There has been a shortage recently of new California appellate decisions in the fields on which we most focus on this site, but that doesn't mean there is nothing new under the California legal sun. For employers here is an interesting confluence of recent case law and recent legislation:
Megan McArdle, aka Jane Galt, on her Asymmetrical Information site links to a report at Mike O'Sullivan's Corp Law Blog on the recent Court of Appeal decision in the case of Ralphs Grocery Co. v. Superior Court. The Ralphs markets -- currently one of the targets of the southern California grocery strike -- implemented a bonus plan for its employees, based upon the profitability of its stores determined by GAAP accounting methods. In making the GAAP computations prior to determining the amount of any bonus, Ralphs would take into account expenses such as shoplifting losses and workers' compensation costs. Even though those reductions were made in the initial GAAP calculation -- i.e., before the amount of any bonus was calculated -- the Court viewed the calculations as constituting prohibited "deductions from wages for 'any cash shortage, breakage, or loss of equipment, unless it can be shown that the shortage, breakage, or loss is caused by a dishonest or willful act, or by the gross negligence of the employee.'" On that basis, the court disallowed the bonus program for non-exempt employees. Mike O'Sullivan summarizes the result:
Here, a regulatory imperative to protect lower-level workers from certain charges will deprive them of many unrelated but significant benefits. California's voluminous wage and hour laws are notoriously Byzantine, uneconomic, illogical and nit-picky. California's plaintiffs' bar is notoriously quick to bring class action lawsuits against employers who deviate in any way from these laws. Many California employers, sizing up the situation, will conclude that the economically rational decision will be to exclude all lower-level employees from company-wide bonus plans.
(Emphasis added.) For employers, the potential headaches from this ruling are only compounded by the recent passage and signing of California Senate Bill 796. That statute, effective January 1, 2004, effectively authorizes "bounty hunting" by allowing individual employees to bring civil actions recover penalties under California's Labor Code whenever the state agencies charged with Labor Code enforcement do not do so. While any penalties assessed in such suits go to the State, the employees who bring the actions are authorized to recover attorneys' fees and, in some cases, additional penalties, and the statute creates a penalty for any Labor Code violation for which the Code itself doesn't already specify a penalty.
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