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Basing a UCL Claim Partially on FLSA Violation Does Not Confer Federal Question Jurisdiction

In Federal Question Jurisdiction, FLSA, Remand on August 15, 2010 at 8:00 am

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Judge Percy Anderson of the Central District of California faced the question of whether basing a UCL claim partially on a violation of the FSLA creates federal jurisdiction.  The Court held that it did not.  The case is Williams, et al. v. Wells Fargo Bank, N.A., No. CV 10-4761 PA (PJWx), 2010 WL 3184248 (C.D. Cal. Aug. 9, 2010).

Plaintiffs’ alleged that defendant Wells Fargo Bank, N.A. (“Defendant”) misclassified them as exempt from overtime and failed to pay wages for overtime compensation.

Plaintiffs were employed by Defendant as “Home Mortgage Consultants” sometime between February 10, 2001 and the present. During that time, Plaintiffs were paid on a commission sales basis and were never paid any overtime or premium pay. On May 30, 2010, Plaintiffs brought this action against Defendant in the Superior Court for the County of Los Angeles, alleging (1) violation California Labor Code §§ 510 and 1198 for unpaid overtime; (2) violation of California Labor Code §§ 2800 and 2802 for unpaid business expenses; (3) violation California Labor Code §§ 201 and 202 for wages not timely paid upon termination; (4) violation California Labor Code § 204 for wages not timely paid during employment; (5) violation California Labor Code § 226(a) for non-compliant wage statements; and (6) violation of California Business & Professions Code §§ 17200, et seq.

Defendant filed a Notice of Removal on June 28, 2010, alleging federal question jurisdiction.  Plaintiffs filed a motion to remand, maintaining that they have only alleged state law claims, and thus there is no basis for subject matter jurisdiction.

Defendant contended that Plaintiffs have effectively alleged a separate federal claim by alleging violation of the UCL based on violation of the FLSA.

Defendant is asking that this Court treat UCL claims and the violations upon which they are based as one in the same. However, Defendant has not cited, and the Court has not found, any authority which supports this position. Indeed, Defendant’s view seems to directly contradict the California Supreme Court‘s characterization of the UCL as a statute that “borrows” violations of other laws and makes them “independently actionable.” Accordingly, the Court does not find that Plaintiffs have somehow alleged a federal cause of action by basing their UCL claim in part on Defendant’s alleged violation of FLSA.

Defendant also contended that because most of Plaintiffs’ claims stem from their allegations that Defendant misclassified them as exempt from overtime compensation, and Plaintiffs’ overtime claim is entirely dependent on an interpretation of the FLSA, the resolution of Plaintiffs’ claims depends upon the resolution of whether Defendant violated the FLSA.  The court was not persuaded.

Although Defendant is correct in noting that most of Plaintiffs’ claims stem from allegations that Defendant improperly classified them as exempt, there is no indication in the complaint that this misclassification is based on exemptions set forth in federal law, as opposed to California law. . . . Where a plaintiff has alleged a UCL claim based on both the violation of state and federal law, courts have found that federal question jurisdiction does not exist. See, e.g., Holliman v. Kaiser Foundation Health Plan, 2006 U.S. Dist. LEXIS 14627 at *13 (N.D. Cal. March 14, 2006) (finding no federal question jurisdiction where UCL claim was based on violations of California Labor Code and FLSA); Roskind v. Morgan Stanley Dean Witter & Co. 165 F. Supp. 2d 1059, 1067 (N.D. Cal. April 11, 2001) (finding no federal question jurisdiction where UCL claim was based on “unfair” misrepresentations and violation of the National Association of Securities Dealers rules); Castro v. Providian Nat’l Bank, 2000 U.S. Dist. LEXIS 19062 at *8-9 (N.D. Cal. Dec. 29, 2000) (finding that even if plaintiffs were basing UCL claim on violation of federal Truth in Lending Act (“TILA”) in addition to violations of California law, claim did not depend on question of federal law because jury could find violation of section 17200 without finding violation of TILA).

Here, Plaintiffs have alleged a UCL claim based on a number of “unlawful” acts, which include two FLSA violations in addition to nine violations of the California Labor Code. Because a single unlawful business practice may give rise to liability under the UCL, a jury could very well find that Defendant violated section 17200 without also finding that it violated the FLSA. As such, Plaintiffs’ UCL claim does not depend upon the resolution of a question of federal law.

Id. **3-4.

By CHARLES H. JUNG

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Waiting Time Penalty Under Labor Code Section 203(a) Should Be Calculated Based on Actual Hours Worked

In Waiting Time Penalties on August 15, 2010 at 1:46 am

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The Fourth District issued an unpublished opinion discussing the proper means of calculating the waiting time penalty under Labor Code section 203.  In Riley v. Valencia, 2010 WL 3195816 (Cal. Ct. App. 4th Dist. Aug. 13, 2010), the trial court utilized the actual hours the employee worked to calculate the penalty.  The employee, Ashley Riley, contended the trial court improperly calculated the section 203 waiting time penalty, arguing that the court should have multiplied her hourly rate ($6.75) for 30 days at eight hours per day for a total penalty of $1,620, as opposed to multiplying her hourly rate ($6.75) by her average daily hours worked (3.5 hours) for 30 days for a total penalty of $708.75.  Riley contends that section 203 required the trial court to use eight hours per day in its calculations, even though Riley actually worked only three to four hours per day.

The Fourth District concluded the trial court properly calculated the penalty and affirmed the judgment.

Facts

Riley bused tables for employer Valencia (doing business as La Carreta Mexican Restaurant). Eventually, Riley left or was discharged from her employment and filed suit against Valencia for waiting time penalties for unpaid wages due, among other employment-related causes of action. The trial court found in favor of Riley pursuant to section 203 and made the following calculations: “a. Penalty for failure to pay all wages due upon discharge: 6.75 x 3.5 = 23.625 x 30 = $708.75.”

Issue

The sole issue facing the Fourth District was whether the trial court properly calculated the waiting time penalty pursuant to section 203 where it used Riley’s actual hours worked, instead of a generic eight-hour work day, to calculate the “wages” of the employee at the “same rate” pursuant to Labor Code § 203(a).

Because section 203 does not explicitly define “same rate,” Riley contends the waiting time penalty calculus should rely on section 510, subdivision (a)’s definition of a day’s work: “Eight hours of labor constitutes a day’s work.” We conclude the trial court properly calculated the waiting time penalty because the trial court averaged Riley’s daily pay rate ($6.75 x 3.5 hours) and applied that number ($23.625) to reach the correct penalty result of $708.75.

Section 203(a) states:

If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.3, 201.5, 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 himself or herself to avoid payment to him or her, or who refuses to receive the payment when fully tendered to him or her, including any penalty then accrued under this section, is not entitled to any benefit under this section for the time during which he or she so avoids payment.”

The court concluded that “same rate” as used in Section 203(a) means the “employee’s actual daily wage and does not refer to an arbitrary daily wage based on a standard eight-hour workday.”  Id. *2.

Following the plain meaning of section 203, California courts have consistently construed the “same rate” variable of the waiting time penalty calculus to consist of the ratio of dollars per hours actually worked. (Mamika v. Barca (1998) 68 Cal.App.4th 487, 490; Barnhill v. Robert Saunders & Co. (1981) 125 Cal.App.3d 1, 7-8; Oppenheimer v. Sunkist Growers, Inc. (1957) 153 Cal.App.2d Supp. 897, 898-899.) Courts take this “daily wage” and multiply it by up to 30 days, thereby yielding the waiting time penalty. (Mamika, at p. 490; Barnhill, at pp. 7-8; Oppenheimer, at pp. Supp. 898-899.)

Following this authority, we also conclude that section 203, subdivision  (a) means exactly what it says that “the wages of the employee shall continue … at the same rate” for up to 30 days. Here, the trial court correctly calculated the waiting time penalty because the employee’s “same rate” plainly refers to the employee’s actual daily wage and does not refer to an arbitrary daily wage based on a standard eight-hour workday. (Mamika v. Barca, supra, 68 Cal.App.4th at pp. 492-493.) This interpretation has been utilized by California courts since at least 1957, and as early as 1909 in other state courts interpreting similar statutes. (Oppenheimer v. Sunkist Growers, Inc., supra, 153 Cal.App.2d at pp. Supp. 898-899; St. Louis, I.M. & S.R. Co. v. Bryant (1909) 92 Ark. 425 [122 S.W. 996].) Riley does not cite, nor have we found, any case law supporting her contention that section 203 requires trial courts to calculate the waiting time penalty with a fixed eight-hour workday.

Plaintiff contended that the court should import section 510(a) statement that eight hours of labor constitutes a “day’s work” into section 203’s waiting time penalty calculation.  But the court concluded that section 510(a) “applies to overtime pay rates and thus is not applicable to section 203’s waiting time penalty calculation”.  The court noted that “neither a ‘day’s work,’ nor ‘an 8 hour workday,’ nor any reference to section 510 appears in section 203.”  Id. *2.  The court found that section 203(a) requires “employee-specific calculations because it refers to ‘the wages of an employee’ or the employee’s wage per the employee’s hours worked.”

Judges and Attorneys

The appeal was taken from a judgment of Hon. Eddie C. Sturgeon, the Superior Court of San Diego County.

Justice Gilbert Nares wrote the opinion, with Justices Patricia D. Benke and Cynthia Aaron concurring.

Scott A. McMillan of The McMillan Law Firm, APC in La Mesa, CA represented Plaintiff and Appellant.

Marc Howard Mandelblatt of the Law Offices of Marc Mandelblatt in San Diego, CA represented Defendant and Respondent.

By CHARLES H. JUNG

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