Monday, December 27, 2010

Maybe Home Depot Execs Now Feel the Need "to Sit Down".

Home Depot brought a demurrer [attack by motion that the complaint does not allege facts sufficient to state a cause of action] to allegations that its failure to provide its retail employees seating accommodations was a violation of Labor Code Section 1198 and Wage Order 2-2001.  Specifically, Home Depot alleged that the plaintiffs could not, as a matter of law, allege a violation of the "Private Attorneys General Act of 2004" ["PAGA"] because that Act did not contemplate actions to recover penalties by private action where: a) the Wage Order stated the employer duty as an affirmative obligation rather than a prohibition and b) the Wage Order contained its own penalty provision, so the "default remedy" under "PAGA" did not apply.  The Court of Appeal rejected both arguments based on careful statutory interpretation getting to the question of what the Legislature intended. 

What does this summary mean in plain English used by non-lawyers?  The decision establishes that violations of the Labor Code and Wage Orders for matters other than wage violations will also be covered by PAGA.  This decision invites an attack by employees upon company wide practices for a wider category of violations.  The court's analysis was that the Legislature wanted exactly that, because of inadequate Agency resources to enforce the penalty provisions.  The incentive to lawyers and clients:  share in the penalties, and collect sizable fees, either as a percentage, or by "lodestar" hourly rates. [75% goes to the State, and 25% to the employees.  See generally Labor Code Sec. 2699(j).]

In the Home Depot case, the wage order, long ignored, will now be taken seriously.  The Order requires an employer to provide reasonable seating arrangements at counters in the immediate work area for employees where to do so would not interfere unduly with the business operation and work to be done.  The penalties are $100 for the first violation "per each aggrieved employee" for the first payperiod, and $200 for each violation "for each aggrieved employee" for each payperiod thereafter.  

What is the money at stake?  Assume for example 3000 retail employees in the 300 Home Depot Stores in California.  Assume a one year statute of limitations on a "penalty" recovery provision.  Assume 26 pay period per year.  $5,100 per "aggrieved employee" per year times 3000 employees times 3 years equals $45,900,000.00.   Only $11,475,000.00 of that would go to the employees themselves.  If a percentage of 40% is used for attorney's fees, those would be $4,590,000.00.   With numbers like these, it is possible to understand the incentive behind the PAGA action, and Home Depot's furious effort to stop it at the demurrer stage.  
The Case:  Home Depot USA Inc., v. Superior Court (2010) 2010 DJDAR 19245. 

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