Wage & Hour Counsel : Wage & Hour Lawyer & Attorney : Littler Mendelson Law Firm : Employment Law, Labor Relations

The California Court of Appeal, Second District, affirmed yet another ruling in favor of employers in the state. In Price v. Starbucks, case number B219501, the court upheld the lower court’s orders striking the plaintiff’s itemized wage statement claim for failure to show injury and his reporting time pay claim finding no violation of law.

Plaintiff Drake Price was employed by Starbucks as a barista for a brief period in late 2007. When Price failed to show up for a shift he was taken off the work schedule for the week, and was told to come in to “have a talk” with the manager five days later. When Price reported to Starbucks on the designated date, he was told his employment was being terminated in a “45 second” meeting. On the day of his termination, Price was paid his final wages and also paid two hours of “reporting time pay” for the termination meeting, as required by Cal. Code Regs., tit. 8, § 11050, subd. 5(A). He thereafter sued on behalf of himself and all others similarly situated, asserting claims for reporting time pay pursuant to the California Wage Orders, inaccurate wage statements in violation of California Labor Code section 226, and for various other Labor Code violations, as well as unfair business practices under the California Business and Professions Code.

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On February 15, 2011, the U.S. District Court for the District of New Jersey decertified a class of approximately 1,500 Home Depot merchandising assistant store managers (MASMs) who brought claims under the Fair Labor Standards Act (FLSA) against Home Depot. In Aquilino v. Home Depot, U.S.A., Inc., the plaintiffs were MASMs, who were the second-highest ranking employee in a Home Depot, subordinate only to the store manager. The MASMs claimed that they were improperly classified as executive employees who were exempt from the overtime requirements of the FLSA, and sued Home Depot for failing to pay them overtime wages.

In 2006, the court conditionally certified the class of MASMs, but expressly stated that certification “may be revisited . . . if it later appears, after appropriate discovery, that the additional plaintiffs who opt in the lawsuit are not similarly situated.” Notice was sent to approximately 12,728 current and former MASMS – 1,747 initially joined the litigation, and 1,502 remained in the litigation. Home Depot later moved to decertify the conditional collective action, arguing that the plaintiffs could not establish that they were similarly situated to the proposed class.

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In the same week that one California court held that employees are entitled to two hours pay for any day in which they did not receive required meal and rest breaks, employers received welcome news from another California appellate court, which found employers do not have to ensure employees receive their meal breaks to avoid class claims for extra pay.

California’s Labor Code requires employers to “provide” meal periods to employees, but the precise obligation that provision imposes has been the subject of conflicting court opinions. Employees contend that the employer must ensure that they actually receive a break of at least 30 minutes, whereas employers argue that the word “provide” means that employers must merely make meal periods available to employees.

A California court of appeal has now agreed with employers, holding that the word “provide” should be construed according to its dictionary meaning of “to supply or make available.” In Tien v. Tenet Healthcare, an employee sought to certify a class of hourly non-exempt employees who supposedly were denied 30-minute meal periods and ten-minute rest breaks. The trial court waffled, first certifying several classes, then reversing itself, eventually agreeing with the employer.

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On February 22, 2011, the U.S. Supreme Court declined to review a decision from the Seventh Circuit Court of Appeals which had approved the use of the “half time” method of computing unpaid overtime compensation in a misclassification case under the FLSA. Urnikis-Negro v. American Family Property Services, 616 F.3d 665 (7th Cir. 2010), cert. denied, No. 10-745 (Feb. 22, 2011).

Pursuant to the “half time” method, when an employee agrees to receive a fixed weekly salary as payment for all hours worked, the employee’s “regular rate” for any particular workweek is determined by dividing the employee’s weekly salary by the number of hours actually worked in that week. If it is later determined that the employee was misclassified as exempt, the amount of unpaid overtime compensation due for that week is equal to half of the employee’s regular rate times the number of overtime hours worked.
 

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The U.S. District Court for the Western District of New York has determined that the Fair Labor Standards Act requires employers to reimburse foreign H-2B visa workers for certain expenses paid by the workers if, after subtracting the costs from the workers’ wages, the workers’ effective net salary would fall below minimum wage. See Teoba v. Trugreen Landcare, No. 10-CV-6132 (W.D.N.Y. filed Feb. 15, 2011). The plaintiffs in Teoba alleged that they had paid for the costs of obtaining an H-2B visa, traveling to the United States, and the services of a third-party recruitment firm, which the employer had retained. The plaintiffs further alleged that after deducting the costs from their earned wages they received a net salary that fell below minimum wage.

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In a collective action under the Fair Labor Standards Act (FLSA), the Tenth Circuit Court of Appeals recently joined the Eighth Circuit and the Department of Labor in holding that sick leave buy-backs are included in the FLSA regular rate, but vacation leave buy-backs are not. Chavez v. City of Albuquerque, No. 09-2274 & 09-2288, 2011 U.S. App. LEXIS 622 (10th Cir. Jan. 12, 2011).

In Chavez, the plaintiffs, 780 former and current employees of the City of Albuquerque, a municipal corporation, filed a multi-count complaint on behalf of themselves and all others who had previously worked or were currently employed, alleging that the City improperly calculated its employees’ wage, overtime, and bonus pay in violation of the FLSA.

After motions for summary judgment and a bench trial, the U.S. District Court for the District of New Mexico ultimately found for the City on all counts save for one – the plaintiffs’ claim that the City failed to include vacation and sick leave buy-backs in its calculation of the FLSA regular rate. On review, the Tenth Circuit agreed with the district court that sick leave buy-backs must be included in the FLSA regular rate, but rejected the court’s finding that vacation buy-backs should also be included. Accordingly, the Tenth Circuit reversed the district court’s finding on this issue and affirmed the rest. 

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A California Court of Appeal rendered a potentially significant blow to California employers on Wednesday. In the first reported decision of its kind from a California appellate court, the court in United Parcel Service, Inc. v. Superior Court, held that California Labor Code section 226.7 permits an employee to recover up to two premium payments per work day: one for failure to provide a meal period and another for failure to provide a rest period.

Labor Code section 226.7 provides:

(a) No employer shall require an employee to work during any meal or rest period mandated by an applicable order of the Industrial Welfare Commission.

(b) If an employer fails to provide an employee a meal period or rest period in accordance with an applicable order of the Industrial Welfare Commission, the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each work day that the meal or rest period is not provided.

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On February 10, 2011, the California Court of Appeal for the Second District affirmed summary judgment in favor of Costco Wholesale Corporation (Costco), in Head v. Costco Wholesale Corp., case number B222841, finding that Costco properly calculated the regular rate of pay of its salaried, nonexempt ancillary managers.

In 2001, Costco reclassified its ancillary managers from salaried exempt to salaried non-exempt, using a conversion formula to ensure that their incomes would remain the same after the reclassification. Specifically, Costco calculated the managers’ regular rates of pay using their salaries prior to the reclassification, based upon a 40-hour workweek, which resulted in reduced hourly pay rates for the managers. The reduced hourly pay rates were listed on the managers’ wage statements as their regular rates of pay. Costco then calculated new salaries for the managers based on this regular rate of pay, adding as additional compensation an anticipated five hours of overtime pay per week at the premium rate, as such overtime hours were expected of these employees. The revised salaries were listed on Costco’s internal personnel forms as the managers’ reported salaries. After reclassification, an ancillary manager would receive the revised salary for hours worked up to 45, plus overtime compensation for any hours worked beyond 45 per week.

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In Christopher v. SmithKline Beecham, the Ninth Circuit issued a strong rebuke to the Department of Labor (and cemented a circuit split) in a remarkable decision upholding the “outside sales” exemption for Pharmaceutical Sales Representatives (PSRs).

The plaintiffs were employed as PSRs for SmithKline Beecham Corporation. The PSRs were classified by their employer as exempt “outside salesmen” under the FLSA and were not paid overtime compensation. The district court granted the employer’s motion for summary judgment, and the PSRs appealed.

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The Massachusetts Supreme Judicial Court recently held that the state’s Payment of Wages Law prohibits employers from reducing employee wages to recoup employee debt obligations unless the deduction can be considered a “valid set-off,” which it proceeded to interpret in a very restrictive manner. As the Payment of Wages Law provides for mandatory treble damages and attorneys’ fees, employers should immediately review their payroll practices to ensure that they are not making improper deductions. See our recent ASAP for a detailed analysis for the implications of this decision for employers.

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On January 26, 2011, the California Supreme Court created more uncertainty regarding meal and rest period obligations in California by granting review of the Court of Appeal’s published decision in Hernandez v. Chipotle Mexican Grill, Inc. As we discussed more fully on November 5, 2010, in Hernandez, the Court of Appeal affirmed the trial court’s ruling that an employer need only make meal periods available to employees, and affirmed the denial of class certification, holding that individual issues predominated over common issues as some employees received both meal and rest breaks, some missed only rest breaks, some missed only meal breaks, some missed both, and even the named plaintiff admitted that the ability to take breaks depended on the location where he worked.

With the grant of review and depublication of Hernandez, employers are once again left to read the tea leaves while waiting for the California Supreme Court to decide Brinker Restaurant Corporation v. Superior Court. In October 2010, the Court granted review in Faulkinbury v. Boyd & Assocs., which had affirmed an employer’s duty to make meal periods available, but held that certification was improper in that case. In May 2010, the Court let stand the published decision in Jaimez v. Daiohs, which affirmed the lower court’s rulings that meal periods must be made available, and that in certain cases, certification of such claims is proper.

Oral argument has not been scheduled yet in Brinker.

This entry was written by Erica H. Kelley.

Photo credit: shirhan

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