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Chindarah v. Pick Up Stix

February 26, 2009


Appeal from a judgment of the Superior Court of Orange County, Jonathan H. Cannon, Judge. Affirmed. (Super. Ct. No. 03CC03896).

The opinion of the court was delivered by: Sills, P. J.




In February 2003, two former employees of Pick Up Stix (Stix) filed a complaint against their former employer alleging claims for unpaid overtime, penalties and interest due to the misclassification of their jobs as exempt from overtime pay. The complaint was amended in July 2003 to allege a proposed class action to recover unpaid overtime on behalf of the plaintiffs and all other current and former general managers, assistant managers, and lead cooks employed by Stix between February 28, 1999 through September 2003.

Stix‟s attempt to settle the lawsuit through mediation failed. Stix then decided to attempt settlement with as many putative class members as possible. It offered each of them an "amount . . . based upon a figure . . . Stix had previously offered at the mediation." Over two hundred former and current employees accepted the offer and signed a settlement agreement, which included a general release. By signing the agreement, the employee acknowledged that he or she had spent more than 50% of the time performing managerial duties, released Stix from all claims for unpaid overtime and any other Labor Code violations during the relevant time period, and agreed "not to participate in any class action that may include . . . any of the released Claims . . . ."

Shortly after the settlement agreements were signed, the original plaintiffs filed a second amended complaint including allegations that the settlement agreements violated numerous provisions of the Labor Code. Eight current and former Stix employees who had signed the settlement agreements joined the proposed class action as plaintiffs (the Chindarah plaintiffs).*fn1 Stix filed a cross-complaint against them, alleging breach of contract and breach of the settlement agreement and seeking declaratory relief. Stix then filed its answer to the second amended complaint, pleading the release as an affirmative defense.

The Chindarah plaintiffs moved for summary adjudication of the cross-complaint, claiming the releases they signed were void under Labor Code sections 206 and 206.5. Stix moved for summary judgment of the complaint, claiming the releases barred recovery by the Chindarah plaintiffs. The trial court found the Labor Code did not prohibit the release of a claim for unpaid wages where there is a bona fide dispute over whether any wages were owed. The trial court found because Stix "produced evidence showing a good faith dispute with regard to classification of the employees," it had "produced evidence . . . creating a triable issue of fact as to whether or not [plaintiffs] were owed any additional wages." Finding the releases valid as a matter of law, the trial court granted Stix‟s motion for summary judgment and denied the motion by the Chindarah plaintiffs.


Labor Code section 206.5 provides: "An employer shall not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made. A release required or executed in violation of the provisions of this section shall be null and void as between the employer and the employee. Violation of the provisions of this section by the employer is be a misdemeanor."*fn2 Section 1194, subdivision (a) provides: "Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney‟s fees, and costs of suit."

The release states, "In exchange for the release from Employee set forth below, the Company will pay Employee by check the gross amount of [varied amounts] less payroll deductions, in full and complete satisfaction of all issues and claims by Employee for unpaid overtime, penalties, interest and other Labor Code violations for the time period of February 28, 1999 through September 2003."

The Chindarah plaintiffs contend the release is void as a matter of law to the extent it releases claims for any wages actually due and unpaid and to the extent it constitutes an agreement to work for less than the overtime compensation actually due and unpaid. The Plaintiffs claim "wages actually due and unpaid" means wages that are disputed, if they are ultimately found to be owing. In other words, the Plaintiffs claim any settlement of a dispute over overtime compensation runs afoul of sections 206.5 and 1194.

There are no California cases directly on point. The two that come close are Reid v. Overland Machined Products (1961) 55 Cal.2d 203 (Reid) and Sullivan v. Del Conte Masonry Co. (1965) 238 Cal.App.2d 630 (Sullivan). In Reid, the plaintiff was a sales representative for the defendant. After the termination of his employment, the plaintiff demanded commissions owed to him, and the defendant sent him a check for approximately $800 "bearing an endorsement that the payment was "payment in full for all commissions due‟ under the contract." (Reid, at p. 206.) The parties agreed that the plaintiff was owed the amount of the check for orders invoiced at the time of the termination of his employment. But the plaintiff sued to recover commissions on orders obtained before the termination of employment but invoiced after termination. The defendant raised the defense that the plaintiff‟s retention of the check constituted an accord and satisfaction.

The court acknowledged that "[o]rdinarily the conditional payment of either an amount concededly owed or an amount in excess of that concededly owed is sufficient consideration for a settlement of a bona fide disputed claim." (Reid, supra, 55 Cal.2d at p. 207.) In the case of wage claims, however, the Legislature created a specific rule in the form of section 206, subdivision (a): "In case of a dispute over wages, the employer shall pay, without condition and within the time set by this article, all wages, or parts thereof, conceded by him to be due, leaving to the employee all remedies he might otherwise be entitled to as to any balance claimed." The court found no accord and satisfaction could result from the plaintiff retaining the check because "in a dispute over wages the employer may not withhold wages concededly due to coerce settlement of the disputed balance." (Reid, at p. 207.) In dicta, the court added the language ...

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