Diaz v. Grill Concepts Servs., Inc.
23 Cal. App. 5th 859
Cal. Ct. App. 5th2018Background
- Grill Concepts operated a Daily Grill at LAX within the City of Los Angeles Airport Hospitality Enhancement Zone and paid employees a "living wage."
- In July 2010 the City amended the Zone ordinance to change the annual adjustment mechanism for the living wage; Grill Concepts continued paying the pre-amendment wage through June 2014.
- Grill Concepts' HR director suspected an amendment might have increased the wage in June 2010, contacted outside counsel who contacted the City Attorney, but the company did not follow up or otherwise verify the final bulletin; it did not ask other zone employers or perform further legal research.
- In March 2014 employee counsel demanded repayment for underpayments; plaintiffs sued as a class for underpaid wages, prejudgment interest, treble damages under the ordinance, and, for former employees, Labor Code §203 "waiting time" penalties.
- Grill Concepts promptly paid the wage underpayments but the trial court found: the ordinance was not unconstitutionally vague; prejudgment interest was owed; treble damages were not warranted; and Grill Concepts acted "willfully" under Labor Code §203 so waiting time penalties were due. Grill Concepts appealed only the willfulness finding and whether courts may equitably waive §203 penalties.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was Grill Concepts' failure to pay the increased living wage "willful" under Lab. Code §203? | Plaintiffs: Yes — employer suspected underpayment, did not correct, so conduct was intentional/knowing. | Grill Concepts: No — it could not locate or understand the amended ordinance; mistake was inadvertent or in good faith. | Held: Yes — the employer's negligent, halfhearted investigation and unreasonable vagueness defense made the failure willful; ignorance of law coupled with negligence does not avoid §203 liability. |
| Was the amended City living wage ordinance unconstitutionally vague? | Plaintiffs: No — ordinance and referenced administrative bulletin give sufficiently definite guidance. | Grill Concepts: Yes — amendment references an external bulletin and borrows terms that allegedly do not clearly apply to its workforce. | Held: No — ordinance reasonably and practically construed; external bulletin was a valid definitional reference and other textual/temporal cues dispelled vagueness. |
| Did Grill Concepts' vagueness challenge constitute a "good faith dispute" that negates willfulness? | Plaintiffs: No — the challenge was unreasonable and unsupported by evidence. | Grill Concepts: Yes — asserted good faith belief and presented vagueness defense. | Held: No — the challenge was objectively unreasonable and unsupported; good faith belief alone is insufficient. |
| May a trial court exercise equitable discretion to waive or reduce Labor Code §203 waiting time penalties? | Plaintiffs: No — statute mandates penalty where employer willfully fails to pay. | Grill Concepts: Yes — courts have equitable power to avoid harsh penalties in exceptional circumstances. | Held: No — §203 uses mandatory language and purpose (to deter delayed pay) would be undermined by judicially created equitable exceptions; courts lack discretion to waive §203 penalties. |
Key Cases Cited
- Barnhill v. Robert Saunders & Co., 125 Cal.App.3d 1 (Cal. Ct. App. 1981) (defines "willful" failure to pay wages and rejects requirement of malicious intent)
- Trombley, In re, 31 Cal.2d 801 (Cal. 1948) (willfulness means knowing and intentional conduct; describes good faith dispute concept)
- Amaral v. Cintas Corp. No. 2, 163 Cal.App.4th 1157 (Cal. Ct. App. 2008) (discusses when uncertainty or representations by authorities can negate willfulness)
- Road Sprinkler Fitters Local Union No. 669 v. G & G Fire Sprinklers, Inc., 102 Cal.App.4th 765 (Cal. Ct. App. 2002) (explains "good faith dispute" defense to waiting time penalties)
- Smith v. Superior Court, 39 Cal.4th 77 (Cal. 2006) (explains purpose of §203 waiting time penalties to compel prompt payment)
- Lusardi Construction Co. v. Aubry, 1 Cal.4th 976 (Cal. 1992) (recognizes narrow equitable relief where government representation led to noncompliance)
- Tammen v. County of San Diego, 66 Cal.2d 468 (Cal. 1967) (establishes rule that negligent failure to discover law does not justify relief)
- Hoffman Estates v. Flipside, 455 U.S. 489 (U.S. 1982) (business regulation subject to less strict vagueness test and presumption of constitutionality)