Judge Monica Bachner, Case 21STCV11337 2023-01-13 Tentative Ruling

Defendants Designed Metal Connections, Inc.’s and Precision Castparts Corp.’s motion for summary adjudication is granted as to Issues 1, 2, and 3 of the first cause of action; Issues 4 and 5 of the fourth cause of action; and Issue 6 of the fifth cause of action.

Defendants Designed Metal Connections, Inc. (“DMC”) and Precision Castparts Corp. (“PCC”) (collectively, “Defendants”) move for summary adjudication against Plaintiffs Reina Guevara (“Guevara”), Angelina Turner (“Turner”), and Maria Lara (“Lara”) (collectively, “Plaintiffs”) on Guevara’s second amended complaint (“Guevara SAC”), Turner’s complaint (“Turner Complaint”), and Lara’s complaint (“Lara Complaint”) on the first (penalties pursuant to the California Private Attorneys General Act (“PAGA”) for unpaid minimum wage and overtime) [Issue Nos. 1-3], fourth (PAGA penalties for failure to provide accurate itemized wage statements) [Issue Nos. 4-5], and fifth (PAGA penalties for failure to pay wages due upon termination of employment) [Issue No. 6] causes of action on the grounds that the undisputed facts demonstrate Plaintiffs’ claims for penalties pursuant to PAGA based on the theories of liability set forth therein have no merit. (Notice of Motion, pgs. 3-4; C.C.P. §437c.)

Defendants filed evidentiary objections in response to Plaintiffs’ Compendium of Evidence (“P-COE”). Defendants’ objections are in violation of C.R.C. Rule 3.1354 because its objections are rife with argument. However, the Court in its discretion will consider Defendants’ objections.

Defendants’ 1/6/2023 evidentiary objection to the Declaration of Aaron Woolfson (“Woolfson”) are overruled as to Nos. 1, 2, 3, 4, 5, 6, 7, 8, and 9.

On March 24, 2021, Plaintiff Guevara filed her initial complaint against Defendants in Case No. 21STCV11337 (“Guevara Complaint”). On May 28, 2023, Plaintiff Guevara filed her first amended complaint (“Guevara FAC”) against Defendants. On July 8, 2021, Plaintiff Lara filed her operative complaint (“Lara Complaint”) against Defendant DMC only, in Case No. 21STCV25089 for six causes of action for violations of PAGA: (1) recovery of unpaid wages and overtime; (2) failure to provide meal periods; (3) failure to provide rest periods; (4) failure to provide accurate itemized wage statements; (5) failure to pay wages due upon termination of employment; and (6) failure to indemnify for expenditures or losses in discharge of duties. On July 9, 2021, Plaintiff Turner filed her complaint (“Turner Complaint”) against Defendants in Case No. 21TRCV00498 for five causes of action for violation of PAGA: (1) recovery of unpaid wages and overtime; (2) failure to provide meal periods; (3) failure to provide rest periods; (4) failure to provide accurate itemized wage statements; and (5) failure to pay wages due upon termination of employment . On September 10, 2021, Plaintiff Guevara filed her operative second amended complaint (“Guevara SAC”) naming Plaintiff Turner as a named plaintiff with the same five causes of action as the Turner Complaint. On May 4, 2022, this Court ordered Plaintiffs’ cases consolidated in Case No. 21STCV11337, Guevara v. Designed Metal Connections, Inc., et al. (5/4/22 Minute Order.) On May 4, 2022, Plaintiff Turner filed a request to dismiss her separately filed case, Case No. 21TRCV00498, without prejudice. For the purposes of this motion, the operative complaints are the Lara Complaint and the Guevara SAC. On July 21, 2022, Defendants filed the instant motion relating to the first (recovery of unpaid wages and overtime), fourth (failure to provide accurate itemized wage statements), and fifth (failure to pay wages due upon termination of employment) causes of action. On December 19, 2022, Plaintiff Guevara and Defendants resolved Guevara’s individual labor claims. Plaintiffs filed their opposition on December 30, 2022. Defendants filed their reply on January 6, 2023.

Plaintiffs Guevara and Turner seek to recover PAGA penalties on behalf of all of Defendants’ non-exempt employees who were employed within one year of the filing of the initial Guevara Complaint until the present. (Guevara SAC ¶¶1, 8, 15). Plaintiff Lara seeks to recover PAGA penalties on behalf of Defendant DMC’s[1] non-exempt employees who were employed within one year and sixty-five days of filing the Lara Complaint. (Lara Complaint ¶¶1, 11, 14.) As such, the relevant time period is from March 24, 2020, to present (“Relevant Period”).[2] (See Guevara SAC ¶1; Guevara Complaint.) Plaintiffs Guevara and Turner allege they were employees of Defendants from June 2004 through July 10, 2020, and April 2014 through July 10, 2020, respectively, in non-exempt hourly positions. (Guevara SAC ¶¶8, 9, 18.) Plaintiff Lara alleges she was an employee of Defendant DMC from around November 1988 through May 13, 2020. (Lara Complaint ¶6.) Plaintiffs Guevara and Turner allege on November 9, 2020, and December 2, 2020, they gave written notice by certified mail to the Labor and Workforce Development Agency (“LWDA”) and to Defendants of the specified provisions that were alleged to be violated. (Guevara SAC ¶19.) Plaintiff Lara alleges on April 30, 2021, she gave written notice to the LWDA and Defendants of the specified provisions that were alleged to be violated. (Lara Complaint ¶13.)

Plaintiffs allege Defendants engaged in time “rounding,” which resulted in underpayment of wages. (Guevara SAC ¶¶29, 36; Lara Complaint ¶19.) Plaintiffs allege that Defendants failed to include nondiscretionary bonuses when calculating the regular rate of pay. (Guevara SAC ¶¶30, 37; Lara Complaint ¶¶23, 36.) Plaintiffs allege that Defendants required them to work while clocked out for meal breaks. (Guevara SAC ¶38; Lara Complaint ¶23.) Plaintiff Lara alleges that Defendant DMC required employees to clock out at the end of their shift but continue to work. (Lara Complaint ¶18.) Plaintiffs allege that Defendants failed to provide accurate wage statements and failed to pay wages due at the time of termination because they failed to pay minimum and overtime wages by engaging in “rounding,” not including non-discretionary bonuses in the regular rate of pay and requiring them to work while clocked out for meal breaks and after clocking out at the end of their shifts. (Guevara SAC ¶¶28, 74, 81; Lara Complaint ¶¶56, 60, 68, 74.) Plaintiff Lara alleges that Defendant DMC failed to provide accurate wage statements because her wage statements did not state the name of the employing legal entity. (Lara Complaint ¶22.)

Labor Code §510 provides, “[a]ny work in excess of eight hours in one workday and any work in excess of 40 hours in any one workweek and the first eight hours worked on the seventh day of work in any one workweek shall be compensated at the rate of no less than one and one-half times the regular rate of pay for an employee.” (Lab. Code §510(a).) Section 510 also mandates that, “[a]ny work in excess of 12 hours in one day shall be compensated at the rate of no less than twice the regular rate of pay for an employee. In addition, any work in excess of eight hours on any seventh day of a workweek shall be compensated at the rate of no less than twice the regular rate of pay of an employee.” (Id.)

Labor Code §1197 provides, “[t]he minimum wage for employees fixed by the commission or by any applicable state or local law, is the minimum wage to be paid to employees, and the payment of a lower wage than the minimum so fixed is unlawful.” (Lab. Code §1197.)

Plaintiffs allege that Defendants failed to pay minimum and/or overtime wages because they “employed a rounding policy wherein Defendants rounded the hours worked [by] Plaintiffs and Aggrieved Employees to a factor of 15 minutes.” (Guevara SAC ¶¶29, 36; see Lara Complaint ¶19.) Plaintiffs allege the rounding, on average, favored Defendants, resulting in lost wages to Defendants’ non-exempt employees. (Guevara SAC ¶¶29, 36; see Lara Complaint ¶19.) Plaintiffs allege Defendants failed to pay overtime wages at the regular rate of pay because they did not include non-discretionary bonuses in the regular rate of pay when calculating overtime wages. (Guevara SAC ¶¶30, 37; see also Lara Complaint ¶¶23, 36).

Defendants argue Plaintiffs’ rounding theory of liability fails as a matter of law because it is undisputed that Defendant DMC did not round non-exempt employees’ time entries at any time during the Relevant Period. (Motion, pg. 8.)

Defendants submitted evidence that Defendant DMC has not “rounded” its employees’ time records. Specifically, Defendants submitted evidence of a report regarding the timekeeping and payroll data and whether Defendant DMC’s timekeeping and payroll data reflect and practice of rounding time punches during the Relevant Period, which demonstrates there is no evidence in Defendant DMC’s timekeeping and payroll data of a policy or practice of rounding time punches. (D-USSF 2; D-COE Vol. 2, Exh. D ¶¶1-10; D-COE Vol. 1, Exh. B-15, Exh. C-16.) Defendants met their burden on Issue 1 of the first cause of action, shifting the burden to Plaintiffs to demonstrate a triable issue of material fact as to whether Defendant DMC rounded non-exempt employees’ time entries at any time during the Relevant Period.

Plaintiffs concede that Defendants have not engaged in widespread rounding and there is no triable issue of material fact as to whether Defendant DMC rounded non-exempt employees’ time entries at any time during the Relevant Period. (Opposition, pgs. 2, 4.)

Accordingly, Defendants are entitled to summary adjudication as to Issue 1 of the first cause of action.

California courts adopt the definition of “regular rate” set forth in the federal Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 207(e). (Prachasaisoradej v. Ralphs Grocery Co., Inc. (2007) 42 Cal.4th 217, 242 n.14, citing Huntington Memorial Hospital v. Superior Court (2005) 131 Cal.App.4th 893, 902-903.) The FLSA provides that the “regular rate” of pay includes “all remuneration for employment paid to, or on behalf of the employee” with various exceptions. (29 U.S.C. §207; Chavez v. Converse, Inc. (N.D. Cal., Aug. 18, 2016, No. 15-CV-03746 NC) 2016 WL 4398374, at *2.)

One of these exceptions relates to bonuses that are based on a “percentage of total earnings.” (29 C.F.R. §778.210; Chavez, 2016 WL 4398374, at *2.) The FLSA provides that when a bonus is calculated as a percentage of an employee’s earnings, the payment of the bonus simultaneously pays overtime compensation due on the bonus. (29 C.F.R. §778.210.) As such, the payment of the bonus will “satisfy in full the overtime provisions of the Act and no recomputation will be required.” (Id.)

In Chavez v. Converse Inc., the employer used the following formula to calculate employees’ bonuses: “quarterly earnings x target percentage (5%) x 100% x the store revenue achievement percentage.” (Chavez, 2016 WL 4398374, at *3.) Quarterly earnings included all base pay, paid time off, overtime, and merit developmental lump sum awards. (Id.) The Chavez Court held that, because the bonus amounts were based on a percentage of total earnings, the employer was not required to pay additional overtime as a result of the bonus. (Id.)

Defendants argue that, like the formula used to calculate employees’ bonuses in Chavez, here, the non-discretionary quarterly cash bonus (“QCB”) employees were eligible to earn has been calculated based on a percentage of the employee’s total earnings for the quarter according to the following formula: payout percentage x participation level x eligible pay. (Motion, pg. 9.) Defendants argue eligible pay includes an employee’s salary, straight-time pay, overtime and double time pay, shift differential pay, holiday pay, vacation pay, sick pay, bereavement pay, military leave pay, jury duty pay, meal and rest break premiums if required under applicable law, other paid time off (PTO), and therefore, was not required to recalculate the regular rate of pay as a matter of law. (Id.; 29 C.F.R. § 778.210.)

Plaintiffs argue an employee’s regular rate of pay is properly determined by “dividing his total remuneration for employment (except statutory exclusions) in any work week by the total number of hours actually worked by him in that workweek for which such compensation was paid.” Huntington Memorial Hospital, 131 Cal.App.4th at pg. 905.) However, Huntington Memorial Hospital is inapposite because the issue in Huntington was whether a short-shift differential must be included in the regular rate of pay, which is irrelevant to whether the regular rate must be recalculated after the payment of a percentage-based bonus that already accounted for shift differentials.[3]

Plaintiffs argue employees “who receive incentive bonuses in addition to their guaranteed base pay clearly receive a greater regular rate than the minimum base rate.” (Id., quoting Walling v. Hamischfeger, Corp. (1945) 325 U.S. 427, 431, emphasis added.) Plaintiffs argue Defendants misconstrue Chavez, which stated, “if the bonus is based on factors to act as an incentive to the employee, the regular rate of pay must be recalculated to include the additional bonus pay under both federal regulations and California DLSE guidance. 29 C.F.R. § 778.211(c); DLSE Manual § 49.2.4. These incentive factors include bonuses for production, efficiency, quality, and duration of service. DLSE Manual § 49.1.3.4(3).” (Chavez, 2016 WL 4398374, at *2, emphasis added.) Plaintiffs’ argument that Defendants misconstrued Chavez is misplaced, and incentivization factors are not relevant here. As stated earlier, the Chavez Court determined the employer could lawfully provide bonuses based on a percentage of total earnings and fully discretionary merit awards without recalculating the regular rate of pay. (Id. at *3.)

Defendants submitted evidence that the bonuses that Defendants paid to its non-exempt employees were calculated as a percentage of their total quarterly earnings. Specifically, Defendants submitted evidence that Defendant DMC’s non-exempt employees have only been eligible to earn one type of non-discretionary bonus. (D-USSF 3; D-COE Vol. 1, Exh. B ¶2.) Defendants submitted evidence that the non-discretionary bonus is the QCB, which is awarded on a quarterly basis if the DMC meets certain financial targets. (D-USSF 4, 5; D-COE Vol. 1, Exh. B ¶2, Exh. B-14 at DMCI00042.) Defendants submitted evidence that during the Relevant Period, each employee’s individual QCB payout has been calculated as a percentage of the employee’s total earnings during the quarter, and during the relevant period, the formula for calculating the QCB has been Payout Percentage x Participation Level x Eligible Pay. (D-DSSF 6; D-USSF 8; D-COE Vol. 1, Exh. B-14 at DMCI00040.) Plaintiffs submitted evidence that During the Relevant Period, when calculating the QCB, eligible pay has included salary, straight-time pay, overtime and double time pay, shift differential pay, holiday pay, vacation pay, sick pay, bereavement pay, military leave pay, jury duty pay, meal and rest break premiums, and other paid time off (PTO). (D-DSSF 9; D-COE Vol. 1, Exh. B-14 at DMCI00040.) Defendants submitted evidence that Plaintiff Lara admits the QCB was calculated as a percentage of her total earnings for the quarter. (D-DSSF 7; D-COE Vol. 1, Exh. A-10 at 51:13-22.) Accordingly, Defendants met their burden on summary adjudication, shifting the burden to Plaintiffs to demonstrate a triable issue of material fact as to whether Defendants’ failure to include the non-discretionary bonus in the regular rate for purpose of paying overtime is legal.

Plaintiffs failed to meet their burden to demonstrate a triable issue of material fact as to whether Defendants’ failure to include the non-discretionary bonus in the regular rate for purpose of paying overtime is legal. Specifically, Plaintiffs submitted evidence of the Declaration of Aaron Woolfson that “there were 10,696 paychecks that were paid to 464 employees that were within three months prior to a payment for a non-discretionary bonus, where the employees should have been paid more due to the bonus not being calculated as part of the [regular rate of pay] RROP on the affected paychecks.” (Opposition, pg. 6, citing; P-COE Exh. 1 ¶¶22-37.) This declaration fails to address the applicable law that calculates the QCB bonus as a percentage of total earnings, the percentage-based bonus rule, or the QCB bonus policy to determine how the bonus was calculated. (P-COE Exh. 1 ¶22.) Accordingly, Plaintiffs failed to demonstrate a triable issue of material fact.

Accordingly, Defendants are entitled to summary adjudication as to Issue 2 of the first cause of action.

PAGA’s notice requirement PAGA’s notice requirement demands more than bald allegations of Labor Code Violations and must allow the LWDA “to intelligently assess the seriousness of the alleged violations” and allow the employer “to determine what policies or practices are being complained of so as to know whether to fold or fight.” (Alcantar v. Hobart Service (9th Cir. 2015) 800 F.3d 1047, 1057; see also Brown v. Ralph’s Grocery Co. (2018) 28 Cal. App. 5^th 824, 837.) Defendants argue Plaintiffs’ notice letters to the LWDA failed to allege that Plaintiffs worked while they were clocked out for meal breaks or that Plaintiffs worked after clocking out at the end of their shifts, and therefore failed to give written notice to the LWDA and Defendants. (Motion, pg. 10.)

Plaintiffs argue their LDWA letters do not need to put forth “every potential fact” to support their claims for labor violations. (Cardenas v. McLane FoodServices, Inc. (C.D. Cal. 2011) 796 F.Supp.2d 1246, 1259-1261; Williams v. Superior Court (2017) 3 Cal.5th 531, 545 [determining that “[n]othing in Labor Code section 2699.3, subdivision (a)(1)(A), indicates the ‘facts and theories’ provided in support of ‘alleged’ violations must satisfy a particular threshold of weightiness, beyond the requirements of nonfrivolousness generally applicable to any civil filing.”].) Plaintiffs’ citation to Williams is inapposite because it concerns Plaintiffs’ right to proceed with discovery, not summary adjudication. Plaintiffs argue Lessard v. Trinity Protection Services, Inc. demonstrates Labor Code §2699.3 lists violations that cannot be cured by a Defendant upon notice, which includes all but one (e.g., Labor Code §1182.12) of the allegations in Plaintiffs’ LDWA letters. (Lessard v. Trinity Protection Services, Inc. (E.D. Cal., Aug. 3, 2010, No. 2:10-CV-01262-MCE) 2010 WL 3069265, at *3.) Unlike Lessard, Plaintiff Lara fails alleges a cause of action in her notice letter to the LDWA sufficient to provide the statutory goal of altering the LDWA. (Lessard, 2010 WL 3069265, at *3.)

Defendants submitted evidence that Plaintiffs’ notice letters to the LWDA failed to allege that Plaintiffs worked while they were clocked out for meal breaks or that Plaintiffs worked after clocking out at the end of their shifts. Specifically, Defendants submitted evidence that none of Plaintiffs’ LWDA letters allege that Plaintiffs worked after clocking out at the end of their shifts. (D-DSSF 14; D-COE Vol. 1, Exhs. A-11, A-12, A-13.) Defendants further submitted evidence that during the Relevant Period, Plaintiff Lara did not work after clocking out at the end of her shift. (D-DSSF 16; D-COE Vol. 1, Exh. A-10 at 45:25-46:8.) Accordingly, Defendants met their burden on summary adjudication, shifting the burden to Plaintiffs to demonstrate a triable issue of material fact as to whether Plaintiffs’ LDWA letters provide sufficient notice to the LWDA and Defendants that Plaintiffs worked while they were clocked out for meal breaks or that Plaintiffs worked after clocking out at the end of their shifts.

Plaintiffs failed to meet their burden to create a triable issue of material fact as to whether LDWA letters provide sufficient notice to the LWDA and Defendants that Plaintiffs worked while they were clocked out for meal breaks or that Plaintiffs worked after clocking out at the end of their shifts. Specifically, Plaintiffs submitted evidence that Defendant Lara’s PAGA letter states, “Ms. Lara and other aggrieved employees were required to regularly use their personal cellphones to carry out their work-related duties, including, without limitation, communicate with supervisors . . . as well as send/receive text messages regarding scheduling.” (P-DSSF 14, 16; P-COE Exh. 2-F at pg. 4.) Plaintiff Lara’s LWDA letter does not indicate that use of her cell phone required her to clock out for meal breaks or at the end of her shift. Accordingly, Plaintiffs failed to meet their burden to create a triable issue of material fact as to whether LDWA letters provide sufficient notice to the LWDA and Defendants that Plaintiffs worked while they were clocked out for meal breaks or that Plaintiffs worked after clocking out at the end of their shifts.

Accordingly, Defendants are entitled to summary adjudication as to Issue 3 of the first cause of action.

Defendants’ motion for summary adjudication as to the first cause of action for PAGA violations for recovery of unpaid wages and overtime is granted as to Issues 1, 2, and 3.

Labor Code §226(a) requires employers to provide employees with itemized wage statements that include the following information: gross wages earned, total hours worked, all deductions, net wages earned, the inclusive dates of the period for which the employee is paid, the name of the employee and the last four digits of their Social Security number, the name and address of Defendant, and all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate. (Lab. Code § 226(a).)

Labor Code §201 provides that, if an employer terminates an employee, it must pay all wages earned and unpaid at the time of discharge. (Lab. Code §201(a).) If an employee quits, all wages earned and unpaid are due and payable not later than 72 hours after quitting, unless the employee has given 72 hours previous notice of his or her intention to quit, in which case the employee is entitled to his or her wages at the time of quitting. (Lab. Code §202(a).) If an employer violates Labor Code §§201 or 202, the employee may recover a penalty of up to 30 days of additional wages. (Lab. Code § 203(a).)

Plaintiffs allege Defendants’ alleged failure to provide accurate wage statements and failure to pay all wages due at termination are based, in part, on Defendants’ alleged failure to pay minimum and overtime wages during their employment. (Guevara SAC ¶¶28, 74, 81; Lara Complaint ¶¶56, 60, 68, 74.)

Defendants repeat the same argument and submit the same evidence posed in Issues 1, 2, and 3, meeting their burden on Issue 4 and shifting the burden to Plaintiffs to create a triable issue of material fact. (Motion, pg, 11.) Plaintiffs submit the same evidence posed in Issues 1, 2, and 3, and again fail to create a triable issue of material fact as to Issue 4.

Accordingly, Defendants are entitled to summary adjudication as to Issue 4 of the fourth cause of action.

Labor Code section 226(a)(8) requires that wage statements include the name of the legal entity that is the employer. (Lab. Code § 226(a)(8).)

Plaintiff Lara alleges Defendant DMC failed to include the name of the legal employing entity on her wage statements. (Lara Complaint ¶18.)

Defendants argue it is undisputed that Defendant DMC was Plaintiff Lara’s actual legal employer. (Motion, pg. 12.)

Defendants submitted evidence that during the Relevant Period, Defendant DMC was listed as the employer on Plaintiffs’ wage statements. (D-USSF 15; D-COE Vol. 2, Exhs. C-17, C-18, C-19.)

Plaintiffs concede that there is no triable issue of material fact. (Opposition, pg. 10.)

Accordingly, Defendants are entitled to summary adjudication as to Issue 5 of the fourth cause of action.

Defendants repeat the same argument and submit the same evidence posed in Issues 1, 2, and 3 (Motion, pg. 11), meeting their burden on Issue 6 and shifting the burden to Plaintiffs to create a triable issue of material fact. Plaintiffs provide no argument in opposition, and submitted the same evidence posed in Issues 1, 2, and 3 (see Response Separate Statement), and again fail to create a triable issue of material fact as to Issue 6.

Accordingly, Defendants are entitled to summary adjudication as to Issue 6 of the fifth cause of action.

Based on the foregoing, Defendant’s motion for summary adjudication is granted as to Issues 1, 2, 3, of the first cause of action; Issues 4 and 5 of the fourth cause of action; and Issue 6 of the fifth cause of action.

[1] Plaintiff Lara only names Defendant DMC in the Lara Complaint and does not name Defendant PCC. However, Defendant PCC is Defendant DMC’s parent company’s parent company’s parent company. (Motion, pg. 1 n.2; Defendant’s Compendium of Evidence [“D-COE”] Vol. 1, Exh. A-1 ¶2.)

[2] The Relevant Period in the Guevara SAC includes the relevant period that would apply to the Lara Complaint (from May 4, 2020, to present), and because Defendants are not currently moving for summary adjudication as to Plaintiff Lara’s sixth cause of action, there is only one Relevant Period to note for the purposes of this motion.

[3] Huntington Memorial Hospital suggests this distinction. (Huntington Memorial Hospital, 131 Cal.App.4th at pg. 905 [“For clarity, we distinguish between the pay practice at issue here, a short-shift differential—where an employee does not work a full 12–hour shift and, as a result, receives extra pay for the time worked—and a shift differential—where an employee receives additional pay due to the nature of the work, such as working a nightshift or performing undesirable tasks. [Citation] The parties agree that a shift-differential must be included in the regular rate, and rightly so. [Citation] Their disagreement concerns short-shift pay.”].)