Kao v. Joy Holiday, A147540

Kao, a Taiwanese national, began working for Joy Holiday in California in March 2009; he was paid $1,700/month (net) claimed as an "allowance" until receiving an H-1B visa in Feb 2010, after which a one‑paragraph work agreement listed $2,500/month for 20 hours/week though Kao actually worked ~50 hours/week.
Payments were often cash, recorded in a handwritten salary log; some checks were memoed "salary." Kao was placed on payroll after the H-1B, but continued to receive less than the full stated monetary salary due to rent deductions.
Kao sued for breach of contract (as third‑party beneficiary of H‑1B petition), federal and California wage-and-overtime violations, failure to provide itemized wage statements (Lab. Code §226), and waiting‑time penalties (Lab. Code §203).
The trial court rejected Kao’s statutory wage claims (finding he was a non‑employee before the visa and an exempt administrative employee after), but awarded Kao $58,284 on quantum meruit for unpaid labor.
The Court of Appeal reversed: it held Kao was an employee from March 2009–May 2011 and non‑exempt (monetary salary was below federal/state exemption thresholds), vacated the quantum meruit award, and remanded for calculation of statutory wages, overtime, §226 damages, §203 waiting‑time penalties, interest, costs and fees.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Employee status (pre‑visa period)	Kao contended he was an employee entitled to wages from March 2009 onward.	Joy Holiday claimed Kao was a non‑employee "guest"/trainee awaiting visa, so not entitled to wages.	Court: Kao was an employee pre‑visa; payments were salary and the employer was the primary beneficiary.
Exempt status (post‑visa period)	Kao argued he was non‑exempt and owed overtime; monetary salary was below exemption thresholds.	Defendants argued Kao was a salaried administrative exempt employee based on total compensation (including nonmonetary benefits).	Court: Exemption not met—monetary salary was below federal and California minimums; nonmonetary benefits cannot be credited to meet the salary basis for exemption.
Quantum meruit award	Kao defended quantum meruit only if statutory remedies failed.	Defendants argued quantum meruit conflicted with the parties' express agreement.	Court: Quantum meruit vacated because statutory wage remedies apply; Kao entitled to statutory relief instead.
Wage statement & waiting‑time penalties	Kao alleged missing/inadequate wage statements and willful delay of final wages.	Defendants contended no violation because of their characterization of Kao's status and payroll practices.	Court: Joy Holiday knowingly failed to provide required §226 statements and willfully delayed final wages; Kao entitled to §226 penalties and §203 waiting‑time penalties (limited to uncontested wages).

Patel v. Quality Inn South, 846 F.2d 700 (11th Cir.) (FLSA broadly covers workers including undocumented/non‑permitted workers)
Walling v. Portland Terminal Co., 330 U.S. 148 (U.S. 1947) (trainee/non‑employee analysis under FLSA)
Powell v. U.S. Cartridge Co., 339 U.S. 497 (U.S. 1950) (FLSA breadth of coverage)
Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2d Cir.) (factors distinguishing trainee from employee)
Martinez v. Combs, 49 Cal.4th 35 (Cal.) (California’s broad definitions of employee/employer)
Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004 (Cal.) (DLSE opinion letters and interpretive guidance are persuasive)
Negri v. Koning & Associates, 216 Cal.App.4th 392 (Cal. Ct. App.) (employer bears burden proving exemption)
Mamika v. Barca, 68 Cal.App.4th 487 (Cal. Ct. App.) (calculation method for waiting‑time penalties)
Barnhill v. Robert Saunders & Co., 125 Cal.App.3d 1 (Cal. Ct. App.) (definition of "willful" failure to pay wages)