Mendis v. Schneider National Carriers, Inc.

MOTION for Summary Judgment

W.D. Wash.September 1, 2016

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION TO SUMMARY JUDGMENT Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 The Honorable John C. Coughenour UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WASHINGTON AT SEATTLE BALAPUWADUGE MENDIS and MICHAEL FEOLA, on their own behalf and on behalf of all others similarlysituated, Plaintiff, v. SCHNEIDER NATIONAL CARRIERS, INC., a Nevada Corporation, Defendant. Case No. 2:15-cv-00144 JCC DEFENDANT’S MOTION FOR SUMMARY JUDGMENT NOTE ON MOTION CALENDAR: September 23, 2016 ORAL ARGUMENT REQUESTED Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 1 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT Case No. 2:15-cv-00144 JCC i LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 TABLE OF CONTENTS Page I. INTRODUCTION ................................................................................................................ 1 II. GENERAL FACTUAL BACKGROUND ........................................................................... 2 A. Plaintiffs Are National Long Haul Truck Drivers. ................................................... 2 B. Schneider’s Compensation Systems For Long Haul Truck Drivers. ........................ 2 1. Standard Mileage Rate Compensation Plans. ............................................... 2 2. Per Diem Compensation Plans. ..................................................................... 4 3. Training Pay. ................................................................................................. 5 4. Rest Breaks. .................................................................................................. 5 III. THE ON DUTY, NOT DRIVING MINIMUM WAGE CLAIMS FAIL AS A MATTER OF LAW. ............................................................................................................. 6 IV. THE TRAINING TIME MINIMUM WAGE CLAIMS FAIL AS A MATTER OF LAW. .................................................................................................................................... 8 V. THE REST BREAK CLAIM FAILS AS A MATTER OF LAW. ....................................... 9 A. Schneider’s Mileage Rate Compensation System Does Not Violate the Rest Break Regulation. ............................................................................................. 9 B. If The Rest Break Regulation Applies to Piece Rate Workers, The Dormant Commerce Clause Would Preclude The Rest Break Regulation From Governing Periods Worked Wholly Outside Of Washington. ...................... 10 1. Plaintiffs Work Predominantly Outside Of Washington, And Therefore The Vast Majority Of Their Rest Break Periods Occurred Wholly Outside Of Washington. ................................................. 11 2. The Dormant Commerce Clause Prohibits State Laws that Directly Control Commerce Occurring Wholly Outside Of The State. .................... 12 3. Washington’s Rest Break Regulation Is Per Se Invalid To The Extent It Directly Regulates Commerce Wholly Outside Of Washington ................................................................................................. 13 VI. THE PER DIEM DEDUCTION CLAIM FAILS AS A MATTER OF LAW BECAUSE THE PER DIEM COMPENSATION PLAN DOES NOT INVOLVE ANY “DEDUCTIONS” FROM WAGES. ......................................................................... 16 A. Feola’s Per Diem Deduction Claim Is Time-Barred. .............................................. 17 Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 2 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT Case No. 2:15-cv-00144 JCC ii LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 B. The Governing Regulation. ..................................................................................... 17 C. The Per Diem Plan Did Not Result In Any “Deduction” From Mendis’ Wages. ..................................................................................................................... 18 D. Helde Is Distinguishable. ........................................................................................ 18 E. Plaintiffs’ Interpretation Of The Wage Deduction Regulation – That Washington Law Prohibits Activity Federal Law Specifically Authorizes - - Would Be Barred By Federal Conflict Preemption. ............................................. 19 1. Governing Legal Principles. ....................................................................... 19 2. Analysis....................................................................................................... 20 VII. PLAINTIFFS’ OVERTIME CLAIM FAILS BECAUSE THE MILEAGE RATE PAY SYSTEM FOR LONG HAUL VAN TRUCKLOAD DRIVERS PAYS AN AMOUNT REASONABLY EQUIVALENT TO OVERTIME......................................... 20 VIII. CONCLUSION. .................................................................................................................. 22 Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 3 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 1 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 Defendant Schneider National Carriers, Inc. (“Schneider”) hereby moves this Honorable Court for an Order pursuant to Fed. R. Civ. P. 56 granting summary judgment and dismissing the claims of Plaintiffs Balapuwaduge Mendis (“Mendis”) and Michael Feola (“Feola”). For all the reasons explained below, there is no genuine dispute as to any material fact, and Schneider is entitled to judgment as a matter of law. I. INTRODUCTION Plaintiffs are long haul truck drivers whom Defendant Schneider National Carriers, Inc. (“Schneider”) compensated on a mileage basis to haul shipments for its customers. Plaintiffs’ mileage pay covered all activities necessary to deliver the freight and Schneider paid them extra for unusual but necessary tasks. They have now sued as putative class representatives, seeking additional compensation beyond what they have already been paid, and asserting minimum wage, overtime, rest break, and wage deduction claims. But under Washington law, Plaintiffs are entitled to nothing other than the pay to which they agreed, and which Schneider paid them. Plaintiffs’ claims fail for the following reasons:  Plaintiffs seek separate compensation for their “on duty, not driving” claim under California law theories that are inconsistent with and not recognized by Washington law;  Plaintiffs were paid at least minimum wage for all of their training time;  Plaintiffs were compensated for their rest breaks through their mileage pay and Washington law does not require separate compensation for break time;  Plaintiffs’ attempt to apply Washington law to activities occurring wholly outside the state violates the dormant Commerce Clause;  Schneider’s per diem plan does not involve deductions from wages and at least one of the Plaintiff’s wrongful deduction claims is time-barred;  Plaintiffs’ per diem claims are preempted, as state law cannot obstruct a pay method that federal tax law specifically allows;  Plaintiffs consented to deduction from their pay for cash withdrawals from their fuel cards; and  Plaintiffs are not entitled to overtime because Schneider has already paid them the reasonable equivalent, exempting them from state overtime law. Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 4 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 2 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 These fatal defects in Plaintiffs’ claims prevent them from obtaining the double recovery they seek and entitle Schneider to judgment as a matter of law. II. GENERAL FACTUAL BACKGROUND A. Plaintiffs Are National Long Haul Truck Drivers. Plaintiffs Balapuwaduge Mendis (“Mendis”) and Michael Feola (“Feola”) are national long haul truck drivers for Schneider’s Van Truckload business division.1 (See ). Plaintiffs drive throughout the continental United States, are away from their home states for several weeks at a time, and then return home for several days, before heading out on the road again. Plaintiffs pick up and deliver numerous shipments during the time they are on the road. Plaintiffs receive dispatch instructions from Schneider’s headquarters in Green Bay, Wisconsin through an in-truck computer unit. Accordingly, like airline pilots, national long haul truck drivers spend very little time working in their home state. (Mendis Dep at 100:10-14; 108:4-109:15); (Feola Dep at 112:15-118:11); (Pierce, ¶¶ 2, 3).2 B. Schneider’s Compensation Systems For Long Haul Truck Drivers. Schneider paid Feola over $46,000 during the 14 months he worked for Schneider as an employee between 2011 and 2012. (Holley Gauthier, ¶ 10). Mendis has averaged around $50,000 per year in earnings during his employment. (Holley Gauthier, ¶ 2). 1. Standard Mileage Rate Compensation Plans. Schneider pays its long haul drivers on a piece rate system referred to as a “mileage rate plus accessorial” system. The mileage rate is the main component of this system. The mileage 1 Even though Feola is a former employee, this brief will refer to Mendis and Feola collectively in the present tense -- i.e., they “drive” for Schneider, for ease of reference. 2 Schneider’s motion is supported by the concurrently filed declarations of Jill Holley Gauthier, William Patrick Lilja, Dan Pierce, and Sonya Kwon. Additional supporting evidence is is attached to the concurrently filed Declaration of Brian E. Spang In Support of Defendant Schneider National Carriers, Inc.’s Motion for Summary Judgment. This brief cites declarations by name and paragraph number, and deposition transcripts by name and page and line number. Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 5 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 3 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 rate is a specified amount of money per mile – e.g., 39 cents per mile. The “mile” component is not measured by actual odometer miles. Rather, the “mile” component is measured by the Household Movers Good industry standard (“HHMG”), which provides a set number of miles measured by zip code between the pick-up location and the drop off location. The mileage rate for a given shipment is determined by multiplying the HHMG miles between the pickup location and the delivery location by the mileage rate of X cents per mile. (Lilja, ¶¶ 2-5). Long haul drivers also receive accessorial pay for certain specified tasks or activities that fall outside the typical scope of tasks necessary to deliver a load. (Lilja, ¶ 6). These accessorials are specified in each driver’s individual pay package. For example, Schneider pays drivers accessorials for hand loading and unloading; a New York City Premium for driving through that crowded metropolitan area; and breakdown pay in the event of a truck breakdown. (Lilja, ¶¶ 2, 4, 6 and Exh. 1). Mileage rate compensation therefore compensates for working time beyond actually driving the truck. Driving a shipment from Point A to Point B across the country requires several different tasks in addition to actually driving the truck. Federal law requires drivers to inspect the truck and trailers before and after a trip. See 49 C.F.R. § 396.11. Federal law also imposes various paperwork and recordkeeping requirements. See id. Drivers must sometimes wait at a destination for trailers to be loaded or unloaded. (Mendis Dep. at 161:11-162:10). And, of course, drivers must fuel their trucks. (Mendis Dep. at 150:6-11); (Feola Dep. at 153:3- 8). Schneider does not separately compensate drivers for these tasks because the mileage rate component compensates long haul drivers for all tasks ordinarily required to deliver a shipment from Point A (the pick-up location) to Point B (the drop-off location), other than the activities specifically designated and compensated as an accessorial. (Mendis Dep. at 160:14-162:10; 167:14-17); (Feola Dep. at 143:8-144:8). (Lilja, ¶ 4 and Exh. 1, pp. SNC 1648, SNC 2120, and SNC 2238) (mileage rate definition). Accessorials separately compensate drivers for unusual tasks or circumstances they may encounter when delivering a shipment from Point A to Point B. Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 6 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 4 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 (Lilja, ¶¶ 2, 6 and Exh. 1). 2. Per Diem Compensation Plans. Schneider also offers a Per Diem compensation plan. The Per Diem plan takes advantage of a tax deduction available to long haul truck drivers for meal expenses incurred during work trips away from home. (Lilja, ¶¶ 7-10 and Exh. 2).3 The Per Diem plan differs from the regular mileage rate plan because it has two components. The first component is a mileage rate like the regular mileage rate compensation plan, and is taxable income. The second component is also expressed as a mileage rate but it is not taxable income but rather reimbursement for meal expenses. Because the second component of the Per Diem plan pay is nontaxable, drivers on the Per Diem plan may receive more of their paycheck in their pocket, and pay less in taxes. However, the sum of the two components of the Per Diem pay plan is two cents less than an equivalent driver paid pursuant to the mileage rate plan. (Lilja, ¶¶ 8-12 and Exh. 2). New Schneider drivers are placed in the Per Diem compensation plan, but can opt out if they wish. (Lilja, ¶ 13 and Exh. 2). Drivers who opt out receive a slightly higher mileage rate – 3 Employees who travel for business are permitted to take deductions from their federal taxes for meal expenses, so long as the deductions are substantiated.See 26 U.S.C. § 162(a); 26 C.F.R. § 1.274- 5(2)(iii). Long haul truck drivers are in a particularly good position to take advantage of this tax deduction because they spend so much time away from home.However, drivers must keep records and receipts of their meals to substantiate the deduction. In 2011, the IRS implemented rules authorizing and permitting employers of long haul truck drivers to create compensation arrangements that allow drivers to take advantage of this tax deduction without the need to individually substantiate it. See generally Rev. Proc. 2011-47, 2011-42 I.R.B. 520; id. at § 4.04 (“Special rules for the transportation industry”). In short, the IRS rules authorize compensation plans that estimate the amount of deductible expenses, and incorporate those estimates into the mileage rate component of the compensation plan, so that drivers may take advantage of the deduction without needing to collect and maintain all the expense receipts and associated documentation. Rev. Proc. 2011-47,2011-42 I.R.B. 520, §4.01 (“If [employer] pays a per diem allowance in lieu of reimbursing actual lodging, meal, and incidental expenses incurred or to be incurred by an employee for travel away from home, the amount of the expenses that is deemed substantiated for each calendar day is equal to the lesser of the per diem allowance for that day or the amount computed at the federal per diem rate ...”); id, § 4.04(5)(b) (providing example of a truck driver in the transportation industry paid a “cents per mile” allowance that qualifies as a permitted allowance under the rules using the specific rate for special transportation industry meal and incidental expenses rate); I.R.S. Notice 2015- 63, 2015-40 I.R.B. 459 (Oct. 5, 2015), § 3 (setting the current per diem rate for the special transportation industry meal and incidental expenses at $63 per day).Schneider implemented its Per Diem plan pursuant to this IRS authorization. (Lilja, ¶ 9). Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 7 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 5 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 two cents per mile – but 100% of their mileage rate pay is taxable wages. (Lilja, ¶¶ 11, 13). Mendis began working under the Per Diem plan in July 2012 and opted out in February 2013. (Holley Gauthier, ¶ 3).4Mendis’ first paycheck (paid under the Per Diem plan) illustrate how compensation is calculated under the Per Diem compensation plan. (See Holley Gauthier, ¶¶ 4-9 and Exhs. 1 and 2) (explaining the pay calculations). 3. Training Pay. Schneider regularly provides its drivers with quarterly and annual training. Some of the training sessions are done by electronic means, while others are taught in a classroom. (Pierce, ¶ 8) Schneider separately compensates drivers for the time they spend in training by specifically setting the compensation level so that drivers are paid at least minimum wage under state law. Thus, drivers are thus paid $10 for trainings scheduled to last one hour, $20 for trainings scheduled to last two hours, and so on. (Holley Gauthier, ¶¶ 12-13 and Exh. 3). Plaintiffs have been paid accordingly for all of their training time during their employment with Schneider. (Holley Gauthier ¶¶ 12-15, and Exhs. 3-5). 4. Rest Breaks. Federal law requires truck drivers subject to federal regulation, including long haul drivers like Mendis and Feola, to take a 30 minute rest break after eight hours on duty. 49 C.F.R. § 395.3(a)(3)(ii). Schneider encourages drivers to take rest breaks even more frequently. (Pierce, ¶ 4). Mendis and Feola both testified that they take rest breaks every few hours. (Mendis Dep. at 164:15-165:2; 165:19-166:7); (Feola Dep. at 120:7-121:2). Because rest breaks are an ordinary part of delivering a shipment, they are included in the drivers’ mileage rates. (Pierce Dep. at 78:2-5). 4 Feola began working for Schneider as an employee in May 2011. (Holley Gauthier, ¶ 11). Feola was initially paid pursuant to the Per Diem plan, but opted out of it in July 2011. (Feola Dep. at 110:14- 111:11); (Holley Gauthier, ¶ 11). Plaintiffs’ initial complaint was filed on December 30, 2014. (ECF No. 1). Feola therefore opted out of the Per Diem plan (July 2011) more than three years before the initial Complaint was filed (December 30, 3014). Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 8 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 6 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 III. The On Duty, Not Driving Minimum Wage Claims Fail As a Matter of Law. Plaintiffs challenge Schneider’s piece-rate compensation system based on inapplicable out-of-state law. Federal law requires drivers to log their activities in one of four categories: (1) Driving; (2) On Duty, Not Driving; (3) Sleeper (time spent in the sleeper berth of a cab); and (4) Off Duty. 49 C.F.R. § 395.8(b); see (Pierce, ¶¶ 5, 6-7 and Exhs. 1 and 2). Despite acknowledging that “on duty, not driving” activities such as fueling, rig inspections and recordkeeping are necessary components of doing the job that Schneider pays them to do – delivering shipments from point A to point B – Plaintiffs contend that they must be separately paid at least the minimum wage for each minute spent performing these activities. Contrary to their own testimony and Schneider’s definition of mileage pay, Plaintiffs allege that the mileage rate compensates them only for actually driving the truck and not for anything else involved in delivering a shipment. Plaintiffs’ theory is solely based on inapplicable California case law, which is wholly inconsistent with Washington law. Accordingly, and just as this district has recently done, this Court should reject Plaintiffs’ theory. Washington law expressly permits piece rate compensation systems. WAC 296-126-021 (governing “employees” who are “paid on a ... piecework basis”); Helde v. Knight Transp., Inc., 2016 U.S. Dist. LEXIS 56162, at *3 (W.D. Wash. April 26, 2016) (“as long as the employer pays its employees the equivalent of the minimum wage rate for each hour of work, the parties are free to establish a ... piece rate .. or other system of compensation”). Washington law also expressly permits the averaging of compensation received during a workweek for purposes of determining whether the minimum wage was paid under a piecework system: Where employees are paid on a commission or piecework basis, wholly or partially, (1) The amount earned on such basis in each work-week period may be credited as a part of the total wage for that period; and (2) The total wages paid for such period shall be computed on the hours worked Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 9 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 7 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 in that period resulting in no less than the applicable minimum wage rate. WAC 296-126-021. In contrast to California law, Washington law does not recognize a distinction between “production” and “non-production” time – or, here, “Driving” and “On Duty, Not Driving” time – for purposes of calculating minimum wage compliance. Thus, Plaintiffs were paid the minimum wage if their gross weekly pay divided by their hours worked (both driving and on duty not driving) is greater than the applicable minimum wage throughout the limitations period. WAC 296-126-021; Helde, 2016 U.S. Dist. LEXIS 56163, at *3-4 (“Pursuant to WAC 296-126- 021, if an employee is paid solely by the piece, the wages earned in a week are divided by the total number of hours worked during that period: the resulting wage must be no less than the established minimum wage rate”); Hill v. Xerox Corp., 2014 U.S. Dist. LEXIS 94612, at *6 (W.D. Wash. July 10, 2014) (Coughenour, J.) (“For workers who are paid on a commission or piecework basis, the right [to a minimum wage] accrues across the workweek ...”). In Helde, a group of long haul truck drivers, represented by the same counsel as Plaintiffs here, asserted the same on duty, not driving claim with respect to a substantially similar mileage rate compensation system. Indeed, the Plaintiffs in Helde made the same arguments Schneider anticipates they will make here -- that “an averaging methodology is contrary to the remedial purposes” of the Washington Minimum Wage Act (“MWA”). Helde, 2016 U.S. Dist. LEXIS 56162, at *6. Plaintiffs in Helde based their arguments on California case law and select words and phrases picked from Washington statutes, regulations and cases. Judge Lasnik rejected Plaintiffs’ theory: Plaintiffs’ underlying assumption is faulty: the MWA does not require payment on an hourly basis. Plaintiffs’ reliance on references in statutes, regulations, and cases to the payment of wages “per hour” or “for each hour of work” is misplaced. Those references do not mandate that every employer utilize an hourly compensation scheme: ... piece-rate systems are [] permissible under the MWA. ... For piece rate workers, WAC 296-126-021 provides for the averaging of all amounts paid in a week over all hours worked in that same period to determine Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 10 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 8 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 whether the amount paid is equivalent to the minimum wage rate. Having eschewed the analytical framework provided by the governing regulations, plaintiffs have not shown a violation of the MWA with regards to payment for the non-driving tasks. … *** As long as an employee is paid the equivalent of the established minimum wage under the averaging methodology set forth in the regulations, the MWA is satisfied. Helde, 2016 U.S. Dist. LEXIS 56162, at *4-5, *6 (granting summary judgment to Knight and denying summary judgment to the plaintiffs on their on duty, not driving claim). The same result should befall Plaintiffs’ MWA claim here, as Plaintiffs do not assert that Schneider failed to pay them the applicable minimum wage. IV. The Training Time Minimum Wage Claims Fail As A Matter Of Law. Plaintiffs also allege that they were not paid minimum wage for time spent in training during their employment. As discussed below, there is no genuine dispute that both Plaintiffs were in fact paid at least $10 per hour for all time they spent in training, which exceeds the Washington minimum wage.5 (Holley Gauthier, ¶¶ 12-15 and Exhs. 3, 4 and 5). Feola testified in his deposition that Schneider paid him an accessorial for time spent in training. (Feola Dep. at 181:12-23). Feola claimed that the training pay “was always under what the minimum wage was.” (Feola Dep at 181:22-182:4). This does not create a genuine issue of fact because Schneider’s business records show that Feola was paid at a rate of at least $10 per hour for all the trainings he attended during the 14 months he was an employee. (Holley Gauthier, ¶14 and Exhs. 3 and 4). Feola’s uncorroborated conjecture cannot defeat summary judgment. Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1063 (9th Cir. 2002) (“uncorroborated and self-serving” evidence is insufficient to establish a genuine issue of material fact). Therefore, Plaintiffs’ minimum wage training time claims fail as a matter of law. 5 Plaintiff Mendis originally asserted a claim that he was not paid minimum wage for the time that he spent in his initial orientation training. However, this claim has been superseded by Plaintiffs’ Amended Complaint. Schneider therefore does not address it here. Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 11 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 9 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 V. The Rest Break Claim Fails As A Matter Of Law. A. Schneider’s Mileage Rate Compensation System Does Not Violate the Rest Break Regulation. Plaintiffs’ rest break claim is not supported by current Washington regulations. Although Washington regulations require that rest breaks must be “on the employer’s time” as specified in WAC 296-126-092(4), the statute only requires that rest breaks be paid. Despite Plaintiffs’ allegations that they are not paid for rest breaks, Schneider in fact pays Plaintiffs for their rest breaks as a part of their mileage rate compensation. Plaintiffs seek to be paid a second time for their rest breaks. They base this argument entirely on the false premise that Washington law prohibits the inclusion of rest breaks in piece-rates. However, nowhere within Washington’s regulations is there a requirement that an employer pay twice for an employee’s rest breaks. The Washington Supreme Court recently addressed rest breaks in Demetrio v. Sakuma Bros. Farms, Inc., 183 Wn.2d 649 (2015). However, this case was specifically limited to agricultural workers being paid on a piece-rate basis, and applied to a different regulation pertaining only to that industry. While the court held in Sakuma that employers must pay agricultural workers separately on an hourly basis for rest breaks, that analysis should not extend to all piece-rate workers. The piece-rate system in Sakuma consisted of a flat amount per pound or per box of fruit harvested. 183 Wn.2d at 653. Nothing in the piece rate accounted for anything other than the activity of picking fruit. Therefore, given the specific facts of that case, and the regulation that applied, it was reasonable for the court to have concluded that rest breaks were not included in the piece rate and that time spent on rest breaks were essentially deductions from the contracted for piece-rate wages for producing each unit of fruit. Schneider’s piece-rate formula is vastly different because it already accounts for many additional activities, not just miles driven. It encompasses all tasks required to transport a load from point A to point B, which necessarily includes mandatory rest breaks given Washington law’s flexibility in permitting parties to contract for piece-rate compensation. Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 12 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 10 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 Furthermore, Washington’s non-agricultural piece-rate regulation expressly contemplates that employees be paid wholly by piece-rate. WAC 296-126-021 (“[w]here employees are paid on a commission or piece work basis, wholly or partially…). If the holding in Sakuma were extended to all piece-rate workers, “wholly” would have no meaning, and no employee could ever be paid wholly by piece-rate unless such employee were paid additional amounts for rest breaks. Thus, when properly construed, the non-agricultural rest break regulation does not require employers to separately pay piece-rate workers for rest breaks. Although the court in Helde expressed a concern that permitting a piece-rate wage to include rest breaks might incentivize truck drivers (like agricultural workers) to skip rest breaks in order to maximize the number of loads that they can haul, there is no basis in the record here to support any such extension of Sakuma. The piece-rate systems utilized by agricultural workers and truck drivers, respectively, are vastly different, especially given how Schneider’s piece-rate pay system is structured. The Plaintiffs in this case would not secure any additional bonus, pay, or even obtain additional jobs by merely skipping their rest breaks to reach their load’s destination earlier. To the contrary, drivers would actually jeopardize their own careers because skipping DOT required rest breaks would put them in direct violation of federal law – which would lead to discipline by Schneider, a company with a strong safety record that reviews all driver logs for DOT compliance. Schneider’s compensation system incorporates pay for rest breaks (and all other duties required to get a load from point A to point B), and therefore there is no meaningful benefit for a driver to forego a rest break (or any other routine duty). B. If The Rest Break Regulation Applies to Piece Rate Workers, The Dormant Commerce Clause Would Preclude The Rest Break Regulation From Governing Periods Worked Wholly Outside Of Washington. If WAC 296-126-092(4) applied to Plaintiffs, it would require a 10 minute rest break within every four hour period worked. Plaintiffs both admitted that they regularly took such rest breaks. (Mendis Dep. at 164:15-165:2; 165:19-166:7); (Feola Dep. at 120:7-121:2). Plaintiffs’ rest break claim, based on Sakuma, contends that Washington’s rest break regulation requires Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 13 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 11 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 Schneider to separately pay for all rest breaks they took anywhere in the country, regardless of whether the four hour period within which the breaks were required began and ended outside of Washington. Thus, for example, when Plaintiffs take a rest break at a truck stop in New York, and spend that rest break talking with another Schneider driver taking a rest break who lives in Florida, Plaintiffs contend that Schneider must pay Plaintiffs for their rest break, even though it need not pay the Florida driver for taking the exact same break, simply because Plaintiffs live in Washington. In short, Plaintiffs contend that Washington law sets the price for the rest breaks they take wholly outside of Washington. But the U.S. Constitution prohibits states from regulating commerce taking place wholly outside its borders. State statutes which directly regulate transactions taking place wholly outside of the state are per se invalid, regardless of the state’s intent or belief of the extraterritorial reach of its law. Sam Francis Found. v. Ebay, Inc., 784 F.3d 1320, 1323 (9th Cir. 2016) (en banc) (“a statute that directly controls commerce occurring wholly outside of the boundaries of a State exceeds the inherent limits of the enacting State’s authority and is invalid regardless of whether the statute’s extraterritorial reach was intended by the legislature”) (quoting Healy v. Beer Inst., 491 U.S. 324, 336 (1989)). Accordingly, and as further explained below, Plaintiffs’ rest break claim fails as a matter of law with regard to rest breaks taken and rest break periods occurring wholly outside of Washington. 1. Plaintiffs Work Predominantly Outside Of Washington, And Therefore The Vast Majority Of Their Rest Break Periods Occurred Wholly Outside Of Washington. The federally-required driver logs Plaintiffs have maintained track their location throughout their driving trips. As national long haul truck drivers, Plaintiffs drive and work across the country for several weeks at a time and only return to their homes in Washington at the completion of their multiple-week driving trips. (Mendis Dep at 100:10-14; 108:4-109:15); (Feola Dep at 112:15-118:11). Accordingly, the vast majority of Plaintiffs’ four hour rest break periods, and actual rest breaks taken, occur wholly outside of Washington. Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 14 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 12 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 Two illustrative examples demonstrate this point. On December 28, 2012, Mendis began a driving trip in Washington and crossed into Oregon. Mendis did not return from that trip until January 23, 2013. Mendis worked across the continental United States between the start and end of that trip, wholly outside of Washington.6 (Pierce, ¶ 6 and Exh. 1). Feola similarly began a driving trip on February 16, 2012, and returned five weeks later on March 22, 2012. Feola worked wholly outside of Washington between the start and end of that trip. (Pierce, ¶ 7 and Exh. 2).7 Accordingly, every single four hour rest break rest break period between the start date and end date of these trips began and ended wholly outside of Washington. And every rest break Plaintiffs took between the start date and end date of these trips was taken wholly outside of Washington. Plaintiffs’ jobs for Schneider are to drive precisely these types of trips. 2. The Dormant Commerce Clause Prohibits State Laws that Directly Control Commerce Occurring Wholly Outside Of The State. The Commerce Clause of the United States Constitution delegates to Congress the “Power ... [t]o regulate Commerce ... among the several States.” U.S. Const. art. I, § 8, cl.3. “Implicit in this affirmative grant of regulatory power to Congress is a negative aspect, referred to as the dormant Commerce Clause.” Sam Francis, 784 F.3d at 1323 (internal marks and citation omitted). “The dormant Commerce Clause is [therefore] a limitation upon the power of the States ...” Sam Francis, 784 F.3d at 1323 (same). Dormant Commerce Clause jurisprudence is multi-faceted, but the Ninth Circuit recently and en banc confirmed a “simple, well-established constitutional rule summarized [by the Supreme Court] in Healy.” Sam Francis, 784 F.3d at 1325. Simply stated, “the Commerce 6 From December 29, 2012 through January 22, 2013, Mendis drove through Oregon, California, Arizona, New Mexico, Texas, Kansas, Missouri, Oklahoma, Louisiana, Mississippi, Alabama, Georgia, Virginia, West Virginia, Kentucky, Tennessee, Arkansas, Illinois, North Carolina, Ohio, Wisconsin, Indiana, Pennsylvania, South Carolina, Florida, Maryland, Michigan, Nebraska, Utah, and Idaho, but never entered Washington. (Pierce, ¶ 6 and Exh. 1). 7 From February 17, 2012 through March 21, 2012 Feola drove through Idaho, Montana, Wyoming, South Dakota, Minnesota, Iowa, Illinois, Indiana, Michigan, Ohio, West Virginia, Virginia, Nebraska, Missouri, Arkansas, Oklahoma, Texas, Colorado, Wyoming, Utah, Nevada, California, and Oregon, but never entered Washington. (Pierce, ¶ 7 and Exh. 2). Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 15 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 13 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 Clause precludes the application of a state statute to commerce that takes place wholly outside of the state’s borders, whether or not the commerce has effects within the state.” San Francis, 784 F.3d at 1323 (quoting Healy, 491 U.S. at 336). The Ninth Circuit noted that Healy similarly held that “a statute that directly controls commerce occurring wholly outside the boundaries of a State exceeds the inherent limits of the enacting State’s authority and is invalid regardless of whether the statute’s extraterritorial reach was intended by the legislature.” 491 U.S. at 336 (quoted by Sam Francis, 784 F.3d at 1323). In sum: (1) “[d]irect regulation” of commerce outside the subject state “occurs when a state law directly affects transactions that take place entirely outside of the state’s borders,” and (2) such direct regulation of transactions taking place entirely outside of the state’s borders “is invalid per se.” Valley Bank of Nev. v. Plus Sys., Inc., 914 F.2d 1186, 1189-90 (9th Cir. 1990) (quoted by Sam Francis, 784 F.2d at 1323-24, internal marks omitted). 3. Washington’s Rest Break Regulation Is Per Se Invalid To The Extent It Directly Regulates Commerce Wholly Outside Of Washington Sam Francis involved a California statute governing fine art sales. The statute required a royalty payment to the artist whenever “the seller resides in California or the sale takes place in California.” 784 F.3d at 1323 (quoting Cal. Civ. Code § 986(a), emphasis by the Ninth Circuit). The first clause potentially regulated sales by California residents that took place outside of California. 784 F.3d at 1323 (providing example). The Ninth Circuit “easily conclud[ed] that the royalty requirement, as applied to out-of-state-sales by California residents, violates the dormant Commerce Clause,” because “[u]nder Healy, the Commerce Clause precludes the application of a state statute to commerce that takes place wholly outside of the State’s borders.” 784 F.3d at 1323, 1324-25. This “simple, well established constitutional rule summarized in Healy” invalidates Plaintiffs’ claims for paid rest breaks for time periods worked wholly outside of Washington. The examples provided demonstrate this point. Mendis worked the entire period from December 29, 2012 through January 22, 2013 outside of Washington. (Pierce, ¶ 6 and Exh. 1). Feola Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 16 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 14 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 worked the entire period from February 17, 2012 to March 21, 2012 outside of Washington. (Pierce, ¶ 7 and Exh. 2). Taking Plaintiffs’ deposition testimony that they regularly took rest breaks at least every four hours as true, every four hour period requiring rest breaks during these multi-week periods began and ended wholly outside of Washington, so Plaintiffs took their rest breaks wholly outside of Washington on those days. Plaintiffs’ attempt to apply Washington’s rest break regulation to mandate payment for those rest break periods spent wholly outside of Washington fails as a matter of law because, under Sam Francis and Healy, the Washington rest break regulation is “invalid per se” to the extent it directly regulates rest breaks wholly outside of Washington. Sam Francis, 784 F.3d at 1324 (quoting Valley Bank, 914 F.2d at 1189-90). This conclusion is bolstered by the existing decisions concluding that where, as here, an employee works predominately outside of the state of his or her residence, the dormant Commerce Clause prohibits application of the employee’s home state’s wage laws outside of the state. See Guy v. IASCO, 2004 Cal. Unpub. LEXIS 5757, at *20-25 (Cal. App. June 17, 2004) (Commerce Clause prohibited application of California overtime laws to California-based employees who spent 90% of their working time outside of California; “The regulation of overtime pay of flight personnel who work in interstate and foreign commerce is a direct regulation of such commerce” that “violates the commerce clause”) (citing, inter alia, Healy, 491 U.S. at 336); United Airlines, Inc. v. IWC, 211 Cal. App. 2d 729, 748-49 (1963), disapproved of on other grounds by IWC v. Super. Ct., 27 Cal. 3d 690 (1980) (dormant Commerce Clause prohibited application of uniform cost reimbursement regulation to California-based flight attendants; “If the regulation is sustained a most anomalous situation results ... on interstate flights there might very well be two stewardesses working side by side, one [California-based] with a free uniform, the other with a uniform a part only of the cost of which United paid ... [this] point[s] out strongly the interference of the regulation with interstate commerce ...”); see also Ward v. United Airlines, Inc., 2016 U.S. Dist. LEXIS 94803, at *18 (N.D. Cal. July 19, 2016) (dormant Commerce Clause prohibited California wage statement law from applying to Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 17 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 15 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 California-based pilots who “performed work in a patchwork of states”); Hirst v. Skywest, Inc., 2016 U.S. Dist. 67806, at *33-37 (N.D. Ill. May 24, 2016) (dormant Commerce Clause prohibited application of Illinois Minimum Wage Law to Illinois-based flight attendants). Plaintiffs’ claim that the Washington rest break regulation should apply extraterritorially is likely based on Bostain v. Food Express, Inc., 159 Wn.2d 700 (2007). Bostain held that Washington’s overtime statute was extraterritorial and covered hours worked both within and without Washington by a Washington-based employee. 159 Wn.2d at 713. Indeed, Bostain specifically stated that Washington’s overtime law applies to all hours worked, even if all hours are worked wholly outside of Washington. 159 Wn.2d at 711 (“The act’s purpose does not depend on the work itself being performed within the state”). Washington appears unique in this regard. Courts in other states have determined that their state wage laws do not apply extraterritorially, based on a presumption against extraterritoriality, or the language of the statutes, or both.8 Similar decisions recognize that this result avoids conflict with the dormant Commerce Clause.9 While Bostain addressed the dormant Commerce Clause, and decided that application of Washington’s overtime law to hours worked outside of Washington did not violate the dormant Commerce Clause, the court did not apply the extraterritoriality / direct regulation analysis which 8 See, e.g., Sullivan v. Oracle Corp., 51 Cal. 4th 1191, 1199 (2011); Risinger v. SOC LLC, 936 F. Supp. 2d 1235, 1249-50 (D. Nev. 2013); Panos v. Timco Engine Ctr., Inc., 197 N.C. App. 510, 515-518 (2009); Redick v. E Mortgage Mgmt., LLC, 2013 U.S. Dist. LEXIS 36002, at *39-40 n.9 (D. Del. Mar. 15, 2013) (“It is also worth noting that other states, including Delaware, have interpreted their respective wage laws to extend only to regulation of employment within state borders”) (collecting cases). 9 See, e.g., Cotter v. Lyft, Inc., 60 F. Supp. 3d 1059, 1063-64 (N.D. Cal. 2014) (observing that deciding California’s wage laws applied to work wholly outside California “would raise serious constitutional concerns” under Healy) (citing, inter alia, Sarviss v. General Dynamics Info. Tech., Inc., 663 F. Supp. 2d 883, 901 (C.D. Cal. 2009) (“the Court’s interpretation avoids the potential dormant commerce clause issues that may arise from the application of California wage and hour law to a job that was performed almost entirely outside of California”).Accord Booth v. Appstack, Inc. 2015 U.S. Dist. LEXIS 40779, at *37-38 (W.D. Wash. March 30, 2015) (observing that this Court has repeatedly interpreted the Washington Dialing and Announcing Device Act to not apply to phone calls “both initiated and received outside the state of Washington,” because a contrary interpretation would be unconstitutional under Healy) (citing Hartman v. United Bank Card, Inc., 291 F.R.D. 591, 598 (W.D. Wash. 2013)). Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 18 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 16 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 the U.S. Supreme Court applied in Healy and the en banc Ninth Circuit applied in Sam Francis. Instead, Bostain applied the “balancing” test of Pike v. Bruce Church, Inc., 397 U.S. 137 (1970), which upholds state statutes unless their burden on interstate commerce outweighs the local benefit of the statute. Bostain, 159 Wn.2d at 719. However, the recent en banc decision in San Francis and analogous post-Bostain circuit court decisions confirm that Healy’s direct regulation analysis should be applied to the extraterritoriality question. See also, e.g., Pharm. Research & Mfrs. of Am. v. County of Alameda, 788 F.3d 1037, 1043 (9th Cir. 2014) (warning against “conflating” the “‘direct-regulation’ doctrine and the second-tier, Pike balancing test”); Amer. Bev. Ass’n v. Snyder, 735 F.3d 362, 376 n.7 (6th Cir. 2013) (“Because we concluded that Michigan’s unique-mark provision ... is [impermissibly] extraterritorial, the Pike balancing test does not apply”). Plainly, Bastian’s dormant Commerce Clause analysis is not binding on this Court because it involves a question of federal constitutional law, not state law. Regardless, Bostain’s holding must yield to recent binding Ninth Circuit dormant Commerce Clause precedent. In sum, Plaintiffs’ rest break claim depends in large part on the Washington rest break regulation requiring paid rest breaks for rest break periods worked wholly outside of Washington. State laws governing transactions wholly outside of the state are per se invalid under the dormant Commerce Clause. Therefore, Washington’s rest break regulation is per se invalid under the dormant Commerce Clause to the extent it governs transactions wholly outside of Washington. VI. The Per Diem Deduction Claim Fails As A Matter Of Law Because The Per Diem Compensation Plan Does Not Involve Any “Deductions” From Wages. Plaintiffs allege that the Per Diem compensation plan creates an impermissible “deduction” in the amount of the two cent per mile difference between the regular mileage pay package rate and the alternative Per Diem compensation plan mileage rate. This claim fails for the simple reason that the Per Diem plan does not involve any “deductions” from wages. The Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 19 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 17 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 Per Diem plan is a separate compensation plan from the regular mileage rate plan. A driver paid under the Per Diem plan does receive two cents less per mile in gross pay than if he or she were paid under the regular mileage rate plan (but due to the tax advantages, may receive more net pay). But a lower mileage rate is just that – a lower mileage rate. No “deduction” occurs. This claim therefore fails as a matter of law. A. Feola’s Per Diem Deduction Claim Is Time-Barred. As an initial matter, the statute of limitations for Feola’s wage deduction claim is three years. See Seattle Prof’l Eng’g Employees Ass’n v. Boeing Co., 139 Wash. 2d 824, 838 (2000). Feola’s deduction claim relates back to the filing of the initial Complaint on December 3, 2014. (ECF No. 1). But Feola’s last payment under the Per Diem compensation plan occurred in July 2011, more than three years before the Complaint was filed. (Feola Dep. at 110:14-111:11); (Holley Gauthier, ¶ 11). Feola’s Per Diem deduction claim is therefore time-barred. B. The Governing Regulation. “During an on-going employment relationship, an employer may deduct wages” if the employee expressly authorizes the deduction in writing, so long as the employer does not “derive any financial profit or benefit” from the authorized deduction. WAC 296-126-028(2) and (4) (emphasis added). Thus, Plaintiffs have no claim unless they can show the Per Diem plan worked a “deduct[ion]” from their “wages” during the periods they were paid under the Per Diem plan. The regulation does not define “deduct,” so “we look to a dictionary to determine its ordinary meaning.” Bilanko v. Barclay Court Owners Assoc., 185 Wn. 2d 443, 448 (2016) (citations omitted). “According to several dictionary definitions, the word ‘deduct’ means ‘to take away, as from a sum or amount.’” Meshna v. Schrivanos, 471 Mass. 169, 174 (2015) (interpreting wage statute, citations omitted); see also Prachasaioradej v. Ralphs Grocery Co., 42 Cal. 4th 217, 228 (2007) (“To ‘deduct’ is to ‘take away [one amount] from another’; to ‘subtract’”) (interpreting wage statute, citation omitted). To “deduct” is therefore to “subtract.” Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 20 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 18 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 Amoco Corp. v. Comm’r, T.C. Memo 1996-159, 1996 Tax Ct. Mem LEXIS 175, *75 (March 28, 1996) (“‘subtract’ and ‘deduct’ are synonyms”) (citing WEBSTER’S NEW DICTIONARY OF SYNONYMS at 793 (1968)). Plaintiffs’ claim therefore requires evidence that the Per Diem Plan somehow “takes away” or “subtracts” money from the wages they earned while compensated on the Per Diem Plan. C. The Per Diem Plan Did Not Result In Any “Deduction” From Mendis’ Wages. Mendis’ argument will likely focus on documents Schneider drafted to explain its Per Diem compensation plan to drivers. But as explained above, Mendis must present evidence demonstrating that the Per Diem compensation plan resulted in the taking away or subtracting of money from his wages. Mendis cannot present any such evidence because the Per Diem plan did not result in any deduction from his wages. As discussed above, Mendis initially was compensated under a Per Diem plan, then opted out and converted to a non-Per Diem plan. After he converted, his mileage rate was two cents greater than it had been under the Per Diem compensation plan. Thus, on a gross basis, his mileage rate increased. But the fact the two plans and mileage rates are different is not, and cannot be, evidence of a deduction from wages. The Per Diem compensation plan is simply a separate plan from the non-Per Diem compensation plan under which Plaintiffs voluntarily agreed to be compensated. D. Helde Is Distinguishable. Many employers in the trucking industry offer Per Diem plans similar to Schneider’s to take advantage of the IRS’s approval and authorization of such tax-advantaged compensation plans. Indeed, in Helde, Judge Lasnik held that Knight’s internal documents explaining its per diem plan to its drivers created a question of fact concerning whether the plan worked an unauthorized deduction. Helde v. Knight Transp., 982 F. Supp. 2d 1189, 1197 (W.D. Wash. 2013). But Knight’s internal documents are obviously not admissible against Schneider here. And Mendis’ actual wage calculations demonstrate that the Per Diem plan did not cause or create Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 21 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 19 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 any deductions from his wages. Helde is distinguishable and not applicable to this case. E. Plaintiffs’ Interpretation Of The Wage Deduction Regulation – That Washington Law Prohibits Activity Federal Law Specifically Authorizes -- Would Be Barred By Federal Conflict Preemption. 1. Governing Legal Principles. Even if Schneider’s Per Diem compensation plan were to be interpreted as an unauthorized wage deduction, then the Washington wage deduction regulation would be preempted by federal law because it would prohibit conduct expressly authorized by federal law. As explained above, Schneider’s Per Diem compensation plan is specifically authorized by IRS regulations. Plaintiffs’ unauthorized deduction claim, if successful, would render illegal under state law that which is specifically authorized by federal law. “This is precisely the type of conflict that is addressed by federal preemption.” Fredrickson v. Starbucks Corp., 980 F. Supp. 2d 1227, 1250 (D. Ore. 2013). Federal law preempts state law when the two are in “irreconcilable conflict.” Barnett Bank of Marion Cty., N.A. v. Nelson, 517 U.S. 25, 31 (1996). Federal and state laws are in irreconcilable conflict when “the state law may ‘stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.’” Barnett Bank, 517 U.S. at 31 (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941)). Obstacle preemption does not require that the federal and state laws “impose directly conflicting duties,” such as federal law requiring truckload companies to offer Per Diem compensation plans, and state law prohibiting truckload companies from offering Per Diem plans. Barnett Bank, 517 U.S. at 31. State law nevertheless stands as an obstacle to the accomplishment of federal law when federal law authorizes activities which the state law prohibits. Barnett Bank, 517 U.S. at 31 (a federal statute permitting, but not requiring, national banks to sell insurance in small towns preempted a state statute forbidding them to do so); Franklin Bank of Franklin Square v. New York, 347 U.S. 373, 375-79 (1954) (federal statutes permitting, but not requiring, national banks to receive savings deposits preempted a state statute prohibiting national banks from using the word “savings” in their Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 22 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 20 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 advertising). 2. Analysis. In Fredrickson, federal tax law permitted employers to withhold federal taxes based on estimated tips, rather than actual tip income received by employees. Plaintiff employees sued under Oregon’s wage deduction law, claiming that withholding federal taxes based on estimated tips, rather than actual tips, worked an unauthorized deduction from wages. Oregon’s wage deduction law permitted deductions from wages “required” by federal law. ORS § 652.610(3). Because federal law did not “require” the employer to withhold federal taxes based on estimated tips, but rather only authorized it to do so, plaintiffs argued that the withholdings were unlawful deductions. The court found that federal law preempted plaintiffs’ claim because federal law authorized the withholding. Fredrickson, 980 F. Supp. 2d at 1250 (citing, inter alia, Barnett Bank, 517 U.S. at 32-34). The same logic and analysis applies here. Federal law authorizes Schneider’s Per Diem compensation plan. To the extent Washington’s wage deduction regulation can be interpreted to prohibit Schneider from using its Per Diem compensation plan, Washington law stands as an obstacle to the accomplishment and execution of the federal purposes authorizing Per Diem plans. “When a state law specifically prohibits an activity that is authorized by federal law, the state law must give way.” Fredrickson, 980 F. Supp. 2d at 1250 (citations omitted). For all these reasons, Plaintiffs’ Per Diem plan deduction claim fails as a matter of law. VII. Plaintiffs’ Overtime Claim Fails Because The Mileage Rate Pay System For Long Haul Van Truckload Drivers Pays An Amount Reasonably to Overtime. Plaintiffs do not dispute that as national long haul truck drivers, they are subject to regulation by the U.S. Department of Transportation and therefore exempt from the overtime pay requirements of the Fair Labor Standards Act. See 29 U.S.C. § 213(b)(1). Plaintiffs are likewise exempt from Washington’s overtime pay requirement “if the compensation system under which ... [they] are paid includes overtime pay, reasonably equivalent to that required by” Washington law. RCW 49.46.130(2). Schneider’s mileage rate compensation system meets this “reasonably Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 23 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 21 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 equivalent” standard and Plaintiffs are therefore exempt from Washington’s overtime law as well. Washington’s Department of Labor and Industry (“L&I”), Washington state courts, and this district court have all reviewed mileage rate compensation plans substantively similar to Schneider’s mileage rate compensation plan. These decisions all considered a comparison of the compensation received by long haul drivers paid on a mileage rate basis to short haul or local delivery drivers paid on an hourly basis. L&I and the state and federal courts have unanimously found that those substantively similar mileage rate compensation plans satisfied the “reasonably equivalent” standard. Mynatt v. Gordon Trucking, Inc., 183 Wn. App. 253, 263-271 (2014); Westberry v. Interstate Distrib. Co., 164 Wn. App. 196, 208 (2011); Helde, 982 F. Supp. 2d at 1201, 1202 (“DLI has been willing to accept the hourly rate trucking companies pay their local or short-haul drivers as the ‘base rate of pay’ for purposes of evaluating the reasonable equivalence of a proposed alternative compensation system *** Given the calculations presented and DLI’s willingness to accept similar compensation structures as reasonably equivalent under RCW 49.46.130, the Court finds that plaintiffs have failed to raise a genuine issue of fact regarding their overtime claims.”); see (Declaration of Brian E. Spang, Exhs. G and H) (L&I letters approving substantively similar mileage rate plans). Schneider’s research has not disclosed a contrary decision by any state or federal court or L&I. A review of Plaintiffs’ actual compensation demonstrates that, on average, Plaintiffs received more – or at least a reasonably equivalent amount of – compensation under Schneider’s mileage rate plan than they would have received if they had been paid on a straight hourly basis plus overtime under RCW 49.46.120. (Declaration of Sonya Kwon, ¶¶ 9, 23). Accordingly, based on the unanimous precedents, Plaintiffs’ overtime claim fails as a matter of law because Schneider’s mileage rate compensation system meets the reasonably equivalent standard with regard to Plaintiffs. Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 24 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 22 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 VIII. CONCLUSION For all the foregoing reasons, Plaintiffs’ claims fail as a matter of law and Schneider’s motion for summary judgment should be granted. September 1, 2016 s/Kellie A. Tabor Douglas E. Smith, WSBA #17319 Kellie A. Tabor, WSBA #46260 LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 Phone: 206.623.3300 Fax: 206.447.6965 E-Mail: desmith@littler.com ktabor@littler.com s/Joel H. Spitz Joel H. Spitz, appearing pro hac vice s/Michael R. Phillips Michael R. Phillips, appearing pro hac vice s/Brian E. Spang Brian E. Spang, appearing pro hac vice MCGUIREWOODS LLP 77 West Wacker Drive, Suite 4100 Chicago, IL 60601 Phone: 312.849.8100 Fax: 312.849.3690 Email: jspitz@mcguirewoods.com mphillips@mcguirewoods.com bspang@mcguirewoods.com Attorneys for Defendant Schneider National Carriers, Inc. Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 25 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 DEFENDANT’S MOTION FOR SUMMARY JUDGMENT - 23 Case No. 2:15-cv-00144 JCC LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 206.623.3300 CERTIFICATE OF SERVICE I am a resident of the State of Washington, over the age of eighteen years, and not a party to the within action. My business address is One Union Square, 600 University Street, Ste. 3200, Seattle, WA 98101. I hereby certify that on September 1, 2016, I filed the DEFENDANT’S MOTION FOR SUMMARY JUDGMENT with the Clerk of the Court using the United States District Court for the Western District of Washington’s e-Filing system, which served a true and correct copy of the foregoing document to the Honorable John C. Coughenour and on the following persons: Hardeep S. Rekhi, WSBA # 34579 Gregory A. Wolk, WSBA # 28946 Rekhi & Wolk, P.S. 1411 Fourth Avenue, Suite 1101 Seattle, WA 98101 T: (206) 388-5887 F: (206) 577-3924 E-mail: hardeep@rekhiwolk.com greg@rekhiwolk.com Attorneys for Plaintiffs Toby J. Marshall, WSBA #32726 Erika L. Nusser, WSBA #40854 Terrell Marshall Daudt & Willie PLLC 936 North 34th Street, Suite 400 Seattle, WA 98103-8869 T: (206) 816-6603 F: (206) 350-3528 E-mail: tmarshall@tmdwlaw.com enusser@tmdwlaw.com Attorneys for Plaintiffs I declare under penalty of perjury under the laws of the State of Washington that the above is true and correct. Executed on September 1, 2016, at Seattle, Washington. /s/ Liana Natividad Liana Natividad lnatividad@littler.com LITTLER MENDELSON, P.C. Case 2:15-cv-00144-JCC Document 43 Filed 09/01/16 Page 26 of 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 [PROPOSED] ORDER GRANTING DEFENDANT SCHNEIDER NATIONAL CARRIERS INC.’S MOTION FOR SUMMARY JUDGMENT Case No. 2:15-cv-00144 JCC 1 LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101-3122 206.623.3300 The Honorable John C. Coughenour UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WASHINGTON AT SEATTLE BALAPUWADUGE MENDIS and MICHAEL FEOLA, on their own behalf and on behalf of all others similarly situated, Plaintiffs, v. SCHNEIDER NATIONAL CARRIERS, INC., a Nevada Corporation, Defendant. Case No. 2:15-cv-00144 JCC [PROPOSED] ORDER GRANTING DEFENDANT SCHNEIDER NATIONAL CARRIERS INC.’S MOTION FOR SUMMARY JUDGMENT This matter having come before the Court on Defendant Schneider National Carriers, Inc.’s Motion for Summary Judgment (“Motion”), the Court having considered the Motion, the papers filed in support thereof and in opposition thereto and being fully advised, now therefore it is hereby ORDERED that the Motion is GRANTED, and all claims herein are DISMISSED WITH PREJUDICE as against Defendant Schneider National Carriers, Inc. Dated this ____ day of ______________, 2016. __________________________________________ THE HONORABLE JOHN C. COUGHENOUR UNITED STATES DISTRICT COURT JUDGE Case 2:15-cv-00144-JCC Document 43-1 Filed 09/01/16 Page 1 of 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 [PROPOSED] ORDER GRANTING DEFENDANT SCHNEIDER NATIONAL CARRIERS INC.’S MOTION FOR SUMMARY JUDGMENT Case No. 2:15-cv-00144 JCC 2 LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101-3122 206.623.3300 Submitted by: /s/ Kellie A. Tabor Kellie A. Tabor, WSBA #46260 ktabor@littler.com LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101.3122 Phone: 206.623.3300 Fax: 206.447.6965 Attorneys for Defendant Schneider National Carriers, Inc. Case 2:15-cv-00144-JCC Document 43-1 Filed 09/01/16 Page 2 of 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 [PROPOSED] ORDER GRANTING DEFENDANT SCHNEIDER NATIONAL CARRIERS INC.’S MOTION FOR SUMMARY JUDGMENT Case No. 2:15-cv-00144 JCC 3 LITTLER MENDELSON, P.C. One Union Square 600 University Street, Suite 3200 Seattle, WA 98101-3122 206.623.3300 CERTIFICATE OF SERVICE I am a resident of the State of Washington, over the age of eighteen years, and not a party to the within action. My business address is One Union Square, 600 University Street, Ste. 3200, Seattle, WA 98101. I hereby certify that on September 1, 2016, I electronically filed the foregoing [PROPOSED] ORDER GRANTING DEFENDANT SCHNEIDER NATIONAL CARRIERS INC.’S MOTION FOR SUMMARY JUDGMENT with the Clerk of the Court using the CM/ECF system which will send notification of such filing to The Honorable John C. Coughenour and to the following: Hardeep S. Rekhi, WSBA # 34579 Gregory A. Wolk, WSBA # 28946 Rekhi & Wolk, P.S. 1411 Fourth Avenue, Suite 1101 Seattle, WA 98101 T: (206) 388-5887 F: (206) 577-3924 E-mail: hardeep@rekhiwolk.com greg@rekhiwolk.com Attorneys for Plaintiffs Toby J. Marshall, WSBA #32726 Erika L. Nusser, WSBA #40854 Terrell Marshall Daudt & Willie PLLC 936 North 34th Street, Suite 400 Seattle, WA 98103-8869 T: (206) 816-6603 F: (206) 350-3528 E-mail: tmarshall@tmdwlaw.com enusser@tmdwlaw.com Attorneys for Plaintiffs I declare under penalty of perjury under the laws of the State of Washington that the above is true and correct. Executed on September 1, 2016, at Seattle, Washington. /s/ Liana Natividad Liana Natividad lnatividad@littler.com LITTLER MENDELSON, P.C. Firmwide:142532292.1 073276.1003 Case 2:15-cv-00144-JCC Document 43-1 Filed 09/01/16 Page 3 of 3