18th Annual Workplace Class Action Report - 2022 Edition

Annual Workplace Class Action Litigation Report: 2022 Edition 409 penalties for the violation under the Labor Code Private Attorneys General Act of 2004 (“PAGA”). Defendant demurred to Plaintiff’s complaint on the grounds that its wage statements complied with § 226(a)(9) as a matter of law. The trial court agreed and sustained the demurrer without leave to amend. On Plaintiff’s appeal, the California Court of Appeal affirmed the trial court’s judgment. On appeal Plaintiff argued that he properly pled a violation of § 226(a)(9) by alleging that Defendant disaggregated overtime wages into “overtime base” and “overtime premium” components and listed different numbers of hours worked at each component rate. Id . at *6. Plaintiff alleged that the wage statements provided to employees were unlawful because they listed two completely different number of overtime hours, i.e ., “11.75 for Overtime Base and 3.75 for Overtime Prem 0.5.” Id . Plaintiff argued that an employee would not know which item was for overtime and which was for regular pay. In affirming the trial court’s judgement, the Court of Appeal looked to the plain language of § 226(a)(9), which merely requires employers to provide accurate itemized wage statements showing “all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee.” Id . As such, the Court of Appeal held that disaggregating overtime rates and hours, as Defendant did in this case, did not violate the statutory mandate of § 226(a)(9). The Court of Appeal pointed out that on his wage statements, Plaintiff was able to see all the applicable rates at which he worked, and add the two component overtime rates to determine his overall overtime rate. Further, from looking at the wage statement Plaintiff was able to determine the number of hours for which he earned the full overtime rate by looking at the number of hours paid at the “overtime premium” rate, and was able to use other lines on the wage statement, such as the total number of hours worked and total compensation, to confirm that he was paid appropriately. Id. at *9. Moreover, the Court of Appeal opined that the conclusion that disaggregated overtime wages and hours was permitted by § 226(a)(9) was further bolstered by the Department of Labor Standards Enforcement (“DLSE”), a state agency authorized to enforce California’s labor laws, since it used a disaggregated overtime wage rate in its exemplar wage statement for piece-rate workers. For these reasons, the Court of Appeal affirmed the judgment of the trial court. Waters, et al. v. Kohl ’ s Department Stores, Inc., 2021 Cal. App. Unpub. LEXIS 4457 (Cal. App. 2d Dist. July 7, 2021). Plaintiffs, two retail consumers, brought a putative class action alleging that Defendant violated the California’s Consumers Legal Remedies Act (“CLRA”), the unfair competition law (“UCL”), and the false advertising law (“FAL”). Defendant allowed customers at its stores to earn $10 in “Kohl’s Cash” usable on a future transaction for each $50 spent it stores. Id . at *1-2. Plaintiffs alleged that Kohl’s Cash misled consumers because, despite its name and appearance, Defendant did not treat Kohl’s Cash as “actual cash,” but rather applied Kohl’s Cash to certain purchases and returns in a manner that caused customers to overpay for goods. Id . at *3. Initially, Plaintiffs requested for an informal discovery conference to address a discovery dispute about Plaintiffs’ request for documents and information directly related to class certification, including the identities of persons with knowledge of the alleged deceptive conduct, and internal documents and communications about the advertising concerning Kohl’s Cash. Defendant argued that it should not be required to provide any of the discovery because it intended to file a summary judgment motion, which would dispose of Plaintiffs’ case. Before the discovery was provided, Defendant filed a "no-merit" motion pursuant to Civil Code § 1781 on Plaintiffs’ CLRA cause of action. Id . at *5. At the § 1781 hearing, Plaintiffs requested a continuance to permit Plaintiffs to conduct discovery regarding whether Kohl’s Cash certificates were likely to deceive a reasonable consumer. In opposition to Defendant’s no-merit motion, Plaintiffs had identified eight categories of discovery that were necessary to oppose the no-merit motion. The trial court granted Defendant’s no-merit motion on the CLRA cause of action, without addressing Plaintiffs’ request for a continuance. Citing Plaintiffs’ deposition testimony, the trial court ruled, that based upon the evidence presented and the specific plain language of the coupons in evidence, it found that no reasonable consumer would be misled regarding the use of the Kohl’s Cash coupons. Subsequently, the trial court grant Defendant’s motion for judgment on the pleadings on the remaining causes of action. Plaintiffs appealed to the California Court of Appeal. On appeal, Plaintiffs argued that the trial court erred in several respects, including by denying Plaintiffs’ request to continue the no-merit motion hearing to enable Plaintiffs to conduct necessary discovery. The Court of Appeal reversed the trial court’s judgment. The Court of Appeal held that the trial court abused its discretion by denying Plaintiffs’ request to continue the no-merit motion hearing. The Court of Appeal determined that the discovery sought was relevant to the no-merit motion and was necessary to oppose it. The trial court’s decision not to continue the no-merit motion hearing to permit discovery on the likelihood of consumer deception prejudiced Plaintiffs and constituted and abuse of discretion. For these reasons the Court of Appeal reversed the trial court’s judgment.