Monday, July 30, 2012

Attorneys' Fees on an Appeal of a Labor Commissioner Decision: Arias v. Kardoulias

I'm reminded of the addage -- pigs get fat, hogs get slaughtered -- as I read the case of Arias v. Kardoulias 2012 DJDAR 10297 (July 26, 2012).  Arias filed a claim for unpaid wages associated with her care of the defendants' elderly father.  The Labor Commissioner awarded her $6,319.69. 

I can imagine how the case unfolded.  Arias worked for a home health care agency.  The family liked her, but didn't enjoy paying the fees associated with the agency.  Arias suggested that she work for the family directly, cutting out the agency.  But then Arias realized that she could make more money than she was paid.  Of course, the family didn't understand employment laws and how to pay a personal attendant.  When the relationship ended (perhaps with the death of the father), Arias sued for unpaid wages.  Thus, she probably is not a litigant with clean hands.  But wage and hour law doesn't care.  It requires payment for services rendered without regard to particular defenses. 

The family should have felt lucky to escape with a $6K award.  I have seen awards much higher than that.  And Arias probably should have been happy with her award, realizing that she would probably need legal help to appeal the case to Superior Court.  Yet, that's what she did.  Arias appealed, which means she is entitled to a hearing "de novo".  This means "do-over."  It's a second chance to prove your case before a Superior Court judge. 

But Arias filed the appeal late.  Thus, the court lacked jurisdiction to hear the case.  Eventually, the case was dismissed on the jurisdictional, not substantive, reason.  Arias should have been happy with her successful outing with the Labor Commissioner.  Instead, she became a hog and lost.  (She didn't lose enough, however, as she was still entitled to her $6K.) 

This is where the defendants turned from pig to hog.  They sought $8,495 in attorneys' fees and costs in getting the appeal dismissed. 

Under Labor Code section 98(c) if the party filing the appeal is unsuccessful, the court must assess attorneys' fees and costs.  According to this provision, an employee is successful if the court awards an amount greater than zero.  Thus, the court had to determine whether a dismissal of an appeal on jurisdictional grounds is the equivalent of an award of zero for purposes of assessing attorneys' fees. 

The court concluded that a dismissal on jurisdictional grounds is not the equivalent of an award of zero.  When the court dismisses a case on jurisdictional grounds, it does not determine the merits of the appeal.  An employee presents an unmeritorious appeal, on the other hand, only when the court reaches the merits of the appeal. 

So the result in this case is was the defendants did not recover any attorneys' fees.  The Labor Commissioner's decision constituted a judgment and the defendants were still required to pay Arias $6K in unpaid wages. 

Perhaps defendants would have been better off to forgo the claim for attorneys' fees (which probably could not have been recovered from a home caregiver), and forget the appeal and all of its associated costs. 

Pigs may get fat, but hogs definitely get slaughtered. 

Tuesday, July 24, 2012

No Attorneys' Fees for Missed Meals & Breaks: Kirby v. Immoos Fire Protection, Inc.

Employers scored a significant victory with the Supreme Court's decision in Kirby v. Immoos Fire Protection (2012) 53 Cal.4th 1244.  The court determined that a prevailing party in a claim of missed meal or rest periods under Labor Code section 226.7 is not entitled to attorneys' fees.  In this particular case, the employer was the prevailing party and it did not obtain attorneys' fees.  However, in most cases, the employee's lawyers use the prospect of obtaining attorneys' fees in order to increase the settlement value of their clients' cases.  What this should mean is that fewer cases will be filed alleging meal and rest period violations. 

Kirby filed multiple claims asserting various violations of wage and hour laws.  He eventually settled his claims with some defendants and then dismissed his claims against the employer.  The employer then sought attorneys' fees under Labor Code section 218.5. 

Section 218.5 provides for attorneys' fees to the prevailing party in an "action for the non-payment of wages" and other benefits. 

In 2007, the Supreme Court held that the one-hour premium imposed upon the violation of a meal or rest period constituted a wage rather than a premium.  Murphy v. Kenneth Cole Productions (2007) 40 Cal.4th 1094.  This decision was substantial since for two reasons:  (1) The statute of limitations for non-payment of wages is three years and that for a penalty is one year; and (2) attorneys' fees became available for miss meal and rest period cases. 

Apparently, we all had that wrong when it came to attorneys' fees.  According to the Supreme Court, the non-payment of wages is not the "gravamen" of a section 226.7 claim.  The one-hour premium is the remedy and whether or not it is paid, does not have a bearing on whether a violation of section 226.7 occurred.  And attorneys' fees under section 218.5 are in actions for the non-payment of wages, not the violation of the meal and rest period law. 

I am surprised, but pleased, with the Supreme Court's ruling.  I hope that it goes a long way in reducing the number of civil cases filed with allege meal and rest period claims.  Without the potential of obtaining their fees, attorneys will be less interested in asserting those claims.  Yet, the employee still has a fair avenue for redress by going to the Labor Commissioner and seeking the payment of the one-hour premium. 

Smile, you won one!  With Brinker that gives employers two substantial victories in 2012. 

Thursday, July 5, 2012

Enforcing Non-Compete and Non-Solicitation Provisions in California

California employers are often concerned about their ability to prevent an employee from competing against the company, or soliciting customers or employees.  In addition, employers are concerned about competitors soliciting its employees.  Employers must be careful not to violate Section 16600 of the Business and Professions Code ("B&P Code) in attempting to implement or enforce non-compete and non-competition. 

The B&P Code prevents any contractual provision that restrains a person's ability to engage in their profession.  Exception is made for the person who sells his/her interest in a business.  Part of the value of the sold business is the retention of clients.  If the seller competes against the buyer of the business and solicits clients, then the value of the business is substantially harmed.  But few situations fall within this exception. 

Silguero v. Creteguard, Inc. (2010) 187 Cal.App.4th 60, is an instructive case on the effect of non-compete provisions .  The plaintiff worked for Floor Seal Technology ("FST") as an inside sales rep.  She signed a confidentiality agreement providing that she would not engage in sales activities for 18 months after leaving the company. 

Shortly after being fired, Ms. Silguero found employment with Creteguard.  However, FST contacted Creteguard and informed it of the confidentiality agreement with the non-compete agreement.    Creteguard did not believe the non-compete was legal, but fired Ms. Silguero anyway.  Ms. Silguero sued Creteguard for wrongful termination. 

The Court of Appeal held that a worker can maintain a cause of action against his/her employer for firing him/her due to an illegal non-compete provision.  To do so violates public policy by limiting a person's mobility and right to engage in a lawful profession. 

VL Systems, Inc. v. Unisen, Inc. (2007) 152 Cal.App.4th 708 also provides guidance on what an employer can and cannot do in implementing non-compete provisions.  VLS entered into an agreement to provide about 16 hours of computer services for Star Trac.  The agreement stated that Star Trac would not hire a VLS employee unless it paid VLS 60 percent of the employee's first year salary. 

After the job was complete, Star Trac advertised for an IT position.  A VLS employee who had not worked on the Star Trac project applied, and was hired.  VLS demanded that Star Trac pay it $60,000. 

The Court of Appeal invalidated the agreement, concluding that it was harsh, oppressive and over broad, in violation of 16600.  The Court took no position on whether a more narrowly-drafted provision would be viable under section 16600. 

I personally believe that in the correct circumstances, a narrowly-drawn provision prohibiting a customer from hiring your employee can be justified and permissible under section 16600.  However, a business must carefully review its circumstances and the justification for such a provision.  If reasonable, the court is more likely to uphold the agreement.