Judge Kerry Bensinger, Case Number: 23STCV27962, Date: 2024-04-03 Tentative Ruling

On November 15, 2023, Plaintiff Eun Jung Lim (“Plaintiff” or “Lim”), filed a Complaint against Defendant AOOS Sign, Inc. (“AOOS”), alleging causes of action for:

As alleged in the Complaint, Lim was employed by AOOS as a Social Media Specialist. During her employment, AOOS did not provide timely wage statements, failed to compensate Lim for completing work assignments outside of work hours, often failed to provide Lim with statutorily required 30-minute meal breaks, and never informed Lim that she was entitled to a 10-minute rest break for every four hours worked. On September 14, 2023, Lim learned from a co-worker about the 10-minute rest breaks. On the same day, Lim complained to AOOS office manager, David Chen (“Chen”), that she was never told about the 10-minute rest breaks. On September 15, 2023, Lim informed Chen and AOOS Chief Executive Officer, Yangbo Qu (“Qu”) that she would begin taking her 10-minute rest breaks starting that day. On the same day, Lim received an email from Qu officially terminating Lim’s employment because her “performance and conduct in [her] role are no longer suitable for the company’s needs.”

On January 19, 2024, AOOS filed this Demurrer to the alter-ego allegations and each cause of action in the Complaint.

A demurrer tests the legal sufficiency of the pleadings and will be sustained only where the pleading is defective on its face.¿ (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 459.)¿ “We treat the demurrer as admitting all material facts properly pleaded but not contentions, deductions or conclusions of fact or law.¿ We accept the factual allegations of the complaint as true and also consider matters which may be judicially noticed.¿ [Citation.]”¿ (Mitchell v. California Department of Public Health (2016) 1 Cal.App.5th 1000, 1007; Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604 [“the facts alleged in the pleading are deemed to be true, however improbable they may be”].) Allegations are to be liberally construed.¿ (Code Civ. Proc., § 452.)¿ In construing the allegations, the court is to give effect to specific factual allegations that may modify or limit inconsistent general or conclusory allegations.¿ (Financial Corporation of America v. Wilburn (1987) 189 Cal.App.3d 764, 769.)¿¿If the cause of action is based in statute, the facts supporting each statutory requirement must be specifically pled. (Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 604.)

A demurrer may be brought if insufficient facts are stated to support the cause of action asserted.¿(Code Civ. Proc., § 430.10, subd. (e).) “A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.”¿(Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)¿¿¿

Where the complaint contains substantial factual allegations sufficiently apprising defendant of the issues it is being asked to meet, a demurrer for uncertainty will be overruled or plaintiff will be given leave to amend.¿ (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.)¿ Leave to amend must be allowed where there is a reasonable possibility of successful amendment.¿ (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.)¿ The burden is on the complainant to show the Court that a pleading can be amended successfully. (Ibid.)¿

“Before filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person, by telephone, or by video conference with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.”¿ (Code Civ. Proc., § 430.41, subd. (a).)¿ Defense counsel has complied with the meet and confer requirement. (See Declaration of Airene Williamson, ¶¶ 5-9.)

AOOS demurs to the alter-ego allegations and each cause of action. The court addresses each in turn.

“Ordinarily, a corporation is regarded as a legal entity, separate and distinct from its stockholders, officers and directors, with separate and distinct liabilities and obligations. [T]he corporate form will be disregarded only in narrowly defined circumstances and only when the ends of justice so require. Before a corporation's obligations can be recognized as those of a particular person, the requisite unity of interest and inequitable result must be shown. These factors comprise the elements that must be present for liability as an alter ego.” (Leek v. Cooper (2011) 194 Cal.App.4th 399, 411 (cleaned up).) To properly plead alter ego, a plaintiff “must allege sufficient facts to show a unity of interest and ownership, and an unjust result if the corporation is treated as the sole actor.” (Id. at p. 415.)

Plaintiff is informed and believes and thereon alleges that, at all relevant times mentioned herein, each defendant was an alter-ego of each and every other defendant. Unity of interest and ownership existed such that the separate personalities each of defendant never existed or ceased to exist. Further, if the acts are treated as those of one of the defendants alone, an inequitable result will follow. Accordingly, Plaintiff alleges that each defendant was an alter-ego of each and every other defendant and vice versa.

By way of this lawsuit, Plaintiff seeks to pierce the corporate veil and hold the individual defendant liable for the acts of his or her alter ego. The individual defendant held and now holds substantial interest in the corporate defendants and should therefore be deemed to be corporate defendants’ alter ego. The corporate defendants were, and now still are, mere shells and naked frameworks which the individual defendant used, and now uses, as a conduit for the conduct of his or her personal business and/or property affairs and/or obligor for the assumption of obligations and/or liabilities incapable of performance by said corporate and/or entity defendants, which are the obligations and liabilities of the individual defendant.

AOOS argues these allegations are unsupported by any facts and are therefore subject to demurrer. The court agrees. The alter-ego allegations are conclusory and devoid of any facts to apprise AOOS of the basis for Lim’s claims.

Lim contends that she has properly pleaded each element for alter-ego liability. Lim misses the point. There are no factual allegations to show whether a unity of interest exists or an inequitable result will follow if corporate separateness is respected. The absence of facts deprives AOOS of notice for the basis for Lim’s alter-ego theory.

Lim further contends a demurrer attacks causes of action, not an alter-ego allegation. Because alter-ego theory is not itself a claim, Lim contends the demurrer should be overruled as to these allegations. The law is otherwise. Under Leek, supra, a plaintiff “must allege sufficient facts to show a unity of interest and ownership, and an unjust result if the corporation is treated as the sole actor.” (Leek, at p. 415, emphasis added.) The Complaint does not so allege.

A. 1^st Cause of Action: Failure to Provide Rest Periods [California Labor Code § 226.7]

The First Cause of Action is based on the following allegations: AOOS never informed Lim that she was entitled to a 10-minute rest break and was never given an uninterrupted 10-minute rest break (Complaint, ¶¶ 8, 10, 11).

AOOS argues the First Cause of Action fails because Lim does not identify which of the fifteen Industrial Wage Commission (IWC) Wage Orders that applies to Lim.

To establish a rest break violation, a plaintiff must prove both of the following:

1. That the plaintiff worked for the defendant on one or more workdays for at least three and one-half hours; and

2. That defendant did not authorize and permit to take one or more 10-minute rest breaks to which plaintiff was entitled.

Contrary to AOOS’s argument, there is no requirement that a plaintiff plead the applicable IWC Wage Order to state a cause of action for failure to provide rest periods. Moreover, the allegations are sufficient. Specifically, the Complaint alleges that Lim was never able to take her rest breaks during her employment or paid rest break premiums. (Complaint, ¶ 8.)

B. 2^ndCause of Action: Failure to Provide Rest Periods [California Labor Code § 226.7 and 512]

The Second Cause of Action is based on the following allegations: (1) Lim’s meal breaks were often less than 30 minutes or she never took one because of the amount of work to do, and (2) Chen would often interrupt Lim’s meal break and once instructed Lim to use her lunch break to run errands for AOOS. (Complaint, ¶ 7.)

To establish a meal break violation, the plaintiff must prove both of the following:

1. That the plaintiff worked for defendant for one or more workdays for a period lasting longer than five hours; and

2. That defendant did not provide the plaintiff with the opportunity to take a timely uninterrupted meal break of at least 30 minutes for each five-hour period worked.

Like the First Cause of Action, AOOS again asserts the Second Cause of Action fails because Lim does not identify which of the fifteen Industrial Wage Commission (IWC) Wage Orders that applies to Lim. However, there is no requirement that a plaintiff plead the applicable IWC Wage Order to state a cause of action for a meal break violation. Moreover, the allegations are sufficient. Specifically, the Complaint alleges that Chen frequently interfered with Lim’s meal break such that she took less than 30-minutes in her meal period, or not at all.

C. 3^rd Cause of Action: Failure to Furnish Timely and Accurate Itemized Wage Statements [California Labor Code § 226]

The Third Cause of Action is based on the allegations that AOOS did not provide Lim with wage statements when paying her wages by direct deposit. Lim received the wage statements only upon request. Further, AOOS did not furnish Lim with accurate wage statements because AOOS never paid Lim rest break or meal break premiums. (See FAC, ¶¶ 4-5, 32.) Further

“Labor Code section 226, subdivision (a), lists the information that an employer must include on nonexempt employees' pay statements. Section 226, subdivision (e), entitles employees “suffering injury as a result of a knowing and intentional failure by an employer to comply” to recover the greater of actual damages or fifty dollars for an initial violation and one hundred dollars for subsequent violations, plus costs and reasonable attorney’s fees.” (Murphy v. Kenneth Cole Prods., Inc. (2007) 40 Cal.4th 1094, 1101, fn. 1.) “An employee is deemed to suffer injury for purposes of this subdivision if the employer fails to provide a wage statement.” (Lab. Code, § 226, subd. (e)(2)(A).)

AOOS argues the Third Cause of Action fails because, as alleged, Lim eventually had access to and did receive her wage statements. (See Complaint, ¶ 4.) The argument misses the mark. Under the plain terms of Labor Code section 226, a violation occurs when an employer does not furnish either “semimonthly or at the time of each payment of wages, . . . an accurate itemized statement….” (Lab. Code, § 226, subd. (a).) The Complaint so alleges. An employer also violates Labor Code section 226 where, as is alleged here, it fails to provide an accurate itemized statement. (See Lab. Code, § 226, subd. (e)(2)(B).)

D. 4^th Cause of Action: Failure to Pay Minimum Wages [California Labor Code §§ 1194, 1194.2]

The Fourth Cause of Action is based on the allegations that Lim worked on a film project for AOOS outside of work hours for which she was not compensated. (Complaint, ¶¶ 6, 38.)

The elements of a cause of action for violation of Labor Code section 1194 are: (1) plaintiff performed work for defendant, (2) plaintiff was paid less than the minimum wage for some or all hours worked, and (3) defendant owes plaintiff an amount of wages. (CACI No. 2701.)

AOOS argues the Fourth Cause of Action fails because, as alleged, Lim was paid more than the minimum wage. (See Complaint, ¶ 2.) The argument is not well taken. The Complaint also alleges that Lim performed work (the video project) for AOOS which she did not receive any compensation. (See Complaint, ¶¶ 6, 38.) The failure to pay less than the minimum wage for some hours worked is a violation of Labor Code section 1194. (See CACI No. 2701.)

E. 5^th Cause of Action: Failure to Pay Overtime Wages [California Labor Code §§ 204, 510]

Like the Fourth Cause of Action, the Fifth Cause of Action is based on the allegations that Lim worked on a film project for AOOS outside of work hours for which she was not compensated. (Complaint, ¶¶ 6, 42.)

An employee that works in excess of 8 hours in one day and 40 hours in one week must be compensated at a rate higher than her regular rate of pay. (Lab. Code, § 510; IWC Wage Order No. 4-2001 § 3(A).) A plaintiff must show that he performed work for the defendant, he worked overtime hours, defendant knew or should have known that plaintiff worked overtime hours, plaintiff was not paid the appropriate rate for the overtime hours, and the amount of overtime pay owed. (CACI No. 2702.)

AOOS argues the Fifth Cause of Action fails for two reasons: there is no allegation (1) that AOOS knew or should have known that Lim worked overtime hours, and (2) which Wage Order is applicable to Lim’s claim. The court disagrees. As alleged, AOOS tasked Lim with a video project which required Lim to walk her dog. Lim did this work outside of work hours. (Complaint, ¶¶ 6, 42.) Under these facts, AOOS knew or should have known that Lim completed this work outside of her normal hours. Further, there is no requirement that a plaintiff identify the wage order applicable to the claim. (See CACI No. 2702.)

F. 6^th and 7^th Causes of Action: Retaliation in Violation of Labor Code §§ 98.6, 1102

The Sixth and Seventh Causes of Action are premised on the allegations that Lim complained to Chen that she was never instructed to take 10-minute rest breaks and that she would begin taking those breaks. On the same day Lim made this complaint, Chen and Qu sent her an email terminating her employment. (Complaint, ¶¶ 11-14.)

Labor Code section 98.6 provides, “[a] person shall not discharge an employee or in any manner discriminate, retaliate, or take any adverse action against any employee or applicant for employment because the employee or applicant engaged in any conduct delineated in this chapter, including the conduct described in subdivision (k) of Section 96, and Chapter 5 (commencing with Section 1101) of Part 3 of Division 2, or because the employee or applicant for employment has filed a bona fide complaint or claim or instituted or caused to be instituted any proceeding under or relating to their rights that are under the jurisdiction of the Labor Commissioner, made a written or oral complaint that they are owed unpaid wages, or because the employee has initiated any action or notice pursuant to Section 2699, or has testified or is about to testify in a proceeding pursuant to that section, or because of the exercise by the employee or applicant for employment on behalf of themselves or others of any rights afforded them.”

Labor Code section 1102.5, subdivision (b) provides, “[a]n employer, or any person acting on behalf of the employer, shall not retaliate against an employee for disclosing information, or because the employer believes that the employee disclosed or may disclose information, to a government or law enforcement agency, to a person with authority over the employee or another employee who has the authority to investigate, discover, or correct the violation or noncompliance, or for providing information to, or testifying before, any public body conducting an investigation, hearing, or inquiry, if the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation, regardless of whether disclosing the information is part of the employee's job duties.”¿ (Lab. Code, § 1102.5, subd. (b).)¿ To establish a claim for whistleblower retaliation, the following elements must be met: (1) plaintiff engaged in a protected activity; (2) plaintiff suffered an adverse employment action; and (3) a causal link exists between the protected activity and adverse actions. (Mokler v. Cty. of Orange (2007) 157 Cal.App.4th 121, 138.)

AOOS argues the Sixth and Seventh Causes of Action fail because (1) the Complaint does not allege that Lim reported activities which she reasonably believed constituted a legal violation or that she engaged in any conduct protected under the labor Code.[1] The court agrees with AOOS. The Complaint does not allege Lim reasonably believed that AOOS committed a legal violation in failing to notify her of the right to take 10-minute breaks.

Accordingly, the demurrer to the Sixth and Seventh Causes of Action is SUSTAINED.

A cause of action for wrongful termination in violation of public policy requires the following elements: (1) plaintiff was employed by defendant; (2) defendant discharged plaintiff; (3) violation of public policy was a substantial motivating reason for plaintiff’s discharge; and (4) the discharge caused plaintiff’s harm. (CACI No. 2430.)¿ “As a matter of law, only an employer can be liable for the tort of wrongful discharge in violation of public policy.” ¿(Khajavi v. Feather River Anesthesia Med. Grp. (2000) 84 Cal.App.4th 32, 53.)

The same allegations supporting the Sixth and Seventh Causes of Action also form the basis for the Eighth Cause of Action. Given that the court has found that the Sixth and Seventh Causes of Action are insufficiently pleaded, the court likewise finds the Eighth Cause of Action is deficient.

H. 9^th Cause of Action: Failure to Pay Compensation Due Upon Separation [California Labor Code § 203]

The Ninth Cause of Action is premised upon AOOS’s alleged failure to pay premiums for missed Lim’s meal periods and rest periods, and to pay Lim her final wages upon separation. (Complaint, ¶¶ 66, 67.)

Labor Code section 203 provides, “If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.3, 201.5, 201.6, 201.8, 201.9, 202, and 205.5, any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days. An employee who secretes or absents themselves to avoid payment to them, or who refuses to receive the payment when fully tendered to them, including any penalty then accrued under this section, is not entitled to any benefit under this section for the time during which the employee so avoids payment.”

AOOS argues this cause of action fails because the Complaint does not identify the applicable Wage Order. The court has considered and rejected this argument. Given that the court has overruled AOOS’s demurrer to the various Labor Code violations pertaining to unpaid wages and meal and rest breaks (First, Second, Third, Fourth, and Fifth Causes of Action), the court further finds the Ninth Cause of Action is sufficiently plead. (See Complaint, ¶¶ 65-67.)

The demurrer to the First, Second, Third, Fourth, Fifth, and Ninth Causes of Action is OVERRULED.

The demurrer to the Sixth, Seventh, and Eighth Causes of Action is SUSTAINED. Leave to amend is GRANTED.

Plaintiff is ordered to serve and file her First Amended Complaint within 30 days of this order.

Kerry Bensinger

Judge of the Superior Court

[1] AOOS also argues that these causes of action fail because Lim complained to AOOS rather than to a governmental agency or body. However, AOOS relies on authority that has been superseded by statute. Under the plain terms of Labor Code section 1102.5, retaliation is actionable for disclosure of information “to a person with authority over the employee or another employee who has the authority to investigate, discover, or correct the violation or noncompliance.” (Lab. Code, § 1102.5, subd. (b), emphasis added.) The court sustains the demurrer to the Sixth and Seventh Causes of Action on other grounds.