Due Process; Limits on Punitive Damages, not Civil Penalties
The Court of Appeal distinguished between remedial civil penalties and punitive damages in Los Angeles County Metropolitan Transportation Authority v. Superior Court (2004) 123 Cal.App.4th 261, and held that a government entity is not immune from civil penalties imposed by the Unruh Civil Rights Act (Civil Code section 52 et seq.) under Government Code section 818, which bars imposing punitive damages against public entities.
Labor Code Section 203 provides a waiting time penalty that is consistent with constitutional due process.
State Farm v. Campbell (2003) 538 U.S. 408 concerns constitutional due process limits on punitive damages, not civil penalties. As the Supreme Court notes, one prong of its test in BMW of North America, Inc. v. Gore (1996) 517 U.S. 559 (which refused to sustain a $2 million punitive damages award accompanying $4,000 in compensatory damages) is “the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.” The evil Campbell sought to remedy was the risk of an excessive punitive award imposed by a lay jury. “We have admonished that punitive damages pose an acute danger of arbitrary deprivation of property. Jury instructions typically leave the jury with wide discretion in choosing amounts, and the presentation of evidence of a defendant’s net worth creates the potential that juries will use their verdicts to express biases against big businesses, particularly those without strong local presences.”
The law does not view wage penalties as implicating property rights, which puts the 203 penalty outside of Campbell right at the start.
“A statute entitled ‘An act to provide for the protection of servants and employees of railroads,´ relating to the payment of unpaid wages without abatement or deduction on discharge of an employee, does not amount to deprivation of property, as the act is purely prospective in its operation. It does not interfere with vested rights, existing contracts, or destroy, or sensibly encroach upon, the right to contract, although it imposes a duty in reference to the payment of wages actually earned, which restricts future contracts in the particular named.” [Citation omitted.]
Moore v. Indian Spring Channel Gold Mining Co. (1918) 37 Cal.App. 370, 378 (quoting St. Louis, etc., R.R. Co. v. Paul, 173 U.S. 409).
When the section 203 penalty scheme withstood a constitutional due process challenge early in the last century in Moore v. Indian Sprint Channel Gold Mining Co. (1918) 37 Cal.App. 370, the remedial purpose of the penalty was highlighted in the decision. After a penal statute imposing misdemeanor liability and a fine not to exceed five hundred dollars was ruled unconstitutional (Matter of Crane, 26 Cal.App. 22), the legislature changed the law to impose a penalty based on wages with a thirty day limit.
Appellant expresses difficulty in discovering any material distinction between the two acts. In the act of 1911, continues the brief, the penalty is nothing more nor less than a fine not exceeding five hundred dollars; while in the amendment of 1915 the penalty is in effect a fine not exceeding thirty times the servant’s daily wage.” It seems to us that the distinction is obvious in this: The act of 1911 declares that a violation of its provisions is a crime for which the violator is answerable to the state, while by the amendment he must compensate the wage-earner by way of penalty.”
Moore at 373-374. The court of appeal compared the penalty to other statutes, such as Code of Civil Procedure sections 732, 733 and 735 which impose treble damages on tenants who commit waste, cut down trees or forcibly detain property. “The constitutionality of these sections is not questioned. They are held not to be penal, but remedial.” Id. at 375.
The Court of Appeal distinguished between remedial civil penalties and punitive damages in Los Angeles County Metropolitan Transportation Authority v. Superior Court (2004) 123 Cal.App.4th 261, and held that a government entity is not immune from civil penalties imposed by the Unruh Civil Rights Act (Civil Code section 52 et seq.) under Government Code section 818, which bars imposing punitive damages against public entities. “[A] number of courts have concluded that to be condemned as punitive, a penalty, generally speaking, must simply and solely serve that purpose.” Id. at 272 “It is apparent from this legislative history that section 52 has at least two important non-punitive purposes. The first is simply to provide increased compensation to the plaintiff. The second purpose, and perhaps the most important one, is to encourage private parties to seek redress through the civil justice system by making it more economically attractive for them to sue. . . . If not for the civil penalty, many such litigants would neither have the economic incentive nor the means to retain counsel to pursue perpetrators under the statute.” Id. at 271-272.
Moore notes that the 203 penalty has a similar purpose. “There has been a pronounced tendency in state and national legislation for many years, not only to ameliorate the working conditions of the wage earner, but to safeguard him in his relations to his employer in respect of hours of labor and the compensation to be paid for his labor. . . the public safety and welfare demand . . . laws which are designed to secure [for labor] a reasonable wage, [and] to provid, where practicable, for the enforcement of payment by way of liens on the product of his labor . . . The intention of the penalty imposed by the act in question is to make it to the interest of the employer to keep faith with [its] employees and thus avoid injury to them and possible injury to the public at large.” Id. at 381-382.
Note: Moore repeatedly refers to the wage and labor laws under discussion as applicable to a class, e.g., “The act refers to all wage-earners, designated as employees, as the class referred to, and it unquestionably applies equally to all of the class.” Id. at 379.
ABOUT THE AUTHOR: William A. Daniels
William A. Daniels is a Trial Attorney in Encino, CA. His practice focuses on employment, serious personal injury and class actions. A graduate of Loyola Law School of Los Angeles, he is a member of the Consumer Attorney Association of Los Angeles Board of governors and a founding member of the Civil Justice Program and the 21st Century Trial School at Loyola. For several consecutive years he has been names a “Super Lawyer” Los Angeles Magazine in Southern California.
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