California employers are wise to adhere to the strict requirements of California’s wage and hour laws. Wage and hour issues continue to be a fertile ground for both class action and single plaintiff litigation. In 2008, 44,000 wage and hour class actions were filed in California. Additionally, the courts continue to struggle with the application of various wage and hour issues. For example, ever since the $100 million verdict against Starbucks for violating the state’s statute regarding tips and tip pooling, there have been a number of published opinions discussing this issue. In Grodensky v. Artichoke Joe’s Casino, 171 Cal. App. 1399 (2009), the Court held that employees have a private cause of action to enforce claims for tips, that mandatory tip pools are legal; however, the tip pool cannot include managers who are agents of the employer, and therefore, precluded from participating in the tip pool. In Ethridge v. Rains Int’l California, Inc., 172 Cal. App. 4th 908 (2009), the Court also addressed tip pools in holding that they may be shared with individuals who do not provide “direct table service” so long as they participated in the “chain of service.” Significantly, national employers should be aware that California’s rules regarding tips and tip credits are different from and more stringent than federal law on these issues.  

The growth of wage and hour class action litigation in California is directly related to the damages which are available. Violation of the wage and hour laws may give rise to liability that expands exponentially because the underlying violation triggers additional penalties. If an employer has misclassified an individual as being “non-exempt,” and therefore failed to provide him/her with overtime compensation, or has failed to pay an individual his/her proper wages and/or meal breaks, the penalties for those violations may be compounded by additional penalties. For example, these “underlying” violations may also violate: (1) the requirement that departing employees be paid all of their “wages” upon termination; (2) the requirement that an employee receive an accurate itemized statement of his/her wages (Cal. Lab. Code § 226); and (3) the Private Attorney General Statute (Cal. Lab. Code § 2699). Additionally, various claims are covered by California’s Unfair Competition Statute, California Business and Professions Code § 17200, and therefore are subject to a four-year statute of limitations as well as providing for “restitution.” Most of these statutes also provide for the award of attorney’s fees and costs to the employee.  

The bottom line is that California employers need to be particularly vigilant in connection with wage and hour issues. A seemingly innocuous mistake in adhering to “technical” requirements may give rise to a multitude of penalties which, in the current legal landscape, are frequently pursued on a class-wide basis.