Clear Lines Reaffirmed: No Right to Jury in California Unfair Competition and False Advertising Claims; No Right to Attorneys’ Fees in Claim for Missed Rest/Meal Breaks

Standard

In two cases decided on April 30, 2020, the California Supreme Court used an outlier appellate court decision and the California Court of Appeal used a trial court decision that granted relief not warranted by the record or case authority to reaffirm constitutional and statutory rights and limitations.  In one case, the Supreme Court clarified that claims under California’s Unfair Competition Law (Bus. & Prof. Code § 17200 et seq.) (“UCL”) and False Advertising Law (Bus. & Prof. Code § 17500 et seq.) (“FAL”) are equitable, providing no ground to assert a right to a jury trial.  In the other, the Court of Appeal reversed a trial court award of attorneys’ fees in a claim for missed rest and meal breaks, because the Labor Code section granting the right to fees was inapplicable to the claim.

These decisions instruct (1) that all UCL and FAL claims will be tried to the court, without a jury, and (2) a claim for premium pay for missed meal and rest breaks will not support an attorneys’ fees award under Labor Code section 218.5(a).

I.  Nationwide: California Constitutional and Statutory Provisions Do Not Support Trial by Jury of Claims under the UCL and FAL

In Nationwide Biweekly Administration, Inc. v. Superior Court (Apr. 30, 2020) 9 Cal.5th 279, the California Supreme Court exhaustively reviewed California statutory and constitutional case law, as well as legislative and common law history, to hold that claims under the UCL and FAL are equitable and, therefore, there is no right to a jury trial.  Supreme Court review was prompted by a Court of Appeal decision that, according to the Court, was alone in determining that, where the government seeks civil penalties in an action under either of these two statutes while also seeking injunctive or other equitable relief, the California Constitution requires a jury trial.

In line with their broad remedial intent and purpose, the UCL and FAL were “fashioned to permit courts to utilize their traditional flexible authority, tempered by judicial experience and familiarity with the treatment of analogous business practices in [California] and other jurisdictions, in evaluating whether a challenged business act or practice or advertising should properly be considered impermissible under” the UCL or FAL.  Moreover, based upon the broad discretion that the statutes granted the courts to determine whether and in what amount civil penalties should be assessed, together with the other equitable remedies available, including injunctive relief and restitution, the Court concluded “that the gist of both the UCL and FAL causes of action . . . is equitable,” rather than an action akin to “legal causes of action in which the right to jury trial existed at the time of the first [California] Constitution’s adoption in 1850 . . . .”  Therefore, the right to jury established by the California Constitution did not apply to claims for injunctive and restitutionary relief and for civil penalties under those statutes.

The Court limited its holding to the claims and remedies provided for in the UCL and FAL, in contrast to “other statutory causes of action that authorize both injunctive relief and civil penalties,” as to which the Court expressed no opinion regarding whether the state Constitution would protect the right to jury trial.  The “nature of the substantive statutory standards and remedies embodied in the civil causes of action under the UCL and FAL establish the equitable nature of the actions,” and an analysis of other statutes with similar remedies but with different applicable standards might result in a different conclusion.

Nevertheless, the Nationwide decision offers parties guidelines and standards by which to argue against or for the right to a jury trial on claims under other statutes authorizing similar relief.

II.  Betancourt: Premium Wage Claims for Missed Meal and Rest Breaks Do Not Support a Right to Attorneys’ Fees as a Claim for Wages

In Betancourt v. OS Restaurant Services, LLC (Apr. 30, 2020) 2020 WL 2570839, the California Court of Appeal held that, where the claims in an employment lawsuit were for premium pay for missed rest and meal breaks under Labor Code section 226.7(c), a trial court erred in awarding attorneys’ fees after settlement of those claims, because none of them entitled the plaintiff to fees under section 218.5 of the California Labor Code.  Section 218.5(a) provides:  “In any action brought for the nonpayment of wages, . . . the court shall award reasonable attorney’s fees and costs to the prevailing party if any party to the action requests attorney’s fees and costs upon the initiation of the action.”  (To recover fees, a prevailing defendant employer must, in addition, show “that the employee brought the court action in bad faith.”)

Following the California Supreme Court decision in Kirby v. Immoos Fire Protection, Inc. (2012) 53 Cal.4th 1244, the Court explained that “an action for nonprovision of meal or rest breaks is not an action brought for nonpayment of wages.  The remedy for nonprovision of meal or rest breaks is an additional hour of pay (often described in the case law as ‘premium wages’), but that does not turn a lawsuit for violation of meal or rest breaks into a lawsuit for nonpayment of wages.”

Likewise, the claim for premium pay for missed rest and meal breaks did not entitle the plaintiff to recover penalties for alleged waiting time and wage statement violations, under sections 203 and 226 of the Labor Code.  Therefore, she could not recover attorneys’ fees under section 226(e) of the Labor Code, which authorizes such an award for “section 226 derivative penalties” claims.

Although the plaintiff sought to characterize the “predicate misconduct” that her claim addressed as the “failure to pay earned wages,” the trial record did not support that characterization.

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