Labor & Employment Law Daily Wrap Up, WAGE-HOUR—CLASS ACTIONS—9th Cir.: District court’s finding employer willfully made over-deductions from employee pay for benefit fund premature, (Dec 1, 2025)

By Ronald Miller, J.D.

A reasonable jury could find that the employer did not know it was making excess WBF deductions.

The Ninth Circuit ruled that a district court erred by rushing to summary judgment on the willfulness and benefit issues with respect to employee claims an employer made over-deductions from their wages for a Workers’ Benefit Fund (WBF). The appeals court also concluded that the district court erred in holding that the employees’ written authorization was a defense to all the “shoe” claims where employees were required to purchase non-slip shoes. Accordingly, the appeals court reversed a jury’s judgment on the WBF and shoe claims and remanded. However, the appeals court affirmed the jury’s verdict that the employees won their unpaid break claims (Gessele v. Jack in the Box Inc., Nos. 23-2522 and 23-2527 (9th Cir. Nov. 25, 2025)).

Employees of the Jack in the Box fast food restaurant chain sued the employer challenging three of its policies. Specifically, the employees alleged that the employer over-deducted from employees’ wages for a WBF, did not pay workers for interrupted meal periods more than 20 minutes long, and deducted employees’ pay for non-slip shoes.

Workers Benefit Fund. The WBF funded itself by collecting an assessment, half from employers and half from employees, pursuant to Oregon law. The WBF deductions were processed using a computer program that deducted 1.8 cents per hour from all hourly employees in Oregon. The employer then paid the state 3.6 cents per hour worked, the 1.8 cents taken from the employee plus 1.8 cents per hour out of its own coffers.

Over the next few years, Oregon decreased the WBF assessment rate. The employer paid the correct reduced amount to Oregon, but it never updated the amount deducted from employees. So, employees paid more than half the WBF assessment. In February 2012, the employer discovered the error and corrected it.

Unpaid breaks. During shifts longer than six hours, employees usually took unpaid 30-minute meal periods. But when business was heavy, the employer would recall employees before their breaks ended. The employer treated breaks as meal periods and did not pay for them if the employee was on break for at least 20 of the 30 minutes. If a meal period was shortened, the employer paid for the time worked but not the other minutes.

Shoe deductions. To reduce the number of slip and fall injuries, in 2003 the employer decided to require employees to wear non-slip shoes. The employer decided to make employees purchase shoes from Shoes for Crews. Employees would pay for the shoes by authorizing paycheck deductions. The employer would deduct the price in three or four installments from the employee’s later paychecks. Shoes for Crews provided the employer with rebates and also promised to indemnify the employer for certain injuries suffered by employees wearing its shoes. The employer collected more than $1 million in rebates and $295,000 in indemnities.

The district court concluded at summary judgment that the employer’s WBF over-deductions were willful. It also found the shoe deductions were for the employees’ benefit. Third, in a footnote, it said the parties had agreed that the final paycheck claims related only to the franchise transfer class.

Jury determinations. The case was tried to a jury. With respect to the WBF claim, the jury found that the employees had proven that some class members were not paid minimum wages, not paid sufficient overtime, and/or paid their final wages late due to a WBF over-deduction. With respect to the shoe claims, the jury found that each employee authorized their shoe deductions in writing. Thus, they recovered no statutory damages. Further, the employees won their unpaid break claims resulting in an additional damage award. However, on August 8, 2023, the district court granted the employer’s renewed motion for judgment as a matter of law (JMOL) on the unpaid break claims.

The employer appealed from the judgments against it with respect to the WBF claims. The employees cross appealed with respect to the unpaid break and shoe claims.

Over-deductions. This appeal focused on the WBF over-deductions. Under Oregon law, WBF contributions must be split evenly between employer and employee. Because the employer made its employees pay more than their share, they could recover the amounts it should not have deducted. Also, if the employer over-deducted willfully, the employees could seek penalty wages. Beyond the over-deductions and penalty wages, the employees could also recover prejudgment interest. The jury awarded all these categories of damages.

Willfulness. On appeal, the employer denied liability for any penalty wages because the district court erred in finding the over-deductions willful at summary judgment. The Ninth Circuit reversed the partial summary judgment against the employer and remanded for a trial on willfulness. This disposed of the penalty wage award.

To recover penalty wages, the employees must prove the employer “willfully fail[ed] to pay... wages... of an[] employee whose employment cease[d.]” In Oregon employment law, “[a]n employer... willfully fails to pay wages owed at termination only if it is ‘fully aware of [its] obligation to do so’ but nonetheless consciously and voluntarily decides not to fulfill that obligation.” Thus, the employees had to prove that the employer over-deducted while fully aware of the circumstances and did not miscalculate unintentionally. Here, the employees did not meet their burden.

The appeals court determined that a reasonable jury could find the employer did not know it was making excess WBF deductions. The employer first learned of the error in February 2012. If it did not learn about the mistake until 2012, it lacked the knowledge needed to willfully fail to pay anyone’s final wages. At most, the employer over-deducted 0.4 cents per hour. About half the employees lost less than $2 over eight years. Across all of Oregon, and during the whole time the employer over-deducted, the over-deductions totaled about $22,000. The employer could have missed these minuscule sums without being careless.

A reasonable jury could find the employer was also not careless when it relied on its payroll software to handle these deductions. When Oregon’s WBF rate changed, the employer had to manually update the employee rate. A reasonable company might expect commercial payroll software to automatically split the WBF contributions after the total rate changed. The employees failed to point out any reason the employer should not have trusted its computer program to figure out how much to deduct automatically.

Thus, the appeals court remanded the matter so a jury can decide whether the employer was willful rather than granting summary judgment to the employer.

Unpaid break class. The employees contested how the district court handled the unpaid break claims. The district court did not certify an unpaid break class because the employees could not prove their claims class wide. The appeals court agreed with the employees that the district court’s initial reasoning was insufficient. However, the district court offered another reason the class claim could not proceed. Because that reasoning was correct, the appeals court affirmed the district court’s denial of an unpaid break class.

Next, the employees claimed the district court erred in granting the employer’s renewed motion for JMOL on their individual claims. They argued that, even if the class claims failed, they could prevail individually by proving the employer breached its On-Duty Meal Policy Agreements with the employees. Because the employees waived this theory, they could not rely on it on appeal. Accordingly, the appeals court affirmed here too.

Shoe claims. The appeals court, however, reversed the district court’s holding that the employees’ written authorization was a defense to all the shoe claims. Specifically, the district court found the employer established that the shoes were for the employees’ benefit. The employer could only deduct from its employees’ wages for the shoes if permitted by statute. The provision it cited only applies if the shoes benefited the employees. Thus, the appeals court reversed the employer’s victory on the shoe claims. On remand, the district court should (1) reconsider whether to certify a shoe class given this decision; (2) retry the shoe claims (on a class or individual basis) to see if the shoes were for the employees’ benefit; and (3) resolve any other issues consistent with the appellate decision.

The case is Nos. 23-2522 and 23-2527.

Judge: Smith, M., Jr.

Attorneys: Jon M. Egan (Law Offices of Jon M. Egan) for Jessica Gessele, Ashley Ortiz, Nicole Gessele, Tricia Tetrault, and Christina Mauldin. David P.R. Symes (Symes Law Office) and Ian T. Maher (Ballard Spahr) for Jack in the Box Inc.

Companies: Jack in the Box Inc.

Cases: WageHour ClassActions WorkingTime PensionBenefitPlans StateLawClaims AlaskaNews ArizonaNews CaliforniaNews HawaiiNews IdahoNews MontanaNews NevadaNews OregonNews WashingtonNews