AMICUS SUPPORT NEEDED IN CALIFORNIA SUPREME COURT ON THE LEGALITY OF PROFIT-BASED COMPENSATION

Plaintiff Eddy Prachasaisoradej sued his employer, Ralphs Grocery Company (Ralphs), alleging that a profit-based bonus plan that Ralphs made available to certain of its union and non-union employees violates California’s wage laws, insofar as Ralphs deducts certain store expenses
from store revenue to calculate store profit in accordance with standard accounting principles.

The trial court dismissed the case on federal preemption grounds. In a published decision, California’s Court of Appeal recently reversed the dismissal and ordered plaintiff’s case reinstated. A copy of the decision may be viewed at the following website: http://www.courtinfo.ca.gov/opinions/documents/B165498.PDF

As a result of the Court of Appeal’s published decision, true profit-based compensation, where profit is calculated according to standard accounting principles, is no longer available in California as a matter of state law. Such compensation plans as do exist are subject to attack if they include
workers’ compensation costs (as to all employees) and cash and merchandise shortages (as to hourly employees) among the expenses deducted from revenue to arrive at net earnings. And true profit-based compensation is effectively off the table as a subject for bargaining between unions and employers on the issue of wages for California employees, even though it is a mandatory subject of collective bargaining under the National Labor Relations Act.

Ralphs filed a petition on October 18, 2004, seeking review by the California Supreme Court of the state wage law and federal labor law questions that the Court of Appeal's decision presents. Ralphs is seeking amicus support by letter brief for its petition. Such support can be for either the state wage law questions or the federal labor law questions, or both. While there is no deadline, amicus letters supporting the petition should be filed with the Supreme Court as soon as possible, preferably by November 18, in order to assure the Court will have time to consider them before making a decision on Ralphs’ petition.

Amicus letters supporting review need not be long or complicated. Rather, they merely need to explain why in the writer’s opinion, this case presents issues important enough that the California Supreme Court ought to review them.

For further information about this litigation, please contact Daniel Gonzalez at (818) 995-0800 or dgonzalez@horvitzlevy.com.

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