Quarterly report pursuant to Section 13 or 15(d)

Litigation

v3.21.1
Litigation
3 Months Ended
Mar. 31, 2021
Commitments And Contingencies Disclosure [Abstract]  
Litigation

Note 6 – Litigation

On November 21, 2012, David Kaanaana (“Kaanaana”), a former staffing employee, filed a class action wage and hour lawsuit against BBSI in the California Superior Court on behalf of himself and certain other employees who worked at County Sanitation District No. 2 of Los Angeles County (“the District”). The trial court ruled in plaintiffs’ favor regarding certain alleged meal breach violations but ruled in favor of BBSI with respect to the application of the California prevailing wage law to the District and other claims. These latter rulings were appealed by the plaintiffs to the California Court of Appeal. On November 30, 2018, the California Court of Appeal for the Second Appellate District returned its decision in Kaanaana v. Barrett Business Services, Inc., overruling the trial court's decision to dismiss the prevailing wage claim, ruling that the work in question at the District constitutes “public works” under the applicable law, and also ruling that plaintiffs’ are entitled to additional remedies with regard to the meal break violations under California law. On January 9, 2019, BBSI filed a petition of review to the California Supreme Court.

On February 27, 2019, the California Supreme Court granted the petition to review the Court of Appeal’s decision with respect to the prevailing wage issue. An amicus brief in support of BBSI’s appeal was filed by the District and certain associations of special districts, cities and counties in California. Oral argument took place on January 5, 2021. A decision from the California Supreme Court was issued March 29, 2021 affirming the Court of Appeal decision and concluding that the recycling sorting work performed by the staffing employees in question was a “public work” and therefore would be subject to prevailing wage requirements. No damages were awarded in the appeals process, and management expects the case to be remanded to Superior Court for any such determination with respect to both the prevailing wage issue and any additional remedies for the meal break violations.

Although certain costs from the Kaanaana case are estimable and accrued, potential liability from the public work determination is not currently considered estimable and is therefore not accrued. There is not precedent on how this type of ruling would impact historical work performed prior to a relevant prevailing wage rate being established by the California Department of Industrial Relations. There remain many possible outcomes, including that a prevailing wage rate could be set considerably higher than actual wages paid, which totaled approximately $2.2 million, or that actual wages paid may be determined to be equivalent to prevailing wages. There may also be other procedural outcomes.

BBSI believes it has the right to recover from the District any increased costs that may result from the court’s past or future decisions related to prevailing wage requirements, including any fees and penalties that may be incurred.

In addition to the matter above, BBSI is subject to other legal proceedings and claims that arise in the ordinary course of our business. There are significant uncertainties surrounding litigation, including the possible liabilities in the Kaanaana case. For this case and others, management has recorded estimated liabilities of $3.1 million in other accrued liabilities in the condensed consolidated balance sheets.