Take A Seat: Second Court In As Many Months Holds That Retail Employees Denied “Suitable Seats” May Recover California PAGA Penalties

Foreshadowing a flood of class action lawsuits against California employers, the Court of Appeal in Home Depot U.S.A. v. Superior Court (Harris) concurred with the recent decision in Bright v. 99¢ Only Stores, and held that the California Labor Code Private Attorney General Act of 2004 (“PAGA”) provides employees who claim they have been unreasonably denied “suitable seats” with a private right of action to sue for civil penalties of up to $200 per employee, per pay period. Prior to November 2010, no appellate court had held that employees allegedly denied suitable seating could seek a monetary remedy; now, two courts in as many months have concluded that they may.

The Facts

Plaintiffs asserted a single claim under PAGA on behalf of themselves and current and former Home Depot employees, alleging Home Depot failed to provide employee seating in the cashier and counter areas in violation of Labor Code sections 1198 and 2699(f), and Industrial Welfare Commission (“IWC”) Wage Order 7. Home Depot demurred, asserting that Plaintiffs could not recover PAGA penalties for alleged violations of Wage Order 7-2001. When the trial court overruled the demurrer, Home Depot petitioned the Court of Appeal for a Writ of Mandate.

Bright v. 99¢ Only Stores

On November 12, 2010, while Home Depot’s petition was pending, a separate division within the same district of the Court of Appeal issued its opinion in Bright v. 99¢ Only Stores, holding that retail employees who claim they were denied suitable seating could seek PAGA penalties pursuant to Labor Code section 1198 for violations of Wage Order 7. The Court of Appeal found that (1) the Wage Order’s directive that “[a]ll working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats,” created a “condition of labor” that was incorporated by Labor Code section 1198, (2) PAGA applies to “any statutory violation for which there is no specific pre-existing civil penalty,” (3) although Wage Order 7-2001 permits underpaid employees to recover penalties, it provides no “specific” penalty for the failure to provide suitable seating; and therefore (4) PAGA permits employees to recover civil penalties for an employer’s failure to provide suitable seating because there is no specific pre-existing civil penalty for such a violation of Wage Order 7-2001.

The Court’s Decision In Home Depot

On December 22, 2010, the Court of Appeal in Home Depot agreed with 99¢ Only Stores and affirmed that the trial court properly overruled Home Depot’s demurrer, holding that PAGA provides employees with a private right of action to recover civil penalties under PAGA for violations of the “suitable seating” requirement in Wage Order 7-2001.

Home Depot first argued that “no labor condition expressed in affirmative terms [“all working employees shall be provided with suitable seats”] operates as a prohibition,” and thus no PAGA penalties may be recovered because Labor Code section 1198 only states that working conditions “prohibited” by the wage orders are unlawful. The court rejected this argument, as “ ‘not in keeping with the remedial purpose’ of [Labor Code] section 1198, as it renders the affirmative mandates ‘mere[] suggestions.’ ”

The Court of Appeal also rejected Home Depot’s argument that the Wage Order’s penalty provision (Section 20(A)) provides comprehensive remedies for the entire Order. The court cited language in 99¢ Only Stores, finding that the remedies provided by Wage Order 7-2001 are “nonexclusive” and “[i]n addition to any other civil penalties provided by law.” Because Section 20(A) does not specifically provide for violations of the suitable seating requirement, PAGA “supplements” the Wage Order and provides employees with a private right of action to seek civil penalties.

Last, in response to Home Depot’s argument that PAGA’s default penalties are excessive and improper because they are twice as onerous as the penalties set forth in the Wage Order itself, the Court of Appeal noted that PAGA grants courts the discretion to “award a less amount than the maximum civil penalty.” Accordingly, the court concluded that PAGA’s default penalties were not excessive under these circumstances.

What Home Depot Means For Employers

Both Home Depot and 99¢ Only Stores represent a new breed of class action lawsuits constituting the leading edge of the next wave of litigation to hit California employers. We predict that plaintiffs will attempt to stretch the “suitable seat” holdings to create private causes of action for similar Wage Order provisions addressing such things as recordkeeping, uniforms and tools, and suitable change rooms and resting facilities. For now, employers should assess whether they need to provide employees with suitable seating, and brace themselves for a bevy of Wage Order class claims in 2011.

Please feel free to contact any of the individuals on our retail industry team listed below for further guidance.

Laura Maechtlen: (415) 544-1011 or lmaechtlen@seyfarth.com
Ken Sulzer: (310) 201-5223 or ksulzer@seyfarth.com