GENERAL ATOMICS, Petitioner, v. THE SUPERIOR COURT OF SAN DIEGO COUNTY, Respondent, TRACY GREEN, Real Party in Interest.
D078211
Court of Appeal, Fourth Appellate District, Division One, State of California
May 28, 2021
CERTIFIED FOR PUBLICATION; (San Diego County Super. Ct. No. 37-2019-00028571-CU-OE-CTL)
ORIGINAL PROCEEDINGS in mandate. Ronald L. Styn, Judge. Petition granted.
Paul Hastings, Paul W. Cane, Jr. and Zachary P. Hutton, for Petitioner.
Seyfarth Shaw, Jeffrey A. Berman and Sheryl L. Skibbe, for the California Employment Law Council and the Employers Group, as Amici Curiae on behalf of Petitioner.
No appearance for Respondent.
Diversity Law Group, Larry W. Lee, Max W. Gavron; Polaris Law Group and William L. Marder for Real Party in Interest.
We conclude the trial court erred by determining that General Atomics’ wage statements violate section 226. The wage statements show the applicable hourly rates in effect and the corresponding number of hours worked at each rate. In the wage statements provided by General Atomics, the applicable hourly rates are (1) the standard hourly rate determined by contract or other agreement between the employee and the employer and (2) the overtime premium hourly rate, determined by statute, that must be added to the employee‘s standard wages to compensate the employee for working overtime. These rates are plainly shown, along with the hours worked at each rate.
While other formats may also be acceptable, given the complexities of determining overtime compensation in various contexts, the format adopted by General Atomics adequately conveys the information required by statute. It also allows employees to readily determine whether their wages were correctly calculated, which is the central purpose of section 226. Indeed, the alternative format Green proposes would make such a determination more difficult, rather than less. We therefore grant the petition for writ of mandate.
FACTUAL AND PROCEDURAL BACKGROUND
Green‘s operative complaint contains two causes of action. The first is a putative class action. The second is a representative action under the Labor Code Private Attorneys General Act (PAGA;
To test Green‘s theory of liability, the parties appear to have agreed that General Atomics would file an early motion for summary adjudication directed at Green‘s PAGA claim. In that motion, General Atomics contended that its wage statements were lawful. It argued that its wage statements complied with section 226 because they showed the applicable hourly rates—i.e., the standard contractual hourly rate and the overtime premium
In opposition, Green cited the statutory requirement that overtime be paid “at the rate of no less than one and one-half times the regular rate of pay for an employee.” (
Green claimed that the wage statements provided by General Atomics were confusing because they do not separately show overtime hours that were compensated at 1.5x the regular rate of pay. Instead, they show the overtime rate as 0.5x the regular rate. They also list overtime hours twice, once for the standard contractual rate and once for the overtime premium. Green maintained that the DLSE sample wage statement was inapplicable because it covered a worker compensated on a piece-rate basis, rather than an hourly basis. The DLSE sample for workers earning a single standard hourly rate showed a 1.5x overtime rate.
After hearing argument, the trial court asked Green to submit examples of wage statements showing a 1.5x overtime rate for employees who earned multiple standard hourly rates during a single pay period. Green filed a supplemental brief attaching various examples. General Atomics responded that Green‘s examples either did not reflect multiple standard hourly rates or did not comply with section 226 themselves.
After another hearing, the court issued a written order denying General Atomics’ motion for summary adjudication. The court noted that the material facts were undisputed. General Atomics admitted its wage statements show a 0.5x overtime premium, rather than a 1.5x overtime rate. The court found that the wage statements provided by General Atomics should have shown the nonovertime hours and overtime hours separately, with their applicable hourly rates. By combining nonovertime hours and overtime hours, and listing the overtime hours a second time with the 0.5x overtime premium, the wage statements did not show the 1.5x overtime rate or allow an employee to easily calculate it.
General Atomics filed a petition for writ of mandate in this court challenging the trial court‘s order denying its motion for summary adjudication. (
DISCUSSION
Our review following an order granting summary adjudication is substantively identical to our review following an order granting summary judgment. (See Butte Fire Cases (2018) 24 Cal.App.5th 1150, 1157.) “A defendant‘s motion for summary judgment should be granted if no triable issue exists as to any material fact and the defendant is entitled to a judgment as a matter of law.” (Kahn v. East Side Union High School Dist. (2003) 31 Cal.4th 990, 1002-1003.) “We review the record and the determination of the trial court de novo.” (Id. at p. 1003.) This standard is not materially affected by the procedural posture of this original proceeding. (Prudential Ins. Co. of America, Inc. v. Superior Court (2002) 98 Cal.App.4th 585, 594-595.)
As noted, section 226 requires an employer to furnish to its employee “an accurate itemized statement in writing” showing, among other things, “all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee . . . .” (
“The core purpose of section 226 is ‘to ensure an employer “document[s] the basis of the employee compensation payments” to assist the employee in determining whether he or she has been compensated properly.’ ” (Ward v. United Airlines, Inc. (2020) 9 Cal.5th 732, 752.) “Section 226 ‘play[s] an important role in vindicating [the] fundamental public policy’ favoring ’ ” ‘full and prompt payment of an employee‘s earned wages.’ ” ’ ” (Soto v. Motel 6 Operating, L.P. (2016) 4 Cal.App.5th 385, 390.) Its aim ” ’ “is to [ensure] that employees are adequately informed of compensation received and are not shortchanged by their employers[.]” ’ ” (Id. at p. 392.)
To frame the issues, we begin with some examples of different wage statement formats. In their briefing in this court, the parties largely frame their contentions around simplified versions of the wage statements provided by General Atomics. A simplified General Atomics wage statement for an employee who earns a single standard hourly rate appears in the table below. This employee earns an hourly rate of $25 and worked 45 hours total, of which 5 hours were overtime. The statement shows 45 hours at the employee‘s standard rate and 5 hours at a 0.5x overtime rate. In our examples, we have omitted the notation “(0.5x)” after the “Overtime” description, which General Atomics includes in its briefing, because it does not appear in its actual wage statements.
| Description | Hours | Rate | Gross Pay |
|---|---|---|---|
| Straight-time | 45 | $25.00 | $1,125.00 |
| Overtime | 5 | $12.50 | $62.50 |
| Total Hours Worked: 45 | Total Pay: $1,187.50 | ||
| Description | Hours | Rate | Gross Pay |
|---|---|---|---|
| Straight-time | 40 | $25.00 | $1,000.00 |
| Overtime (1.5x) | 5 | $37.50 | $187.50 |
| Total Hours Worked: 45 | Total Pay: $1,187.50 | ||
A simplified General Atomics wage statement for an employee who earns multiple standard hourly rates appears in the next table. This employee is compensated at two different hourly rates, depending on her task or role, and she worked a total of 50 hours, of which 10 hours were overtime.
| Description | Hours | Rate | Gross Pay |
|---|---|---|---|
| Straight-time | 20 | $15.00 | $300.00 |
| Straight-time | 30 | $20.00 | $600.00 |
| Overtime | 10 | $9.00 | $90.00 |
| Total Hours Worked: 50 | Total Pay: $990.00 | ||
Green offers the following table, which reflects her interpretation of the statutory requirement for an employee who earns two different standard hourly rates. The nonovertime and overtime hours are stated separately, as are their corresponding rates.
| Description | Hours | Rate | Gross Pay |
|---|---|---|---|
| Straight-time | 15 | $15.00 | $225.00 |
| Overtime (1.5x) | 5 | $24.00 | $120.00 |
| Straight-time | 25 | $20.00 | $500.00 |
| Overtime (1.5x) | 5 | $29.00 | $145.00 |
| Total Hours Worked: 50 | Total Pay: $990.00 | ||
With these examples in mind, we turn to the parties’ contentions. General Atomics argues that its wage statements show “all applicable hourly rates” and the “corresponding number of hours worked at each hourly rate” because the rates and hours listed form the basis for calculating overtime compensation. (
It is, of course, fundamental that an employee who works overtime must receive extra compensation. For example, by statute, “[a]ny work in excess of eight hours in one workday and any work in excess of 40 hours in any one workweek and the first eight hours worked on the seventh day of work in any one workweek shall be compensated at the rate of no less than one and one-half times the regular rate of pay for an employee.” (
“Significantly, an employee‘s ‘regular rate of pay’ for purposes of Labor Code section 510 and the [Industrial Welfare Commission] wage orders is not the same as the employee‘s straight time rate (i.e., his or her normal hourly wage rate). Regular rate of pay, which can change from pay period to pay period, includes adjustments to the straight time rate, reflecting, among other things, shift differentials and the per-hour value of any nonhourly compensation the employee has earned.” (Alvarado v. Dart Container Corp. of California (2018) 4 Cal.5th 542, 554 (Alvarado).)
“Not all employees earn at a fixed pay rate throughout a pay period, and therefore regular rate of pay is a weighted average reflecting work done at varying times, under varying circumstances, and at varying rates.” (Alvarado, supra, 4 Cal.5th at p. 569.) As explained in the DLSE‘s enforcement manual, “Where two rates of pay are paid during a workweek, the California method for determining the regular rate of pay for calculating overtime in that workweek mirrors the federal method, based upon the weighted average of all hourly rates paid. [Citation.] Initially, therefore, it must be predicated upon the finding that there are established hourly rates being paid. The rate will be established by adding all hours worked in the week and dividing that number into the total compensation for the week.” (See DLSE, The 2002 Update of the DLSE Enforcement Policies and Interpretations Manual (Revised) (August 2019) § 49.2.5, citing
Crucially, as both parties appear to agree, although the statutory overtime rate is 1.5x the regular rate, an employee does not simply earn 1.5x the regular rate for every overtime hour, in addition to the standard rate for nonovertime hours. The regular rate for the employee in General Atomics’ second example (Table 2A), where the employee earns two different standard
| Description | Hours | Rate | Gross Pay |
|---|---|---|---|
| Straight-time | 15 | $15.00 | $225.00 |
| Straight-time | 25 | $20.00 | $500.00 |
| Overtime (1.5x) | 10 | $27.00 | $270.00 |
| Total Hours Worked: 50 | Total Pay: $995.00 | ||
To use the regular rate intelligibly, the statement must reflect that all hours are being compensated at the regular rate, with nonovertime hours at 1.0x the regular rate and overtime hours at 1.5x the regular rate, as in the following table.
| Description | Hours | Rate | Gross Pay |
|---|---|---|---|
| Straight-time | 15 | $18.00 | $270.00 |
| Straight-time | 25 | $18.00 | $450.00 |
| Overtime (1.5x) | 10 | $27.00 | $270.00 |
| Total Hours Worked: 50 | Total Pay: $990.00 | ||
Because each nonovertime hour is compensated at the regular rate, with overtime at 1.5x the regular rate, this example obscures the standard or contractual hourly rates earned by the employee. The wage statements provided by General Atomics avoid this result by identifying the standard or contractual hourly rates, with the total number of hours worked at each rate, and then identifying separately the 0.5x overtime premium. The format used by General Atomics results in the correct total pay.3
With this discussion in mind, we return to the statutory requirement that a wage statement show “all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee . . . .” (
Including a 1.5x overtime rate in these wage statements would be incongruous in many circumstances. Where an employee earns a single standard hourly rate, the result is the same because the standard hourly rate happens to be the same as the statutory regular rate of pay (as in Tables 1A and 1B). (See Chavez v. City of Albuquerque (10th Cir. 2011) 630 F.3d 1300, 1313.) But where an employee earns multiple standard hourly rates, or other compensation, the standard hourly rates are not the same as the statutory regular rate of pay. Green‘s proposed solution (Table 2B) reflects hourly rates for an employee‘s overtime hours that are neither the standard contractual hourly rate nor the statutory overtime rate (1.5x the regular rate of pay).5 It therefore contradicts Green‘s own position that wage statements must show overtime at 1.5x the regular rate of pay. Green‘s solution makes it more difficult for an employee to calculate her total contractual compensation because she must split the contractual compensation attributable to the overtime hours from the overtime premium. And Green‘s solution makes it more difficult for an employee to calculate the statutory regular rate of pay and the statutory overtime rate, because she must subtract the overtime hourly rate from the corresponding nonovertime hourly rate, and still double or triple that figure (for the regular rate and 1.5x overtime rate, respectively).6
McKenzie considered a wage statement that separated hourly wages and hours worked into three categories: standard (nonovertime) hours, overtime hours, and overtime premium hours. (McKenzie, supra, 765 F.Supp.2d at p. 1226.) Among other things, the federal district court found that this format did not provide “an accurate overtime rate because instead of multiplying the regular rate of pay by one and one-half, the pay stubs provide two overtime rate categories and they each provide corresponding rates that are either the same or half of the regular rate.” (Id. at p. 1231.) But, in McKenzie, the wage statement did not list the total hours worked. (Id. at p. 1229.) It was therefore unclear how the two overtime entries related to the standard (nonovertime) entry and to one another. (Ibid.) Here, by contrast, the wage statements provided by General Atomics state the total hours worked. It is therefore apparent that the “overtime” hourly rate represents compensation in addition to the standard contractual compensation.
Wright considered a wage statement analogous to Table 1A, involving an hourly employee with a single standard hourly rate. (Wright, supra, 2018 WL 1975076, at *10.) The court observed that, in order to determine the overtime rate, “the (partial) overtime rate on [the employee‘s] pay stubs must be added to the regular rate for the employee to calculate the correct overtime rate.” (Id. at *11.) The employer‘s wage statement did not “show either the accurate overtime rate or the accurate number of hours paid at the regular rate” because it listed an overtime premium of 0.5x (rather than 1.5x) and combined nonovertime and overtime hours in the line item for the standard hourly rate. (Ibid.) Wright did not consider the situation where an employee earns multiple hourly rates in a single pay period or take into account the complexities of displaying a 1.5x overtime rate in that situation. It also did not consider why, given that situation, the potential “applicable hourly rate[s]” under the statute could not include a 0.5x overtime premium. It is therefore unpersuasive.
Moreover, the reasoning in Wright and, to some extent McKenzie, appears to run afoul of the principle in Morgan, supra, 186 Cal.App.4th 1136, that a wage statement does not violate section 226 even if it requires the employee to perform simple math to obtain the required information. In
Along these lines, the federal district court in Arroyo v. International Paper Co. (N.D.Cal. 2020) __ F.Supp.3d __ [2020 WL 887771] (Arroyo) disagreed with Wright and, as relevant here, approved of a wage statement analogous to the example in Table 1A. The court explained, “[T]his Court disagrees with the Wright court‘s conclusion that the overtime rate is unclear where the statements list an ‘Overtime Premium’ of one-half the regular rate of pay, rather than an ‘Overtime Rate’ of one and one-half the regular rate of pay. The exemplar wage statement clearly states the ‘Regular Hours’ rate of $20.37 per hour, and directly underneath that states the ‘Overtime Premium’ of $10.185 per hour. The Court finds as a matter of law that this information is sufficient to show the overtime rate as required by [the statute].” (Id. at p. __ [*10].)
Green points out that, unlike in Arroyo, the wage statements provided by General Atomics do not identify overtime pay as a premium. They simply say “Overtime.” But, because the wage statements provided by General Atomics separately state the total hours worked, it is apparent that the overtime rate and hours listed represent compensation in addition to the employee‘s
Green argues that the DLSE‘s sample hourly wage statement supports her position. General Atomics, on the other hand, relies on the DLSE‘s sample piece-rate wage statement. The parties do not contend we must defer to the DLSE‘s interpretation, but they cite the sample wage statements for their persuasive value. (See Alvarado, supra, 4 Cal.5th at p. 559; Morgan, supra, 186 Cal.App.4th at p. 1147.) To the extent they are relevant, we conclude the DLSE‘s sample wage statements support General Atomics. The DLSE‘s sample hourly wage statement is similar to Green‘s proposal in Table 1B. It covers an employee who earns a single standard hourly rate. The DLSE‘s sample piece-rate wage statement contains line items for “productive” hours, i.e., hours in which the employee earned her piece-rate wage, and “non-productive” hours, i.e., hours in which the employee earned other wages. Each of these line items contains an hourly rate and hours worked (both nonovertime and overtime). Separately, the DLSE wage statement contains a line item for “Overtime,” which lists overtime hours a second time and a 0.5x overtime premium hourly rate. A DLSE note states, “Because all hours have been paid at their respective rates, the overtime premium portion of those hours is computed at a factor of either .5 (overtime) or 1 (double time).”
The DLSE‘s sample piece-rate wage statement supports our conclusion that the 0.5x overtime rate is an “applicable hourly rate” that may be listed on a wage statement under section 226. It also supports our conclusion that a line item labeled “overtime” rather than “overtime premium” does not violate the statute under these circumstances. Although piece-rate compensation is not at issue in this proceeding, the concepts embodied by this DLSE sample wage statement apply by analogy here. Green‘s efforts to distinguish this statement are unpersuasive. And, while the DLSE‘s sample hourly wage statement shows a 1.5x overtime rate (for an employee earning a single hourly rate), we disagree that the sample supports Green‘s position that an hourly wage statement must show a 1.5x overtime rate to comply with the statute.
Lastly, we disagree with Green‘s argument that writ relief is inappropriate here. “An order denying a motion for summary adjudication may be reviewed by way of a petition for writ of mandate. [Citation.] Where the trial court‘s denial of a motion for summary judgment will result in trial on
DISPOSITION
The petition is granted. Let a peremptory writ of mandate issue directing the trial court to vacate its order denying General Atomics’ motion for summary adjudication and enter an order granting the motion. General Atomics shall recover its costs in this original proceeding. (
GUERRERO, J.
WE CONCUR:
HALLER, Acting P. J.
IRION, J.