KATHLEEN EISELE v. HOME DEPOT U.S.A., INC., a Delaware corporation
No. 3:20-cv-01740-HZ
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON
November 29, 2022
HERNANDEZ, District
Jon M. Egan
Jon M. Egan, PC
547 Fifth Street
Lake Oswego, OR 97034-3009
Attorney for Plaintiff
David G. Hosenpud
Erin M. Wilson
Hank Stebbins
Lane Powell PC
601 S.W. Second Avenue, Suite 2100
Portland, OR 97204
Donna Marie Mezias
Akin Gump Strauss Hauer & Feld LLP
580 California Street, Suite 1500
San Francisco, CA 94104
Attorneys for Defendant
HERNANDEZ, District Judge:
This matter is before the Court on Defendant Home Depot‘s Motion for Partial Summary Judgment [ECF 52] and Plaintiff Kathleen Eisele‘s Cross-motion for Partial Summary Judgment on the Illegality of Home Depot‘s Rounding Policy [EFC 56]. For the following reasons the Court grants in part and denies in part Defendant‘s Motion and grants in part and denies in part Plaintiff‘s Cross-Motion.
BACKGROUND
The following facts are taken from the parties’ filings on summary judgment and are undisputed unless otherwise noted.
Defendant Home Depot uses a time-keeping software system, Kronos, to track the time worked by non-exempt employees (associates) for payroll purposes in Oregon and elsewhere. Associates use Kronos to punch in and out at the beginning and end of their shifts and to punch in and out for meal breaks. Kronos precisely records the time the associates work based on these punches, but is programmed to round each
On August 28, 2020, Plaintiff Kathleen Eisele filed a class action complaint against Defendant in Multnomah County Circuit Court bringing claims for failure to pay wages when due in violation of
On October 8, 2020, Defendant removed the matter to this Court pursuant to the Class Action Fairness Act,
On July 22, 2022, Defendant filed a Motion for Partial Summary Judgment in which it seeks an “order determining that Plaintiff‘s claim for failure to provide wages due on behalf of herself and the ‘Rounding Class’ fails as a matter of law” and the Defendant is not liable for penalty wages on Plaintiff‘s claims based on rounding.
On July 22, 2022, Plaintiff filed a Cross-Motion for Summary Judgment in which she seeks an order holding Defendant‘s rounding policy is not authorized by Oregon law and, therefore, Plaintiff and the class members are entitled to recover unpaid wages and penalties as a result of time lost to the rounding policy.
The Court heard oral argument and took the Motions under advisement on September 28, 2022.
STANDARDS
Summary judgment is appropriate if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law.
Once the moving party meets its initial burden of demonstrating the absence of a genuine issue of material fact, the burden then shifts to the nonmoving party to present “specific facts” showing a “genuine issue for trial.” Fed. Trade Comm‘n v. Stefanchik, 559 F.3d 924, 927–28 (9th Cir. 2009) (internal quotation marks omitted). The nonmoving party must go beyond the pleadings and designate facts showing an issue for trial. Bias v. Moynihan, 508 F.3d 1212, 1218 (9th Cir. 2007) (citing Celotex, 477 U.S. at 324).
The substantive law governing a claim determines whether a fact is material. Suever v. Connell, 579 F.3d 1047, 1056 (9th Cir. 2009). The court draws inferences
DISCUSSION
Plaintiff asserts rounding is not permissible under Oregon law and, even if it is permissible, Defendant‘s system does not meet the applicable standard. Defendant, on the other hand, asserts rounding is permissible under Oregon law and its rounding system satisfies the requirements.
I. Oregon Wage-and-Hour Law Generally
Oregon statute requires “[e]very employer” to “establish and maintain a regular payday, at which date the employer shall pay all employees the wages due and owing to them.”
all hours for which an employee is employed by and required to give to the employer and includes all time during which an employee is necessarily required to be on the employer‘s premises, on duty or at a prescribed work place and all time the employee is suffered or permitted to work. ‘Hours worked’ includes ‘work time’ as defined in ORS 653.010(11).
“Any employer who pays an employee less than the wages to which the employee is entitled... is liable to the employee affected: (a) For the full amount of the wages, less any amount actually paid to the employee by the employer; and (b) For civil penalties provided in ORS 652.150.”
II. Rounding
Plaintiff contends “[n]o Oregon statute, administrative rule, or appellate case allows an employer to underpay an employee as long as they overpay a different employee” (i.e., there is no authority for rounding under Oregon law). Pl. Motion for Summ. J. at 11. Defendant concedes there is not any Oregon statute, rule, or appellate case that permits rounding. Defendant, however, asserts that because Oregon statutes and regulations do not explicitly prohibit rounding, the Court should borrow the rounding standard found in
It has been found that in some industries, particularly where time clocks are used, there has been the practice for many years of recording the employees’ starting time and stopping time to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour. Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work. For enforcement purposes this practice of computing working time will be accepted,
provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.
Defendant notes this district applied
While [BOLI] will always provide public records in our control, this is a record that was inadvertently retained beyond its retention period.
Please keep in mind that administration of the Bureau‘s wage and hour Division has changed several times since 2007.
While federal regulations may be instructive, the agency is not bound by those regulations and would determine on a case by case basis whether all hours worked had been properly compensated.
We cannot over-stress the importance of the employee still being paid for all hours worked.
Hosenpud Decl. [53], Ex. 4 at 1. This suggests BOLI likely no longer approves of the guidance statement relied on by the court in Du Ju. In addition, the court in Du Ju did not analyze whether the rounding provision of
Defendant also relies on the fact that a district court in California and a California state trial court approved Defendant‘s rounding practices under California wage-and-hour law: Utne v. Home Depot U.S.A., Inc., No. 16-CV-01854-RS, 2017 WL 5991863, at *2 (N.D. Cal. Dec. 4, 2017), and Camp v. Home Depot U.S.A., Inc., 19CV344872 (Sup. Ct. Cal. Feb. 24, 2021), reversed and remanded No. H049033, 2022 WL 13874360, at *1 (Cal. Ct. App. Oct. 24, 2022). In reaching their conclusions both Utne court and the trial court in Camp relied on the California Court of Appeals’ decision in See‘s Candy Shops, Inc. v. Superior Court, 210 Cal. App. 4th 889 (2012). Recently, however, the California Court of Appeals reversed and remanded the trial court‘s decision in Camp, questioned the
The decision in Camp is instructive. In Camp the plaintiff2 filed a putative class action against Home Depot alleging that its electronic timekeeping system captured each minute worked by employees, but due to Home Depot‘s rounding policy, putative class members were paid for less time than was reflected in Home Depot‘s timekeeping system. Camp, 2022 WL 13874360, at *1. Home Depot moved for summary judgment on the basis that its “rounding policy was neutral on its face, neutral as applied, and otherwise lawful under See‘s Candy.” Id. The trial court found Home Depot‘s rounding policy “is neutral on its face and is used in such a manner that it will not result, over a period of time, in failure to compensate employees properly for all the time they have actually worked,” and, therefore it met the standard articulated in See‘s Candy. Id. Accordingly, the trial court granted Home Depot‘s motion for summary judgment. The plaintiff appealed asserting that “notwithstanding See‘s Candy, neither the [California] Labor Code nor the relevant wage order authorizes time rounding that results in an individual employee failing to receive compensation for all time worked.” Id. The Court of Appeals agreed with the
plaintiff and reversed and remanded for the trial court to enter an order denying Home Depot‘s motion for summary judgment.
The court began its analysis in Camp by observing that the California Supreme Court “‘has never decided the validity of the rounding standard articulated in See‘s Candy,‘” and, therefore, it is still an open question in California. Camp, 2022 WL 13874360, at *2 (quoting Donohue v. AMN Services, LLC 11 Cal. 5th 58, 72 (2021)). The court then noted California law defines “hours worked” as “‘the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.‘” Camp, 2022 WL 13874360, at *4 (quoting
Regarding See‘s Candy, the Camp court noted in reaching its conclusion that California courts should adopt the rounding provision of
Turning to Troester the Camp court found the California Supreme Court provided guidance in that case regarding “(1) the circumstance of a federal wage and hour standard that has no apparent counterpart in California‘s wage and hour laws, and (2) the proper interpretation of various Labor Code and wage order provisions.” Camp, 2022 WL 13874360, at *7. Specifically, in Troester the court analyzed whether the FLSA de minimus rule found in
will be paid for all work performed.” Camp, 2022 WL 13874360, at *8 (quoting Troester, 5 Cal. 5th at 840)(emphasis in Camp). The court found the federal de minimus doctrine, which permits “employers under some circumstances to require employees to work as much as 10 minutes a day without compensation is less protective than a rule that an employee must be paid for ‘all hours worked’ or ‘[a]ny work’ beyond eight hours a day” and there was not any “convincing evidence of the IWC‘s intent to adopt the federal standard.” Troester, 5 Cal. 5th 829, 840-41 (quotation omitted). The court also pointed out that “[w]hat [the defendant] calls ‘de minimus’ is not de minimus at all to many ordinary people who work for hourly wages.” Id. at 847. The court recognized that “one of the main impetuses behind the de minimis doctrine in wage cases is the practical administrative difficulty of recording small amounts of time for payroll purposes,” but noted “employers are in a better position than employees to devise alternatives that would permit the tracking of small amounts of regularly occurring worktime.” Id. at 848 (quotation omitted). In addition, “technological advances . . . help with
Finally, the Camp court reviewed Donohue v. AMN Services, LLC 11 Cal. 5th 58 (2021), in which the California Supreme Court addressed the issue of time rounding in the context of meal periods. The Donohue court noted the Court of Appeals relied on See‘s Candy in concluding employers may use rounded time punches for meal periods. The court pointed out that it “has never decided the validity of the rounding standard articulated in See‘s Candy” and it was “not asked to do so” in Donohue. Donohue, 11 Cal. 5th at 72. The court concluded, even assuming the validity of See‘s Candy, the rounding policy in Donohue did not “comport with its neutrality standard.” Id. at 73. The court recognized that “rounding was developed as a means of ‘efficiently calculat[ing] hours worked’ and wages owed to employees.” Id. (quoting See‘s Candy, 210 Cal. App. 4th at 903). The defendant, however, “was already using an electronic timekeeping system . . . that recorded employees’ unrounded time punches. . . . [The defendant] actually had to take the extra step of converting the unrounded time punches to rounded ones; it is not clear what efficiencies were gained from this practice.” Id. at 73-74.
Extrapolating from Troester and Donohue the Camp court concluded the trial court erred when it concluded Home Depot, relying on its rounding policy, met its burden to show there was not any triable issue of material fact regarding whether the plaintiff was paid for all of the time he worked. Camp, 2022 WL 13874360, at *10. Specifically, the court reiterated that the California Labor Code contemplates that “employees will be paid for all work performed.” Id. (citations omitted). In addition, courts have held when “the language or intent of state and federal labor laws substantially differ, reliance on federal regulations or interpretations to construe state regulations is misplaced.” Id. (citations omitted). The court noted
Oregon statute defines “wages” as “compensation due to an employee by reason of employment.”
Defendant asserts here, as it did in Camp, that rounding “results in a readily verifiable paycheck because partial hours are shown in quarterly decimals, e.g., 6.25 hours. By contrast 6 hours 10 minutes, if paid precisely, would show as 6.16666 . . . hours on the wage statement.” Def. Mot. for Summ. J. at 4 n.2. This Court is not persuaded by Defendant‘s argument because Defendant records the precise time worked by associates and then must take an extra step to round each employee‘s total shift wages. More importantly, Defendant does not point to any provision in Oregon law “that privileges arithmetic simplicity over paying employees for all time worked.” Camp, 2022 WL 13874360, at *11.
In summary, the Court concludes Defendant has not established that Oregon law authorizes time rounding that results in the failure to pay each employee for all of the time worked particularly when, as here, an employer can capture and has captured the exact amount of time an employee has worked.
III. De Minimus
Defendant asserts even if the Court concludes Oregon law does not permit rounding under the circumstances here, it is still entitled to summary judgment because “any lost minutes are de minimus, and, therefore, not compensable.” Def. Mot. for Summ. J. at 16. Defendant relies on Corbin v. Time Warner Entertainment, 821 F.3d 1069 (9th Cir. 2016). In that case the plaintiff brought a putative class action against his former
Corbin, however, is of limited relevance in this case because it was decided before the California Court of Appeals decision in Troester and, in any event, the plaintiff did not appeal the district court‘s application of the federal de minimus doctrine to his California state-law claims. The Ninth Circuit, therefore, did not evaluate the propriety of applying the federal de minimus doctrine to state-law wage claims. Corbin, 821 F.3d at 1081 n.11. This is crucial because, as noted, Oregon law differs significantly from the FLSA in that it requires each employee to be compensated for every hour worked and Defendant has not pointed to any provision of Oregon law that permits an employer to fail to pay an employee for all of the time worked particularly when, as here, an employer has captured the exact amount of time an employee has worked during a shift.
Even if the de minimus doctrine applied to Oregon wage claims, the Court concludes Defendant has not satisfied the Lindow requirements. Specifically, the record does not reflect any “practical administrative difficulty in recording the additional time.” In fact, it is undisputed that Defendant records all associates’ exact time worked. Secondly, the record reflects that the aggregate time the putative class worked and was not paid was significant and, according to Plaintiff‘s data, amounted to a net loss to associates of $294,405.31. Finally, the uncompensated additional work was regular: it was the result of Defendant‘s regular and consistent rounding practice that happened every shift throughout the putative class period.
The Court concludes that in the absence of persuasive authority that Oregon has adopted the de minimus doctrine and because Defendant fails, in any event, to establish that it satisfied the Lindow requirements, the de minimus doctrine does not apply here. Accordingly, the Court denies Defendant‘s Motion for Partial Summary Judgment as to the issue of the propriety of rounding and grants Plaintiff‘s Cross-Motion for Partial Summary Judgment on that issue.
IV. Willfulness
It is not entirely clear from Plaintiff‘s Complaint that Plaintiff seeks penalty
A. The Law
Although
[i]n civil cases the word wilful, [sic] as ordinarily used in courts of law, does not necessarily imply anything blamable, or any malice or wrong toward the other party, or perverseness or moral delinquency, but merely that the thing done or omitted to be done was done or omitted intentionally. It amounts to nothing more than this: That the person knows what he is doing, intends to do what he is doing, and is a free agent.
Id. (quoting Sabin v. Willamette–Western Corp., 276 Or. 1083, 1093 (1976)). “An employer, then, willfully fails to pay wages owed at termination only if it is ‘fully aware of [its] obligation to do so’ but nonetheless consciously and voluntarily decides not fulfill that obligation.” Id., at *5 (quoting Wilson v. Smurfit Newsprint Corp., 197 Or. App. 648, 660 (2005)). The definition of willful “excludes the individual who does not know that his employee has left his employ or who has made an unintentional miscalculation.” Wilson, 197 Or. App. at 660 (quotation omitted).
Oregon courts have held “‘[a]n employer acts willfully if, having the financial ability to pay wages which he knows he owes, fails to pay them. The statute was not intended to impose liability where the employer‘s refusal to pay wages is based upon a bona fide belief that he is not obligated to pay them.‘” Wilson, 197 Or. App. at 661 (quoting Nilsen, 251 Or. at 293). In addition, “an employer lacks knowledge, and therefore does not act willfully, if it has a good faith belief that one of the elements necessary to trigger the obligation to pay wages owed at termination is lacking.” Wilson, 197 Or. App. at 661 (citing Hekker v. Sabre Constr. Co., 265 Or. 552, 561 (1973)). These cases
establish that an action is willful if it is fully knowing, intentional, and voluntary. Clearly, a malicious action or one taken in bad faith qualifies. Equally as clearly, an employer does not act willfully if it acts without fully knowing that the historical circumstances triggering the obligation have occurred (for example, that the employee has quit) or if it acts based on an innocent miscalculation that is not careless.
Wilson, 197 Or. App. at 662–63.
Defendant contends there is not any basis under which this Court could conclude its rounding policy resulted in a willful failure to pay Plaintiff‘s wages. Specifically, Defendant asserts it was not “fully aware” of the obligation to pay the wages at issue because the only Oregon case law addressing rounding policies similar to Defendant‘s, Du Ju, expressly approved of them, and, at the time of Defendant‘s Motion, two courts outside of Oregon had expressly approved of Defendant‘s rounding policies: Utne and the trial court in Camp. Defendant asserts it had a bona fide belief that its rounding policy was permissible under Oregon law and, therefore, it did not willfully fail to pay wages within the meaning of
Plaintiff asserts Defendant misunderstands the meaning of willfulness under Oregon‘s wage-and-hour laws. Plaintiff asserts “willful” within the context of Oregon wage-and-hour law does not mean intentionally violating clear law, rather it focuses on whether the employer knew the historical facts that ultimately gave rise to liability. See Wilson, 197 Or. App. at 662-63. Plaintiff contends, therefore, that mistakes of law are “willful” for the purposes of wage-and-hour law. Defendant, in turn, contends a reasonable mistake of law or lack of legal clarity defeats a finding of willfulness.
Whether a mistake of law can preclude a finding of willfulness is dependent on the circumstances. For example, in Nilsen the defendants failed to pay wages owed at termination based on the erroneous belief that they were not liable to pay wages as a matter of law because they were not actual employers, but merely agents of a corporate employer. The court held penalty wages under those circumstances were not appropriate because “ORS 652.150 authorizes the imposition of a penalty only if the employer willfully fails to pay his employee‘s wages. . . . The statute was not intended to impose liability where the employer‘s refusal to pay wages is based upon a bona fide belief that he is not obligated to pay them.” Nilsen, 251 Or. at 293. Similarly, in Hekker v. Sabre Construction Company, 265 Or. 552 (1973), the issue was whether the employer paid all of the plaintiff‘s commissions pursuant to the terms of an employment contract. The court found the employment contract was ambiguous, construed the contract in the plaintiff‘s favor, and denied penalty wages on the basis that the plaintiff failed to show the failure to pay was willful because the “defendant‘s failure to pay plaintiff his commissions was based on a bona fide belief that no commissions were due under the terms of the employment agreements.” Id. at 561.
The Oregon Supreme Court reached the opposite conclusion regarding a mistake of law in Young v. State, 340 Or. 401 (2006). In Young the plaintiff filed a putative class action in Oregon state court on behalf of himself and other state employees to whom the state failed to pay overtime between 1995 and 1997. Young v. State, 195 Or. App. 31 (2004), reversed and remanded, 340 Or. 401 (2006). The case arose as a result of an amendment to Oregon‘s overtime compensation law. Specifically, before 1995,
could not assert a ’bona fide belief’ that it had no obligation to pay overtime to its white-collar employees.” Id. (citing Taylor v. Werner Enterprises, Inc., 329 Or. 461, 470 (1999))(“The question . . . is whether [the employer] had, or can be imputed to have had, a level of awareness of its obligation to pay plaintiff such that its failure to pay was ‘willful.‘“). Accordingly, the court reversed the Court of Appeals and found all of the plaintiffs were entitled to penalty wages under
Here the state of the law regarding the permissibility of Home Depot‘s rounding program is uncertain. As Defendant noted, the court in Du Ju approved a similar rounding program and two courts in California had approved Defendant‘s specific rounding program. Accordingly, although the Court concludes Oregon does not permit rounding, the Court also concludes the state of the law was sufficiently uncertain that Defendant should not be penalized for reasonably believing that its rounding program was permissible in Oregon. Thus, Defendant‘s failure to pay Plaintiff‘s wages as a result of the rounding program was not “willful” within the meaning of
CONCLUSION
For the foregoing reasons, the Court GRANTS IN PART and DENIES IN PART Defendant‘s Motion for Partial Summary Judgment [52] and GRANTS IN PART and DENIES IN PART Plaintiff‘s Cross-motion for Partial Summary Judgment [56].
IT IS SO ORDERED.
DATED: November 29, 2022
MARCO A. HERNANDEZ
United States District Judge