When Must a Defendant Forfeit Bonds in a Wage Claim?

Did an employer’s failure to file a valid notice of appeal from the Labor Commissioner's orders bar the trial court from awarding the bonds they posted?

Did an employer’s failure to file a valid notice of appeal from the Labor Commissioner's orders bar the trial court from awarding the bonds they posted?

Background

From 2002 to 2016, Manuel Chavez worked as an on-site property manager at a hotel owned by the appellants. In 2015, he filed a wage claim with the California Labor Commissioner's office alleging that, for 14 years, appellants paid him less than minimum wage and engaged in other forms of wage theft.

The appellants responded by filing a lawsuit in the Los Angeles County Superior Court seeking $10 million from Chavez, alleging he was an independent contractor who’d stolen hotel rental moneys. The appellants dismissed the suit the day before trial. In 2017, the Labor Commissioner's office issued two ODAs (order decision or award) requiring appellants to pay Chavez a total of over $235,000 in unpaid wages, penalties, and interest. The appellants were told of their right to challenge the ODAs under Labor Code section 98.2. That section states the procedures by which a party to a proceeding before the Labor Commissioner resulting in an ODA may seek review. In essence, they must file an appeal to the superior court. The section also contains specific requirements for properly noticing such an appeal and requires the party seeking review to post a bond or cash deposit with the superior court in the amount owed under the ODA. These two requirements are prerequisites to the superior court having jurisdiction to hear such an appeal.

The Appellants Didn’t Appeal But Instead Filed Another Lawsuit

The appellants failed to file a valid notice of appeal of the ODAs under section 98.2(a); instead, they again filed a lawsuit against Chavez. This time, the appellants' complaint contained the following claims:

Because there was no section 98.2 appeal from the ODAs, they automatically became final by operation of law. This triggered the Labor Commissioner's statutory obligation to “file … a certified copy of the final order[s] with the clerk of the superior court of the appropriate county.” As such, the Labor Commissioner filed the two ODAs in Chavez's favor in the Los Angeles County Superior Court. In turn, this triggered the court clerk's statutory obligation to “immediately” enter “[j]udgment … in conformity [with the ODAs].” The clerk of court entered judgments against the appellants in Chavez's favor in the amount of the ODAs plus costs and interest.

The appellants then appealed the clerk's judgments, arguing they’d been improperly entered without due process. The Court of Appeals rejected that challenge. Still, the appellants refused to release the bonds to Chavez and appealed.

The Decision by the Court of Appeals

On appeal, the appellants asserted that the superior court lacked jurisdiction to order the release of the bonds or enter judgment against them as bond principals. They argued that, because they never succeeded in filing a valid section 98.2 appeal with the trial court, the trial court lacked the authority to issue any orders regarding bonds posted under section 98.2.

California Court of Appeals Presiding Judge Frances Rothschild wrote that by the express terms of section 98.2, the bonds were subject to forfeiture if, inter alia, appellants failed to pay a valid judgment in Chavez's favor within the statutory timeframe. Here, appellants failed to pay the clerk's judgments based on the ODAs in Chavez's favor long after the time limit. As a result, the plain language of section 98.2 required the court to forfeit the bonds to Chavez in satisfaction of the clerk's judgments and ODAs on which they were based.

Nothing in the statute supports that a bond should be treated differently because it’s filed in connection with an attempted section 98.2 appeal that fails due to lack of proper notice (as occurred here), rather than in connection with a section 98.2 appeal that fails for some other reason unrelated to the merits of the appeal (such as an untimely bond). As a result, Judge Rothschild said the statute expressly contemplates a situation in which an attempted section 98.2 appeal has failed without there necessarily having been an adjudication on the merits or jurisdiction to hear a section 98.2 appeal. Moreover, the court is not only empowered but required to satisfy the relevant ODA from a bond posted under such circumstances.

Finally, the purpose of the bond requirement is to provide assurance that a judgment in favor of the employee will be satisfied and to discourage employers from hiding assets to avoid enforcement of the judgment. Courts have strictly enforced the bond requirement as a jurisdictional prerequisite because it’s consistent with achieving both of these goals. Judge Rothschild said the appellants' jurisdictional argument, by contrast, would be counterproductive to achieving these goals. They had the opportunity to challenge the ODAs, and their efforts failed. Regardless of why those efforts failed, they’re now required to pay the judgments resulting from the ODAs.

Judge Rothschild also noted that allowing the appellants to avoid paying those judgments from the bond currently under the court's control would at best delay and at worst prevent Chavez collecting under the judgments. By contrast, rejecting the appellants' jurisdictional argument and affirming the forfeiture of the bond to Chavez—which is what the plain language of the statute requires in any event—is consistent with the goal of the jurisdictional bonding requirement: assuring that where, as here, an employer had been unsuccessful in its challenge to an ODA, the employer pays what it owes.

The order and judgment were affirmed. Patel v. Chavez (Court of Appeal of California, Second Appellate District, 11/22/22).

Bottom Line

An employer's failure to file a valid notice of appeal from Labor Commissioner's orders entered against them doesn’t preclude the entry of orders compelling their forfeiture of bonds it had posted for appeal.

Danielle G. Eanet can be reached at Eanet, PC in Los Angeles, CA at danielle@eanetpc.com.

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