A recent decision by our California Supreme Court, In re Tobacco Cases II, will make it easier for plaintiffs' lawyers to pursue class actions under the state's Unfair Competition Law (Section 17200 of the Business & Professions Code).  While this decision has been met with much dismay within the business community, it is unclear whether it will have a significant impact on employment cases, such as class actions for wage-hour violations.

 

The main issue in the Tobacco Cases was whether the class representative must prove that every unnamed member of the proposed class suffered an injury and lost money or property as a result of the unfair competition.  The Supreme Court ruled that these requirements, which were added to the Unfair Competition Law by Proposition 64 in 2004, apply only to the class representative, not to unnamed class members.

Before the voters approved Proposition 64, unfair competition lawsuits could be brought by "any person" acting for his or her own interests or for "the general public."  This led to abusive "shakedown" lawsuits in which lawyers or other plaintiffs who never suffered any injury at all made frivolous claims in order to leverage a monetary settlement. Proposition 64 was supposed to end that practice once and for all.

But as a result of the Tobacco Cases decision, courts in some unfair competition cases may end up certifying broader and even larger classes.  For example, the class definition in the Tobacco Cases includes all persons who smoked at least one cigarette in California during a specified time period, and were exposed to the tobacco companies' marketing and advertising activities in this state. The Supreme Court essentially refused to limit the class only to those persons who actually relied on the tobacco companies' allegedly deceptive advertising campaign.  The result could be more costly "shakedown" settlements in unfair competition cases.

Still, the Tobacco Cases decision might not have much of an impact on employment class actions.  Most employment class actions arise in the wage-hour area (e.g., employees denied overtime pay or meal/rest breaks), while others involve alleged illegal discrimination in hiring, pay or promotion.  In the wage cases, the class definition usually only includes employees who allegedly were injured and lost money as a result of the employer's pay practices.  Even under the Tobacco Cases decision, it is unclear whether courts in wage-hour cases would certify classes that include persons who did not lose money as a result of the claimed wage-hour violations.

However, discrimination cases might be another matter altogether, especially those involving job applicants.  It's long been the law that an unsuccessful job applicant could sue the company claiming that some employer practice or policy screened out a disproportionate percentage of job applicants of a particular race, national origin, sex, age, etc. Often, the class consists of actual job applicants and those who might not have applied because they felt it would have been a waste of time due to the allegedly improper stumbling block imposed by the employer.  In those cases, plaintiffs often challenge an employer policy that may or may not have affected a particular individual - much like tobacco advertising.

It will take some time before we know the full impact of the Tobacco Cases decision.  In the meantime, employers should closely monitor their payroll and other workplace practices to ensure they are complying with the laws.  Your contact at the Firm is ready to assist you if you have any questions about this topic, or wish to arrange for a payroll practices audit or a review of policies that are likely to engender discrimination complaints.