Opinion
NOT TO BE PUBLISHED
Superior Court County of Santa Barbara Ct. No. 01264561, Denise de Bellefeuille, Judge
Nava & Gomez, Cesar H. Nava, Santos Gomez, Stanley J. Hodson, Law Office of Louis H. Kreuzer II, and Louis H. Kreuzer for Plaintiff and Appellant.
Orrick, Herrington & Sutcliffe, Lynne C. Hermle, Joseph C. Liburt, Christian N. Brown for Defendant and Respondent.
COFFEE, J.
Arcadio Ortega was an automotive service technician (AST) employed by Sears, Roebuck and Company (Sears). He filed a class action complaint alleging that Sears failed to (1) pay minimum wage; (2) provide accurate pay stubs; (3) reimburse ASTs for the cost of tools; and (4) pay waiting time penalties.
The trial court concluded that Ortega failed to satisfy his burden that common questions predominated on the minimum wage and tool indemnification claims, and rejected his request for waiting time penalties. On the pay stub claim, it found that Ortega failed to present sufficient evidence of injury. We affirm.
FACTS
Ortega filed a class action complaint on behalf of himself and all other similarly situated non-exempt auto mechanics against Sears, for Labor Code violations that allegedly occurred from October 25, 2003 through October 27, 2007. The proposed class consists of approximately 4, 568 persons employed as ASTs, levels I, II, III and IV in Sears Automotive Centers (SACs). There are approximately 80 SACs in California.
The complaint alleged causes of action for failure to pay minimum wages, failure to provide itemized wage statements; failure to provide and maintain tools; and failure to timely pay wages due at termination. Ortega also alleged that Sears required ASTs to work "off the clock" and that Sears violated the Unfair Competition law. Ortega alleged six other causes of action which are not the subject of this appeal.
Ortega's "off the clock claims" were that he was required to work on cars after he had clocked out at the end of his shift. He was also required to work off the clock to clean his workstation, and to change into and out of his uniform at the beginning and end of each day. Ortega alleged he was not paid for travel time to attend training. Certification was denied as to all of his off the clock claims, and Ortega has not challenged this ruling on appeal.
Ortega was employed by Sears from 1999 to 2007. He worked as an AST I and II, in Oxnard, Ventura and Thousand Oaks. He alleged in his declaration that he was paid a base hourly rate (BHR) of less than minimum wage. He was also required to provide his own tools as a condition of employment. They included screwdrivers, wrenches, airguns, gloves, lamps and metal hammers. Often an AST's tools "went missing" and Sears did not reimburse the AST or replace the tool. Sears allowed vendors to visit the automotive centers to sell tools to the ASTs. Ortega also claimed he was never provided with accurate pay stubs.
The trial court found that Sears had failed to pay minimum wage and that its itemized wage statements (pay stubs) did not comply with California law. It ruled that the minimum wage and tools claims were not amenable to class certification because individual questions predominated. It denied certification of the paystub claim because Ortega did not show injury.
Ortega contends that, because the court decided the issue of liability on the minimum wage and pay stub claims, the only issue as to those matters is a determination of damages. He asserts that the court's order "contradicts itself by finding class-wide violations or disputes as to common issues of law and fact, and then denying certification." He also argues that the court erred by failing to certify his tool indemnification claim.
DISCUSSION
Requirements for Class Treatment
Code of Civil Procedure section 382, authorizes maintenance of a class action when there is a question of "common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court... '"
"The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members. [Citations.]" (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326.) "The 'community of interest' requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class. [Citation.]" (Ibid.)
We review the trial court's ruling for an abuse of discretion. (Sav-On Drug Stores v. Superior Court, supra, 34 Cal.4th at p. 326.) Because trial courts are ideally situated to evaluate the efficiencies and practicalities of permitting group action, they are afforded great discretion in granting or denying certification. (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435-436 .)
Where the facts are such that each putative class member must litigate numerous factual questions, common questions do not predominate and class treatment is inappropriate. (Arenas v. El Torito Restaurants, Inc. (2010) 183 Cal.App.4th 723, 732 [certification denied where tasks performed by restaurant managers varied widely between restaurants]; see also Keller v. Tuesday Morning, Inc. (2009) 179 Cal.App.4th 1389; Walsh v. IKON Office Solutions, Inc. (2007) 148 Cal.App.4th 1440; Dunbar v. Albertson's Inc. (2006) 141 Cal.App.4th 1422.)
Payment of Minimum Wage
Ortega contends that Sears' compensation system violates the Labor Code and conceals from its ASTs that it fails to pay minimum wage. Sears classifies ASTs as Level I, II, III, and IV technicians. They are paid on a hybrid compensation system that involves a base hourly rate (BHR) plus incentive pay for each job performed. The incentive pay is either 1) a percentage of the revenue charged each customer or 2) a pre-set commission based upon a type of service. The trial court referred to both forms of incentive pay collectively as "piece rates, " and we adopt that term here.
Sears concedes that level I and II ASTs have a BHR lower than minimum wage, while level III and IV ASTs have a BHR that exceeds minimum wage. It argues, however, that all level I and II ASTs earn above minimum wage when the BHR plus piece rate compensation is combined, thus it has not violated the minimum wage law. Sears does not keep track of the time an employee spends on piece rate work, just the piece rate charged for a particular service.
In its opposition to the certification motion, Sears provided a detailed description of its payroll system. ASTs clock in and out on computers called "Tire Point of Sale" terminals (TPOS). A timekeeping software program (SSG) runs on TPOS. Sears asserts that ASTs are trained to use this program. They clock in at the beginning of their shift and clock out at the end of the shift. (They also clock in an out for meal periods.) If ASTs fail to record hours worked, they can "self-correct" on TPOS, tell a manager or sign a Punch Correction Form to get paid. Reports of "missed time punches" are generated so managers can follow up with employees who have not punched in or out.
Sears asserts that employees can also use TPOS to track their incentive or piece rate pay. When a car is brought in for service, the job is entered into TPOS. Upon completion, the ASTs sign out. TPOS calculates the piece rate owed, according to the pre-set rate. Sears states that ASTs therefore have access to the jobs performed and piece rates earned, before they are even paid. TPOS, however, lacks the ability to track the amount of time ASTs spend on a piece rate job. Sears compensates ASTs at a different rate for meetings, inventory, training and travel (MITT rate). This is calculated as the AST's average rate of pay during the previous quarter, adding together the BHR and piece rates. Sears states that all ASTs earn more than minimum wage under the MITT rate.
Based upon the foregoing evidence, the trial court concluded that "[t]here is no question that Sears pays a BHR that is less than the minimum wage for some of its workers." It observed that Sears presented no evidence of its payment practices from October 25, 2003 through October 27, 2007. The court indicated that it "must assume that, if [Sears] was paying a BHR greater than the minimum wage during the class period, [it] would have told the court."
The court determined that litigation of the minimum wage claim would "involve thousands of mini-trials of hour-by-hour analysis of each employee's work" to determine the BHR and piece rate compensation earned each hour. For each employee, the court would need to determine whether the employee worked on a car, and allocate some or all of the piece rate (for that work) to the hour. This would involve "large amounts of data" per individual and was further complicated because Sears does not keep track of time spent on piece rate work.
We agree. The task before the trial court was to determine if the minimum wage violation was amenable to class treatment. This required an inquiry into Sears' compensation system to determine how the ASTs were paid. Sears conceded that it paid less than minimum wage to level I and II ASTs, excluding piece rate compensation. The court considered the difficulty of establishing the time spent on each piece rate job performed by each employee, during the class period. This is all that was necessary in order for the court to deny certification. Notwithstanding that Sears conceded that it had not paid minimum wage, we conclude there was no error in denying class certification. The trial court properly determined that individual issues predominated.
Inaccurate Wage Statements
Ortega contends that Sears did not provide accurate wage statements ("pay stubs"), thus concealing its minimum wage violations. Labor Code section 226, subdivision (a) provides in part, "Every employer shall, semimonthly or at the time of each payment of wages, furnish each... employee[]... an accurate itemized statement in writing showing (1) gross wages earned, (2) total hours worked... (3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis..., 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."
"An employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not exceeding an aggregate penalty of four thousand dollars ($4,000), and is entitled to an award of costs and reasonable attorney's fees." (Lab. Code, § 226, subd. (e).)
All further statutory references are to the Labor Code.
The trial court found that Sears' pay stubs do not comply with section 226, subdivision (a) because they lack 1) the piece rate units and 2) applicable piece rates. The trial court stated, "Clearly, this pay stub, which plaintiff says is typical, does not comply with Labor Code [section] 226 and Sears does not argue that it does." The trial court determined that Sears' electronic pay stubs are also deficient.
The trial court concluded, however, that Ortega had not demonstrated injury to merit damages under section 226, subdivision (e). It stated that when employees received their pay stubs "they could answer any questions by going to Sears TPOS computers, as several individuals have indicated they do on a regular basis." The court denied class certification because Ortega had not shown common injury.
Ortega suggests that we follow the decision of Division One of this District, Jaimez v. DAIOHS USA, Inc. (2010) 181 Cal.App.4th 1286, which recently addressed injury in the context of a wage statement claim. There, the employees' pay stubs failed to identify current earnings, total hours paid and piece rates. (By contrast, the single pay stub that Ortega offered into evidence reflected his BHR, his BHR hours worked, and earnings to date, but lacked the piece rate or piece rate unit.)
In determining that a wage statement claim was amenable to class treatment, the Jaimez court relied upon two federal court cases, Wang v. Chinese Daily News, Inc. (C.D.Cal. 2006) 435 F.Supp.2d 1042 and Elliot v. Spherion Pacific Work, LLC (C.D.Cal. 2008) 572 F.Supp.2d 1169. In Wang, the court held that injury consisted of the cost of litigation and the employees' difficulty and expense in reconstructing time and pay records. In Elliot, the court concluded that injury was established by a showing of employee confusion over the wages owed, difficulty in reconstructing pay records, and forcing employees to make mathematical computations to determine wages owed. The Jaimez court observed that the Wang court had "set the bar [for proof of injury] rather low" (Jaimez v. DAIOHS USA, Inc., supra, 181 Cal.App.4th at p. 1306), and that the holdings in Wang and Elliot cases established that "a very modest showing [of injury] will suffice." (Ibid.)
Ortega claims the ASTs' injury is shown by the fact that the noncompliant pay stubs hinder their ability to prove the amount of damages. This alone, Ortega contends, is proof of injury. We conclude that section 226, subdivision (e) clearly requires a much more robust showing of injury, which was absent here. It defies common sense to declare that uncertainty of the amount of earnings constituted injury, or that injury could be shown by "employee confusion, " causing employees to make mathematical computations, or the cost of bringing a lawsuit. Moreover, none of Ortega's 69 declarants alleged injury resulting from the inaccurate paystubs. As the trial court noted, if an employee had a question regarding his pay stub, he could consult TPOS to determine its accuracy.
Here, the trial court correctly determined that the pay stubs were inaccurate. Although it may be argued that the court reached the merits of the claim, there was no error. A trial or appellate court is not precluded "from considering how various claims and defenses relate and may affect the course of the litigation, considerations that may overlap the case's merits." (Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1092; Walsh v. IKON Office Solutions, Inc., supra, 148 Cal.App.4th at p. 1450 [affirmative defenses may be considered to defeat certification]. It was necessary for the trial court to consider the legal issue (existence of injury) before it could determine whether class treatment was warranted. The trial court properly found this claim inappropriate for class treatment.
The dissent suggests that we remand the matter "for the trial court's further determination of the appropriateness of the matter being certified as a class action." The trial court, after extensive analysis, denied certification. It is unclear what would be accomplished by requiring the court to repeat its decision-making process. An order denying certification is reviewed under an abuse of discretion standard, and there was none here.
Supplying and Maintenance of Tools
Ortega argues on appeal that ASTs must have ready access to tools to make car repairs. He asserts that Sears fails to supply the necessary tools or to maintain tools provided by the ASTs, thus they cannot perform their work efficiently. He asserts that Sears violated a wage order requiring it to provide and maintain tools for the ASTs, and violated Labor Code, section 2802, subdivision (a), by failing to reimburse ASTs and for replacement of lost tools.
Industrial Welfare Commission Order 7-2001, section 9(B) provides in part, "When tools or equipment are required by the employer or are necessary to the performance of a job, such tools and equipment shall be provided and maintained by the employer, except that an employee whose wages are at least two (2) times the minimum wage provided herein may be required to provide and maintain hand tools and equipment customarily required by the trade or craft."
Labor Code section 2802, subdivision (a) provides, "An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful."
According to the deposition of Pete Cardinale, region manager for the west region, each store is provided with basic tool kits. If a manager needs a specialized tool, he orders it from a Sears store or an auto parts store. ASTs may use their own tools and many do. Cardinale testified that ASTs bring their own tools, such as air guns for the sake of efficiency. There is no policy for replacing an AST's personal tool that is broken on the job. Sears submitted 114 declarations attesting that it provided all the necessary tools, obtained specialty tools, and that ASTs were not required to buy their own tools. The court noted that some of the Sears' declarants reported that Sears had the necessary tools and others indicated that Sears obtained the tools they needed.
The trial court concluded that "[i]t appears that ASTs bring their own tools so they won't have to share. It makes them work more efficiently. But plaintiff has not shown that [an] AST's own tools are necessary to performance of the job." The court found that the tool issue would involve individual analyses of each store and the needs and preferences of individuals ASTs. Individualized inquiries would also include whether the employee asked for reimbursement and whether the expenditure was reasonable and necessary.
The trial court observed that all of Ortega's declarants stated they were required to provide their own hand tools, and many were also required to provide their own gloves. The court stated, "Here, more than in other areas, the uniformity of plaintiff's declarations makes them appear to be the work of lawyers more than individual declarants. Sears' declarants, in much more varied language, say that they are not required to purchase their own tools but many of them choose to use their own tools."
All of Ortega's declarants reported that they were required to supply and maintain their own tools as a condition of employment. Two said they could not afford tools, so borrowed them from other ASTs. All alleged that they were not reimbursed for the tools they purchased nor did Sears replace tools that were broken on the job. The declarants reported different types of tools required to perform their work. The estimates of the costs to purchase and/or replace broken tools varied from $100 to $1,250 up to $4,000 and $6,000. One declarant placed the cost of tools as high as $20,000. These allegations alone illustrate the lack of commonality within the class.
A trier of fact would have to determine whether over 4, 000 ASTs working at approximately 80 different locations should be reimbursed for each tool purchased, lost or broken during the class period. Because Sears presented evidence that it was providing necessary tools, and not categorically failing to provide any tools, Ortega could not demonstrate that there was a class-wide issue susceptible to common proof. The trial court's finding that individual issues predominated was supported by substantial evidence. The claim is inappropriate for class certification. Given our rulings, we need not address Ortega's claims concerning unfair competition or waiting time penalties.
DISPOSITION
We affirm the judgment. Costs on appeal are awarded to Respondent.
I concur: YEGAN, Acting P.J.
CONCURRING AND DISSENTING
PERREN, J.
I respectfully concur in the majority's decision on all issues save one: the wage statements. (Lab. Code, § 226, subd. (a).) Contrary to the findings of the trial court, I believe that appellants did suffer "injury" from respondent's furnishing of admittedly inadequate pay statements.
The trial court found, and the majority agree, that while the pay statements reflect the gross wages earned, neither they nor the electronic wage statements Sears relies upon to correct their deficiencies, furnish overtime hourly rates, piece rate units and applicable piece rates. As the trial court found, "Sears pay stubs, electronic or otherwise, do not comply with Labor Code § 226(a), " and, as my colleagues note, the stubs were wrong. Sears does not dispute this but urges that any deficiencies were remedied by the employee having recourse to the "Tire Point of Sale" computer system that the automotive service technician routinely used during the work day to log into and out of service jobs. Put another way, Sears' failure to account to its employees as required by law could be remedied by the employee curing the defect. The law, however, places this burden on Sears, not its employees.
Having concluded that Sears is in violation of Labor Code section 226, subdivision (a), the trial court and my colleagues nonetheless conclude that this conduct is not actionable since there is no showing of "injury" to the employee. Presumably this means that there is no showing that an employee was unable to ferret out an actual wage loss as a result of the required information having been omitted from the statement. Indeed, there is no such showing. I conclude, however that the requirement that there be a showing of injury is not so narrow. The possibility of not having a fair apportionment of time between hourly rates, piece rate units and applicable piece rates, and the burden imposed on the employee to reconstruct pay records and make the mathematical computations necessary to determine if wages that were earned were paid, provide evidence of some injury. (Jaimez v. Daiohs USA, Inc. (2010) 181 Cal.App.4th 1286, 1306, citing Wang v. Chinese Daily News, Inc. (C.D.Cal. 2006) 435 F.Supp.2d 1042, and Elliot v. Spherion Pacific Work, LLC (C.D.Cal. 2008) 572 F.Supp.2d 1169, 1181.)
Whether the standard for the proof of injury requires only that we "set the bar rather low, " or that "a very modest showing will suffice" (Jaimez v. Daiohs USA, Inc., supra, 181 Cal.App.4th at p. 1306), I conclude that the requisite showing has been made and that the trial court erred in concluding otherwise.
I would remand for the trial court's determination of the appropriateness of the matter being certified as a class action, a decision it never reached, having concluded that the claim failed for lack of proof of injury.