Adanna Car Wash Corp. v. Gomez

Filed 1/18/23
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
ADANNA CAR WASH B313649
CORPORATION,
(Los Angeles County Super.
Plaintiff and Appellant, Ct. No. 20LBCP00190)
v.
JESUS GOMEZ,
Defendant and Respondent.
APPEAL from an order of the Superior Court of Los
Angeles County, Mark C. Kim, Judge. Affirmed.
Gulino Law Office and John J. Gulino for Plaintiff and
Appellant.
Telleria, Telleria & Levy and M. Anthony Jenkins for
Defendant and Respondent.
__________________________
This appeal addresses the relationship between two
statutory surety bonds required under different sections of the
Labor Code.1 Adanna Car Wash Corporation (Adanna) appeals
from the superior court’s dismissal of its trial de novo appeal
from the Labor Commissioner’s award of back wages and other
damages in favor of Adanna’s former employee, Jesus Gomez.
The trial court dismissed the appeal for lack of jurisdiction
because Adanna failed to post with the trial court an appeal bond
required by section 98.2.
Adanna contends that it, in fact, had complied with section
98.2, pointing to a surety bond that it had posted earlier under a
different Labor Code provision, section 2055. The section 2055
undertaking is required of all car wash owners as a condition of
operating a car wash business. We agree with the trial court that
the section 2055 bond was not the appeal bond required under
section 98.2. Accordingly, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Following a hearing on Gomez’s wage claim against
Adanna, the Labor Commissioner awarded Gomez $23,915.59 for
overtime earnings, meal period premium pay, rest period
premium pay, liquidated damages, interest, and waiting time
penalties. (The merits of the claim are not material to this
appeal.) On August 13, 2020, the Labor Commissioner served its
decision on Adanna.
Under section 98.2, subdivision (a), a party to a Labor
Commissioner proceeding may seek review “of an order, decision,
or award by filing an appeal to the superior court, where the
appeal shall be heard de novo.” Under subdivision (b) of the
1 All subsequent statutory references are to the Labor Code
unless indicated otherwise.
2
statute, if the employer is the appealing party, the employer
must post a bond.
On August 18, 2020, Adanna filed with the superior court a
document entitled “Department of Industrial Relations Notice of
Appeal De Novo” and a “Notice of Posting Bond Re Department of
Industrial Relations Notice of Appeal De Novo.” The notice of
posting bond stated: “NOTICE IS HEREBY GIVEN that,
pursuant to California Labor Code, § 98.2(b), Appellant hereby
posts an appeal bond in the amount of the Order, Decision, or
Award from which Appellant appeals. The Original of the appeal
bond is appended hereto as Exhibit ‘A.’ ”
The first page of exhibit A was a “Hudson Continuation
Certificate,” which indicated the Hudson Insurance Company
(Hudson) had issued Adanna Car Wash Corporation a California
“Car Wash Bond” in favor of the Department of Industrial
Relations. The corporate certificate stated its seal was affixed on
May 8, 2020. Although the document had a line for the signature
of Hudson’s “Attorney-in-Fact,” Julliet Adesuyan, the certificate
attached to the notice was unsigned. The next two pages of
exhibit A indicated that Hudson and ASI American Safety
Casualty Insurance gave Julliet Adesuyan power of attorney up
to $150,000.2
On February 16, 2021, Gomez moved to dismiss the appeal
because Adanna “failed to deposit/post an undertaking, which is a
jurisdictional prerequisite for [its] appeal under Labor Code
section 98.2(b).” Gomez explained Adanna had attached a copy of
2 As we discuss shortly, the $150,000 reference is to the
amount of a bond required under section 2055 (not section 98.2),
a statute applicable only to car wash businesses.
3
its section 2055 car wash bond, not the required section 98.2
bond. We set out in the margin the two statutes, which, we
observe, are in separate Divisions of the Labor Code.3
In his motion to dismiss and reply points and authorities,
Gomez pointed out that the superior court did not have control
over the section 2055 bond which is filed with the Labor
Commissioner. Thus, the earlier bond could not necessarily (or at
least not easily) secure payment to the employee following a
3 Division 1 of the Labor Code creates, among other things,
the Department of Industrial Relations and an administrative
process for an employee to seek relief against an employer. (§ 79
et seq.) It is not unique to any particular type of business or
employer. Under section 98.2, “[a]s a condition to filing an appeal
pursuant to this section, an employer shall first post an
undertaking with the reviewing court in the amount of the order,
decision, or award. The undertaking shall consist of an appeal
bond issued by a licensed surety or a cash deposit with the court
in the amount of the order, decision, or award.” (§ 98.2, subd.
(b).) If the employee succeeds in the appeal and the employer
fails to pay the judgment in 10 days of entry of judgment,
settlement, or dismissal or withdrawal of appeal, the bond is
forfeited to the employee. (Ibid.)
Section 2055 is part of Division 2 of the Labor Code and
deals only with regulation and supervision of car washes. On its
face, it has nothing to do with Labor Commissioner appeals.
Section 2055, subdivision (b) conditions a car wash’s registration
and registration renewal on the car wash obtaining “a surety
bond issued by a surety company admitted to do business in this
state. The principal sum of the bond shall not be less than one
hundred fifty thousand dollars ($150,000).” The bond is “in favor
of, and payable to, the people of the State of California, and shall
be for the benefit of any employee damaged by his or her
employer’s failure to pay wages, interest on wages, or fringe
benefits. . . .” (Id., subd. (b)(1).)
4
successful appeal. Gomez argued the bond was a jurisdictional
requirement and, without an appeal bond, the superior court
lacked jurisdiction to hear Adanna’s appeal from the Labor
Commissioner’s award.
In opposition, Adanna argued that the section 2055 bond
satisfied the section 98.2 undertaking because the former was
intended to benefit car wash employees and Gomez was a car
wash employee. Adanna also asserted Gomez’s motion was
untimely under Code of Civil Procedure section 995.920.
The superior court granted Gomez’s motion and dismissed
the appeal. The court agreed that Adanna failed to file the
required section 98.2 undertaking and concluded the court lacked
jurisdiction to hear the appeal from the Labor Commissioner’s
decision. Adanna appealed to this court.
DISCUSSION
Adanna argues the superior court erred in dismissing its
appeal because it satisfied section 98.2’s undertaking
requirement with its section 2055 car wash bond.4
1. Standard of Review and Applicable Law
The basic framework of appeals of Labor Commissioner
decisions to the superior court has been succinctly stated by our
4 There are no cases, published or unpublished, discussing
the section 2055 undertaking requirement. However, some
secondary resources refer to the undertaking as a “car wash
bond,” and we adopt that nomenclature. (See e.g. Rebekah
Didlake, Ensuring Wages for California Restaurant Workers:
Utilizing the Self-Help Prejudgment Wage Lien Tool (2022)
52 Golden Gate U. L. Rev. 187, 204; Labor and Employment Law
– California (CCH 2018) ¶ 5-46503, § 13682, subd. (b)(2) [2017
WL 3889857].)
5
colleagues in the First District: “When an employer does not pay
wages as required by law, an employee may file either a civil
action in court or a wage claim with the [Labor] Commissioner.
(§§ 98-98.8.)” (Cardinal Care Management, LLC v. Afable (2020)
47 Cal.App.5th 1011, 1018 (Cardinal Care).) If the employee
seeks administrative relief, a deputy commissioner holds an
informal, expedited hearing on the employee’s wage claims.
(Ibid.) “Within 10 days after service of notice of the [Labor]
Commissioner’s order, decision, or award, either party may
appeal to the superior court, which considers the matter de novo.”
(Ibid.)
“An employer’s right to appeal the [Labor] Commissioner’s
decision is further ‘conditioned on the necessary prerequisite that
the employer post . . . [an] undertaking for the amount of the
award.’ [Citation.] ‘The undertaking shall consist of an appeal
bond issued by a licensed surety or a cash deposit with the court
in the amount of the order, decision, or award.’ (§ 98.2[, subd.]
(b).) ‘The purpose of this requirement is to discourage employers
from filing frivolous appeals and from hiding assets in order to
avoid enforcement of the judgment.’ ” (Burkes v. Robertson (2018)
26 Cal.App.5th 334, 341–342, fn. omitted.) The “undertaking
requirement of section 98.2[, subdivision] (b) is mandatory and
jurisdictional, and . . . the court has no authority to extend the
deadline for posting the undertaking beyond the deadline for
filing the notice of appeal.”5 (Palagin v. Paniagua Construction,
Inc. (2013) 222 Cal.App.4th 124, 140.)
5 As is the case with bonds in other settings, where an
indigent employer is unable to post the security, the employer
may ask the trial court to waive the undertaking. (Cardinal
6
Whether Adanna satisfied the required undertaking and
whether the superior court had jurisdiction are legal issues that
we review de novo. (Deiro v. Los Angeles County Civil Service
Com. (2020) 56 Cal.App.5th 925, 929.)
2. Adanna Failed to Post the Required Undertaking
Without citation to any authority, Adanna asserts the
documents it attached to the notice of the bond posting satisfied
section 98.2, subdivision (b). We disagree.
a. The Certificate on Its Face Was Not a Legally
Enforceable Bond
Preliminarily, we observe that although the “The Hudson
Continuation Certificate” in exhibit A identified a bond number,
the document itself was not executed. The signature of Hudson’s
attorney in fact, Julliet Adesuyan, is nowhere to be found.
Execution by the surety is a prerequisite for a valid bond in an
action or proceeding. (See Code Civ. Proc., § 995.140, subd. (a)(1)
& (2) [“ ‘Bond’ includes both of the following: [¶] (1) A surety,
indemnity, fiduciary, or like bond executed by both the principal
and sureties. [¶] (2) A surety, indemnity, fiduciary, or like
undertaking executed by the sureties alone.”].) The two pages
that follow the continuation certificate purport to be powers of
attorney, not a bond.
b. Adanna’s Car Wash Bond Was Not the Required
Section 98.2 Appeal Bond
Even if the continuation certificate were an enforceable
bond for some purposes, it is simply not the undertaking required
by section 98.2. We begin our analysis with the obvious: there
Care, supra, 47 Cal.App.5th at p. 1019; see Code Civ. Proc.,
§ 995.240.) Adanna makes no argument along this line.
7
are two types of bonds in play here – a section 98.2 appeal bond
and a section 2055 car wash bond.
Section 98.2, subdivision (b) states “the undertaking shall
consist of an appeal bond issued by a licensed surety or a cash
deposit with the court in the amount of the order, decision, or
award.” (§ 98.2, subd. (b), italics added.) The appeal bond is
forfeited to the employee where the employer’s appeal fails or is
withdrawn, and the employer does not timely pay the award.
(§ 98.2, subd. (b).)
In contrast, a $150,000 car wash bond is a prerequisite to
operating a car wash in California. (§ 2055.) On its face, section
2055 makes clear a car wash bond has nothing to do with
litigation or appellate proceedings. It is condition that must be
satisfied before the car wash employer may obtain a license or
permit: “An employer shall not conduct any business until the
employer obtains a new surety bond and files a copy of it with the
[Labor Commissioner].” (§ 2055, subd. (b)(3).)
Here, “The Hudson Continuation Certificate” expressly
states the undertaking is a “CA Car Wash Bond” that benefits
the Department of Industrial Relations. Adanna admits in its
appellate briefing that the bond was issued pursuant to section
2055.
Adanna’s sleight-of-hand attempt to substitute a car wash
bond for an appeal bond runs afoul of a rule that applies to bonds
in general. Code of Civil Procedure section 995.140, subdivision
(b) expressly distinguishes between a licensing bond and one
furnished in connection with litigation. It provides: “A bond
provided for or given ‘in an action or proceeding’ does not include
a bond provided for, or given as, a condition of a license or
permit.” (§ 995.140, subd. (b); see Walt Rankin & Associates, Inc.
8
v. City of Murrieta (2000) 84 Cal.App.4th 605, 618 [bond for
public works contract is not a bond on “an action or proceeding”].)
The distinct purposes of the two bonds explain, at least in
part, why they are found in two different Divisions of the Labor
Code: the appeal bond (§ 98.2) in Division 1 and the car wash
bond (§ 2055) in Division 2.
c. Allowing an Employer to Rely on a Car Wash Bond in
Lieu of an Appeal Bond Would Disadvantage
Employees like Gomez
Ignoring the internal differences in the statutory language
of sections 98.2 and 2055, and their placement in the Labor Code,
Adanna argues the car wash bond’s “purpose and its effect is
identical to that of the ‘appeal bond’ identified in [section] 98.2.”
Adanna continues that posting a car wash bond in lieu of an
appeal bond, or at least appending the car wash bond to its notice
of appeal, “places no additional burden on the employee but
provides the employee with an ally in the form of the Labor
Commissioner. That is, the Labor Commissioner undertakes to
enforce the bond obligations in a circumstance where the
employer fails to pay timely a judgment affirming the Labor
Commissioner Award or a finding in favor of the employee.”
That is not so. The car wash bond is “in favor of, and
payable to, the people of the State of California, and shall be for
the benefit of any employee damaged by his or her employer’s
failure to pay wages, interest on wages, or fringe benefits. . . .”
(§ 2055, subd. (b)(1).) Although the employee is the indirect
beneficiary of the car wash bond, the bond itself is payable to the
Department of Industrial Relations—not Gomez. (See generally
Code Civ. Proc., § 995.130, subd. (a) [“ ‘Beneficiary’ means the
person for whose benefit a bond is given, whether executed to, in
9
favor of, in the name of, or payable to the person as an obligee.”].)
Because the employee is not the direct beneficiary of the bond, to
recover damages from the section 2055 car wash bond, the
employee must “proceed against the employer’s surety bond by
taking whatever action he or she deems appropriate to obtain the
unpaid wages, interest on wages, fringe benefits, or gratuities
from the bond.” (Cal. Code Regs., tit. 8, § 13693(a).)
In contrast, the section 98.2 appeal bond is a streamlined
method for the enforcement of any Labor Commissioner award in
favor of the employee. It guarantees immediate forfeiture of the
bond to the respondent employee when “the employer fails to pay
the amount owed within 10 days of entry of the judgment,
dismissal, or withdrawal of the appeal, or the execution of a
settlement agreement.” (§ 98.2, subd. (b).)6
d. The Legislature Amended Section 98.2 in 2000
Because of Its Concern that Employees Were Often
Having Difficulty Enforcing Labor Commissioner
Awards Following an Appeal
The Legislative history also supports our analysis that the
posting of a section 98.2 bond is essential to protect employees in
Labor Commissioner appeals filed by employers. Prior to 2000,
section 98.2 did not require employers seeking appellate review of
6 Adanna does not address the hypothetical situation in
which the Labor Commissioner’s award to the employee exceeds
the $150,000 limit of the car wash bond. Adanna’s position on
appeal would suggest that the employer could post the car wash
bond plus an additional appeal bond to make up the difference.
There is nothing in the statutory scheme that supports such an
odd procedure.
10
Labor Commissioner awards to post a bond.7 In that year, the
Legislature amended section 98.2 to include the appeal bond
requirement to ensure that workers are paid if they prevail at the
de novo appeal in cases where employers “disappear or declare
bankruptcy” during the appeal. (Assembly member Steinberg, on
Labor and Employment Com., letter to Gov. Davis, Sept. 8, 2000
7 Prior to the 2000 amendment, section 98.2, subdivisions (a)
and (b) read:
“(a) Within 10 days after service of notice of an
order, decision, or award the parties may seek review
by filing an appeal to the municipal or superior court,
in accordance with the appropriate rules of
jurisdiction, where the appeal shall be heard de novo.
A copy of the appeal request shall be served upon the
Labor Commissioner by the appellant. For purposes
of computing the 10-day period after service, Section
1013 of the Code of Civil Procedure shall be
applicable.
“(b) If the party seeking review by filing an
appeal to the municipal or superior court is
unsuccessful in the appeal, the court shall determine
the costs and reasonable attorneys’ fees incurred by
the other parties to the appeal, and assess that
amount as a cost upon the party filing the appeal.”
The only other part of the pre-2000 version of section 98.2
that referred to a bond was subdivision (h): “The Labor
Commissioner shall make every reasonable effort to ensure that
judgments are satisfied, including taking all appropriate legal
action and requiring the employer to deposit a bond as provided
in Section 240.” This provision is found in subdivision (j) in the
current statute. Section 240 allows the Labor Commissioner to
require a bond where an appeal has not been taken.
11
regarding Assem. Bill No. 2905 (1999-2000 Reg. Sess.) pp. 1-2.)
As later legislative analysis explains, when the appeal bond was
being considered there was evidence that “unscrupulous
employers, particularly those in the underground economy, were
filing ‘frivolous’ appeals of [Labor Commissioner] decisions with
the superior court in an effort to drag out litigation and hide
assets so that workers would not be able to collect on judgments,
even if ultimately successful on appeal.” (Sen. Com. on Labor
and Industrial Relations, Analysis of Assem. Bill No. AB 2772
(2009–2010 Reg. Sess.) as amended Apr. 8, 2010, p. 1.) Via the
bond requirement, the Legislature sought to eliminate frivolous
appeals and protect the employee who was successful in
proceedings before the Labor Commissioner.
The Court of Appeal’s 2006 decision in Progressive
Concrete, Inc. v. Parker (2006) 136 Cal.App.4th 540 (Progressive
Concrete) instigated further amendment to section 98.2,
subdivision (b). The Progressive Concrete court concluded that
the appeal bond was directory, not mandatory or jurisdictional.
(Id. at p. 552.) After Progressive Concrete, the Legislature found
that some employers continued to disregard the bond
requirement and trial courts could not dismiss on that basis.
Instead, courts had to first issue an order directing the employer
to post the bond before dismissing the appeal. This meant “that
an employee must generally retain counsel to file a motion for
such an order. If the employer disobeys the court order by failing
to post the bond, then the court may dismiss the appeal.” (Sen.
Com. on Labor and Industrial Relations, Analysis of Assem. Bill
No. 2772, supra, at p. 2.) Employers who failed to post bonds
either (1) delayed proceedings to shift assets and judgment proof
themselves, or (2) hoped that “workers would be unable to secure
12
counsel to handle the trial de novo and would walk away from a
legitimate claim for wages (which they had won at the Labor
Commissioner level).” (Assemblymember Swanson, Labor and
Employment letter to Gov. Schwarzenegger, July 8, 2010, Assem.
Bill No. 2772 (2009-2010 Reg. Sess.) p. 1.)
In 2010, Assembly Bill No. 2772 made explicit that the
appeal bond was a condition of filing and the failure to post an
appeal bond a basis for dismissal. (Sen. Com. on Labor and
Industrial Relations, Analysis Assem. Bill No. 2772, supra, at
p. 4.) Assembly Bill No. 2772 evidenced the Legislature’s
intention to prevent employers from gaming the system and to
make it easier for employees to actually receive their
compensation following a successful Labor Commissioner award
or trial de novo judgment. (See Sonic-Calabasas A, Inc. v.
Moreno (2013) 57 Cal.4th 1109, 1129 [“The purpose of this
requirement is to discourage employers from filing frivolous
appeals and from hiding assets in order to avoid enforcement of
the judgment. (Sen. Com. on Labor and Industrial Relations,
Analysis of Assem. Bill No. 2772[, supra,] p. 4.)”].)
We hold that a section 2055 car wash bond is not an appeal
bond under section 98.2 subdivision (b). Because exhibit A to
Adanna’s notice was not an appeal bond, Adanna failed to file the
requisite undertaking per section 98.2, subdivision (b). The
superior court lacked jurisdiction over the Adanna’s de novo
appeal, and respondent’s motion to dismiss was properly
granted.8
8 Adanna also argues that Gomez’s motion was untimely
because it was filed more than 10 days after service of Adanna’s
notice. Code of Civil Procedure section 995.930, subdivision (c)
allows a court to permit late filing of a motion challenging a bond
13
DISPOSITION
The order is affirmed. Defendant and respondent Jesus
Gomez is awarded costs on appeal.
RUBIN, P. J.
I CONCUR:
MOOR, J.
“upon a showing of good cause for failure to make the objection
within the time required by statute or of changed circumstances.”
By its order dismissing the appeal, the superior court impliedly
found there was good cause for not filing the motion within the
statutory period. Adanna does not claim that the court abused
its discretion in doing so. (See Laraway v. Sutro & Co. (2002)
96 Cal.App.4th 266, 273 [“Determinations of good cause are
generally matters within the trial court’s discretion, and are
reversed only for an abuse of that discretion.”].)
14
Adanna Car Wash Corporation v. Jesus Gomez
B313649
BAKER, J., Concurring
Although I do not subscribe to all the particulars of the
majority’s published opinion—which in several respects goes
beyond what was presented to us in the briefs filed by the parties,
I agree the result reached by the trial court should be affirmed.
BAKER, J.