Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—E.D. Cal.: Unpaid wages may be subject of California unfair competition claim, but not waiting time penalties, (Oct 16, 2013)

By Tobias J. Gillett, J.D., LL.M.

Former employees asserting California Unfair Competition Law (UCL) claims against an employer based on violations of California’s Labor Code could proceed with UCL claims seeking restitution of unpaid wages, but not with UCL claims based on an award of waiting time penalties under the Labor Code, the federal district court in Sacramento has ruled (Pena v. Taylor Farms Pacific, Inc., October 14, 2013, Mueller, K.).

The former employees brought a putative class action against multiple employers, asserting eight employment claims, including violations of the California Labor Code and the UCL. In the present decision, the court addressed defendant Taylor Farms Pacific, Inc.’s motion to dismiss the employees’ claim for unpaid wages and waiting time penalties under California Labor Code sections 201 to 203 and motion to strike the derivative portion of the employees’ claim for violation of the UCL.

The court concluded that three of the representative plaintiffs stated a claim for unpaid wages and waiting time penalties under California Labor Code sections 201 and 203; that one plaintiff stated a claim for unpaid wages and waiting time penalties under sections 201, 202, and 203; and that one plaintiff failed to state a claim. The court therefore denied the motion to dismiss as to four plaintiffs, but granted it with prejudice as to the fifth.

Unfair Competition Law. The court permitted the employees’ UCL claim to proceed as to unpaid wages under California Labor Code sections 201 and 202, but not as to waiting time penalties under section 203. The court explained that the UCL prohibits “any unlawful, unfair or fraudulent business act or practice, including violations of other laws that it makes independently actionable and even actions not “specifically proscribed by some other law.” However, “plaintiffs are limited to injunctive relief and restitution,” and “may not receive damages.”

Here, the court found that “unlawfully withheld wages are property of the employee within the contemplation of the UCL,” and therefore “may be the subject of a restitutionary order under the UCL.” However, section 203 awarded “penalties” imposed on an employer for failure to render full and prompt payment of an employees earned wages. The court observed that “permitting recovery of section 203 penalties via the UCL would not restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest.” Section 203 penalties were intended to punish employers, rather than to compensate employees. Therefore, “section 203 penalties may not be recovered as restitution under the UCL.”

Since a claim could “not be struck under Rule 12(f) for such a failing,” the court denied Taylor Farms’ motion to strike. Instead, the court dismissed the UCL claim to the extent it was derived from a violation of section 203 under Rule 12(b)(6).

The case is No. 2:13-cv-01282-KJM-AC.

Attorneys: Patricia K. Oliver (R. Rex Parris Law Firm) for Maria del Carmen Pena. Sarah Zenewicz (Gibson, Dunn & Crutcher LLP) for Taylor Farms Pacific, Inc.

Companies: Taylor Farms Pacific, Inc.

Cases: StateUnfairTradePractices CaliforniaNews