Kaiser Foundation Hospitals sued for alleged sick leave and vacation pay violations

Employee claims California company denied the right to use sick leave, failed to pay at correct rate

Kaiser Foundation Hospitals sued for alleged sick leave and vacation pay violations

California’s Healthy Workplaces, Healthy Families Act of 2014 (HWHFA) generally requires employers to give eligible employees at least three paid sick days per year. The law can impose compensatory damages, liquidated damages, and civil penalties on violators.

Under section 248.5(e) of the HWHFA, a person attempting to enforce the section “on behalf of the public as provided for under applicable state law” should be entitled only to equitable, injunctive, or restitutionary relief if they succeed in their attempt.

Kaiser Foundation Hospitals – the defendant in the case of Wood v. Kaiser Foundation Hospitals – owned and operated hospitals and medical facilities across California. The plaintiff, an employee paid by hourly wages, filed a lawsuit against Kaiser.

The plaintiff asked for penalties under the Private Attorneys General Act of 2004 (PAGA) for the employer’s alleged violations of the HWHFA. She said that she was an aggrieved employee who could act on the state’s behalf and who could collect civil penalties for violations against fellow aggrieved Kaiser employees in California.

The plaintiff claimed that Kaiser:

  • violated the HWHFA by failing to pay sick leave at the correct rate
  • wrongfully denied employees the right to use sick leave
  • violated the vacation pay provisions of California’s Labor Code

Kaiser filed a demurrer. It argued that the HWHFA did not authorize PAGA claims for civil penalties. The legislature intended to restrict claims filed by aggrieved employees seeking to recover civil penalties under the PAGA, Kaiser said.

The trial court agreed with Kaiser’s argument. It sustained Kaiser’s demurrer and dismissed the plaintiff’s claims. However, the California Court of Appeal for the Fourth District, First Division disagreed with Kaiser’s position and reversed the trial court’s decision.

The appellate court held that section 248.5(e) of the HWHFA did not prevent aggrieved employees from filing PAGA claims for violations of the HWHFA. It was inconceivable that the legislature meant to prohibit PAGA actions to enforce the HWHFA, given the perceived need to mandate minimum paid sick leave, the appellate court said.

Given the text, history, and context of section 248.5(e), the phrase “on behalf of the public as provided for under applicable state law” was intended to refer to a claim under the Unfair Competition Law (UCL), not a PAGA action, the appellate court concluded.

The appellate court explained that the legislative history suggested that the legislature created the PAGA to address the reality that the labor commissioner and attorney general lacked the resources needed to enforce labor laws.

The legislature believed that, unless aggrieved employees acting as private attorneys general had the authority to enforce labor laws, employers would keep violating such laws “on a massive scale,” the appellate court said. According to studies, employers’ violations of California labor laws cost the state between three to six billion dollars per year, the appellate court added.

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