Kent J. Schmidt

Transcript

Voiceover [00:00:04]

Welcome to another episode of the SharkCast on litigation risks management where we explore why businesses are so frequently sued, and how to mitigate and navigate the dangers lurking in the risky waters. Join us now as we welcome our host Kent Schmidt, Litigation Partner at the law firm of Dorsey & Whitney.

Schmidt [00:00:25]

Welcome to another episode of SharkCast. In today’s episode, I’m pleased to be joined by Aaron Goldstein and Nisha Verma. Nisha is a veteran of the SharkCast podcast having appeared on a couple of excellent episodes already. Aaron, your first time here. So, welcome to you both, but particularly to you, Aaron, since it’s your first time on SharkCast.

Goldstein [00:00:44]

Thanks, Kent. Promise to be gentle.

Schmidt [00:00:46]

Alright. So, those of the listeners that know Nisha and Aaron can probably surmise at least the general subject matter of our conversation today. To think of Aaron Goldstein and Nisha Verma is to think of employment matters, the labor and employment issues that often ensnare companies in California and around the world. So, we are, of course, gonna be talking about employment cases and employment issues today. But more specifically, today we’re gonna be talking about wage claims, or sometimes referred to as wage and hour claims. There are some unique issues that come out in wage claims. Wage claims make up a significant portion of employment litigation and I wanna ask some questions about litigation strategies, some of the pitfalls that companies routinely fall into, some of the unique issues that emerge in a wage claim. What you expect to evaluate in a claim at the beginning, trying to engage in perhaps some early settlement discussions, managing discovery, litigating including arbitration. So, we’re gonna tackle this very important topic of wage claims. Let’s begin by sort of getting a handle on the types of claims that are brought. Not all the same forum, not all the same processes, in which the claims are litigated, so, what are the primary venues or fora in which wage claims are brought?

Verma [00:02:15]

If we’re talking about in civil court, and not with the labor commissioner or a state agency, then the most common is gonna be a representative claim or a class action on behalf of multiple people. That’s really the most appetizing and attractive way for any of these plaintiffs’ lawyers to kind of enter into this avenue. So, let’s talk about those in a minute and the differences specifically between class and representative, but there is going to be always some portion of either demand letters or actual claims filed in court in which an individual person is saying hey, I didn’t get all my meal periods the way I should have, I was interrupted during my rest periods, or I had to work overtime and I wasn’t paid for it and I’m not really worried about anyone else, I just want relief for myself.

Schmidt [00:02:59]

So, let me just interject a clarification here. Isn’t it the case that you often have something that starts out as a single plaintiff claim and then there’s either a threat or actually does move into a class?

Goldstein [00:03:11]

Actually, a lot of these cases are initially alleged as a class action, because the plaintiffs’ attorneys knows that that’s the scariest type of claim. You might have a mistake that you’ve made at your company that’s worth $500 or $600 an employee. But if you’ve made that mistake in regard to 100 employees, 200, 300 employees, now you’re talking real money. So, actually these cases are usually alleged initially as class actions. And then we, as your counsel, often try to tell plaintiff’s counsel it won’t work, you can only bring this class on an individual basis.

Schmidt [00:03:44]

Okay.

Verma [00:03:44]

Which is, of, to be fair, harder, and harder to do to in California as it relates to the procedural rules around PAGA and just the settlement posture out there, it’s harder to do, but…

Schmidt [00:03:53]

Okay, let me stop you for a minute…

Verma [00:03:54]

Uh-huh.

Schmidt [00:03:54]

…because you PAGA...

Verma [00:03:55]

Uh-huh.

Schmidt [00:56]

…and we’ve gotta make sure we unpack that for our listeners. We talk about single claims, we talk class claims. I think almost all of our listeners at least understand that the general differences between single claims and PAGA, we’ll get into PAGA more detailed probably near the end of our conversation, but, for now, give us a shorthand definition of what PAGA is.

Verma [00:04:18]

Well, first I’ll break down the acronym, because it’s not fair to start…

Schmidt [00:04:21]

That’s true.

Verma [00:04:21]

…on a discussion with an acronym. And the acronym is PAGA stands for Private Attorneys General Act of 2004. 2004 being 20 years ago.

Schmidt [00:04:33]

It’s a California law, right?

Verma [00:04:34]

This is a California statute that provides another mechanism for employees and particularly their attorneys to bring claims on behalf of other people. What is the most significant difference between a class action and a PAGA action is a PAGA action is said to be a representative action on behalf of the state.

Schmidt [00:04:54]

So, it’s as the name suggests, it’s a person with the cloak, at least temporarily, of the government enforcing something for the good of the common people, not just themselves and not even just the individuals at their company.

Verma [00:05:09]

Well, that’s how it started. At this point, it’s really hard to see that result happening with any of these cases given the abuse that happens over PAGA cases, but yeah, good point. So, when I’m saying 2004, when the statue was enacted in 2004, it was primarily as a tool for private lawyers or individuals to reach out to underrepresented communities, primarily rural communities. And it truly did not become something that private class action plaintiff lawyers were interested in until an entire other legal wrangling took place as it related to class action waivers.

Schmidt [00:05:46]

Okay…

Verma [00:05:46]

Yeah.

Schmidt [00:05:46]

…so, we’re gonna defer the conversation on that, because, otherwise, we’re gonna get too wonky on…

Verma [00:05:51]

Yeah.

Schmidt [00:05:51]

…California rules. Let’s put a pin in that for a moment and step back and talk about, more generally, when you get a wage claim in the door, Aaron, as we’ve already noted, it can be single plaintiff class action, or PAGA, common thread is someone saying I, and perhaps others, didn’t get the wages entitled to. What are the major strategy decisions and advise that you undertake to provide, right at the outset, big picture?

Goldstein [00:06:21]

Well, it’s a big question, and so I’ll start somewhere, and you tell me when you want me to stop, ‘cause we could do that all day. But there’s a few factors about wage class actions that really drive the strategy. One of the most important issues is the fact that the plaintiffs are entitled to their attorney’s fees if they win, and that means in a wage and hour class action where’s it’s very hard to prove that no one ever missed a rest break, no one ever missed a meal break, that you’re probably gonna be on the hook for the other sides fees if you go to trial. And so that really drives the strategy…

Schmidt [00:06:53]

If you go to the trial and lose.

Goldstein [00:06:54]

…if you go to the trial and lose. Well, and the question Nisha and I always ask each other, what does winning look like? If you take a $500,000 demand and you get a judgement at trial that you only owe $50,000, that sounds like a win until you have to pay your attorneys $1,000,000 to find that out and then you’re paying opposing counsels’ attorney’s fees on top of that.

Schmidt [00:07:15]

So, I just want to interject something from a general commercial litigation standpoint. This is a starkly different rule than is applied in most contacts with prevailing party attorney fees. Under most statutes, or under a contract provision that says in this contract dispute, the prevailing party gets attorney fees. In that situation, courts take a proportionality perspective on this. And if you have a $5,000,000 claim and you only get $50,000 on it, the courts won’t award you, you know, half a million or $1,000,000 in fees, because they say you didn’t really achieve your litigation objective. You’re saying that’s not the case with employment claims. If you obtain $1 of withheld wages, you’re entitled to all the fees.

Goldstein [00:08:02]

That’s right. As a matter of fact, one of my colleagues, Marina Lyons, used to be on the plaintiffs’ side and she’s got all sorts of war stories about how they went to trial and they won maybe 10% of what they were looking for, but then got 70% of their fees and, of course, their regional fee demand usually starts very high.

Schmidt [00:08:20]

So, you’re assessing the downside in an employment wage case quite differently just giving the fee shifting rules and that all or nothing type of rule.

Verma [00:08:31]

Right. Which makes sense when you’re talking about the nature of the claimant, the nature of the claimant, someone in here, huge group of employees going back four years, worked 10 minutes and didn’t get overtime or someone in here should have gotten a meal period premium and didn’t. Well, if your claim was failure to provide meal periods, you have prevailed on that claim. There’s not a proportionality, yeah.

Schmidt [00:08:52]

And it’s tied to the public policy, right, of wages are different than just shorting someone on a contract.

Verma [00:08:58]

Absolutely.

Goldstein [00:08:59]

It’s all about deterrents. Really, from the jaded perspective of a defense lawyer, I think there’s maybe a little too much deterrents. I know we’re not gonna get into PAGA right now, but it’s all about making it so scary for employers that they don’t wanna take the case to trial.

Schmidt [00:09:14]

So, I wanna go back to the forum issue as well. You could find yourself in state court, you could find yourself in federal court, there could be an arbitration provision. What are some of the considerations on whether you want, you’re in state court, you wanna try to remove it to federal court, if you have an arbitration provision you wanna try to invoke it, are you better off being in court versus an arbitration? What are some of those early on strategies?

Verma [00:09:40]

So I would say, you said you could find yourself in any of those places. You won’t. You will only find yourself at state court in California. That is where the case will originally be filed. At that point, it’s on the employer to take a look at the options as it relates to first federal court, and the options for removal might be able to be done under the Class Action Fairness Act, and there’s certain parameters that need to be met for that. But that doesn’t mean you’re gonna just win the case if you weren’t paying your employees or anything close to that. It does mean you’ll have probably a fairer shake at discovery, and I think as we all know when it comes to dealing with federal courts you have a judge who has less cases, more clerks. And so, some of the legal arguments of the intellectual arguments that you put forward with the judge are more likely to be heard and entertained. But that does not mean that you’re gonna get a better set of law around should you have paid these people a certain amount of wages. Right?

Schmidt [00:10:32]

Just go back to something you just said. Is it your experience that plaintiff’s lawyers are not choosing federal court ever on wage claims? They always want to be in state court and maybe do everything they can to fight removal.

Verma [00:10:44]

Yes, always.

Schmidt [00:10:45]

Okay.

Verma [00:10:45]

I’m not one to generalize, but I’m telling you, always.

Schmidt [00:10:47]

Yeah, okay.

Verma [00:10:48]

Yeah. And then arbitration is really the code word when it comes to either talking about class actions or representative claims. So, putting PAGA aside, if an employer has an arbitration agreement, there have been decades of litigation through the United States Supreme Court, California Supreme Court, that have got us to the place where an employer can use that arbitration agreement to have the class claims actually dismissed and require the individual to litigate their claim individually in arbitration. So, there’s no question if an employer had an arbitration agreement that they would be invoking that.

Schmidt [00:11:22]

So, is it your common recommendation for most employers in California to have an arbitration provision that would cover their wage claims?

Verma [00:11:31]

It’s our vehement recommendation. If there’s a word stronger than that, I’ll use that word too. Yeah.

Schmidt [00:11:37]

And do you know of anyone out there that takes the position that arbitration’s expensive and you gotta pay the arbitrator and maybe you’re better off not having arbitration provision for wage claims?

Goldstein [00:11:50]

Absolutely not. I mean, I heard that statement made a lot because arbitrators can do crazy things, sure. There’s been cases where arbitrators make awards that would never stand up in court because you’re basically throwing out how many hundreds of years of juris prudence under the Federal Arbitration Act, but here it allows you to do things you just cannot do in court, like kill the class action, which is another point I wanted to make really quick about federal court. In a lot of places, including Washington, where I practice, it is much easier to fight the certification of the class. You know $5,000 Claim that becomes a $500,000 claim goes back to being a $5,000 claim if you can convince a judge to say this is not certifiable as a class, and that is always gonna be easier to do in federal court. Those niches gotten into some and might talk about more. Arbitration get you to definitively get rid of some of these class wide claims.

Schmidt [00:12:47]

And just one making one other point about this, which is in arbitration, you are almost universally giving up on a right to an appeal. And so even take into consideration that we are going to be accepting full and final decision arbitrator with essentially no right to appeal, you’re still happier being in arbitration.

Goldstein [00:13:07]

Well, it’s interesting. In PAGA you get to play at lower stakes, right, because it’s an individual claim that you’re fighting about in front of the arbitrator. So, if the arbitrator gets that wrong, you’re not that much worse off than if you hadn’t of done it, right, because then you go back and you have the class wide fight it’s sort of, like you get to have this one-on-one fight with the name plaintiff, where if you lose you only lose in regard to that one plaintiff, but you kill the whole class. And then later you could always have round two against the whole class if you need to. Okay. Thanks, Kent.

Schmidt [00:13:37]

Let’s talk for a moment about managing client expectation. I’m talking about an employer client that’s just been hit with a wage claim, whether it’s a class claim, a single plaintiff claim, or a PAGA claim. In understanding the upside, there really isn’t an upside, so I’ll strike that. Understanding really the downside, the full scope of the exposure in a doomsday scenario, managing costs. Aaron, you said a moment ago, we ask really big questions.

Goldstein [00:14:08]

Yeah.

Schmidt [00:14:10]

I’m just gonna throw that out there and let both of you comment on how to manage client’s expectations when they’re faced with, let’s say, a significant wage claim.

Goldstein [00:14:20]

Well, you know the first thing is, I’ve actually had cases where it didn’t end up being catastrophic, and it all depends on who you drew as your plaintiff’s attorney. There are different strategies that plaintiff’s attorneys have for making a living. Some like to have a reputation for going to trial and ringing the bell. Some will take a very reasonable settlement if you don’t make them do any work. Right? And so that’s one of the things, especially if you haven’t been sued before, you don’t really think about, which is what is the plaintiff’s attorney after. You know, wage and hour class actions are more like economic transactions as opposed to single plaintiff harassment cases, which are much more bloody. Right?

Schmidt [00:15:01]

Yeah.

Goldstein [00:15:02]

Single plaintiff cases are like the Jerry Springer show. The wage and hour class actions are a lot more meh. And we can get into a lot of the strategies that really revolve around figuring out what plaintiff’s council is hoping to get out of the case and seeing if you can translate that into a really good deal for your clients.

Schmidt [00:15:19]

Let’s stick with this art of war type principle of knowing your adversary, knowing sort of what categories the claimant’s lawyers fall into. Nisha, you deal with all sorts of plaintiff’s lawyer all over state of California and perhaps elsewhere. What are some of the things that you want to try to learn about if you encounter a plaintiff’s lawyer on a wage claim that you’ve not encountered before?

Verma [00:15:43]

I think it’s kind of known now that class action settlements and private settlements are public. Right? And so yeah, the first thing we do is look up the kinds of settlement that that attorney is entering into with other cases, and specifically how that translates on a per work-week basis, per employee basis. Of course, we don’t have the facts of those other cases, but one of the things that’s happened with this kind of influx and growing nature of these cases, there’s just a lot of new players in the game and they’re seeing how much money other plaintiff’s lawyers are making and they wanna kind of grab some of the spoils. Right? And we very well may be dealing with a player that we can’t get a reasonable settlement with off the bat because of something their own ego. Sometimes their interest in looking like a big player to other plaintiff’s lawyers in their sphere. And so, it’s really important for me to understand, to set clients expectations who it is I’m dealing with on the other side.

Schmidt [00:16:35]

Yeah, it’s this very analogous to what I deal with on the consumer plaintiff’s side of things. First of all, you run into the same players again and again and you get to know them on a first-name basis, but you start learning which players analogy only had a running game, and which will take a shot down the field at the end zone. Do you find that you run into a lot of employment lawyers who never ever wanna try a case, but they’re awful good at sending out tons of demand letters?

Verma [00:17:06]

Yes, I think particularly on the class action side, this is a little bit of a beast that has fed itself, and that there’s a lot of organizations that have entered into a lot of settlements ‘cause it made sense for them. Other plaintiff’s lawyers are seeing those settlements, they’re getting into the game, they’re maybe skipping the part of their practice where they learn how to try a case because what’s the point when you just do a find and replace, PDF it, send a PAGA letter and then…

Schmidt [00:17:28]

Cookie cutter.

Verma [00:17:29]

Yeah. Then start pounding the table at mediation. That’s a skill that’s being learned, right, and in place of all other skills.

Schmidt [00:17:35]

A couple months ago, when dealing with a consumer class action lawyer, I didn’t mean to be pejorative, but I used the phrase cookie cutter in responding and it was as if I had, you know, insulted his mother. But there’s a lot of cookie cutter litigation out there, not only employment, but in lots of other areas where lawyers figure out how to make money, and then they just sort of, you know, repurpose and send out demand letters.

Goldstein [00:17:59]

I think the lady doth protest too much in that particular situation. It sounds like you might’ve hit the mark.

Schmidt [00:18:07]

So, one thing that strikes me as very nerve-wracking about dealing with a single plaintiff claim is the blood in the water scenario. Let’s suppose you have a single plaintiff claim, it feels like it’s the only one like it, perhaps the facts are a little unique and a little unusual, and so it’s not billed as a class action. But you know and your client knows that they have 300 similarly situated employees, and that employees talk, and they are communicating with one another. And if we go ahead and settle this claim, we’re gonna have a ton of them. How do you deal with that type of blood in the water situation?

Goldstein [00:18:49]

Well, you know, Kent, it’s interesting, and this is very counter intuitive for a lot of clients. There will be situations where it’s in their interest to expand the class. You might have a very narrow claim that’s filed because either the plaintiff’s attorney didn’t think about it or there just isn’t a lot of money everywhere else. Unlike single plaintiff cases where you might pay a lot of money to settle one case and then everyone else now can sue you, if your settlement is broad enough, you’re immune from suit because you settled the entire class, all conceivable wage and hour claims. And it’s one of the things you gotta think about when you’re talking to opposing counsel during settlement, we’ll give you a little bit more money, and you’re gonna give us a lot more to our settlement. Then you really are about as close to lawsuit proof as you’re ever gonna be. Right?

Schmidt [00:19:39]

You’re buying peace, so you’re not just settling the individual claim. You’re intentionally inoculating the company from the series of other claims. Or you could cross your fingers and hope to just settle this one and not have a bunch of follow suit.

Verma [00:19:53]

To be clear retrospectively, for the period of time in the past that is covered by the lawsuit, the statute of limitations, what you guys are saying is correct. Once that preliminary approval is granted, once the final approval is granted, the checks go out. Three days later you’re fair game again. Somebody can and will turn around and file another PAGA letter. So well in advance of that kind of due date, I think the next and most important thing for employers to be doing is looking at how do we really arm ourselves for the next one. If we are able to get a PAGA claim into arbitration, how do we win the arbitration by showing that there’s no possible way that any of our employees could have been underpaid or not gotten their meal and rest period like they expected?

Schmidt [00:20:36]

Well, that’s a perfect segue to what I think we should really focus on next in this conversation, and that is something that is a mantra of my constantly. What are the proactive steps that you can take to avoid these claims from being filed in the first place? So let me ask you this. What are some of the routine mistakes that are made, or categories of mistakes that are made, that make well-meaning companies that are not trying to shortchange their employees, they don’t wanna, you know, be unfair to their employees, end up getting sued, and claims they’re very, very difficult to defend and that are very expensive? What are some of the proactive things that companies don’t do or the things that they do that they shouldn’t do?

Goldstein [00:21:19]

Thanks, Kent.

Verma [00:21:19]

I just wanna the first part of your question first, which is how do we prevent these claims from being filed. You cannot prevent them from being filed because the only thing required to file them is to have a human person who has worked somewhere for some amount of time to sign an engagement letter and then an attorney to have the ability to find and replace. I don’t mean to be blunt, but there’s nothing you can do to keep that from happening.

Schmidt [00:21:42]

So, my question was a little too naïve I guess.

Verma [00:21:44]

But to answer your question about what are the biggest mistakes employers are making to not be able to react in the most efficient manner after that process, I would say is treating these claims like they’re one off and not being proactive in collecting the evidence before the claim is filed that all employees are getting paid, their overtime are being paid for all of their time worked, that nobody’s interrupting them in their meal periods and none of this can be anecdotal. It has to be collection of evidence, creation of records affirmatively provided from the employee, every single day. So, when one of these people walks off your work site, is upset about something, and then turns around and finds a lawyer to file a PAGA action, you can have the arbitration with them if you have an arbitration agreement and cross examine them on these records that the employee themselves created, so you have a chance of actually winning this lawsuit in the case where the person truly was not underpaid a dime.

Schmidt [00:22:40]

So, we’ve got best practices, obviously includes meticulous record keeping that involves the employee buying into the records, signing off on the records, you mentioned in your answer meal and rest breaks. What is a common scenario where an employee will bring a claim relating to meal and rest break, and the company didn’t mean for there to be a violation, but is now facing the claim?

Goldstein [00:23:05]

I’ll give two real life examples that illustrate where this is easy and where this hard. I’ve got clients who have an assembly line and when it’s time for a rest break, every machine turns off and it is physically impossible for them to do work for that period of time. And then I’ve got clients who work in the restaurant industry. And in Washington, you have the ability to take mini breaks that add up to the total amount of breaks you’re allowed to take under the law. Proving that is very, very difficult. And if I were gonna paraphrase what Nisha said, what you really need is forensic proof. Right? We’re talking CSI-level proof because again, with the attorney’s fees, all it takes is a little bit of doubt in the mix. And so, things like Nisha was talking about work every week, someone says yes, I took all my meal breaks. And then if someone missed a meal break, you have an automatic system that pays them for that meal break and it’s watertight. They can’t point to a single situation. California’s kind of unique in this ability to use arbitration to get rid of these PAGA claims. In Washington it’s actually a little different and this still applies to non-PAGA claims. If you make the case worth as little money as possible, people will sometimes go away, or they just lose interest because plaintiff’s lawyers aren’t interested in the low-dollar cases, when there’s bigger fish out there.

Schmidt [00:24:28]

Nisha, do you have any additional common mistakes that employers make, other than meal and rest breaks, that result in employee claims being filed?

Verma [00:24:39]

Kent, I really think Aaron and I are both in the place in our careers and with our employers that our employers are not making mistakes as it relates to making sure that all of their employees are paid for all the samework, making sure that they have the adequate rest periods and meal periods because the types of companies that we’re representing actually see that as part of the mission. Right?

Schmidt [00:24:58]

They follow this best practice.

Verma [00:25:00]

They do. And so, for me, if you’re in this sphere, the mistake is not arming yourself with those best practices in a very proactive manner and treating the next class action as a, almost certainty that is going to create a threat to the organization and putting the kind of resources toward preventing it that the organization will be putting toward cybersecurity, for example, or other things going on in the world like natural disasters. I think that given how incredibly easy it is for anyone to walk off your work site and file one of these, preventing and being able to win the next one of these actions. So, employers and organizations can retain their funds to potentially use for the benefit of their employees as opposed to plaintiff’s lawyers should be in line with those other high-threat concerns at the board level.

Goldstein [00:25:52]

And if I could just piggyback off of that, Nisha. I mean one of the things I love about being an employment lawyer is you get to write the script and direct the movie. You know, so I did commercial litigation for a little while, and I always got the case handed to me with the script already written. So, I could be a great director, but the mistakes had been made, the dumb emails had been written. In employment law, you can help your client write the emails, and I always tell clients every e-mail you write is a trial exhibit. I think another way of putting what Nisha was saying is you’re always in litigation, even when you’re not being sued, even when you don’t have the demand letter, you are currently in litigation ‘cause it’s going to happen, and you need to be creating those exhibits, you need to be thinking ahead of where plaintiff’s council’s gonna go, the arguments they’re going to use to poke holes, and pre-emptively plug those holes into that level. Or you can do what a lot of other companies do, which is to say, it’s the cost of doing business. I’m gonna get hit with these every so often, I’m gonna pay, you know, $100,000, $200,000 every couple years, and that’s just what it costs. I think some companies do that. I think we can do a lot better.

Verma [00:26:58]

I think the price tag of these cases is going up drastically, and I think there’s gonna be fewer and fewer companies that can afford to pay out a class action settlement, which are just in my experience as people know, I did this work for a while in Dorsey, and then I went in house. Fortunately, did not have to deal with much of these and came back out post-COVID and just was shocked by the demands I was seeing, the nature of the settlements and how high they’ve gone for. What I saw is completely meritless claims and the intractability of the plaintiff’s bar to come down at all on these settlements. So I think that, yeah, the price tag of these is going up and if there’s an organization out there that’s at a place where maybe they wanna be almost perfect with their compliance, but they really don’t want to put the effort into it and they’ll just wait for the next class action to roll around because maybe they settled the last one for not that much in the grand scheme of things. The next one will be a lot in the grand scheme of things, from the trends that I’m seeing doing this every single day.

Schmidt [00:27:54]

Let me ask one more question relating to wage claims in the context of work from home. How does a work from home scenario raise potential wage and hour claims that you wouldn’t have when that employee was coming to the office?

Goldstein [00:28:09]

It’s a huge problem. I mean, if think about what Nisha and I have been discussing in terms of that wiretype proofs of what a person’s been doing and when. When a person’s working from home, there’s no way to turn off the machinery and say this person stopped working. They can’t badge in and badge out of the building. I mean some of the easiest cases I’ve dealt with is where someone has an overtime claim, and they can’t start work until they swipe their badge. You know, puts a ceiling on it. Someone’s working from home, you know, all they have to do is have a, look, I sent an e-mail at 7:30 last night that proves that I was working through 7:30 and you’ll never shut that case down. And so, employers who are giving into the demands of employees for flexible work, hourly employees, and that’s something you have to consider in this market. You really gotta get creative in terms of how you’re tracking people’s hours. Maybe it’s GPS, right, you can show that the time the person claims they were working, they were actually, you know, driving off to who knows where on personal stuff.

Schmidt [00:29:06]

But also walked out for the privacy claim if you’re tracking your employee’s movement.

Goldstein [00:29:11]

Absolutely. You know, you should be very careful, but you do have to be creative. And I’ve had systems set up with clients where the system shuts them out outside of their working hours. If they’re in the middle of an e-mail, it’s too bad, they’re gonna have to pick it up on Monday. Right? A Friday evening. You’ve got to think of that level. This is the hardest question actually. It’s not the litigation for my most sophisticated clients. It’s how do we balance that perfect scenario of being waged in our class action proof with having employees actually wanna work here and making it a livable place. ‘Cause there is no perfect balance.

Schmidt [00:29:45]

Oh, this is such a great point, and a very practical issue is you gotta do all of this and not get yourself sued as an employer, but you gotta retain the people, and there’s a talent drought in so many different areas to retain qualified people that it becomes a challenge, because you also have to run the business. It’s very, very difficult.

Goldstein [00:30:07]

Kent, I also just want to say another point on this, and I also think this gets lost a lot. It is this is a human business we’re in. And if you can build good relationships with your employees and with opposing counsel, if you’re a defense lawyer like I am, you can really have opportunities you wouldn’t have otherwise had. I’ve had cases go away because employees are willing en masse to engage in, you know, a pick-up stick style settlement with just the company, where they say, you know, we love this company, we believe in it, we will sign something saying we don’t think we’re entitled to any overtime wages ‘cause we know how this works. Right? You will never regret having good relationships with your employees ahead of time, and Nisha made a really good point when she talked about the person who’s angry and leaves, goes to find a lawyer for, I guess, a wrongful termination claim, then hit you with a class action. If you have fewer and fewer employees who leave angry, your odds of getting sued, even on a wage and hour class action go way down.

Schmidt [00:31:06]

So, one litigation avoided strategy is take care of your people.

Goldstein [00:31:09]

Exactly.

Schmidt [00:31:10]

So, I’m gonna do something I’ve not done before on SharkCast, and that is preview another episode, because I think we have to have you come back and devote an entire episode to PAGA. But I’d like to just give a preview of that in the few minutes we have remaining. You gave us the definition of PAGA. What are some things that we’re gonna have to unpack in a longer episode on PAGA? Give us just a two-minute overview of what’s going on with PAGAs, some recent legislation here in California, that has changed the playing field, and what do we have to look forward to?

Goldstein [00:31:45]

Thanks, Kent.

Verma [00:31:45]

You know, it’s interesting ‘cause I saw another practitioner post about PAGA reform and all these changes and ask, but why does PAGA exist? And I think if you knew the history, it’s pretty clear why it exists. It goes back to the distinction between PAGA cases, which there’s decades of case law indicating that they’re different from class actions. Answer your question about the rigorous analysis into that individual and whether they can represent other people, gone, not an issue, completely fall off the table when it comes to PAGA. As long as that individual has experienced a Labor Code violation, they can sue on behalf of other people. That’s the most important thing to understand. I would say the second important thing to understand is what we talked about with the arbitration agreement causing the class claims to fall away doesn’t exactly apply with PAGA. There’s been threading the needle between kind of two different parts of our government that have resulted in a situation where at the moment it is possible to require a PAGA plaintiff to go to arbitration individually on their own claim and for their ability to represent other people to be stayed. The next overlay relating to PAGA is that just this summer there’s been legislation that limits some of the gaping loopholes with PAGA. So, the most important thing to understand is previously with PAGA, as I said before, the claim was on behalf of the state. So actually 75% of the penalties were going to the state. That is changed to 65%, and now there are some tools for employers to use if they are actually hit with penalties to reduce those penalties ahead of time by conducting audits, by doing affirmative cures. By actually doing the things that get money into the pockets of their employees, instead of lining the pockets of claimants lawyers.

Schmidt [00:33:32]

So, I think that’s probably enough to underscore the point that it’s a very wonky discussion and it’s a discussion that probably deserves its entire episode of just talking about the nuances of PAGA. So, we’ll look forward to that.

Goldstein [00:33:45]

Thanks, Kent.

Schmidt [00:33:45]

Right now, I’d like to pivot to the part of our episode that we like to call the Deeper Dive. And I’d like to ask you both a question unrehearsed. On social media there’s this thing I’ve seen from time to time, and maybe you’ve seen it as well. It’s based on the premise that a balanced life involves encouraging mental, financial and physical development, a very holistic approach, and that to that end everyone should have or aspire to aspire to have three hobbies. One that challenges your mind, one that makes some money, and one that challenges your physical strength or stamina. Now that is ambitious to have all three of those hobbies and running a busy practice, family obligations, everything else you’re doing in your communities. I’m not going to suppose that you have those three hobbies, but if you had more had more time, or in the next 10 years, if you don’t have three of those hobbies, just pick one. What is one of those hobbies that you would like to tackle that would either give you some sort of financial return for your work, give you some physical strength and stamina to challenge, or challenge your mind.

Goldstein [00:35:01]

Wow, Kent, that’s tough. I think I’m currently hitting two of those three.

Schmidt [00:35:06]

Wow. Very good.

Goldstein [00:35:06]

Yeah, the money making one, I got to tell you, I feel very blessed to be a partner in a law firm. When it comes to physical challenges for kind of my mid-life crisis thing in my 40s, I started powerlifting competitions, and my wife is convinced I’m gonna put myself in the hospital, and I haven’t yet.

Schmidt [00:35:25]

Take it easy.

Goldstein [00:35:26]

That’s right, that’s right. And I’ve gotten really into recently reading sociological and archaeological texts about things like the history of debt and the history of work. And it’s amazing how relevant it has been to my practice as an employment lawyer. That would be an entire SharkCast episode in and of itself. But you know, as human beings, we’ve lived a lot of different ways in the last 50,000 years, and it’s amazing how many things we take for granted like this is the way the world has to be, that get challenged if you take a broader view of history.

Schmidt [00:35:58]

Wow, that is an area of academic or intellectual pursuit that you don’t hear a lot of people pursuing. So, give me example like some of the texts that you’ve been exposed to. Like how far back are we talking?

Goldstein [00:36:12]

So we’re going back to like Babylon, ancient Sumeria, and there’s an author I really started enjoying a lot, David Graeber. He talks about the history of debt and its connection with slavery and violence throughout history. And I don’t always agree with David Graeber’s solutions to modern problems, which usually involve some version of anarchy, but it’s very interesting to hear about how humanity has lived so many different ways throughout history and the possibilities it opens up. Right? Like this idea that we’re naturally competitive, every person out for themselves mindset that I think we have when we study economics, I think ends up not being true. I think humans might actually be programmed to look out for one another and to engage in mutual aid. And that’s one of the things I wanna translate into a lot of the talks that give employers is, you know, you got to lean into this idea that we do owe each other something in society. It’s not just you give me your labor and I give you a paycheck. There’s more, and as people, we enjoy the workplace so much more when it’s not just an economic transaction.

Schmidt [00:37:19]

Wow, that’s fascinating. So, it’s not even so much history as anthropology combined with philosophy, I suppose.

Goldstein [00:37:25]

Absolutely. That’s a great way of putting it.

Schmidt [00:37:29]

Well, fascinating. Nisha?

Verma [00:37:29]

Yeah, isn’t it two out of three though as well. Not doing any weightlifting, but I also have a hard time seeing how I would choose a hobby that makes money when again, I’m so blessed with the job that I have now, and I’ll have a hard time seeing what I would want to do for income in addition to what I’m doing here. But with the other two, I do yoga three times a week. I’m religious about that. And then in terms of my mind, what I do, and I think a lot of people that work with me know this, including clients, and they’re fine with it, if I don’t allow myself to be in front of any screens after 9:00 PM, and that forces me to sometimes read work that’s been printed, or just pick up a book. And I don’t think it’s necessarily because I’m trying to out-read anybody or out-knowledge anybody. I think it’s more because I wanna put myself in a place where, one, I’m just focusing on one thing for an hour, which so few people in our society even know how to do anymore. There’s so many people that don’t have the neural circuitry to be able to do that because of the constant multitasking and notifications and dingers that they get pulled into. So just to prove to myself that I could sit down and start something, and 60 minutes later still be doing that thing is really important to me. And then I also wanna be in a place where I’m just receiving information, not trying to impress anybody or not trying to prove anything to anybody or tell anyone anything. Just hear and receive. So, it really doesn’t matter what I’m reading. I ran out of whatever I was reading, so I picked up 13 Days, written about the Cuban missile crisis by the previous Robert Kennedy, just to just to be clear.

Schmidt [00:39:00]

So, is this the one that the movie was based on? There was a movie. It’s Kevin Costner.

Verma [00:39:05]

So, the actual memoir part of it is very short, but I thought that, you know, as opposed to going and telling someone how smart I am ‘cause I read this, I could just kind of receive this person’s perspective of this specific moment in time and what a truly skilled negotiator does or thinks about, and just like with it, right, just receive it.

Schmidt [00:39:25]

In the hard paper non-electronic version.

Verma [00:39:29]

Absolutely. Because I’m convinced that blue light after 9 or maybe some other hour for other people does not result in sufficiently.

Schmidt [00:39:37]

Well, thank you for those insights into your non-legal pursuits and wish you both the very best. Thank you both for being here for SharkCast. I think we have enough teasers for future episodes and look forward to having you back real soon.

Goldstein [00:39:53]

Thanks, Kent.

Schmidt [00:39:54]

With that, I’d like to thank our listeners for tuning in to this episode. As always, I’m indebted to the extraordinary team at Dorsey for making this podcast and episode possible. For more resources on this and other litigation risks go to litigationrisk.com, where more information can be found, including a book on managing litigation risk written by yours truly. Until next time, my friends, this is yet another reminder that there are a lot of sharks swimming out there in the murky waters, so swim safely.

Voiceover [00:40:23]

This podcast is not legal advice and does not establish an attorney-client relationship or create any duty of Dorsey & Whitney LLP or those appearing in this podcast to anyone. Although we try to assure that the content of this podcast is accurate, comprehensive, and reflects current legal developments, we do not warrant or guarantee those things. The opinions expressed in this podcast are the opinions of those appearing in the podcast only and not those of Dorsey & Whitney. This podcast is considered attorney advertising under the applicable rules of certain states.