Opinion
G057043 C/w G057380
03-11-2020
CHRISTIAN MORALES, Plaintiff and Respondent, v. BRIDGESTONE RETAIL OPERATIONS, LLC, Defendant and Appellant.
Klatte, Budensiek & Young-Agriesti, Ernest W. Klatte, Summer Young-Agriesti and Selwyn Chu for Defendant and Appellant. Fernandez & Lauby, Brian J. Mankin and Peter J. Carlson for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2017-00900244) OPINION Appeal from a judgment and order of the Superior Court of Orange County, William D. Claster, Judge. Reversed with directions. Klatte, Budensiek & Young-Agriesti, Ernest W. Klatte, Summer Young-Agriesti and Selwyn Chu for Defendant and Appellant. Fernandez & Lauby, Brian J. Mankin and Peter J. Carlson for Plaintiff and Respondent.
INTRODUCTION
Bridgestone Retail Operations, LLC, appeals from a judgment after an order granting a motion for summary judgment and a subsequent Private Attorney General Act (PAGA) award in favor of respondent Christian Morales in this employment action. This case is anomalous - perhaps even unique - in that there is not and never was a claim that Morales had been underpaid. Instead, the dispute is over the information provided on the wage statement accompanying his paycheck.
Bridgestone has already reconfigured its wage statements to reflect the trial court's decision in this case. Thus the real drivers of this appeal, for Bridgestone's purposes, are the PAGA award and the subsequent attorney fee award.
The issue before us is one of pure statutory interpretation. Morales asserted that Bridgestone violated Labor Code section 266, subdivision (a)(9), by failing to include the hourly rate for the overtime he earned on his production bonus. Section 266, subdivision (a)(9), requires an employer to include "all applicable hourly rates in effect during the pay period" on the wage statement required to accompany each paycheck. It is undisputed that Morales' wage statement does not include an hourly rate for the overtime on his production bonus, and that was the basis for the judgment.
All further statutory references are to the Labor Code.
We reverse. The statute requires the wage statement to reflect the hourly rates in effect during the pay period. The "hourly rate" for an overtime production bonus, however, is not and cannot be in effect during the pay period. It is a fictional hourly rate calculated after the pay period closes in order to comply with the Labor Code section on overtime. It appears as part of the calculation for an overtime bonus and then disappears, perhaps never to be seen again. It is not an "hourly rate in effect during the pay period." Its omission therefore does not violate section 226, subdivision (a)(9).
FACTS
Bridgestone employs Morales as a maintenance technician, responsible for servicing customers' automobiles. He is paid according to a hybrid system. Part of his compensation is an hourly wage for a 40-hour week, with time-and-a-half or double time, as appropriate, for any additional hours during the week. The other part is based on "flag units."
A flag unit is a credit that a maintenance technician receives for performing a service such as changing a car's oil. Each service is assigned a number of flag units, and the employee is awarded that number of units for performing that service, regardless of how long it takes to perform it. An employee who takes one hour to perform the service gets the same number of flag units as an employee who takes four hours. Obviously, it is in the employee's interest to perform the service as quickly as possible, so that other flag-unit services can be assigned. But the number of flag units earned depends on the service performed, and not the time involved. Payment for flag units is in addition to the hourly wage. The parties agree that the flag-unit system of payment is a production bonus.
In addition to the statutorily required information regarding employer and employee names, pay period, etc., Morales' wage statement provided the following information about his compensation: regular hours (rate, number, and amount); 1.5 overtime hours (rate, number, and amount); 2.0 overtime hours (rate, number, and amount); total work hours; flag units (rate, number, and amount); and overtime premium (amount).
The parties submitted a representative Morales wage statement for his compensation during a pay period, which looked like this:
| EARNINGS | RATE | HOURS | |
| Regular hours | 12.50 | 24.00 | 300.00 |
| Hourly OT 1.5 | 18.75 | 3.78 | 70.88 |
| Hourly OT 2.0 | |||
| Memo Total Work Hours | 27.78 | ||
| Flag Units | 1.00 | 31.10 | |
| OT Premium | 2.12 |
The wage statement also contains columns for "adjustment period" and "year to date," which have been omitted as not pertinent to the appeal.
Although this number is entered in the "hours" column, when it actually has nothing to do with hours, there does not appear to be any confusion about what the number referred to.
The dispute concerns the last line of the wage statement, "OT Premium." This category is the amount to which Morales was entitled as overtime on his flag units for that pay period. Morales claimed Bridgestone violated section 226, subdivision (a)(9), because the wage statement did not include an hourly rate for OT Premium. Bridgestone asserted that the subdivision did not require an hourly rate for OT Premium.
There were no disputed issues of fact, such as whether Morales had been underpaid for his overtime premium, so the parties made cross-motions for summary judgment, each side advancing its interpretation of section 226, subdivision (a)(9).
Morales proposed two ways in which Bridgestone could have complied with section 226. The first was to list an actual overtime rate of $19.31 in the "hourly OT 1.5" column, instead of $18.75. Second, it could have entered $.56 in the "rate" column and 3.78 in the "hours" column for OT Premium.
The trial court granted Morales' motion and denied Bridgestone's motion. After a trial on PAGA penalties (§ 2699), conducted through briefing and declarations, the court awarded $425,000 in penalties, and judgment was entered accordingly. The court noted that Bridgestone had by the time of trial reconfigured its wage statements, a process the court described as "time-consuming and expensive, lasting nearly 12 months and costing about $30,000." Bridgestone appealed from the judgment. The court subsequently awarded plaintiff's counsel $203,733 in attorney fees, an order which Bridgestone has also appealed. The two appeals have been consolidated.
Bridgestone's sole contention with respect to the attorney fee award is that if the judgment is reversed, the fee award must also be reversed.
DISCUSSION
We review a judgment entered after the grant or denial of a summary judgment motion de novo. (Ennabe v. Manosa (2014) 58 Cal.4th 697, 705.) We also review issues of law such as the interpretation of a statute de novo. (Morgan v. United Retail Inc. (2010) 186 Cal.App.4th 1136, 1142 (Morgan).)
This appeal hinges on the proper interpretation of the portion of section 266, subdivision (a), that provides: "An employer, semimonthly or at the time of each payment of wages, shall furnish to his or her employee, either as a detachable part of the check, draft, or voucher paying the employee's wages, or separately if wages are paid by personal check or cash, an accurate itemized statement in writing showing [¶] . . . [¶] (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee . . . ."
The complete text of section 226, subdivision (a), reads, "An employer, semimonthly or at the time of each payment of wages, shall furnish to his or her employee, either as a detachable part of the check, draft, or voucher paying the employee's wages, or separately if wages are paid by personal check or cash, an accurate itemized statement in writing showing (1) gross wages earned, (2) total hours worked by the employee, except as provided in subdivision (j), (3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis, (4) all deductions, provided that all deductions made on written orders of the employee may be aggregated and shown as one item, (5) net wages earned, (6) the inclusive dates of the period for which the employee is paid, (7) the name of the employee and only the last four digits of his or her social security number or an employee identification number other than a social security number, (8) the name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, as defined in subdivision (b) of Section 1682, the name and address of the legal entity that secured the services of the employer, and (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee and, beginning July 1, 2013, if the employer is a temporary services employer as defined in Section 201.3, the rate of pay and the total hours worked for each temporary services assignment. The deductions made from payment of wages shall be recorded in ink or other indelible form, properly dated, showing the month, day, and year, and a copy of the statement and the record of the deductions shall be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California. For purposes of this subdivision, 'copy' includes a duplicate of the itemized statement provided to an employee or a computer-generated record that accurately shows all of the information required by this subdivision."
The bone of contention here is the phrase "all applicable hourly rates in effect during the pay period." Morales claimed that his wage statement violated section 226, subdivision (a)(9), because it failed to state the correct overtime hourly rate for the flag units.
"When interpreting statutes, 'we follow the Legislature's intent, as exhibited by the plain meaning of the actual words of the law . . . .'" (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 737, quoting California Teachers Assn. v. Governing Bd. of Rialto Unified School Dist. (1997) 14 Cal.4th 627, 632-633.) We give words their ordinary and usual meaning, and we avoid an interpretation that would render any part of the statute meaningless or mere surplusage. (Aleman v. Airtouch Cellular (2012) 209 Cal.App.4th 556, 568.)
Although the parties may be correct in labeling this a case of first impression on this precise issue, we do have some guidance from prior cases. The California Supreme Court addressed the computation of overtime on a flat rate bonus in Alvarado v. Dart Container Corp. of California (2018) 4 Cal.5th 542 (Alvarado). The Court in Alvarado was careful to explain that the details of the opinion dealt with overtime pay on a flat rate bonus and that "[o]ther types of nonhourly compensation, such as a production or piecework bonus or a commission, may increase in size in rough proportion to the number of hours worked, including overtime hours, and therefore a different analysis may be warranted . . . ." (Id. at p. 561, fn. 6.) Nevertheless, we believe some of the basic observations in Alvarado apply to the case before us now.
The court found that section 510 and Wage Order No. 1 provided the state law for courts to construe and enforce; both the statute and the wage order required payment of an overtime premium based on an employee's "'regular rate of pay.'" (Alvarado, supra, 4 Cal.5th at p. 560.) The court stated, "Significantly, an employee's 'regular rate of pay' for purposes of . . . section 510 and the [Industrial Welfare Commission] wage orders is not the same as the employee's straight time rate (i.e., his or her normal hourly wage rate). Regular rate of pay, which can change from pay period to pay period, includes adjustments to the straight time rate, reflecting, among other things, shift differentials and the per-hour value of any nonhourly compensation the employee has earned." (Id. at p. 554.) As to how the "regular rate of pay" is to be determined for overtime purposes, the court stated, "[The bonus] is part of an employee's overall compensation package, and therefore both parties agree that its per-hour value must be determined so that the employee's regular rate of pay - and, derivatively, the employee's overtime pay rate - reflects all the various forms of regular compensation that the employee earned in the relevant pay period. In other words, for the limited purpose of calculating overtime pay, the attendance bonus (which is earned all at once by completing a weekend work shift) is treated as if it were earned on a per-hour basis throughout the pay period." (Ibid.)
It was therefore unnecessary to resort to federal law to determine overtime pay on bonuses. (Alvarado, supra, 4 Cal.5th at p. 560.)
Section 510 provides in pertinent part, "(a) Eight hours of labor constitutes a day's work. Any 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. Any 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. Nothing in this section requires an employer to combine more than one rate of overtime compensation in order to calculate the amount to be paid to an employee for any hour of overtime work." (Italics added.)
The Policies and Interpretations Manual of the Division of Labor Standards and Enforcement (DSLE) includes a formula for computing overtime on a production bonus such as the one Morales receives on his flag units:
"49.2.4 Computing Regular Rate and Overtime on a Bonus. When a bonus is based on a percentage of production or some formula other than a flat amount and can be computed and paid with the wages for the pay period to which the bonus is applicable, overtime on the bonus must be paid at the same time as the other earnings for the week, or no later than the payday for the next regular payroll period. (See Labor Code § 204) Since the bonus was earned during straight time as well as overtime hours, the overtime 'premium' on the bonus is half-time or full-time (for double time hours) on the regular bonus rate. The regular bonus rate is found by dividing the bonus by the total hours worked during the period to which the bonus applies. The total hours worked for this purpose will be all hours, including overtime hours. (See previous section)
"49.2.4.1 Example Involving Overtime and Bonus: First, find the overtime due on the regular hourly rate, computing for salaried worker and piece workers as described in the sections above. Then, separately, compute overtime due on the bonus: find the regular bonus rate by dividing the bonus by the total hours worked throughout the period in which the bonus was earned. The employee will be entitled to an additional half of the regular bonus rate for each time and one-half hour worked and to an additional full amount of the bonus rate for each double time hour, if any. "Regular hourly rate of pay ......................................... $ 20.00 "Total hours worked in workweek = 52 "Total overtime hours at time and one-half = 12 "Overtime due on regular hourly rate = 12 x $30.00 ..................... $360.00 "Bonus attributable to the workweek ............................... $138.00 "Regular bonus rate = $138.00÷52 = $2.6538÷2 = $1.33 x 12 Overtime Hours $ 15.92 "Total earnings due for the workweek: "Straight time: 40 hours @ $20.00 ................................ $800.00 "Overtime: 12 hours @ $30.00 .................................... $360.00 "Bonus ....................................................... $138.00 "Overtime on bonus ............................................ $ 15.92 "Total ....................................................... $1,313.92" (Italics added) (See Marin v. Costco Wholesale Corp. (2008) 169 Cal.App.4th 804, 813-816 [approving Manual's provisions for computing overtime on production bonus].)
Taking the corresponding numbers from Morales' representative wage statement, the calculation looks like this: Regular hourly rate of pay ......................................... $12.50 Total hours worked in the workweek = 27.78 Total overtime hours at time and one-half = 3.78 Overtime due on regular hourly rate = 3.78 hours x $18.75 $70.88 Bonus attributable to the workweek [flag units x flag rate] ................. $31.10 Regular bonus rate = $31.10 ÷ 27.78 = 1.12 ÷ 2 = .56 x 3.78 overtime hours . . . $2.12 Total earnings due for the workweek: Straight time: 24 hours @ $12.50 . . . . $300.00 Overtime: 3.78 hours at $18.75 . . . $70.88 Bonus [flag units x flag rate] $31.10 Overtime on bonus [overtime premium] $2.12 Total $404.10
The present dispute centers on the phrase "all applicable hourly rates in effect during the pay period" in section 226, subdivision (a)(9). Does the "hourly rate in effect during the pay period" mean the per-hour wage, in this case, $12.50 per hour, and the multiples for time-and-a-half and double time? Or does it also include the hourly rate arrived at after computing the overtime premium, that is, after dividing the production bonus by the total hours worked and dividing that number by two (or multiplying by .5)?
As this calculation shows, Morales' "straight time rate (i.e., his . . . normal hourly wage rate)" (Alvarado, supra, 4 Cal.5th at p. 554) - $12.50 for regular hourly time and $18.75 for first-tier overtime - plays no part in calculating the overtime "as if hourly rate (to use Alvarado's expression) on his bonus. This number is a function of the amount of the bonus and the total number of hours worked.
Morales' interpretation renders the qualifying phrase "in effect during the pay period" in section 226, subdivision (a)(9), surplusage. The hourly rate for the overtime premium is not in effect during the pay period. It comes into being after the period closes "for the limited purpose of calculating overtime pay" (Alvarado, supra, 4 Cal.5th at p. 554) and then vanishes. It cannot be calculated until the pay period to which it applies ends, and, unlike the hourly "straight time" wage rate, it changes from pay period to pay period, dependent as it is on the number of overtime hours worked, if any, and the number of flag unit credits obtained during that period.
We recognize that one important purpose of section 226 was to show employees how their pay was calculated in such a way that they can check for themselves to see whether they are being paid as they should be. (See § 226, subd. (e)(2)(B),(C) [employee should be able to determine wages from wage statement "promptly and easily," meaning that a reasonable person could readily ascertain information without reference to other documents or information]; see also Soto v. Motel 6 Operating, L.P. (2016) 4 Cal.App.5th 385, 390 (Soto) [§ 226 enacted "to assist employee in determining whether he or she has been compensated properly"].) The Legislature, however, listed the categories of information needed to fulfill this purpose, such as "the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis" (§ 226, subd. (a)(3)) and "applicable hourly rates in effect during the pay period." (§ 226, subd. (a)(9).) The courts are not free to specify additional categories. (See California Teachers Assn. v. Governing Bd. of Rialto Unified School Dist., supra, 14 Cal.4th at p. 633, quoting Seaboard Acceptance Corp. v. Shay (1931) 214 Cal. 361, 365 ["'This court has no power to rewrite the statute to make it conform to a presumed intention which is not expressed.'"].)
The lump sum for "overtime premium" on the representative wage statement, which corresponds to the "overtime on bonus" category in the above examples, gave no information about how Bridgestone arrived at this amount. But the two fixes Morales proposed did not mend matters. The first fix - an overtime hourly rate of $19.31 - simply pushed the uncertainty back one level. How would the employee know whether that rate is correct? It is not a simple multiple of the hourly rate, such as time-and-a-half. (Cf. Morgan, supra, 186 Cal.App.4th at p. 1147 [employer complied with section 226 by listing regular hours and overtime hours separately; simple addition revealed total hours worked].) And why does it change from pay period to pay period? The other fix proposed multiplying the overtime hours by $.56, the number arrived at after dividing the production bonus by the total number of hours and dividing that number by two. Again, how is the employee to know whether this number is correct?
More importantly for statutory interpretation, the overtime premium "as-if" hourly rate varies from pay period to pay period and cannot be calculated until the pay period closes. It therefore cannot be an "applicable hourly rate in effect during the pay period." (See Soto, supra, 4 Cal.App.5th at p. 392 [unused vacation pay not "earned" until termination of employment; section 226 does not require wage statement to include vacation pay as "gross wages earned" and "net wages earned" (italics added.)].)
"[A]n employee's regular rate of pay changes from pay period to pay period depending on whether the employee has earned shift differential premiums or nonhourly compensation. Therefore, the word 'regular' in this context does not mean 'constant." (Alvarado, supra, 4 Cal.5th at p. 562.)
We offer no opinion regarding how the complicated calculation for an overtime production bonus could or should be expressed on a wage statement in a way employees can understand and verify. That is a legislative task. Our job here is to ascertain whether the trial court correctly interpreted the Labor Code when it decided that Bridgestone violated section 226, subdivision (a)(9), by not including an "applicable hourly rate in effect during the pay period" for the overtime premium on Morales' wage statement. Because there is no "applicable hourly rate in effect during the pay period" for the overtime premium, we conclude that Bridgestone did not violate the subdivision.
DISPOSITION
The judgment and the order awarding attorney fees are reversed. The trial court is instructed to enter judgment for appellant. Appellant is to recover its costs on appeal.
BEDSWORTH, ACTING P. J. WE CONCUR: MOORE, J. ARONSON, J.