improves [the Act] by allowing the [LWDA] to act first on more "serious" violations such as wage and hour violations and give employers an opportunity to cure less serious violations.' (Sen. Rules Com., Off. of Sen. Floor Analyses, analysis of Sen. Bill No. 1809 (2003-2004 Reg. Sess.) as amended July 27, 2004, p. 5.)" (Caliber Bodyworks, supra, 134 Cal.App.4th at p. 375, fn. omitted.)
Section 2699.3, subdivision (a) sets forth the administrative procedures that an aggrieved employee must follow before bringing a PAGA action. The aggrieved employee must "give written notice of the alleged Labor Code violation to both the employer and the [LWDA], and the notice must describe facts and theories supporting the violation. [Citation.] If the agency notifies the employee and the employer that it does not intend to investigate ..., or if
Defendants contend that Thurman was required to comply with these administrative procedures because he was named as a plaintiff in the third amended complaint after the effective date of the amendment that added them to the PAGA.
A similar issue was presented in Wright v. Morris (6th Cir. 1997) 111 F.3d 414 (Wright), in which the federal court of appeals considered whether the administrative exhaustion requirement in the Prison Litigation Reform Act of 1995 (PLRA; Pub.L. No. 104-134 (Apr. 26, 1996) 110 Stat. 1321) applied to prisoner civil rights cases that were pending before the act took effect. The Wright court noted that the United States Supreme Court "has determined that, in deciding whether a new statute should be applied to pending cases, `the court's first task is to determine whether Congress has expressly prescribed the statute's proper reach. If Congress has done so, of course, there is no need to resort to judicial default rules.'" (Wright, supra, at p. 418, quoting Landgraf v. USI Film Products (1994) 511 U.S. 244, 280 [128 L.Ed.2d 229, 114 S.Ct. 1483] (Landgraf); see Oluwa v. Gomez (9th Cir. 1998) 133 F.3d 1237, 1239 [If Congress has expressly described the statute's proper reach, "no further analysis is required and the court will `simply apply the terms of the statute.'"].) Accordingly, the Wright court looked to the relevant statutory language for an expression that the PLRA should or should not apply to pending cases. (Wright, supra, at p. 418.)
The Wright court noted that "[t]he PLRA amended 42 [United States Code section] 1997e to read, `no action shall be brought with respect to prison conditions under section 1983 of this title, or any other Federal law, by a prisoner confined in any jail, prison, or other correctional facility until such administrative remedies as are available are exhausted.'" (Wright, supra, 111 F.3d at p. 418, italics added by Wright.) The Wright court concluded that by its use of the phrase "shall be brought," Congress had "`expressly prescribed the statute's proper reach.'" (Ibid., quoting Landgraf, supra, 511 U.S. at p. 280.) The Wright court held that "[t]he statute expressly
Defendants argue that the exhaustion requirements in section 2699.3 apply to Thurman's prosecution of the third amended complaint because they are procedural rather than substantive changes in the PAGA. Defendants cite Brenton v. Metabolife Internat., Inc. (2004) 116 Cal.App.4th 679 [10 Cal.Rptr.3d 702] (Brenton), in which this court noted that "[i]n contrast to changed substantive statutes, applying changed procedural statutes to the conduct of existing litigation, even though the litigation involves an underlying dispute that arose from conduct occurring before the effective date of the new statute, involves no improper retrospective application because the
Defendants also argue that the statutory repeal doctrine precludes Thurman from recovering civil penalties without having exhausted administrative remedies under section 2699.3. Under that doctrine, as articulated in McCarthy v. Workers' Comp. Appeals Bd. (2006) 135 Cal.App.4th 1230 [37 Cal.Rptr.3d 909] (McCarthy), "`where a right or a right of action depending solely on statute is altered or repealed by the Legislature, in the absence of contrary intent, e.g., a savings clause, the new statute is applied even where the matter was pending prior to the enactment of the new statute.'" (Id. at p. 1236.)
In any event, as we discussed above, section 2699.3 expressly changed the rules for commencing a PAGA action and thus, on its face, does not apply to actions that were pending at the time of its effective date. Accordingly, the only right of action that section 2699.3 "repealed" was the right to commence an action without satisfying the administrative procedural requirements of the statute. That statutory repeal does not affect the present action because the action was commenced prior to the effective date of section 2699.3.
Defendants contend that the trial court erred in allowing Thurman to recover PAGA penalties under section 558 for missed rest periods because, they maintain, that statute does not provide a penalty for missed rest periods. Section 558, subdivision (a) states, in relevant part: "Any employer or other person acting on behalf of an employer who violates, or causes to be violated, a section of this chapter or any provision regulating hours and days of work in any order of the [IWC] shall be subject to a civil penalty as follows . . . ." (Italics added.) Defendants note that chapter 1 of part 2 of division 2 of the Labor Code, consisting of sections 500 through 558, does not include a statute that requires an employer to provide rest periods for employees. They argue that a violation of Wage Order No. 9, section 12, which sets forth rest
Section 12(A) of Wage Order No. 9 states: "Every employer shall authorize and permit all employees to take rest periods, which insofar as practicable shall be in the middle of each work period. The authorized rest period time shall be based on the total hours worked daily at the rate of ten (10) minutes net rest time per four (4) hours or major fraction thereof. However, a rest period need not be authorized for employees whose total daily work time is less than three and one-half (3 ½) hours. Authorized rest period time shall be counted as hours worked for which there shall be no deduction from wages."
These are clearly provisions "regulating hours" under the plain meaning of that phrase as used in section 558. If the Legislature wanted to limit civil penalties under section 558 to IWC orders that regulate overtime pay and alternative workweek scheduling, it presumably would have expressly provided that the statute's civil penalty applies to a violation of any provision regulating overtime pay and alternative workweek schedules in any order of
Defendants contend that the trial court erred in allowing Thurman to recover for missed meal periods after July 2003 because his complaint contains judicial admissions that defendants have provided meal periods, as required, since July 2003. We agree with defendants' contention.
The four verified complaints filed in this action, including the operative verified third amended complaint that added Thurman as a plaintiff, contained the following language regarding the recovery that plaintiffs sought against defendants for failure to provide meal periods: "The following formula was used in reducing the amounts owed by [NCT] because it has been providing meal periods since July 2003: [¶] 26 weekly pay periods [times] 1 hour of lost pay for each meal period not provided [times] $10.00 as the average hourly pay of employees represented by [the union times] 5 days in a typical work week [times] approximately 35 current [NCT employees]." Thus, Thurman not only admitted that defendants had been providing meal periods since July 2003, but he also set forth a mathematical formula for reducing his recovery demand to reflect that admitted fact.
In its statement of decision, the trial court ruled that Thurman was not bound by this admission, stating: "The court declines the invitation to elevate pleading form over the facts as they emerged at trial. To do so would give dignity to the `gotcha' theory of litigation." The trial court found that although defendants had generally done a good job instituting split run shifts in July 2003 to provide the drivers meal periods in July 2003, they "failed to consider the realities of the NCT workplace when [they] designed splits of 30 and 33 minutes." The court stated that "defendants presumably knew this when they served their [Code of Civil Procedure] section 998 offer, and thus suffered no cognizable prejudice from the fact that plaintiff made an allegation that did not turn out to be true."
"Because an admission in the pleadings forbids the consideration of contrary evidence, any discussion of such evidence is irrelevant and immaterial. [Citation.] `"When a trial is had by the Court without a jury, a fact admitted by the pleadings should be treated as `found.' . . . If the court does find adversely to the admission, such finding should be disregarded in determining the question whether the proper conclusion of law was drawn from the facts found and admitted by the pleadings. . . . In such case the facts alleged must be assumed to exist. Any finding adverse to the admitted facts drops from the record, and any legal conclusion which is not upheld by the admitted facts is erroneous." [Citations.]'" (Valerio, supra, 103 Cal.App.4th at p. 1271.) Thus, the trial court may not ignore a judicial admission in a pleading, but must conclusively deem it true as against the pleader. (Dang v. Smith (2010) 190 Cal.App.4th 646, 657 [118 Cal.Rptr.3d 490].)
The trial court reasoned that giving effect to Thurman's judicial admission would improperly "elevate pleading form over the facts as they emerged at trial." The Valerio court rejected similar reasoning by the respondent in that case, who argued that the trial court retained the inherent or equitable power to fashion a remedy that would avoid an unjust result and that the trial court
The Valerio court viewed the respondent's failure to seek relief from his admission by requesting leave to amend as critical, even though it was apparent from the trial court's remarks that the court would have granted a motion to amend or withdraw. The Valerio court concluded: "While the result here is rigorous, the rule is clear and [the appellant] is entitled to rely upon it. To hold otherwise would undermine well-settled rules of pleading relied upon to properly structure litigation. [The respondent] failed to take the necessary procedural steps to remove his judicial admissions, even when [the appellant's] trial management conference statement and trial brief highlighted the issue. Contrary to the [trial] court's reasoning below, informal notification to the opposing party of a change in case theory does not obviate the conclusive effect of judicial admissions." (Valerio, supra, 103 Cal.App.4th at pp. 1273-1274.)
Similarly, in the present case Thurman failed to take the necessary procedural steps to obtain relief from judicial admissions even though defendants raised the issue in their motion in limine to exclude evidence of meal period violations after July 2003. In its opposition to the motion, the union indicated that it would move for leave to amend the third amended complaint to conform to proof, but never did so. Thurman argues that the court effectively granted a motion to amend the third amended complaint to conform to proof, even though he did not formally move to amend, by denying defendants' motion in limine
Stoner is inapposite for several reasons, the principal one being that it did not involve a judicial admission. The Stoner court rejected the appellant/defendant's contention that the trial court's allowing the jury to consider expert testimony supporting a fraud claim based on nondisclosure was an abuse of discretion because the fraud cause of action in the plaintiff's complaint alleged only misrepresentations. (Stoner, supra, 46 Cal.App.4th at pp. 1004-1005.) The Stoner court concluded that the expert testimony did not vary from the allegations in the complaint to such an extent that the defendant was misled, noting that although fraud generally must be specifically pleaded, "as pretrial discovery and revelations during trial give rise to new factual allegations which are not materially different from those contained in the complaint, a court has the discretion to allow the additional evidence . . . ." (Id. at p. 1005.) The Stoner court further noted that the challenged testimony was closely related to the fraudulent acts that were alleged in the complaint. (Ibid.) Thus, Stoner did not involve the issue of whether and when a trial court may properly grant (expressly or impliedly) leave to amend to conform to proof to relieve a pleader of the effects of a judicial admission, despite the general rule that a judicial admission is conclusive against the pleader.
Second, unlike the defendant in Stoner, who was not prejudicially misled by testimony that varied from the allegations in the complaint, the record here shows that defendants prejudicially relied on Thurman's judicial admissions that they had provided meal periods since July 2003. Defendants' counsel filed a posttrial declaration stating that defendants served a statutory offer to compromise under Code of Civil Procedure section 998 on plaintiffs, and that plaintiffs rejected the offer. The declaration averred that in determining the dollar amount of the statutory offer, counsel and defendants relied on plaintiffs' admission that defendants had no liability for missed meal periods after July 2003, and that if the trial court were to allow Thurman to avoid the judicial admissions, defendants would "suffer severe prejudice, as this may allow [Thurman] to recover damages in excess of the statutory offer, and undermine the important reasons for making the statutory offer."
Third, the Stoner court noted that the defendant in that case "did not object to any supposed lack of compliance with technical pleading rules . . . ." (Stoner, supra, 46 Cal.App.4th at p. 1006, italics added.) Here defendants clearly objected before, during, and after trial, to the admission of evidence of missed meal periods after July 2003, and their objection was not based on "technical pleading rules," but on the ground it would violate the well-settled
The trial court's conclusion that the admission did not preclude recovery for missed meal periods after July 2003 because it was not an admission that defendants provided meal periods on all split runs as of July 2003 reflects an unreasonably hyper-technical reading of the admission. Defendants reasonably viewed the admission that defendants had been providing meal periods since July 2003, together with the formula that plaintiffs provided for reducing the missed meal period recovery for all of the employees on whose behalf Thurman sought civil penalties under the PAGA, as an admission that defendants had been in compliance with the law pertaining to meal periods since July 2003, and therefore, that any PAGA liability for missed meal periods ended as of that time. The trial court should have given effect to the judicial admission in determining the amount of civil penalties to award under the PAGA for missed meal periods and the amount of Thurman's restitutionary recovery under the UCL.
The portions of the judgment awarding civil penalties, prejudgment interest, and restitution for missed meal periods are reversed. The matter is remanded with directions to determine the amount of civil penalties for missed meal periods from January 1, 2002, to July 2003, and the amount of restitution and prejudgment interest attributable to missed meal periods during that time period, and to amend the judgment by awarding those amounts in addition to the civil penalties, restitution, and prejudgment interest awarded for missed rest periods. The trial court is further directed to
Haller, Acting P. J., and McDonald, J., concurred.
A key distinction between Martinez and the present case is that section 1194 expressly creates a private right of action for failure to pay minimum wage or overtime compensation. The fact that an action under section 1194 serves to enforce a wage order because the wage order's definition of "legal minimum wage" is controlling in the action is irrelevant to the issue whether a plaintiff bringing an action under the PAGA may recover a civil penalty provided by a wage order, as opposed to a section of the Labor Code. There is no language in Martinez that authorizes a private action to recover penalties provided by a wage order.
In considering the validity of the same collective bargaining agreement exemption in section 10(E) of wage order No. 16-2000, the Lazarin court agreed with the Bearden court's conclusion that the IWC lacked authority to add a collective bargaining agreement exemption to section 10(E) under the current version of section 514, and also rejected the employer's argument that section 10(E) was valid at the time it was adopted under the original version of section 514. (Lazarin, supra, 188 Cal.App.4th at pp. 1574-1575.) Like the Valles court, the Lazarin court gave effect to the Legislature's declaration that the amended version of section 514 clarified, rather than changed, existing law. (Lazarin, at pp. 1575-1576.)
We disagree with Bearden and Lazarin to the extent that they support the proposition that the collective bargaining agreement exemption in section 10(E) of wage order No. 16-2000 was inconsistent with or exceeded the scope of its authorizing statutes at the time the IWC adopted it. We agree with the defendant/employer's argument in Lazarin that when the IWC "adopted wage order 16, section 10(E), [it] was simply including the identical exemption already contained in section 514." (Lazarin, supra, 188 Cal.App.4th at p. 1574.)
The IWC also added a collective bargaining agreement exemption to section 11 regarding meal periods and section 12 regarding rest periods of Wage Order No. 9, presumably in accordance with section 514. However, for unknown reasons, these collective bargaining agreement exemptions are narrower than the exemption provided by section 514 and section 10(E) of wage order No. 16-2000, in that they apply only to collective bargaining agreements that specifically provide for meal periods (Wage Order No. 9, § 11F) or rest periods (Wage Order No. 9, § 12(C)). These exemptions would not apply to Thurman and his fellow NCT drivers because their collective bargaining agreement with NCT did not address meal or rest periods. In any event, the fact that the IWC included any collective bargaining agreement exemption in sections 11 and 12 of Wage Order No. 9 indicates that it was acting under the view that the collective bargaining agreement exemption in the original version of section 514 applied to the entire chapter containing section 514. We note, however, that limiting the exemption to collective bargaining agreements that specifically provide for meal and rest periods (as opposed to collective bargaining agreements that generally provide for wages, hours of work, and working conditions) was inconsistent with the original version of section 514, and that including any collective bargaining agreement exemption in the meal and rest period sections (Wage Order No. 9, §§ 11, 12) is inconsistent with the current version of section 514.
