This article is Part 1 of a two-part series providing an overview of recent California Supreme Court decisions in employment law.
The California Supreme Court issued several decisions during the past year that may affect California employers. We summarize the most important of these decisions below.
Gerard v. Orange Coast Mem. Medical Center (December 10, 2018)
Industrial Welfare Commission (IWC) Wage Order No. 5 allows certain employees in the health care industry to waive one of the two required meal periods on shifts longer than eight hours. However, a Labor Code provision conflicted with that special waiver provision.
Health care workers sued their hospital employer, alleging that a policy authorizing waivers of a second meal period for shifts lasting longer than 12 hours was unlawful because of the narrower Labor Code provision. Years of litigation ensured, culminating in an amended law, two trips to the court of appeal, and finally an opinion from the California Supreme Court.
The Court ruled that section 11(D), the provision of Wage Order No. 5 that allows health care employees working shifts longer than 12 hours to waive a second meal period, does not violate the Labor Code. As a result, certain health care workers may waive second meal periods under Wage Order 5, although other employees covered by Wage Order 5 may not.
Goonewardene v. ADP (February 7, 2019)
Goonewardene filed a lawsuit against her employer for not paying wages due, asserting statutory claims under the Labor Code. Goonewardene’s employer used Automatic Data Processing (ADP) to provide payroll processing services. Goonewardene sued ADP in addition to her employer, claiming ADP was negligent and breached its payroll processing contract.
The Court determined that an employee cannot sue an outside payroll service company to recover unpaid wages due from an employer. First, the employee is not a party to the contract between the employer and the payroll company. A contract claim might be viable only if the employee was a “third party beneficiary” of the contract between the employer and payroll provider. The motivating purpose of the contract, however, is to benefit the employer, not the employees.
Second, the Court found that allowing each employee to name the payroll company as an additional defendant in any wage and hour lawsuit would result in increased costs to the payroll company and the employer, which would not be consistent with the objective of the contract and the reasonable expectation of the contracting parties.
Finally, regarding negligence, the Court determined that the numerous remedies available to employees to recover unpaid wages from their employers rendered it unnecessary to expand the payroll provider’s duty of care to include the employee.
Wilson v. Cable News Network, Inc. (July 22, 2019)
Wilson alleged in a lawsuit that his employer, CNN, fired him for unlawful discriminatory and retaliatory reasons. CNN claimed it fired Wilson for plagiarism. To terminate the lawsuit early, CNN brought a motion to dismiss under California’s anti-SLAPP statute. The anti-SLAPP law allows defendants to request early judicial screening of legal claims targeting free speech or petitioning activities. CNN’s theory was that its decision to remove Wilson was an exercise of its discretion to decide who may publish its content.
The primary issue before the Supreme Court was whether the anti-SLAPP statute may be invoked when the plaintiff alleges claims for employment discrimination and retaliation. Lower courts had decided that such claims were exempt from anti-SLAPP motions.
However, the Supreme Court noted that the anti-SLAPP law provides no exception for discrimination or retaliation claims. The Court held that if the defendant shows that the claims arise from its activities in furtherance of its free speech rights, it may invoke the statute to obtain early judicial screening. Terminating Wilson for plagiarism implicated CNN’s free speech rights because journalistic integrity is central to news products. The Court therefore sent the case back to the lower courts to consider whether the plaintiff’s claims had sufficient merit to allow them to proceed against CNN.
Voris v. Lampert (August 15, 2019)
Voris worked on a number of start-up businesses with Lampert. Voris claimed many of the new businesses did not pay him wages due, and he sued those entities for breach of contract and for statutory wage violations. Voris prevailed on his claims, but he had trouble collecting from his employers because the companies had gone out of business. Voris then sued Lampert personally, seeking to recover his wages from Lampert under a tort claim of conversion (essentially a civil claim for stealing).
The Court held that a conversion claim is not an appropriate remedy for non-payment of wages. The employer’s failure to pay wages to its employee in essence is a breach of the contractual relationship between them. Contract remedies are available, in addition to the Labor Code’s many statutory remedies. Recognition of a conversion claim based on unpaid wages would entirely transform a category of contract claims into torts, an unnecessary step given the already extensive remedies that exist to combat wage nonpayment.
Part 2 of this article will be printed next time.