Diaz v. Grill Concepts Servs., Inc.

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.

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 ).

The matter proceeded to trial. By the time of trial, however, the parties had stipulated that, based on the court's earlier rulings, Grill Concepts owed $31,992.60 in prejudgment interest and $268,758.71 in waiting time penalties. The only issue tried to the court was whether the court had the discretion to waive the waiting time penalties for equitable reasons. The trial court ruled that it did not, although it commented that it would have exercised that discretion if it existed.

After the trial court entered judgment, Grill Concepts filed this timely appeal.

DISCUSSION

Grill Concepts contests the trial court's award of waiting time penalties to those plaintiffs who were former employees, asserting that the trial court

This vagueness standard is hard to meet, and its stringency is not accidental. Language itself is notoriously imprecise. ( People v. Superior Court (Hartway) (1977) 19 Cal.3d 338 , 345, 138 Cal.Rptr. 66 , 562 P.2d 1315 ( Hartway ); Robinson v. United States (1945) 324 U.S. 282 , 286, 65 S.Ct. 666 , 89 L.Ed. 944 ["In most English words and phrases there lurk uncertainties"].) Laws are also accorded a " 'strong presumption' " of constitutionality that is rebutted only upon a showing that they are " ' "clearly, positively, and unmistakably" ' " unconstitutional. ( Tobe v. City of Santa Ana (1995) 9 Cal.4th 1069 , 1107, 40 Cal.Rptr.2d 402 , 892 P.2d 1145 .) And when the law "regulates business behavior," the general presumption of constitutionality is even stronger and, more to the point, the law "is subject to a less strict vagueness test" because such laws have a narrower reach and because "businesses ... can be expected to consult relevant legislation in advance of action." ( Hoffman Estates v. Flipside, Hoffman Estates (1982) 455 U.S. 489 , 498-499, 102 S.Ct. 1186 , 71 L.Ed.2d 362 .)

A law is consequently vague only if it is impossible to give the law a " 'reasonable and practical construction.' " ( American Civil Liberties Union v. Board of Education (1963) 59 Cal.2d 203 , 218, 28 Cal.Rptr. 700 , 379 P.2d 4 .) This assessment is not made in a vacuum. To the contrary, " '[t]he particular context is all important.' " ( People ex rel. Gallo v. Acuna (1997) 14 Cal.4th 1090 , 1116, 60 Cal.Rptr.2d 277 , 929 P.2d 596 , quoting Communications Assn. v. Douds (1950) 339 U.S. 382 , 412, 70 S.Ct. 674 , 94 L.Ed. 925 .) This assessment therefore entails "consulting 'other definable sources' "-such as other statutes and regulations, legislative history, judicial opinions, legal treatises, and legal dictionaries-"that may dispel doubt and

Third, Grill Concepts notes that the City Council's amendment left intact the initial version of section 104.106, and argues that this

Second, Grill Concepts criticizes the trial court for ruling or otherwise suggesting that (1) a good faith dispute is invalid unless raised contemporaneously with the underpayment of wages, (2) Grill Concepts' vagueness argument is "separate" from its argument that its conduct was not willful, and (3) whether Grill Concepts had a good faith dispute turns on whether its vagueness challenge defense was actually viable. Our analysis on appeal does not make any of these alleged errors. Because we review the trial court's ruling and not its reasoning ( People v. Chism (2014) 58 Cal.4th 1266 , 1295, fn. 12, 171 Cal.Rptr.3d 347 , 324 P.3d 183 ), any missteps in its reasoning are irrelevant.

In sum, Grill Concepts' vagueness challenge does not qualify as a good faith dispute.

II. Did the Trial Court Err in Concluding that it Lacked Discretion to Waive the Waiting Time Penalties Under Labor Code section 203 ?

Grill Concepts argues that Labor Code section 203 confers upon trial courts the discretion to dispense with waiting time penalties for equitable reasons. This argument rests upon a question of statutory interpretation, so our review is de novo. ( Weatherford , supra , 2 Cal.5th at p. 1247, 218 Cal.Rptr.3d 394 , 395 P.3d 274 .)

We conclude that Labor Code section 203 does not imbue trial courts with the discretion to waive or reduce waiting time penalties, and do so for two reasons.

First, the plain text of the statute says: "If an employer willfully fails to pay ... any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty" for up to 30 days. ( Lab. Code, § 203, italics added.) And the Labor Code elsewhere provides that, throughout that code, " '[s]hall' is mandatory ...." ( Lab. Code, § 15 ; accord, Tarrant Bell Property, LLC v. Superior Court (2011) 51 Cal.4th 538 , 542, 121 Cal.Rptr.3d 312 , 247 P.3d 542 ["we 'ordinarily' construe ... the word 'shall' as mandatory"].) Where, as here, a statute's plain text is unambiguous, our analysis begins and ends with that text. (

Second, the purpose of the waiting time penalty is "to compel the immediate payment of earned wages upon a discharge" by attaching a substantial penalty to any delay in cutting the final paycheck. ( Smith v. Superior Court (2006) 39 Cal.4th 77 , 92, 45 Cal.Rptr.3d 394 , 137 P.3d 218 ; Mamika v. Barca (1998) 68 Cal.App.4th 487 , 491-492, 80 Cal.Rptr.2d 175 .) Eliminating such delay is " 'essential to the public welfare' " because employees " 'depend[ ] on wages for the necessities of life.' " ( Pressler v. Donald L. Bren Co. (1982) 32 Cal.3d 831 , 837, 187 Cal.Rptr. 449 , 654 P.2d 219 , quoting Trombley , supra , 31 Cal.2d at pp. 809-810, 193 P.2d 734 .) Making the penalty optional means it will not always be applied and, more to the point, means it will likely be litigated in every case; the very existence of such an escape valve reduces employers' incentive to comply and thereby undercuts the very purpose of the penalty. We will not construe a statute in a way that undermines its purpose. (See Pineda v. Bank of America, N.A. (2010) 50 Cal.4th 1389 , 1397, 117 Cal.Rptr.3d 377 , 241 P.3d 870 .)

Grill Concepts notes that courts have fashioned equitable exceptions in other contexts, and urges us to do so here. Most of these cases have nothing to do with Labor Code section 203 or, if they do, are distinguishable. In Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976 , 983, 996, 4 Cal.Rptr.2d 837 , 824 P.2d 643 , our Supreme Court excused a contractor from the applicable prevailing wage law, based on "equitable considerations," when the government agency that hired the contractor represented that the prevailing wage law did not apply to the project at issue. The city attorney's office made no such representation here. In Cantlay & Tanzola, Inc. v. Ingels (1939) 31 Cal.App.2d 553 , 556-557, 88 P.2d 141 , the court excused a vehicle owner from paying a penalty for late payment of vehicle registration

Because the restaurant's employees were "hotel workers" within the meaning

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

Labor Code section 203 empowers a court to award "an employee who is discharged or who quits" a penalty equal to up to 30 days' worth of the employee's wages "[i]f an employer willfully fails to pay" the employee his full wages immediately (if discharged) or within 72 hours (if he or she quits). ( Lab. Code, § 203, italics added; see also Lab. Code, §§ 201, subd. (a), 202, subd. (a) ; Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365 , 378, 36 Cal.Rptr.3d 31 .) It is called a waiting time penalty because it is awarded for effectively making the employee wait for his or her final paycheck. A waiting time penalty may be awarded when the final paycheck is for less than the applicable wage-whether it be the minimum wage, a prevailing wage, or a living wage. ( Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314 , 326, 37 Cal.Rptr.3d 460 ; Road Sprinkler Fitters Local Union No. 669 v. G & G Fire Sprinklers, Inc. (2002) 102 Cal.App.4th 765 , 779-780, 125 Cal.Rptr.2d 804 ( Road Sprinkler Fitters ).)

Grill Concepts c

ontends that it did not act willfully in failing to pay those plaintiffs who quit or were fired before June 2014 the proper amount on their final paycheck because (1) Grill Concepts' underpayment was due to its inability to locate the amended ordinance (rather than a deliberate design to underpay its employees), and (2) even if Grill Concepts had located the amended ordinance, the living wage ordinance as a whole is so confusing to apply that its mistake was innocent (rather than willful).

Does Grill Concepts' failure to find the amended ordinance mean that its failure to follow that ordinance in paying its employees is not willful? We conclude that the answer is "no."

Ignorance of the law is no excuse. This maxim is so long-standing and so well established that it is part of the very fabric of our legal system. ( Stark v. Superior Court (2011) 52 Cal.4th 368 , 396-397, 128 Cal.Rptr.3d 611 , 257 P.3d 41 ; Brumagim v. Tillinghast (1861) 18 Cal. 265 , 271.) A closely related corollary is that citizens have a "duty of inquiry to determine" "whether a contemplated course of conduct is within a statutory prohibition." ( Personal Watercraft Coalition v. Marin County Bd. of Supervisors (2002) 100 Cal.App.4th 129 , 139, 122 Cal.Rptr.2d 425 ( Personal Watercraft ).) Together, they establish the principle that " '[i]gnorance of the law, at least where coupled with negligence in failing to look it up, will not justify a trial court in granting relief ....' " ( Tammen v. County of San Diego (1967) 66 Cal.2d 468 , 476, 58 Cal.Rptr. 249 , 426 P.2d 753 ( Tammen ); Security Truck Line v. Monterey (1953) 117 Cal.App.2d 441 , 445, 256 P.2d 366 ; Community Redevelopment Agency v. Superior Court (1967) 248 Cal.App.2d 164 , 174, 56 Cal.Rptr. 201 .)

Here, Grill Concepts' ignorance of the amended ordinance was " 'coupled with [its] negligence in failing to look it up.' " ( Tammen , supra , 66 Cal.2d at p. 476, 58 Cal.Rptr. 249 , 426 P.2d 753 .) The undisputed facts show that Grill Concepts suspected it was underpaying its employees and went so far as to confirm that the living wage law was in the midst of being amended, but then did nothing else. It did not follow up with the city attorney's office, it did not ask any other hotelier or restaurateur in the Zone what living wage they were paying, and it did not do any further legal research. Instead, it kept running the same website query it had run in the past (and which had failed to turn up the pending amendment). The trial court summed it up best when it noted that Grill Concepts "failed to follow through properly on its investigation of where to find the governing statute" and that its efforts were "below the standard of care." Accordingly, Grill Concepts' inability to locate the amended ordinance does not preclude the finding that its failure to pay was willful.

B. Inability to understand the ordinance

Does Grill Concepts' purported failure to understand the ordinance in its amended form constitute a good faith dispute that means its failure to follow the ordinance was not willful? Because, as noted above, a good faith dispute is defined as the assertion of a defense that is either successful or, if ultimately unsuccessful, nonetheless supported by evidence, reasonable, and

1. Is the ordinance unconstitutionally vague?

Because the constitutional guarantee of due process generally secures the right to notice and the opportunity to be heard ( Dusenbery v. United States (2002) 534 U.S. 161 , 167, 122 S.Ct. 694 , 151 L.Ed.2d 597 ), a law is unconstitutionally

The amended living wage ordinance is not vague because it is possible to give it a " 'reasonable and practical construction.' " Los Angeles Municipal Code sections 104.104 and 104.106 together require that "Hotel Employers" "shall pay" "Hotel Workers" "no less than the hourly rates set under the authority of this article." (L.A. Mun. Code, §§ 104.104.A [so stating], 104.106.B ["On July 1, 2007, Hotel Workers shall be paid a living wage in its

First, Grill Concepts complains that the ordinance requires hoteliers to look to a bulletin "to be published somewhere at some time by some city agency." That a law points a person to an exterior source of information does not render that law unconstitutionally vague. As noted above, laws are to be evaluated against the backdrop of " 'other definable sources' " ( Personal Watercraft , supra , 100 Cal.App.4th at pp. 139-140, 122 Cal.Rptr.2d 425 ), and here the ordinance expressly spells out which source to consult (namely, the annual bulletin). (Accord, In re Mariah T. (2008) 159 Cal.App.4th 428 , 435, 71 Cal.Rptr.3d 542 ["a statute will be deemed sufficiently precise if its meaning can be fairly ascertained by references to similar statutes" or sources].) Further, the ordinance designates which agency is to publish the bulletin. And the ordinance necessarily implies that the bulletin will be published between June 1 (the date the agency must, by statute, be informed of the adjustment amount) and July 1 (the date the agency's bulletin must be implemented by hoteliers and restaurateurs). Grill Concepts also presented no evidence indicating that any hotelier or restaurateur in the Zone had difficulty locating the agency's bulletin within that window each year. ( Allen v. City of Sacramento (2015) 234 Cal.App.4th 41 , 54, 183 Cal.Rptr.3d 654 [burden of proof on party alleging vagueness].)

Second, Grill Concepts contends that Los Angeles Administrative Code section 10.37.2(a) does not clearly point the reader to the annual adjustment rate used by LACERS. The text of that section provides that the LACERS adjustment rate applies to "[ (1) ] [t]he hourly rate with health benefits to be paid to all Employees and [ (2) ] the hourly rate without health benefits to be paid to Airport Employees." (L.A. Admin. Code, § 10.37.2(a).) Grill Concepts asserts that because its employees are not paid the "hourly rate with health benefits" (because they are paid the higher hourly rate for employees who do not receive health benefits) and are not

Fourth, Grill Concepts points out that plaintiffs' lawyer, in its March 2014 demand letter, cited a living wage scale inapplicable to plaintiffs. Without knowing why the wrong wage scale was cited, we cannot and need not infer that it was due to a misunderstanding of the ordinance rather than a clerical error.

In sum, the amended ordinance is not unconstitutionally vague.

2. Even though unsuccessful, is the vagueness challenge to the ordinance supported by evidence, reasonable, and presented in good faith ?

Although we have no reason to question the trial court's finding that Grill Concepts asserted its vagueness challenge in good faith, its challenge is neither supported by the evidence nor reasonable. As explained above, we have determined that the amended ordinance is not vague, and our determination was not a close call. The unreasonableness of Grill Concepts' vagueness challenge is only confirmed by the absence of any evidence that any other hotelier or restauranteur had any problem reading the ordinance to pay its employees the proper living wage. ( Amaral , supra , 163 Cal.App.4th at p. 1183, 78 Cal.Rptr.3d 572 [absence of evidence of confusion refutes vagueness challenge].)

Grill Concepts raises two further points in support of its position that its vagueness challenge constitutes a good faith dispute.

First, it trumpets the trial court's finding that it acted in good faith in asserting its vagueness challenge. This is true, but of no moment. A " 'good

DISPOSITION

The judgment is affirmed. Plaintiffs are entitled to their costs on appeal.

We concur:

LUI, P. J.

CHAVEZ, J.