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Diaz v. Grill Concepts Services, Inc.

California Court of Appeals, Second District, Second Division

May 24, 2018

SANDRA DIAZ et al., Plaintiffs and Respondents,
v.
GRILL CONCEPTS SERVICES, INC., et al., Defendants and Appellants.

          APPEAL from a judgment of the Superior Court of Los Angeles County. No. BC542720 John Wiley, Jr., Judge. Affirmed.

          Stokes Wagner, Arch Y. Stokes, Peter B. Maretz, Shirley Banner Gauvin, and Jacqueline A. Godoy for Defendants and Appellants.

          Hadsell Stormer & Renick, Randy R. Renick, Cornelia Dai, and Springsong Cooper for Plaintiffs and Respondents.

          HOFFSTADT JUDGE.

         An employer that does not pay its employees the wage required by law when they quit or are fired is liable for both the underpayment of wages and, if the failure to pay is “willful, ” a “waiting time” penalty of up to 30 days' wages. (Lab. Code, §§ 203, subd. (a), 1194, subd. (a).) This appeal presents two questions regarding these “waiting time” penalties: (1) Is an employer's failure to pay “willful” when the employer (a) suspects the required wage has gone up but continues paying the old wage after halfheartedly investigating its suspicions, and (b) later makes an unreasonable argument that the wage law is unconstitutionally vague; and (2) Does a trial court have the discretion, on equitable grounds, to relieve an employer from having to pay waiting time penalties? We conclude that the answer to the first question is “yes, ” and the answer to the second question is “no.” Accordingly, we affirm the trial court's order finding the employer liable for waiting time penalties in this case.

         FACTS AND PROCEDURAL BACKGROUND

         I. Facts

         In April 2010, defendants Grill Concepts Services, Inc. and Grill Concepts, Inc. (collectively, Grill Concepts) opened a Daily Grill restaurant (the restaurant) near the LAX Airport. From that date until June 2014, Grill Concepts employed approximately 200 people at the restaurant as servers, bussers, hosts, cooks, and in other non-managerial positions. By June 2014, 83 of those employees had quit or been fired.

         The restaurant was located within the LAX Westin. During that time period, the LAX Westin was located within the Airport Hospitality Enhancement Zone (the Zone) designated by the City of Los Angeles.[1]

         The Los Angeles City Council had passed an ordinance creating the Zone in 2007 (the ordinance). (L.A. Ord. No. 178, 432, codified at L.A. Mun. Code, §§ 104.101 et seq.) The ordinance defined the Zone to be geographically coextensive with the “Gateway to Los Angeles (Century Corridor) Property Business Improvement District.” (L.A. Mun. Code, § 104.103.A.) The ordinance obligated the City to make efforts to promote the businesses within the Zone in a number of ways, including by marketing those business, by providing workforce training and development, by subsidizing power rates, and by improving the streets and waste management system. (Id., § 104.103.B.) In exchange, the ordinance required “Hotel Employers” within the Zone to pay “Hotel Workers” a “living wage” that was higher than the minimum wage required by state law. (Id., §§ 104.104, 104.106.)

         When the restaurant first opened, the ordinance required hotel employers to make annual adjustments to the living wage on January 1 of each year that were keyed to the Consumer Price Index for Urban Wage Earners and Clerical Workers in Los Angeles-Riverside Counties. (L.A. Mun. Code, §§ 104.104.A, 104.106.) On June 9, 2010, the City Council amended the ordinance, and that amendment took effect on July 24, 2010. The amendment required that the annual adjustments to the living wage be made on July 1 of each year, and that they be keyed to the annual increase in retirement benefits paid to members of the Los Angeles City Employees Retirement System that would be set forth in a bulletin promulgated each year by the City's Bureau of Contract Administration. (L.A. Mun. Code, §§ 104.104.A, 104.116, 184.09; L.A. Admin. Code, § 10.37.2, subd. (a).) The amendment resulted in larger annual adjustments to the living wage.

         Because the restaurant's employees were “hotel workers” within the meaning of the ordinance, Grill Concepts paid them a living wage. Until June 2014, however, Grill Concepts paid them the living wage prescribed by the original ordinance, even after the July 2010 amendment went into effect.

         As early as June 2010, Grill Concepts' human resources director suspected that Grill Concepts might be underpaying its employees. That month, the director saw a newspaper article reporting that the living wage within the Zone was higher than what Grill Concepts was paying. The director contacted Grill Concepts' outside counsel, who contacted the Los Angeles City Attorney's Office. A city attorney relayed that an amendment to the ordinance was “in process.” Neither counsel nor the director followed up with the city attorney's office. Nor did the director or outside counsel ask any of the other hotel operators or restaurateurs in the Zone what living wage they were paying. Instead, the director continued doing what he had always done-namely, typing “Airport Hospitality Enhancement Zone Ordinance” into the search query on the City of Los Angeles's website to see if an amended ordinance came up.

         In late March 2014, the attorney for two restaurant employees wrote to Grill Concepts, pointing out that Grill Concepts had not been paying the living wage mandated by the amended ordinance and demanding immediate reimbursement of the underpayment.

         II. Procedural Background

         In April 2014, three restaurant employees-plaintiffs Sandra Diaz, Alfredo Mejia, and Madecadel Goytia (collectively, plaintiffs)-sued Grill Concepts on behalf of a class of current and former restaurant employees for: (1) failing to pay the living wage required by the 2010 amendment to the ordinance, which (a) violated the ordinance (L.A. Mun. Code, § 104.109.A), and (b) constituted unfair competition (Bus. & Prof. Code, § 17200); and (2) “waiting time” penalties, as to those class members who had quit or been fired while being underpaid (Lab. Code, § 203). More specifically, plaintiffs sought (1) reimbursement for underpayment of the living wage (L.A. Mun. Code, § 104.109.A.1), (2) prejudgment interest on the underpayment (Civ. Code, § 3287), (3) a penalty of three times the underpayment due to Grill Concepts' “deliberate[] fail[ure]” to pay the correct amount (L.A. Mun. Code, §§ 104.102.G, 104.109.A.4), and, as to former employees, (4) waiting time penalties (Lab. Code, § 203).

         Within eight weeks, Grill Concepts calculated the underpayment and cut checks to all former and current employees for the full amount of underpayment.

         After the trial court certified the proposed class, the parties then filed cross-motions for summary adjudication aimed at assessing whether Grill Concepts was liable for anything beyond reimbursement of the underpaid wages. Specifically, the motions addressed whether the ordinance was unconstitutionally vague and, if not, whether Grill Concepts (1) owed prejudgment interest on the underpaid wages, (2) owed treble damages under the ordinance, and (3) owed waiting time penalties.

         The trial court partially granted and partially denied the cross-motions. The court ruled that the ordinance was not unconstitutionally vague. Although, in the court's view, the ordinance was “intricate and not user-friendly, ” the ordinance sufficiently advised hotel employers what was required of them, as shown by the fact that no “other employer had a problem” understanding the ordinance. The court next concluded that the amount of underpayment was “capable of being made certain by calculation, ” and thus subject to prejudgment interest under Civil Code section 3287. The court found that Grill Concepts was not liable for treble damages under the ordinance because it did not “deliberately violate the ordinance.” Lastly, the court ruled that Grill Concepts owed waiting time penalties because its failure to pay was “willful” within the meaning of Labor Code section 203. More specifically, the court found that there was no “good faith dispute” that ...


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