Chindarah v. Pick Up Stix, Inc.
Filed February 26, 2009
Fourth District, Division Three
Cite as G037190

Validity of Settlement Agreement in Unpaid Wage Claim Upheld

The case arose from a complaint filed by two former employees, one of them is Boonchai Chindarah, against their former employers at Pick Up Stix for unpaid overtime claims, penalties and interest due to the misclassification of their jobs as exempt from overtime pay.

The case was filed in February 2003 and was amended in July 2003 as a class action suit to recover unpaid overtime of the plaintiffs including former general managers, assistant managers and lead cooks employed by the company from February 1999 through September 2003.

Both parties tried to settle the lawsuit but mediation failed.

After that, the company attempted settlement with as many class members as possible by offering each of them a payment in the same amount as previously offered at the mediation.

As a result, nearly two hundred employees (former and current) accepted the offer and signed a settlement agreement, which included a general release, with the company. By signing the agreement, the employee has consented to the following facts:

• That he or she had spent more than 50% of the time performing managerial duties


• That the agreement releases the company from all claims for unpaid overtime and any other Labor Code violations during the time period


• That the employee has agreed “not to participate in any class action” concerning the released claims.

However, after signing the agreement, the original complainants filed the second amended complaint, which included charges that the agreement violated several provisions of the state Labor Code.

The company filed a cross-complaint against eight former and current employees who had signed the settlement agreements yet joined the proposed class action. The cross-complaint charged them with breach of contract and breach of settlement agreement.

In addition, the company also filed an answer to the second amended complaint and cited the release as an affirmative defense.

Chindarah sought summary adjudication of the cross-complaint, claiming that the releases were void under Labor Code section 206 and 206.5, which provides that:

"An employer shall not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made. A release required or executed in violation of the provisions of this section shall be null and void as between the employer and the employee."

On the contrary, the company moved for summary judgment of the complaint, claiming the releases barred Chindarah and the rest from recovering the unpaid wages.

After hearing, the trial court found the following facts:

• That the Labor Code did not prohibit release of a claim for unpaid wages in situations where there is a bonafide dispute on wages owed


• That there is a triable issue of fact regarding the owed wages as “Stix produced evidence showing good faith dispute with regard to classification of the employees”

After finding that the releases were valid as a matter of law, the trial court granted the company’s motion for summary judgment and denied the complainant’s motion.

Chindarah filed for an appeal.

After review, the Fourth District court of appeal affirmed the decision of the trial court, confirming the right of the employer to secure a release from claims for unpaid overtime. The court held that although an employee’s statutory right to overtime wages is not “waivable”, an employee may release a claim for the overtime wages as part of a settlement in a bonafide wage dispute.