Diaz v. Grill Concepts Services, Inc. ( 2018 )

Filed 5/24/18
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
SANDRA DIAZ et al., B280846
Plaintiffs and Respondents, (Los Angeles County
Super. Ct. No. BC542720)
v.
GRILL CONCEPTS SERVICES,
INC., et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of Los
Angeles County. 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.
******
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
2
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
1 In October 2014, the Los Angeles City Council enacted a
Citywide Hotel Worker Minimum Wage Ordinance that extended
the Zone’s “living wage” law to all hotels throughout the City (See
L.A. Ord. No. 183,241), thereby eclipsing the ordinance at issue
in this appeal.
3
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
4
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
5
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 would have defeated a finding of willfulness
because Grill Concepts merely “failed to exert enough effort to lay
its hands on the [amended ordinance]”; “[a]n effort too weak,” the
court reasoned, “does not create a good faith dispute.”
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.
6
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 erred in concluding that (1) Grill
Concepts acted willfully in underpaying those plaintiffs, and
(2) courts lack discretion to waive the waiting time penalties.
Both issues are properly before us. Although the first issue was
decided at the summary adjudication stage, it is properly before
us because it was not revisited at trial. (Federal Deposit Ins.
Corp. v. Dintino (2008) 167 Cal. App. 4th 333, 343; Code Civ. Proc.,
§ 906.) And the second issue was decided at trial. (Code Civ.
Proc., § 904.1, subd. (a)(1).)
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.) 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; Road Sprinkler Fitters Local Union No. 669 v. G & G
Fire Sprinklers, Inc. (2002) 102 Cal. App. 4th 765, 779-780 (Road
Sprinkler Fitters).)
7
I. Did the Trial Court Err in Concluding that Grill
Concepts Acted Willfully?
Grill Concepts contends 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).
In evaluating these arguments, various standards of review
come into play. To the extent we must interpret the Labor Code
or City ordinances or evaluate constitutional questions, we do so
independently. (Weatherford v. City of San Rafael (2017)
2 Cal.5th 1241, 1247 (Weatherford) [statutory interpretation];
People v. Cromer (2001) 24 Cal. 4th 889, 894 [constitutional
interpretation].) To the extent we must evaluate the trial court’s
finding that Grill Concepts acted willfully, our standard of review
is more nuanced: Although a finding of willfulness is typically
reviewed for substantial evidence after trial (Amaral v. Cintas
Corp. No. 2 (2008) 163 Cal. App. 4th 1157, 1202-1203 (Amaral);
see also Nordstrom Com. Cases (2010) 186 Cal. App. 4th 576, 584
[abuse of discretion review]), where, as here, that finding is made
in the context of a motion for summary adjudication—and is thus
predicated on the absence of any material, disputed facts—we
review the finding of willfulness de novo. (Poole v. Orange
County Fire Authority (2015) 61 Cal. 4th 1378, 1384 [“application
of a statute to undisputed facts” calls for “de novo” review];
accord, Jacks v. City of Santa Barbara (2017) 3 Cal.5th 248, 273
[summary adjudication rulings reviewed de novo]).
8
Under Labor Code section 203, a “willful failure to pay
wages . . . occurs when an employer intentionally fails to pay
wages to an employee when those wages are due.” (Cal. Code
Regs., tit. 8, § 13520; see also Barnhill v. Robert Saunders & Co.
(1981) 125 Cal. App. 3d 1, 7 (Barnhill) [“‘willful’ . . . means that
the employer intentionally failed or refused to perform an act
which was required to be done”]; Kao v. Holiday (2017)
12 Cal.App.5th 947, 963.) The failure to pay is willful if the
employer “knows what [it] is doing [and] intends to do what [it] is
doing” (In re Trombley (1948) 31 Cal. 2d 801, 807 (Trombley)), and
does not also require proof that the employer acted with “a
deliberate evil purpose to defraud work[ers] of wages which the
employer knows to be due” (Barnhill, at p. 7; Davis v. Morris
(1940) 37 Cal. App. 2d 269, 274 [“‘“wil[l]ful” . . . does not
necessarily imply anything blameable, or any malice or wrong
toward the other party’”]).2
Under this definition, an employer’s failure to pay is not
willful if that failure is due to (1) uncertainty in the law
(Barnhill, supra, 125 Cal.App.3d at p. 8; Amaral, supra,
163 Cal.App.4th at p. 1202), (2) representations by the taxing
authority that no further payment was required (Amaral, at pp.
1202-1203), or (3) the employer’s “good faith mistaken belief that
wages are not owed” grounded in a “‘good faith dispute,’” which
exists when the “employer presents a defense, based in law or
fact which, if successful, would preclude any recovery on the part
2 Thus, the definition of willful under Labor Code section 203
differs from the definition of willful under the ordinance because
the latter defines the term as a “deliberate[] fail[ure] or refus[al]
to comply.” (L.A. Mun. Code, § 104.102.G.)
9
of the employee” (Road Sprinkler Fitters, supra, 102 Cal.App.4th
at p. 782; Cal. Code Regs., tit. 8, § 13520, subd. (a); Trombley,
supra, 31 Cal.2d at p. 808). A good faith dispute can exist even if
the employer’s proffered defense is “ultimately unsuccessful,” but
not if the defense is also “unsupported by any evidence, [is]
unreasonable, or [is] presented in bad faith.” (Cal. Code Regs.,
tit. 8, § 13520, subd. (a).)
A. Inability to locate amended ordinance
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; Brumagin 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 (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 (Tammen); Security Truck Line v. Monterey
(1953) 117 Cal. App. 2d 441, 445; Community Redevelopment
Agency v. Superior Court (1967) 248 Cal. App. 2d 164, 174.)
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.) The undisputed facts show
that Grill Concepts suspected it was underpaying its employees
10
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
presented in good faith (Cal. Code Regs., tit. 8, § 13520, subd.
(a)), we must ask two questions: (1) Is Grill Concepts’ vagueness
challenge to the ordinance meritorious, and if not, (2) Is that
challenge nevertheless supported by evidence, reasonable, and
presented in good faith? We conclude that the answer to both
questions is “no.”
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), a
11
law is unconstitutionally vague only it if fails to “‘give the person
of ordinary intelligence a reasonable opportunity to know what is
prohibited’” or to know “what conduct on [his or her] part will
render [him or her] liable to [the law’s] penalties.” (Cranston
v. City of Richmond (1985) 40 Cal. 3d 755, 763; Connally
v. General Const. Co. (1926) 269 U.S. 385, 391.)
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
(Hartway); Robinson v. United States (1945) 324 U.S. 282, 286
[“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.) 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.)
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.) 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, quoting Communications
Assn. v. Douds (1950) 339 U.S. 382, 412.) This assessment
therefore entails “consulting ‘other definable sources’”—such as
12
other statutes and regulations, legislative history, judicial
opinions, legal treatises, and legal dictionaries—“that may dispel
doubt and uncertainty” appearing on the face of the law alone.
(Personal Watercraft, supra, 100 Cal.App.4th at pp. 139-140;
Hartway, supra, 19 Cal.3d at p. 345; Williams v. Garcetti (1993)
5 Cal. 4th 561, 570 [looking to “the definitions and the limits of
parental duties that have long been a part of California
dependency law and tort law”].) In light of these standards, it is
not enough to show that a law lacks the precision of a laser or of
mathematics. (Personal Watercraft, at p. 138; Grayned v. City of
Rockford (1972) 408 U.S. 104, 110.) Nor is it enough to show that
the law “requires interpretation” (People v. Hazelton (1996)
14 Cal. 4th 101, 109), that the law’s meaning is “difficult to
ascertain” (Smith v. Peterson (1955) 131 Cal. App. 2d 241, 246),
or that the law is “‘difficult to apply’” (People v. Serrata (1976)
62 Cal. App. 3d 9, 22).
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 entirety, as required by section 104.104.A of this
ordinance”].) Section 104.104.A states that, “[s]tarting July 1,
2009, and continuing thereafter,” the hourly “rates shall continue
to be adjusted as of July 1 of each year to be the same dollar
amounts as the wage rates at such dates adjusted pursuant to
Section 10.37.2(a) of the Los Angeles Administrative Code.” (L.A.
Mun. Code, § 104.104.A.) Section 10.37.2(a) of the Los Angeles
13
Administrative Code looks to the “annual[] . . . adjustments, if
any, to retirement benefits paid to members of the Los Angeles
City Employees Retirement System (LACERS)” and specifies that
the Designated Administrative Agency “shall publish a bulletin
announcing the adjusted rates” each year. (L.A. Admin. Code,
§ 10.37.2(a).) The ordinance defines the Designated
Administrative Agency for these purposes as the City’s Bureau of
Contract Administration. (L.A. Mun. Code, §§ 104.116, 184.09.)
Read together, a “person of ordinary intelligence” would
understand that, starting July 1, 2009, he or she would need to
increase the living wage by the amount set forth in the Bureau of
Contract Administration’s annual bulletin. Put differently, the
dots all connect.3
Grill Concepts asserts that the amended ordinance is
impermissibly vague for four reasons.
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), 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 [“a statute will be deemed sufficiently
3 Although the amendment did not take effect until nearly a
year later (and hence required employers to prospectively
increase the living wage to account for annual adjustments made
before the amendment was enacted), this does not affect the
understandability of the ordinance on its face, and no one has
challenged this quirk of the statute.
14
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 [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 “Airport Employees” (because they
do not work for LAX), section 10.37.2(a) by its own terms does not
apply specifically to them, thereby making it unclear whether the
LACERS adjustment rate in section 10.37.2 applies to them. We
reject this argument because the amended ordinance, by its plain
language, borrows the annual adjustment rate from section
10.37.2(a); it does not purport to incorporate the entirety of the
section’s provisions. (L.A. Mun. Code, § 104.104.A [specifying
15
that the hourly rates “shall continue to be adjusted . . . to be the
same dollar amounts as the wage rates at such dates adjusted
pursuant to Section 10.37.2(a)”].)
Third, Grill Concepts notes that the City Council’s
amendment left intact the initial version of section 104.106, and
argues that this creates uncertainty because that version
continues to reference the original annual adjustment metric. To
be sure, section 104.106.C continues to read: “On January 1,
2008, Hotel Workers shall receive their first annual living wage
adjustment, as specified in section 104.104.A of this ordinance,
which requires annual adjustments to correspond to changes, if
any, to the Consumer Price Index for Urban Wage Earners and
Clerical Workers in Los Angeles-Riverside Counties.” (L.A. Mun.
Code, § 104.106.C.) But the amended section 104.104 expressly
provides that, “[s]tarting July 1, 2009, and continuing thereafter”
employers subject to the ordinance are to use the new annual
adjustment metric. (L.A. Mun. Code, § 104.104.A.) Any person
reading the statute would know that section 104.106 explained
the metric for making the annual adjustment rate on January 1,
2008, while section 104.104 explains the metric for making
annual adjustments starting on July 1, 2009, and thereafter.
And any residual confusion is dispelled by the general legal
principle that the more recently enacted ordinance trumps.
(Pacific Lumber Co. v. State Water Resources Control Bd. (2006)
37 Cal. 4th 921, 942.)
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.
16
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 [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 faith dispute’” excludes defenses that “are
unsupported by any evidence, are unreasonable, or are presented
in bad faith.” (Cal. Code Regs., tit. 8, § 13520, subd. (a), italics
added; accord, FEI Enterprises, Inc. v. Yoon (2011) 194
Cal. App. 4th 790, 802 [good faith defense regulation “imposes an
objective standard”].) Any of the three precludes a defense from
being a good faith dispute. Thus, Grill Concepts’ good faith does
not cure the objective unreasonableness of its challenge or the
lack of evidence to support it.
17
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), 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.)
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
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538, 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.
(Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal. 4th 728, 737
[“‘“we follow the Legislature’s intent, as exhibited by the plain
meaning of the actual words of the law”’”].) Our Legislature
knows how to make the imposition of a penalty discretionary
(e.g., Lab. Code, § 2699); its decision not to do so in Labor Code
section 203 must be given effect. Further, as noted above, the
term willfully has been construed—by cases and by regulation—
to exclude situations in which an employer’s failure to pay is
understandable due to equitable considerations (such as
uncertainty in the law, misrepresentation by the taxing
authority, or the existence of a good faith dispute). Were we to
recognize a trial court’s equitable discretion to except an
employer from a waiting time penalty on equitable grounds
unconnected to whether the failure to pay was willful, we would
be impermissibly creating an exception to the penalty for willful
violations. This is not something we are allowed to do. (People
v. Pieters (1991) 52 Cal. 3d 894, 900-901 [“creating a statutory
exception where the Legislature has failed to do so would intrude
upon a legislative function”]; Simmons v. Ghaderi (2008)
44 Cal. 4th 570, 583-584 [same].)
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; Mamika v. Barca (1998) 68 Cal. App. 4th 487,
491-492.) Eliminating such delay is “‘essential to the public
welfare’” because employees “‘depend[] on wages for the
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necessities of life.’” (Pressler v. Donald L. Bren Co. (1982)
32 Cal. 3d 831, 837, quoting Trombley, supra, 31 Cal.2d
at pp. 809-810.) 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.)
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, 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, the court excused a
vehicle owner from paying a penalty for late payment of vehicle
registration fees when the lateness was due to an error by a third
party bank. And Petrovich v. Arcadia (1950) 36 Cal. 2d 78, 84-85
simply refused to enforce a liquidated damages clause in a
contract. The only case Grill Concepts cites involving Labor Code
section 203 is Oppenheimer v. Sunkist Growers, Inc. (1957) 153
Cal. App. Supp. 2d 897, 898-899, which construed section 203 to
preclude waiting time penalties from continuing to accrue once
the last paycheck was delivered, even if that paycheck did not
itself include the amount of the then-accrued waiting time
20
penalties; it did not speak to the issue of equitable discretion.
DISPOSITION
The judgment is affirmed. Plaintiffs are entitled to their
costs on appeal.
CERTIFIED FOR PUBLICATION.
______________________, J.
HOFFSTADT
We concur:
_________________________, P. J.
LUI
_________________________, J.
CHAVEZ
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