Appellate Reports

Brown v. Ralph’s Grocery Co. clarifies the requirements under PAGA for what constitutes a sufficient notice by the employee

Jeffrey I. Ehrlich
2018 December

Brown v. Ralph’s Grocery Co.

(2018) __ Cal.App.5th __ (2d District, Div. 5.)

Terri Brown brought a representative action against her employer, Ralph’s Grocery Co. and its parent company, alleging wage-and-hour violations. In 2009, Brown filed with the California Labor and Workforce Development Agency (LWDA) a notice of alleged Labor Code violations, as required under Labor Code section 2699.3, subdivision (a) as a condition of filing a PAGA action and filed her complaint in this action alleging PAGA claims. Thereafter, she filed a second amended complaint alleging new violations of different Labor Code provisions not specified in her 2009 notice.

Defendants moved for judgment on the pleadings, arguing the 2009 notice was deficient, which the trial court granted with leave to amend the notice and the complaint. In March 2016, Brown amended her notice and filed a third amended complaint.

Defendants demurred to the third amended complaint, which was sustained by the trial court. The trial court held that the PAGA claims were barred because the 2009 notice was deficient and the 2016 notice and third amended complaint were filed more than five years after the expiration of the statute of limitations. The trial court rejected Brown’s contention that equitable tolling saved the PAGA claims. Reversed and remanded.

PAGA was enacted to remedy systemic under-enforcement of worker protections. To address this problem, the Legislature adopted civil penalties for provisions that lacked existing noncriminal sanctions and deputized employees harmed by labor violations to sue on behalf of the state and collect penalties, to be shared with the state and other affected employees. Of the civil penalties recovered, LDWA receives 75 percent, leaving 25 percent for “aggrieved employees.” (Lab. Code, § 2699, subd. (i.).)

An aggrieved employee may bring a representative action for wage-and-hour violations, including for violations of the Labor Code provisions listed in section 2699.5. (§§ 2699, subd. (a) and 2699.3, subd. (a)); But “[b]efore bringing a civil action for statutory penalties, an employee must comply with Labor Code section 2699.3. (§ 2699, subd. (a). See also § 2699.5 [requiring compliance with § 2699.3, subd. (a), for violations of §§ 201, 202, 203, 204, 226, subd. (a), 226.7, 512, 1174, subd. (d), and 1198, among other sections].)

Section 2699.3, subdivision (a)(1) “requires the employee to give written notice of the alleged Labor Code violation to both the employer and the [LWDA], and the notice must describe facts and theories supporting the violation.” Then, if the agency notifies the employee and the employer that it does not intend to investigate ..., or if the agency fails to respond within 33 days, the employee may then bring a civil action against the employer.” If the plaintiff has an action pending, the plaintiff “may as a matter of right amend an existing complaint to add a cause of action arising under [PAGA]” within 60 days. (§ 2699.3, subd. (a)(2)(C).) The periods specified in section 2699.3 “are not counted as part of the time limited for the commencement of the civil action to recover penalties” under PAGA. (§ 2699.3, subd. (d).) Proper notice under section 2699.3 is a “condition” of a PAGA lawsuit. (Williams v. Superior Court (2017) 3 Cal.5th 531, 545.)

In Williams, the Court explained that “Nothing in ... section 2699.3, subdivision (a)(1)(A), indicates the ‘facts and theories’ provided in support of ‘alleged’ violations must satisfy a particular threshold of weightiness, beyond the requirements of nonfrivolousness generally applicable to any civil filing. The evident purpose of the notice requirement is to afford the relevant state agency, the [LWDA], the opportunity to decide whether to allocate scarce resources to an investigation, a decision better made with knowledge of the allegations an aggrieved employee is making and any basis for those allegations. Notice to the employer serves the purpose of allowing the employer to submit a response to the agency (see [ ] § 2699.3, subd. (a)(1)(B)), again thereby promoting an informed agency decision as to whether to allocate resources toward an investigation. Neither purpose depends on requiring employees to submit only allegations that can already be backed by some particular quantum of admissible proof.” (Id., 3 Cal.5th at p. 545-546.)

The Supreme Court in Williams recognized the distinction in the notice provision between the alleged violation (i.e., “the allegations an aggrieved employee is making”) and the facts and theories to support the alleged violation (i.e., “any basis for those allegations”). (3 Cal.5th at p. 546.) Federal decisions also recognize that the notice provision requires something more than bare allegations of a Labor Code violation. In Alcantar v. Hobart Service (9th Cir. 2015) 800 F.3d 1047 (Alcantar), the court held the plaintiff’s notice was “a string of legal conclusions with no factual allegations or theories of liability to support them.” (Id. at p. 1057.) The notice identified plaintiff’s employer and stated the employer “(1) failed to pay wages for all time worked; (2) failed to pay overtime wages for overtime worked; (3) failed to include the extra compensation required by ... section 1194 in the regular rate of pay when computing overtime compensation, thereby failing to pay Plaintiff and those who earned additional compensation for all overtime wages due;” and so on. The court reasoned these bare allegations were insufficient because they simply paraphrased the allegedly violated statutes. 

Brown’s 2009 Notice suffers from the same defect as in Alcantar; with one exception, the 2009 Notice was a string of legal conclusions that parroted the allegedly violated Labor Code provisions. It did not state facts and theories supporting the alleged violations not implied by reference to the Labor Code. The notice did not give sufficient information for the LWDA to assess the seriousness of the alleged violations and decide whether to allocate scarce resources to an investigation, or for defendants to determine what policies or practices were being complained of, have an opportunity to cure the violations, and prepare a meaningful response.

The one exception is the allegation of violations of section 226, subdivision (a), requiring employers to maintain accurate and complete wage statements. That allegation adds: “The violations include, without limitation, the failure to include the name and address of the legal entity that is the employer.” This minimal fact supports the alleged violation, making the 2009 Notice adequate for the alleged violation of section 226, subdivision (a).

The second and third amended complaints also included allegations based on Labor Code provisions that plaintiff did not specify in the 2009 Notice and did not include in the first amended complaint, namely sections 201, 202, 203, 558, 1174, subdivision (d), and 1198. Section 2699.3, subdivision (a) requires a plaintiff to give notice of “the specific provisions of this code alleged to have been violated” as a condition of filing suit. Plaintiff did not do that in the 2009 Notice for the alleged violations of sections 201, 202, 203, 1174, subdivision (d), and 1198, making the 2009 Notice deficient as to claims based on those sections.

Section 558 is different. That provision sets forth a remedy – a civil penalty – for certain Labor Code violations and violations of Industrial Welfare Commission orders. (§ 558, subd. (a).) An employee wishing to assert a PAGA claim would need to allege an underlying violation for which section 558 provides the remedy. Section 558, therefore, is not the type of provision to be specified in a PAGA notice.

Because plaintiff’s employment terminated in December 2009, to timely pursue PAGA claims for alleged violations occurring during her employment or upon her discharge, plaintiff had until December 2010 to file her PAGA notice. Section 2699.3 then gave her another 93 days, or until March 2011, to amend her complaint to include any PAGA claims. But plaintiff waited until March 2016 to file the 2016 Notice alleging violations of sections 201, 202, 203, 1174, subdivision (d), and 1198 and to seek to file the third amended complaint based on the 2016 Notice. By then, the one-year statute of limitations on her PAGA claims for violations of those provisions had long since run.

Brown cannot rely on equitable tolling to avoid the time bar. Allowing equitable tolling to preserve PAGA claims where a plaintiff failed to file an adequate section 2699.3 notice for years is inconsistent with the text and purpose of section 2699.3, subdivision (a) and would defeat the entire purpose of PAGA. If a plaintiff could wait many years to assert violations of the Labor Code or amend deficient notices, the LWDA would be hard pressed to make an informed decision about allocating scarce resources to old violations, the employer would be faced with responding based on stale evidence, and workplace violations could continue for years without being remediated or deterred.

But because the court concluded that the 2009 Notice was adequate as to the alleged violations of section 226, subdivision (a), the question remains open whether any of the later-alleged PAGA claims relate back to the claim for violations of section 226, subdivision (a). On remand, the trial court is to consider whether any of the later-added PAGA claims in the third amended complaint – the claims for violations of sections 201, 202, 203, 1174, subdivision (d), and 1198 – relate back solely as to the adequately noticed and alleged claim for violations of section 226, subdivision (a).

Lat v. Farmers New World Ins. Co.

(2018) __ Cal.App.5th __ (2d District, Div. 1)

Who needs to know about this case? Lawyers handling insurance cases where the insurer failed to give a notice as required by the policy.

Why it’s important: Re-affirms the viability of the notice-prejudice rule; applies the rule in a case where the required notice was given after the policy terminated.

Synopsis: Maria Carada purchased a life-insurance policy from Farmers in 1993, naming her sons (the Lats) as beneficiaries. The policy included a waiver-of-premium rider providing that Farmers would waive the cost of the insurance while Carada was disabled if she provided Farmers with notice and proof of her disability. The Rider required that Farmers receive written notice of disability during the period of disability “unless it can be shown that notice was given as soon as reasonably possible.” The Rider also provides that it “will end when,” among other events, “the policy ends.”

Carada was diagnosed with stage-IV colon cancer in August 2012. The illness and its treatment rendered her disabled. She did not give notice to Farmers. On May 20, 2013, Farmers sent a letter to Carada advising that unless she paid additional premiums by July 23, 2013, the policy would lapse. She failed to make further payments. Farmers notified her on July 23, 2013 that the policy was no longer in force.

In August 2013 Carada, through her agent, notified the company of her illness and disability, and asked to have the policy reinstated. Farmers denied the request because the policy had lapsed. Carada died on September 23, 2013.

The Lats then sued Farmers and their agent. The trial court granted Farmers’s motion for summary judgment, finding that “the policy provides that it will lapse upon the expiration of [a] 61-day grace period following a delinquency in premium payments. The Rider provides that it ends when the policy ends. In this case, it is undisputed that [Carada] did not make her premium payments within the 61-day grace period, and that she did not make a disability claim or offer proof of her disability until after the grace period elapsed. Consequently, the policy lapsed, and so too did the Rider.”

The Court of Appeal reversed. Under the notice-prejudice rule, an insurance company may not deny an insured’s claim under an occurrence policy based on lack of timely notice or proof of claim unless it can show actual prejudice from the delay. (Campbell v. Allstate Ins. Co. (1963) 60 Cal.2d 303, 305-306.) The burden of establishing prejudice is on the insurance company and prejudice is not presumed by delay alone. (Ibid.) To establish prejudice, the insurer must show it lost something that would have changed the handling of the underlying claim. (Belz v. Clarendon America Ins. Co. (2007) 158 Cal.App.4th 615, 632.)

Under the Rider in this case, there could be no deduction from Carada’s accumulation account while she was totally disabled, provided she gave Farmers timely notice and proof of her disability. There is no dispute that Carada was totally disabled while the policy was in force and that she would have been entitled to the deduction waiver benefit under the Rider if she had given Farmers timely notice of her disability. Under a straightforward application of the notice-prejudice rule, Farmers could not deny Carada the benefit of the deduction waiver unless Farmers suffered actual prejudice from the delayed notice. Farmers has made no such showing and, therefore, Carada was entitled to the deduction waiver benefit. If Farmers had provided that benefit, Carada’s policy would have been in force at the time of her death. Indeed, the only reason Farmers terminated Carada’s policy was that it applied the deductions it had promised Carada it would waive.

Jeffrey I. Ehrlich Jeffrey I. Ehrlich

Jeffrey I. Ehrlich is the principal of the Ehrlich Law Firm, in Claremont, California. He is a cum laude graduate of the Harvard Law School, a certified appellate specialist by the California Board of Legal Specialization, and a member of the CAALA Board of Governors. He is the editor-in-chief of Advocate magazine and a two-time recipient of the CAALA Appellate Attorney of the Year award.

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