To all outward appearances, a June 29 decision by the California Supreme Court is a victory for employers over unions. That day, justices concluded that labor unions lacked standing to sue on behalf of employees under the state’s unfair competition law (UCL) because the unions themselves had not suffered injury. Furthermore, the court said, any lawsuits brought under the UCL seeking relief on behalf of others must be brought as class actions. In addition, justices said unions cannot bring representative actions under the state’s five-year-old Private Attorneys General Act because they are not “aggrieved employees.”

In the case, Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (First Transit Inc.), two labor unions and 17 individuals sued three transportation companies, alleging violations under the two laws over missed meal and rest breaks. They sought more than $10.6 million in unpaid wages and more than $2.6 million in penalties, interest and attorneys’ fees.

While the ruling ensures that unions will have a difficult time suing on behalf of employees under those two laws, it doesn’t necessarily mean that California employers can now anticipate a reduction in wage and hour claims.

“It’s form over substance,” says Robin Weideman, a partner at Carlton, DiSante & Freudenberger in Sacramento. “All the unions have to do is have employees bring the claims in their own name. It’s an easily fixable problem; it’s not hard to find one employee who’s willing to do it.”

Voters’ Mandate

Two lower courts previously rejected the case, leading to the Supreme Court review. A Los Angeles trial court ruled that the unions lacked standing under the two laws. The Court of Appeals denied the unions’ petition for writ of mandate and the Supreme Court granted the plaintiffs’ petition for review.

In their ruling, justices sought to clarify an area of law targeted in a 2004 ballot initiative by parties who wanted to reduce “frivolous lawsuits” in California. That initiative, Proposition 64, argued that the standing granted under the state’s unfair-competition law was too broad and had been abused. Proposition 64, approved by 59 percent of the state’s voters, amended the law to state that representative claims can only be brought by people who themselves have suffered injury or loss as the result of unfair competition.

In the Amalgamated Transit case, the unions conceded that they didn’t suffer injury as the result of an unlawful action. However, they argued that they had standing to sue as assignees of the employees who did claim injury.

“To allow a non-injured assignee of an unfair competition claim to stand in the shoes of the original, injured claimant would confer standing on the assignee in direct violation of the express statutory requirement in the unfair competition law, as amended by the voters’ enactment of Proposition 64,” Justice Joyce Kennard wrote for the court.

The court also rejected union arguments that Proposition 64 did not negate the federal doctrine of associational standing, which gives associations that lack standing the right to sue on behalf of their members.

Backup Plaintiffs

James Foster Jr., lead counsel for the defendants in the case, agrees that the ruling may not reduce litigation under the two laws, but says it will limit who can bring the lawsuits. “It’s not going to be some [hypothetical] injury brought by a group of people who have an interest in something,” he says.

He characterized that interest as labor unions’ efforts to win the favor of employees who then might decide to organize.

“If unions are trying to court new members, if unions are trying innovative litigious sorts of things to gain loyalty from prospective union members, this really does limit their ability to do that,” says Foster, a partner at McMahon Berger.

John L. Anderson, lead counsel for the plaintiff labor unions, says he was mystified by the court’s decision, but he blamed the public support of the ballot initiative. “Prop 64 was a big political bugaboo; on this case I think [the justices] got scared that they were going to be severely criticized if they allowed assignees to bring in a noninjured party as a plaintiff,” he says.

Anderson, a partner at Neyhart, Anderson, Flynn & Grosboll, argues that if justices were reacting to the political implications of Proposition 64, they misconstrued it. “The authors of Prop 64 were ticked off at lawyers who were going around soliciting clients who may or may not have been injured and then essentially filing an extortionate UCL claim and then getting a settlement out of it. The authors were not really concerned about unions.”

In any event, Anderson agrees with Foster that the ruling won’t have much impact on the volume of litigation employers might expect to see from wage and hour claims. He says that he has about 10 cases with unions as lead plaintiffs and that in each one he lined up individuals as backup plaintiffs out of an excess of caution. Those cases, now class actions, will proceed.

“The message for employers is that this really doesn’t change the landscape at all, in my view,” Weideman says. “Employers should really stay the course in trying to ensure compliance with California’s strict wage and hour requirements–because all the mechanisms for suing under these two laws are still alive and well.”