Plaintiff Roderick Magadia, on behalf of 3 classes (collectively, "Plaintiffs"), brings suit against Defendants Wal-Mart Associates, Inc. and Wal-Mart Stores, Inc. (collectively, "Wal-Mart") regarding alleged violations of California wage and hour laws. Specifically, Plaintiffs claim Wal-Mart violated: (1)
On January 9, 2018, the Court granted Plaintiffs' motion for class certification. The Court certified the following 3 classes:
Meal Period Regular Rate Class : All current and former California non-exempt retail store employees of [Wal-Mart] who received non-discretionary remuneration, including "MYSHARE INCT," and was paid any meal period premium payments in the same period that the non-discretionary remuneration was earned, at any time between December 2, 2012, through the present.
Overtime/INCT Wage Statement Class : All current and former California non-exempt employees of [Wal-Mart] who received "OVERTIME/INCT," at any time between December 2, 2015, through the present.
Final Wage Statement Class : All former non-exempt employees who worked for [Wal-Mart] in the State of California and whose employment terminated (whether voluntarily or involuntarily) at any time from December 2, 2015 to the present.
ECF No. 84 at 22. The Court also appointed Roderick Magadia as class representative.
Wal-Mart moved to decertify the Meal Period Regular Rate Class. ECF No. 132. The Court denied Wal-Mart's decertification motion on November 13, 2018. ECF No. 187.
On July 26, 2018, Wal-Mart moved for partial summary judgment on Plaintiffs' three remaining claims. ECF No. 131. On September 27, 2018, the Court denied Wal-Mart's motion for partial summary judgment. ECF No. 157.
The Court held a 3-day bench trial in this matter beginning on November 30, 2018. The parties filed post-trial briefs on December 7, 2018. ECF Nos. 214, 215. Having considered the evidence and arguments of counsel, the relevant law, and the record in this case, the Court hereby enters the following findings of fact and conclusions of law.
I. FINDINGS OF FACT
A. Stipulated Facts
The Parties stipulated to the following facts:
1. From June 17, 2008 to September 12, 2016, Magadia worked as an hourly associate at a Wal-Mart retail store in San Jose, Califоrnia as a stock associate/cart pusher. ECF No. 176 at 8.
2. On September 12, 2016, Magadia was terminated for absenteeism.
3. During the relevant time period, Wal-Mart used a "Myshare" incentive program for its employees in California retail stores, the details of which are set forth in its written "Myshare Quarterly Incentive Plan."
4. During the relevant time period, Wal-Mart has provided, and continues to provide, all eligible associates when they begin their employment a copy of Wal-Mart's written "MyShare Quarterly Incentive Plan" in effect at that time.
5. MyShare incentive plan payments, a type of bonus, appear on wage statements as "MYSHARE/INCT."
6. Employees who received a MyShare bonus and worked overtime during the relevant time period also receive an incremental overtime payment adjustment. The wage statements report that payment as "OVERTIME/INCT."
7. The OVERTIME/INCT payment is listed on the wage statement as a lump sum without "hours worked" or "hourly rate." This has been Wal-Mart's practice during the relevant time period and continues to be Wal-Mart's current practice.
8. The formula for calculating the OVERTIME/INCT payment cannot be determined from the wage statement alone.
9. Wal-Mart employees, during their employment, have online access to their time records and wage statements via Wal-Mart's intranet.
10. Wal-Mart employees are paid biweekly, and wage statements are produced biweekly to correspond to the biweekly pay periods.
11. Wal-Mart's biweekly on-cycle wage statements include pay period start and end dates.
12. Magadia was aware that he was paid biweekly at all times during his employment with Wal-Mart.
13. When an employee is terminated, the employee immediately receives all wages earned through the date of termination by check. A "Statement of Final Pay" accompanies the check.
15. Magadia received a Statement of Final Pay during his exit interview on the day of his termination.
16. Wal-Mart generates a daily Meal Exception Report at each store. The Meal Exception Report identifies all employees who had a meal exception as determined by the employee's time punches.
17. The Meal Exception Report reflects a meal exception irrespective of whether the associate voluntarily or involuntarily skipped their lunch, voluntarily or involuntarily took a less-than-30-minute break, voluntarily or involuntarily took a late meal period, or actually took a full, compliant meal period but merely forgot to clock in or out for lunсh.
18. All employees who appear on the final weekly Meal Exception Report, for whatever reason, receive a meal period premium payment equivalent to one hour of compensation at the employee's base rate of pay.
19. Wal-Mart pays meal period premiums using the employee's base rate of pay.
B.
A meal exception occurs when a Wal-Mart employee misses a meal, begins their meal late, or cuts a meal short. Tr. at 241:14-17. If a meal exception occurs, an informal conversation takes place between a supervisor and the employee to determine the reason the exception occurred.
However, Magadia, the named Plaintiff, never suffered a meal exception coded as 1, 5, or 12. ECF No. 214 at 15. Moreover, Magadia always received a meal break, albeit the break was sometimes later than scheduled. Tr. at 108:18-109:8. None of these late breaks were after the fifth hour worked, with a sole exception.
When a Wal-Mart employee incurs a meal exception, a meal premium is automatically paid.
C.
1. Statements of Final Pay
Wal-Mart pays employees on a biweekly basis. ECF No. 176 at 8. In line with this
2. OVERTIME/INCT Line Item on Wage Statements
Wal-Mart employees who receive a MyShare incentive award at the end of a quarter and also worked overtime during that quarter are given additional overtime pay based on having received the incentive. ECF No. 176 at 8. The additional overtime pay appears retroactively on the employee's wage statement as "OVERTIME/INCT."
D. Damages Calculations
Plaintiffs' expert, Dr. Brian Kriegler, was certified at trial as an expert in wage and hour damages. Tr. at 437:18-19. Dr. Kriegler relied upon a computational code written by his associates to arrive at his final results; he did not manually calculate anything by hand due to the volume of data provided.
1. Failure to Pay Adequate Compensation for Missed Meal Brеaks
Dr. Kriegler calculated the meal exception claim damages under Plaintiffs' two theories of liability. First, Dr. Kriegler calculated damages for those employees who had meal exceptions coded in EMS as 1, 5, or 12 ("Theory 1"). Ex. 201-7. The three relevant codes are: code 1 (associate initiated customer support); code 5 (manager directed, no coverage for customer support); and code 12 (management directed). Tr. at 276:18-21;
So, for instance, if there was a meal exception on February 1, 2013, and there was a quarterly bonus going from January 1, 2013, through March 31, 2013, hypothetically let's suppose that award amount was $ 1000 ... and hypothetically let's say there were ten workweeks with some work time.... So per workweek, that [award amount] ends up being $ 100 per workweek. For the workweek that the meal exception occurred, I then prorated that $ 100 to a dollar amount per hour. So that would be-let's suppose there were 30 straight time hours in the workweek, so I would take $ 100 and divide it by 30 hours to get $ 3.33, and that would be the damages amount for that particular meal exception.
Dr. Kriegler also calculated pre-judgment interest. He did so by computing per annum interest at a rate of 10%, with a pre-judgment accrual date of November 30, 2018. Tr. at 471:23-472:7. Under Theory 1, this computation resulted in a pre-judgment interest amount of $ 7,402. Ex. 201-7. Under Theory 2, his computation resulted in a pre-judgment interest amount of $ 1,533.
Dr. Kriegler additionally calculated waiting time penalties under
Lastly, Dr. Kriegler calculated PAGA penalties for the meal exception claim. For each pay period after October 4, 2015 (the statute of limitations date for the PAGA penalties) that there was an alleged underpayment for a meal exception, Dr. Kriegler
2. Failure to Provide Accurate Itemized Wage Statements
Under Plaintiffs' theory that Wal-Mart failed to provide accurate itemized wage statements as required by
a. OVERTIME/INCT Line Item
To calculate the § 226(e) penalty, Dr. Kriegler took Wal-Mart's data, and for the first pay period in which there was an overtime incentive payment (i.e., OVERTIME/INCT line item), Dr. Kriegler assessed a $ 50 penalty per employee. Tr. at 446:25-447:14. For each subsequent pay period in which there was an OVERTIME/INCT line item, Dr. Kriegler assessed a $ 100 penalty per employee.
To calсulate the PAGA penalties, Dr. Kriegler multiplied each instance of an OVERTIME/INCT line item per pay period by $ 250.
b. Statements of Final Pay
To calculate the § 226(e) penalty, Dr. Kriegler adopted the same tack as described above. For a first termination, he assessed $ 50.
Moreover, in calculating PAGA penalties, Dr. Kriegler did not make the same mistake as discussed above regarding the statute of limitations date for the PAGA penalties. He used the correct statute of limitations date of October 4, 2015, and
3. Total Statutory and PAGA Damages Sought
For the Meal Period Regular Rate Class, Plaintiffs have calculated damages for meal exceptions coded as 1, 5, or 12 as well as for meal exceptions coded just as 5 or 12. Specifically, for meal exceptions coded as 1, 5, or 12, Plaintiffs request: $ 21,115 in principal damages for Wal-Mart's alleged violations of § 226.7 ; $ 7,402 in pre-judgment interest; $ 10,937,844 in § 203 waiting time penalties; and $ 821,400 in PAGA penalties.
For the Final Wage Statement Class, Plaintiffs request $ 5,823,900 in statutory § 226(e) damages and $ 28,928,500 in PAGA penalties for Wal-Mart's alleged violation of § 226(a)(6).
For the OVERTIME/INCT Wage Statement Class, Plaintiffs request $ 48,046,000 in statutory § 226(e) damages and $ 131,427,750 in PAGA penalties for Wal-Mart's alleged violation of § 226(a)(9). Ex. 201-7.
In total, Plaintiffs request $ 226,013,911 in damages for the OVERTIME/INCT Wage Statement Class, the Final Wage Statement Class, and the Meal Period Regular Rate Class (for meal exceptions coded as 1, 5, or 12). Alternatively, Plaintiffs request $ 215,605,413 in damages for the OVERTIME/INCT Wage Statement Class, the Final Wage Statement Class, and the Meal Period Regular Rate Class (for meal exceptions coded as 5 or 12).
II. CONCLUSIONS OF LAW
The Court first turns to the Plaintiffs' first claim for failure to pay adequate compensation for missed meal breaks. Then, the Court turns to the Plaintiffs' second claim for failure to prоvide accurate itemized wage statements-namely, the failure to include the start and end dates of the payment period on the statements of final pay, and the failure to list an hourly rate or hours worked for the OVERTIME/INCT line item on wage statements. Lastly, the Court addresses the parties' requests for judicial notice.
A. Claim 1: Failure to Pay Adequate Compensation for Missed Meal Breaks,
Below, the Court analyzes whether Plaintiffs' § 226.7 class claims and Magadia's individual § 226.7 claim can proceed as stated, the Court then finds that the § 226.7 class must be decertified and that Magadia's individual claim fails. Nevertheless, the Court cannot eschew a discussion of the merits of Plaintiffs' claims under § 226.7 because Plaintiffs still can demonstrate that PAGA penalties should be awarded. Huff v. Securitas Sec. Servs. USA, Inc. ,
Magadia fails to satisfy the requirements of Rule 23(a) of the Federal Rules of Civil Procedure as class representative of the Meal Period Regular Rate Class. Moreover, the Court finds that Magadia has failed to show that his individual claim succeeds under the evidence presented at trial.
a. The Class Claims
" Rule 23(a) states four threshold requirements applicable to all class actions: (1) numerosity (a 'class [so large] that joinder of all members is impracticable'); (2) commonality ('questions of law or fact common to the class'); (3) typicality (named parties' claims or defenses 'are typical...of the class'); and (4) adequacy of representation (representatives 'will fairly and adequately protect the interests of the class.')." Amchem Prods., Inc. v. Windsor ,
Magadia's claims are not typical of the claims or defenses of the class. Thus, as class representative, Magadia runs afoul of the typicality requirement of Fed. R. Civ. P. 23(a)(3). Magadia also is not an adequate representative of the class. Thus, he does not meet the adequacy requirement under Fed. R. Civ. P. 23(a)(4). It is of no moment that the Court already certified the Meal Period Regular Rate Class as a class represented by Magadia. ECF No. 84 at 22. "Before entry of a final judgment on the merits, a district court's order respecting class status is not final or irrevocable , but rather, it is inherently tentative." Officers for Justice v. Civil Service Comm'n of City & Cty. of San Francisco ,
First, "[t]he test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whethеr other class members have been injured by the same course of conduct." Hanon v. Dataproducts Corp. ,
A meal break is defined as "a meal period of not less than 30 minutes" every five hours.
In the joint pretrial statement the parties filed on November 1, 2018, Wal-Mart put Plaintiffs on notice that Plaintiffs must demonstrate that Magadia suffered a meal period exception coded as 1, 5, or 12. ECF No. 176 at 23. Specifically, Wal-Mart argued that "Plaintiff cannot prove that Walmart denied Plaintiff...a meal period required by section 226.7," and thus could not prove that Magadia suffered a meal exception coded as 1, 5, or 12.
Q. And for the times that you asked [to take a meal break], have there been times then [your supervisor and assistant manager] told you that you couldn't go on your meal break?
A. Yes.
Q. And on those times, did you then have to take your meal break after the scheduled time?
A. Yes.
Q. So would you then take a late meal break?
A. Yes.
Tr. at 85:12-19.
On cross-examination, counsel for Wal-Mart established that Magadia always received a meal break, though it was sometimes late.
Q. And did [Wal-Mart] ever say, "no, you can't take a break now, not in 30 minutes, not in 1 hour, never?" Did that ever happen?
A. What do you mean, never take - they give me - they give me a break, but a late break.
Q. OK. So they always gave you a break, but sometimes the timing of it -
A. Late break
Q. - Was late based on the time it was scheduled?
A. Yes, sir.
On redirect examination, Plaintiffs' counsel failed to establish that Magadia ever suffered a meal exception coded as 1, 5, or 12 in Wal-Mart's EMS system, or that the sole meal exception Magadia could remember took place within the 4-year statutе of limitations.
Q. And was there a time when you got a lunch that was after the fifth hour worked?
A. Yes.
Q. Do you recall how many times that happened?
A. I think I - I think at this - I think once, but I don't remember what date or what year.
Tr. at 118:25-119:5.
During oral closing arguments, Plaintiffs' counsel did not dispute that Plaintiffs failed to show at trial that Magadia had a meal exception coded as 1, 5, or 12. Tr. at 583:9-10 ("Now, again, I'm not disputing the fact that I did not show that evidence."). Nevertheless, Plaintiffs' counsel misleadingly represented to the Court that Magadia had meal exceptions coded as 1, 5, or 12, and even told the Court to go find that information in the record: "It's in the data. I mean, you can pull it up in the data."
Therefore, Magadia has failed to show that he personally suffered a violation of
In Valentino v. Carter-Wallace, Inc. , the district court appointed class representatives to represent people who used a particular liver drug and developed "aplastic anemia or liver failure" as a result.
Second, Magadia fails to satisfy the adequacy requirement of Fed. R. Civ. P. 23(a)(4). "The adequacy inquiry under Rule 23(a)(4) serves to uncover conflicts of interest between named parties and the class they seek to represent." Amchem ,
Magadia has a conflict of interest with the class he purports to represent because he does not possess the same interest and suffer the same injury as the class members. In Amchem , the United States Supreme Court found it inappropriate that "named parties with diverse medical conditions sought to act on behalf of a single giant class rather than on behalf of discrete subclasses. In significant respects, the interests of those within the single class are not aligned."
In conclusion, the Court hereby decertifies the Meal Period Regular Rate Class because Magadia fulfills neither the typicality requirement of Fed. R. Civ. P. 23(a)(3) nor the adequacy requirement of Fed. R. Civ. P. 23(a)(4).
b. Magadia's Individual Claim
Magadia could only recall one instance where he received a noncompliant meal break, but could not remember the incident's year or date. Because Plaintiffs bring a UCL claim, "[a ]ny action on any UCL cause of action is subject to the four-year period of limitations created by that section." Cortez v. Purolator Air Filtration Prods. Co. ,
Magadia worked for Wal-Mart from 2008 to 2016. ECF No. 176 at 8. Because Magadia's employment at Wal-Mart began well before December 2, 2012, Magadia's noncompliant meal break may have occurred before the cutoff date for the statute of limitations for the meal period claim. When questioned at trial about whether he ever received a meal break after the fifth hour worked and how many times such an event may have occurred, Magadia responded: "I think I - I think at this - I think once, but I don't remember what date or what year." Tr. at 119:4-5. Magadia bears the burden of proof at trial that his claims are timely by a preponderance of the evidence. Thus, because Magadia's noncompliant meal break could have taken place before December 2, 2012, he has failed to prove by a preponderance of the evidence that the statute of limitations does not bar his claim. Cf. Ryan v. Microsoft Corp. ,
Moreover, as explained in detail above, Magadia's theory of liability is that those with meal exceptions coded as 1, 5, or 12 were the ones who were wronged by Wal-Mart's payment practices. See, e.g. , Tr. at 28:20-22 ("I want to say that the theory on [the meal break count] is based on what you heard defense counsel say, meal exception codes 1, 5, and 12."). Magadia did not have a meal exception coded as 1, 5, or 12 in Wal-Mart's EMS system. Therefore, Magadia's claim also fails because Magadia has failed to show he was wronged under his own theory of liability.
Thus, Magadia's individual claim for a violation of
Even though Plaintiffs' class claim and Magadia's individual claim cannot proceed under § 226.7, the Court next turns to the merits of the claim that Plaintiffs may still establish a claim for PAGA penalties if Wal-Mart violated § 226.7 with respect to employees other than Magadia.
2. Liability under
Under California law, if an employer fails to provide a compliant meal break, "the employer shall pay the employee one additional hour of pay at the employee's regular rate of compensation."
Wal-Mart currently does not factor in the MyShare incentive award, a nondiscretionary quarterly bonus, Tr. at 134:22-135:8, in calculating what is an employee's regular rate of compensation. Rather, Wal-Mart pays the meal period premium at the employee's base rate of pay. ECF No. 176 at 9. The crux of Plaintiffs' argument is that the regular rate of compensation an employee receives should factor in the MyShare incentive award.
The question now becomes whether Plaintiffs' Theory 1 (meal exceptions coded in the EMS as 1, 5, or 12) or Theory 2 (meal exceptions coded in the EMS as just 5 or 12) renders Wal-Mart liable for violating § 226.7. As described above, EMS code 1 means a meal exception resulting from "associate initiated customer support"; EMS code 5 means a meal exception that was management directed because of no coverage for customer support; and code 12 means a meal exception that was management directed. Tr. at 276:18-21; id. at 360:22-24; id. at 361:8-17. The Court finds that Theory 2 is the correct method of assessing liability.
Courts interpreting § 226.7 have held that "an employer need only relinquish control of the employee for an uninterrupted thirty-minute period; the employer need not ensure a meal break is in fact taken." McLeod v. Michael's Stores, Inc. ,
Wal-Mart's director of global business services technology Victoria Moore testified that "[a]ssociate initiated customer support [i.e., code 1] indicates the associate made the decision to either miss their meal, have a short meal, or a meal late, a late meal, as a result of some type of customer service action." Tr. at 265:11-14 (emphasis added). This testimony was unrebutted. Therefore, for EMS code 1, trial testimony established that the employee chose to engage in customer support despite it being their meal period. As McLeod held, Wal-Mart had already relinquished control over the employee for their meal period. It is up to the employee to decide what to do with his or her time. If the employee chose to engage in customer support even though it was the employee's meal period, Wal-Mart cannot force that employee to take a compliant meal period. There is no evidence here that Wal-Mart ordered the employee to engage in customer service activities. Thus, the Court finds that EMS code 1 does not reflect a violation of § 226.7.
On the other hand, Moore testified that EMS codes 5 and 12 show that management directed the employee to take a noncompliant meal break:
Q. And the third code you mentioned this morning was management directed, no customer support. What does that mean?
A. The associate is - that code means it was - the meal exception was manager directed. No coverage or for customer support.
Q. And in our review of the data contained in the Exception Management System, we also came across the code that just says manager directed without the customer support blurb.
A. Right.
Q. Is that the same thing basically as management directed?
A. Yes.
Id. at 265:20-266:6. Thus, because codes 5 and 12 reflect a Wal-Mart management decision not to let the employee take a compliant meal break, these codes reflect a violation of § 226.7.
Wal-Mart argues that the EMS codes do not show who was actually denied a meal break. Rather, they only show what Wal-Mart employees allege to be the reason a meal exception occurred. However, Wal-Mart's attempt to discredit its own process for investigating and classifying meal exceptions in the EMS is unpersuasive. Testimony by Todd Stokes, Wal-Mart's divisional human resources director, demonstrated that Wal-Mart itself relies on this investigation and classification process for identifying problems with employees' behaviors relating to meal periods:
Q. And this investigation would ultimately, the purpose of that investigation is to end up determining who is accountable for that meal violation, whether it's management or the associate; is that correct?
A. So one of the outcomes from that is that we can sometimes determine the associate worked too long and didn't take it, or sometimes we may learn that a manager pulled an associate away and didn't let them take it. So those are the two general outcomes that can come from that.
Q. And those outcomes, as a matter of practice, should be recorded down somewhere; correct?
A. So, yes, there's a form that's filled out.
Q. And part of the reason for this investigation process is to determine who was accountable and have a discussion with them to make sure that it doesn't happen again, is that correct?
A. That is - I would say that's a good classification. We want to make sure that we address the behavior that needs to change.
Id. at 146:9-147:3. As Wal-Mart conducts an investigation, assigns a code to each meal period exception as a result of Wal-Mart's investigation, and relies upon the results of Wal-Mart's investigation, Wal-Mart cannot turn around and repudiate the results of the investigation and associated EMS entry to avoid liability. As such, the Court finds that the EMS codes are reliable indicators of the reason why a meal exception occurred, because they are encoded as to the reason a meal exception occurred after an investigation conducted by Wal-Mart.
In sum, the Court holds that Wal-Mart violated
3. Damages
Here, the Plaintiffs claim principal damages, pre-judgment interest,
a. PAGA Penalties
The California Court of Appeal has held that "so long as [plaintiff] was affected by at least one of the Labor Code violations alleged in the complaint, he can recover penalties for all the violations he proves." Huff ,
As discussed in further detail below, Magadia was affected by violations of
The Court acknowledges that it has discretion, pursuant to the California Labor Code, to reduce a PAGA penalty if, "based on the facts and circumstances of the particular case, to do otherwise would result in an award that is unjust, arbitrary and oppressive, or confiscatory."
Next, the court turns to Plaintiffs' second claim for failure to provide accurate itemized wage statements.
B. Claim 2: Failure to Provide Accurate Itemized Wage Statements,
To state a claim for failure to provide accurate itemized wage statements, Plaintiffs must show that (1) Wal-Mart failed to provide compliant wage statements under
At summary judgment, the Court found that Wal-Mart's statements of final pay werе noncompliant because they do not include pay period start and end dates in violation of
1. Whether Wal-Mart's Failure to Provide Compliant Wage Statements was "Knowing and Intentional"
As aforementioned, the California Labor Code requires that a violation of § 226 be "knowing and intentional." Plaintiffs' position is that provision of an inadequate wage statement that is not a clerical error or an inadvertent mistake satisfies the "knowing and intentional" requirement. ECF No. 214 at 9. On the other hand, Wal-Mart argues that knowing and intentional conduct is satisfied only when there is fair notice of the illegality of the practices at issue. ECF No. 215 at 9. Wal-Mart points out that "through its practices, policies, and procedures," Wal-Mart is "aware of the law and that it deliberately and intentionally tries to comply with the law."
The Court finds that the knowing and intentional requirement of § 226 is akin to a willfulness requirement. That is, in order to be liable, Wal-Mart must have willfully intended to issue wage statements that were out of compliance with § 226. The Court bases this conclusion on the fact that the California Supreme Court has linked the knowing and intentional standard to a willfulness standard; that the majority of state appellate and federal trial courts have done the same; that linking the knowing and intentional standard to willfulness is consistent with another § 226 provision; and that the commonly-understood meanings of knowing and intentional support linking knowing and intentional to willfulness.
First, the California Supreme Court has linked the "knowing and intentional" standard in
Subdivision (a) [of Section 216 ], construed together with the Penal Code definition of the word "willful," makes it a crime for an employer having the ability to pay, knowingly and intentionally to refuse to pay wages which he knows are due. The Court placed a similar construction on section 203 of the Labor Code which imposes penalties where an employer "willfully fails to pay...wages of an employee who is discharged or who quits." In interpreting that section, it was recognized that a dispute in good faith as to whether any wages were due would be a defense to an action for such penalties.
Moreover, although Trombley deals with
Furthermore, there is no question that the "settled meaning of 'willful,' as used in § 203, is that an employer has intentionally failed or refused to perform an act which was required to be done." Amaral v. Cintas Corp. No. 2 ,
Second, the majority of courts have found that satisfying the knowing and intentional requirement of § 226 requires something more than simply providing an inadequate wage statement that is not a clerical error or inadvertent mistake. The majority view is that an employer's good faith belief that it is not violating the California Labor Code precludes a finding of a knowing and intentional violation. For example, the Stafford v. Brink's, Inc. court noted:
Courts have diverged over the degree of intentionality required to establish a violation of § 226. All courts agree that the statute requires the employee to prove something more than a simple failure to provide required information. Some courts have held that provision of an inadequate wage statement is generally knowing and intentional so long as it was not a clerical error or inadvertent mistake....The majority of courts, however, have not taken this expansive view of the knowing-and-intentional requirement . In particular, many courts have held that the employer's good faith belief that it is not in violation of § 226 precludes a finding of a knowing and intentional violation.
In the instant case, this Court declines to take the approach for which Plaintiffs advocate and that a minority of courts have adopted, which is that the knowing and intentional requirement can be satisfied by simply showing that an employer provided an inadequate wage statement not as a result of clerical error or inadvertent mistake. Rather, the Court adopts the majority of courts' view that an employer's good faith belief that it is not violating § 226 precludes a finding of a knowing and intentional violation. See, e.g. , Apodaca v. Costco Wholesale Corp. ,
Third, the Court's approach is consistent with the statutory language of § 226(e)(3).
Fourth, the interpretation that an employer's good faith belief precludes a finding of a knowing and intentional violation is consistent with the general understanding of "knowing and intentional." Black's Law Dictionary defines "knowing" as "[h]aving or showing awareness or understanding." Knowing, Black's Law Dictionary (10th ed. 2014). Similarly, "intentional" is defined as "[d]one with the aim of carrying out the act." Intentional,
The Court now turns to whether Wal-Mart's noncompliance with § 226(a) was knowing and intentional. First, the Court analyzes Plaintiffs' § 226(a)(6) claim regarding Wal-Mart's statements of final pay. Then, the Court analyzes Plaintiffs' § 226(a)(9) claim regarding the OVERTIME/INCT line item on Wal-Mart's wage statements.
a. Whether Wal-Mart Knowingly and Intentionally Violated § 226(a)(6) Regarding the Statement of Final Pay
Wal-Mart employees are paid biweekly, and wage statements are produced biweekly to correspond to the biweekly pay periods. Stipulated Facts at ¶ 10. These biweekly on-cycle wage statements include pay period start and end dates.
The Court now discusses the merits of Plaintiffs' § 226(a)(6) claim. Admittedly, there is a dearth of statutory, regulatory, and case law guidance as to the metes and bounds of a good faith dispute as applied to
Many courts have applied § 203 's good faith dispute to § 226. For instance, the Woods court noted that courts have interpreted the § 203 " 'good faith dispute' rule...to apply to California Labor Code Section 226 wage statement penalties." Woods ,
As a result, many courts rely on § 203 's good faith dispute for guidance on how to interpret § 226 's good faith dispute. See, e.g. , Dalton ,
The regulation for a good faith dispute under § 203, Cal. Code Regs. tit. 8 § 13520, provides as follows:
A 'good faith dispute' that any wages are due occurs when an employer presents a defense, based in law or fact which, if successful, would preclude any recover[y] on the part of the employee. The fact that a defense is ultimately unsuccessful will not preclude a finding that a good faith dispute did exist. Defenses presented which, under the circumstances, are unsupported by any evidence, are unreasonable, or are presented in bad faith, will preclude a finding of a 'good faith dispute.'
As interpreted by the case law, a good faith dispute presents in the § 203 context when there is "(1) uncertainty in the law, (2) representations by [an]...authority that no further payment [of wages] was required, or (3) the employer's good faith mistaken belief that wages are not owed grounded in a good faith dispute, which exists when the employer presents a defense based in law or fact which, if successful, would preclude any recovery on the part of the employee." Diaz v. Grill Concepts Servs., Inc. ,
Wal-Mart relies on prongs (1) and (3) of Diaz -that there was uncertainty in the law, and that it had a good faith mistaken belief that the statement of final pay complied with § 226(a).
The Court first discusses the guiding principles behind § 226(a). Then, the Court turns to whether Wal-Mart's оmission of the pay period start and end dates on the statements of final pay was knowing and intentional before the Court's May 11, 2018 summary judgment order. Lastly, the Court turns to whether Wal-Mart's omission of information on its statements of final pay was knowing and intentional after the Court's May 11, 2018 summary judgment order.
i. The Principles Behind § 226(a)
An employer, semimonthly or at the time of each payment of wages, shall furnish to his or her employee, either as a detachable part of the check, draft, or voucher paying the employee's wages, or separately if wages are paid by personal check or cash, an accurate itemized statement in writing showing (1) gross wages earned, (2) total hours worked by the employee, except as provided in subdivision (j), (3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis, (4) all deductions, provided that all deductions made on written orders of the employee may be aggregated and shown as one item, (5) net wages earned, (6) the inclusive dates of the period for which the employee is paid, (7) the name of the employee and only the last four digits of his or her social security number or an employee identification number other than a social security number, (8) the name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, as defined in subdivision (b) of Section 1682, the name and address of the legal entity that secured the services of the employer, and (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee and, beginning July 1, 2013, if the employer is a temporary services employer as defined in Section 201.3, the rate of pay and the total hours worked for each temporary services assignment. The deductions made from payment of wages shall be recorded in ink or other indelible form, properly dated, showing the month, day, and year, and a copy of the statement and the record of the deductions shall be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California.
While amending § 226(a), the California Legislature found that "California employers are 'chronic violators of wage and hour, safety, and tax laws.' " California Assembly Committee on Labor & Employment, Bill Analysis, A.B. 2509 (Steinberg), April 12, 2000. Given accurate wage information, employees would be mоre able to identify any violation of wage and hour laws, so California employers would be less likely to attempt to cheat employees.
The question before this Court is whether Wal-Mart's statements of final pay must comply with § 226(a). Courts have held that it is especially vital that the employee receive an accurate itemized statement in writing at the time of termination to avoid "employee confusion over whether they received all wages owed them, difficulty and expense involved in reconstructing pay records, and forcing employees to make mathematical computations to analyze whether the wages paid in fact compensated them for all hours worked." Elliot v. Spherion Pac. Work, LLC ,
Moreover, the California Court of Appeal's opinion in Soto v. Motel 6 Operating, L.P. also supports the conclusion that Wal-Mart's statement of final pay should comply with § 226.
"Where a federal court has jurisdiction by virtue of diversity of citizenship of the parties, the court must follow state law." Burns v. Int'l Ins. Co. ,
As aforementioned, Wal-Mart employees are paid biweekly with corresponding wage statements issued the same day as payment of their biweekly wages. Stipulated Facts at ¶ 10. An employee's final wage statement is issued on this biweekly pay schedule; it is not issued on the day an employee is terminated and paid final wages unless an employee happens to be terminated on the day biweekly wages are paid and a biweekly wage statement is issued. Thus, Wal-Mart's issuance of a final wage statement could be delayed by up to 14 days after an employee is terminated, paid his or her final wages, and given the statement of final pay (which does not identify the pay period for which the final wages are paid). This exacerbates the problems an employee faces in determining whether or not his or her final wages are correct. These problems an employee faces inform courts' interpretations of California Labor Code provisions such as § 226 because the California Supreme Court has held that "the state's labor laws are to be liberally construed in favor of worker protection." Alvarado v. Dart Container Corp. of California ,
Furthermore, because the statement of final pay is issued and given to the employee on the day of termination, it is likely the only chance an employee has to access his or her Wal-Mart supervisor to discuss or dispute, outside of litigation, the accuracy of the wages received. Thus, as per Alvarado 's concern for worker protection, it is critical that the statement of final pay identify the paid period for final wages paid to allow an employee to evaluate whether he or she has been correctly paid.
Also, Wal-Mart provides computer terminals in its stores for employees to access and print their wage statements. Tr. at 162:15-20. Terminated employees lose access to Wal-Mart's computer terminals. Because the date an employee is terminated does not necessarily fall on the same date the final wage statement is issued, employees could lose access to their final wage statements. For instance, Magadia testified that after he was terminated, he could not log in to Wal-Mart's computer terminals to look at his wage statements. Id. at 117:11-16 ("Q. And after your termination, was your access to Walmart's intranet terminated? A. Yes. Q. So after your access to Walmart's intranet was terminated, were you able to log in to look at your pay stubs at all? A. No."). Moreover, there was testimony indicating that Magadia did not even receive his final wage statement because his Wal-Mart intranet access was terminated. Id. at 118:5-8 ("Q. So in other words, if your access to Walmart's
In sum,
ii. Whether Wal-Mart Knowingly and Intentionally Violated § 226(a)(6) Regarding the Statement of Final Pay Prior to the May 11, 2018 Summary Judgment Order
As aforementioned, Wal-Mart argues that there was a good faith dispute because there was uncertainty in the law. Wal-Mart contends that its final wage statement, not the statement of final pay, must comply with § 226(a)(6). ECF No. 86 at 5. The Court finds that under Diaz , there was uncertainty in the law allowing Wal-Mart to claim there was a good faith dispute prior to the Court's May 11, 2018 summary judgment order.
Before this Court issued its May 11, 2018 summary judgment order, ECF No. 121, there was no case law holding that Wal-Mart's statements of final pay must comply with § 226(a). There was also no case law holding that the statute required issuance of a statement of final pay compliant with § 226(a)(6) regardless of whether a compliant semimonthly wage statement was also issued. Thus, Wal-Mart's mistaken belief that its statements of final pay were not wage statements that needed to comply with § 226(a) was in good faith because Wal-Mart issued a terminated employee a final wage statement on Wal-Mart's semimonthly on-cycle pay period schedule in compliance with § 226(a)(6).
iii. Whether Wal-Mart Knowingly and Intentionally Violated § 226(a)(6) Regarding the Statement of Final Pay After the May 11, 2018 Summary Judgment Order
The Court next addresses whether Wal-Mart had a good faith belief that Wal-Mart was in compliance with § 226(a)(6) after the Court's May 11, 2018 summary judgment order.
First, the May 11, 2018 summary judgment order stated in no uncertain terms: "the Court finds that the Statement of Final Pay violates § 226(a)(6) because it does not include the pay period start and end dates." ECF No. 121 at 16. Wal-Mart could no longer have a good faith belief undergirded by uncertainty in the law because at that point, the law of the case was clear: Wal-Mart's statements of final pay needed to comply with all the requirements of § 226(a). Thus, Wal-Mart should have taken immediate steps to fix the deficient statements of final pay. Yet, Wal-Mart did nothing.
Wal-Mart is still issuing deficient statements of final pay, Stipulated Facts at ¶ 14, and belatedly began to inquire about solutions to the problem sometime during the week before Thanksgiving, on the eve of the November 30, 2018 trial, see Tr. at 389:16-391:2 ("A. The payroll information systems department was asked to estimate what kind of effort they thought it might be with what they knew about the ask [to fix Wal-Mart's deficient statements of final pay and wage statements]. The Court: And what was the date of that request?....A. I believe the week before Thanksgiving."). Although fact discovery closed on May 1, 2018, ECF No. 27 at 2, Plaintiffs did not object to Wal-Mart's trial testimony about Wal-Mart's belated remedial inquires to comply with this Court's May 11, 2018 summary judgment order on the eve of the November 30, 2018 trial.
Despite the Court's May 11, 2018 summary judgment order, Wal-Mart has not asked any employee to change Wal-Mart's deficient statements of final pay. Moreover, Michael Baran, Wal-Mart's technical expert in the people systems payroll area, testified that no change has been made to Wal-Mart's statements of final pay:
Q. Okay. And in Mr. Winn's cross-examination of you, you testified that you were asked by Walmart to make a change as to Walmart's wage statements regarding the OVERTIME/INCT and statements of final pay. Do you recall that testimony? ....
A. I was asked about the change. I wasn't asked to make the change.
Q. Do you know who was asked to make the change at Walmart?
A. I don't believe any single individual that I'm aware of .
Q. Do you know if, if any department was asked to implement the changes you testified to during your cross-examination by Mr. Winn?
A. No one has started to implement anything as you said ....The payroll information systems department was asked to estimate what kind of effort they thought it might be with what they knew about the ask.
Id. at 389:16-390:14 (emphasis added). The payroll information systems department was merely asked to "estimate" the effort needed to make changes. Id. So, for 6 months after the Court's May 11, 2018
Second, Wal-Mart did not have a good faith mistaken belief that its statement of final pay complied with § 226(a)(6). The two pieces of evidence of good fаith upon which Wal-Mart relies are that Wal-Mart's statement of final pay identifies the date on which the statement is issued, and that Wal-Mart conducts exit interviews. However, the fact that the statement of final pay includes its issuance date does not demonstrate that Wal-Mart attempted in good faith to comply with § 226(a)(6). After the Court's May 11, 2018 summary judgment order, Wal-Mart knew that its statement of final pay violated § 226(a)(6), but Wal-Mart still failed to add the pay period start and end dates for final wages paid to the statement of final pay. Wal-Mart's inaction despite being on notice of the illegality of its practice of omitting the pay period dates from its statement of final pay belies Wal-Mart's purported good faith mistaken belief that Wal-Mart was in compliance with § 226(a)(6).
Moreover, Wal-Mart's "evidence" of good faith actually acknowledges that Wal-Mart fails to comply with § 226(a)(6). Wal-Mart is essentially saying that employees might be able to get the information required under § 226(a)(6) from their exit interview. However, the California Labor Code does not excuse a violation of § 226(a)(6) simply because an employee might get the information required under § 226(a)(6) from other sources. Thus, there is no evidence, factually or legally, of a good faith mistaken belief.
Therefore, the Court finds Wal-Mart liable for violating § 226(a)(6) after May 11, 2018 because it knowingly and intentionally issued deficient statements of final pay without a good faith dispute.
b. Whether Wal-Mart Knowingly and Intentionally Violated § 226(a)(9) Regarding the OVERTIME/INCT Line Item
As aforementioned, the § 226 good faith inquiry mirrors the § 203 good faith inquiry. See, e.g. , Woods ,
Here, Wal-Mart relies upon the first and third prongs of a good faith dispute because Wal-Mart argues that there is uncertainty in the law, and that Wal-Mart's actions taken with respect to informing associates about how the MyShare Incentive Awards are included in the regular rate of pay excuse Wal-Mart's failure to comply with § 226(a)(9). ECF No. 215 at 10.
First, Wal-Mart argues that the California Court of Appeal's partially unpublished decision in Fabio Canales v. Wells Fargo Bank, N.A. ,
Moreover, Wal-Mart could not have relied on Canales in issuing deficient wage statements that lacked the hours worked or applicable hourly rates for the OVERTIME/INCT line item. Canales issued on May 30, 2018, after this Court's May 11, 2018 summary judgment order finding that "Wal-Mart's wage statements violate § 226(a)(9)," ECF No. 121 at 14. Thus, by the time Canales issued, the law of the case was well-established: Wal-Mart's wage statements needed to comply with § 226(a)(9).
Moreover, Wal-Mart has always omitted the rate or hours worked for the OVERTIME/INCT line item information from its pay statements. Tr. at 137:20-22 ("Q. As far as you know, has Walmart ever identified the rate or hours on the wage statement for the OVERTIME/INCT line item? A. I'm not aware of that."). Thus, Canales -issued on May 30, 2018-postdates Wal-Mart's practice of issuing deficient wage statements. As Canales postdates Wal-Mart's practice of issuing deficient wage statements, Canales could not have provided support for Wal-Mart's practice of issuing deficient wage statements. In addition, the relevant portion of Canales is unpublished, and pursuant to Civil Local Rule 3-4(e), "[a]ny order or opinion that is designated" as unpublished "may not be cited to this Court, either in written submissions or oral argument, except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel."
Additionally, there is an earlier published California Court of Appeal case, Soto , with which Canales conflicts, a conflict Canales itself acknowledged but never reconciled. ECF No. 131-1 at 13. As aforementioned, in Soto , the plaintiff argued that § 226(a) required vacation pay to be listed on the wage statement for the period in which it was earned, even if the employee did not receive the vacation pay until a later pay period.
Also, as the Court held in its order denying Wal-Mart's motion for partial summary judgment, ECF No. 157, Canales is also at odds with the purpose behind § 226(a)(9). Courts have described the purpose of § 226(a)(9) as "requiring more information and disclosure to employees." See, e.g. , York ,
In sum, Canales does not create any uncertainty in California labor laws, which as the California Supreme Court has held, "are to be liberally construed in favor of worker protection." Alvarado ,
Moreover, as aforementioned, the Court's May 11, 2018 summary judgment order placed Wal-Mart on notice that its wage statements were noncompliant with § 226(a)(9). ECF No. 121 at 14. Yet Wal-Mart is still issuing deficient wage statements and belatedly began to inquire about solutions to the problem sometime during the week before Thanksgiving, on the eve of the November 30, 2018 trial. See Tr. at 369:14-19; id. at 389:16-391:2. Michael Baran, Wal-Mart's technical expert in the people systems payroll area, testified that no change has been made to Wal-Mart's wage statements regarding the OVERTIME/INCT line item and that Wal-Mart has not requested anyone at Wal-Mart to make any such change:
Q. Okay. And in Mr. Winn's cross-examination of you, you testified that you were asked by Walmart to make a change as to Walmart's wage statements regarding the OVERTIME/INCT and statements of final pay. Do you recall that testimony? ....
A. I was asked about the change. I wasn't asked to make the change.
Q. Do you know who was asked to make the change at Walmart?
A. I don't believe any single individual that I'm aware of .
Q. Do you know if, if any department was asked to implement the changes you testified to during your cross-examination by Mr. Winn?
A. No one has started to implement anything as you said ....The payroll information systems department was asked to estimate what kind of effort they thought it might be with what they knew about the ask.
Id. at 389:16-390:14 (emphasis added). Michael Baran also testified that Wal-Mart has not figured out what change to make: "Q. Has Walmart been looking into whether to modify its wage statements to display rates and hours that correspond to the overtime incentive payment? A. Yes. Q. Has it figured out how to do that yet? A. No, we have not." Tr. at 369:14-19. So, for 6 months after the Court's May 11, 2018 summary judgment order issued, Wal-Mart
Second, Wal-Mart has not demonstrated a good faith mistaken belief that it complied with § 226(a)(9) under the third prong of the good faith analysis (an employer's good faith mistaken belief grounded in a good faith dispute). § 226(a)(9) requires that wage statements contain "all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee." Wal-Mart's argument that as evidence of its good faith, it informed associates that "[e]arned MyShare Incentive Awards will be included in the regular rate of pay when calculating overtime for the incentive quarter" and "flags this for associates in its written MyShare Quarterly Incentive Plan Program," Ex. 125-7; ECF No. 215 at 10, is unpersuasive and does not implicate a good faith dispute. Wal-Mart's MyShare Quarterly Incentive Plan Program (Exhibit 125) states that "[q]ualifying participants employed in an eligible facility may receive a MyShare incentive award." This statement is emblematic of the very high level of generality the MyShare Quarterly Incentive Plan Program describes how the OVERTIME/INCT line item is calculated. In other words, Wal-Mart's MyShare Quarterly Incentive Plan Program fails to disclose employees' hourly rates and corresponding hours worked for the OVERTIME/INCT line item, as required by § 226(a)(9). The purpose behind enforcing § 226(a)(9) is so "that employees are adequately informed of compensation received and are not shortchanged by their employers." Soto ,
Therefore, the Court concludes that Wal-Mart is liable for violating § 226(a)(9) because it knowingly and intentionally issued wage statements with the OVERTIME/INCT line item.
Having found that Wal-Mart knowingly and intentionally violated both § 226(a)(6) (regarding the statement of final pay claim) after the Court's May 11, 2018 summary judgment order, and § 226(a)(9) (regarding the OVERTIME/INCT claim), the Court turns to the third prong of the inquiry: whether the Plaintiffs suffered injury.
2. Whether Plaintiffs Suffered Injury from Wal-Mart's Omissions from the Statement of Final Pay and the OVERTIME/INCT Line Item
First, the Court discusses whether Plaintiffs suffered any injury because Wal-Mart omitted: (1) the pay period dates from the statement of final pay, and (2) the hours worked and rate paid from the OVERTIME/INCT line item. Then, the Court turns to whether Magadia has Article III standing to bring his claims for violations of
Wal-Mart contends that Magadia suffered no injury because he admitted as such in his testimony: "Q. Have you been injured in any way because of the pay stubs you received? A. Oh. No." Tr. at 99:17-19. Magadia also admitted that he
Injury under § 226 is statutorily defined by the California Labor Code:
An employee is deemed to suffer injury for purposes of this subdivision if the employer fails to provide accurate and complete information [on its wage statements] as required by any one or more of items (1) to (9), inclusive, of subdivision (a) and the employee cannot promptly and easily determine from the wage statement alone ...any of the other information required to be provided on the itemized wage statement pursuant to items ... (6) and (9) of subdivision (a)."
Here, Magadia testified that he could not determine the start and end dates from the statement of final pay (relating to Plaintiffs' § 226(a)(6) claim). Tr. at 102:12-22. Todd Stokes, Wal-Mart's divisional human resources director, conceded this fact in his testimony: "Q. Looking at the statement of final pay itself, without using any other wage statements or any calendar or anything else, can an employee determine what pay period he or she is being paid for on the statement of final pay? A. They cannot determine the pay period specifically off this document."
Moreover, Magadia testified that he cannot determine the rate and hours for the OVERTIME/INCT line item (relating to Plaintiffs' § 226(a)(9) claim).
As such, the Court finds that Magadia's testimony establishes that he has suffered injury for his claims under § 226(a)(6) (regarding the statement of final pay) and § 226(a)(9) (regarding the OVERTIME/INCT line item). Magadia's testimony is corroborated by the testimony of Stokes, Wal-Mart's divisional human resources director. Next, the Court discusses Wal-Mart's contention that Magadia does not have Article III standing.
a. Whether Magadia Possesses Article III Standing
Wal-Mart contends that Magadia does not have Article III standing pursuant to Spokeo, Inc. v. Robins , --- U.S. ----,
Second, the Spokeo Court reaffirmed that the legislature may "elevat[e]" injuries "previously inadequate in law" to legally cognizable "concrete" injuries.
The Ninth Circuit, in interpreting Spokeo , has held that in evaluating a claim of harm, there are two inquiries. "(1) [W]hether the statutory provisions at issue were established to protect [ ] concrete interests (as opposed to purely procedural rights), and if so, (2) whether the specific procedural violations alleged in this case actually harm, or present a material risk of harm to, such interests." Robins v. Spokeo, Inc. ,
First, the statutory provisions were established to protect the concrete interests of employees who have a legitimate right of access to their pay information to protect their interests. These are real rights, rather than purely legal or procedural rights. As an example, in amending § 226(a) to include § 226(a)(9), the provision implicated by Plaintiffs' claim regarding the OVERTIME/INCT line item, the California Senate bill analysis incorporated comments that employees "are often provided little information about their wages," and that "this bill will remedy that problem." York v. Starbucks Corp. ,
In sum, it seems the animating purpose behind § 226(a), with all its provisions regarding what must be disclosed on wage statements, is employee protection. Intertwined with this purpose is an element of deterrence, as "California employers are 'chronic violators of wage and hour, safety, and tax laws.' "
Analogously, in Spokeo II , the Fair Credit Reporting Act's ("FCRA") provisions were at issue.
Second, the specific procedural violations alleged in this case-violations of § 226(a)(6) (regarding the statement of final pay claim) and § 226(a)(9) (regarding the OVERTIME/INCT claim)-actually harm the concrete interests of employees in having access to their wage information. In Spokeo II , the Ninth Circuit noted that the plaintiff's credit report "falsely reported that he is married with children, that he is in his 50s, that he is employed in a professional or technical field, that he has a graduate degree, and that his wealth level is higher than it is."
i. Harm to Plaintiffs' Concrete Interests under § 226(a)(6) (regarding the statement of final pay claim)
In relation to Plaintiffs' claim under § 226(a)(6), it is critical that the statement of final pay contain accurate information regarding "the inclusive dates of the period for which the employee is paid" because the statement is issued on the day the employee is terminated.
Even Wal-Mart's own witness, Todd Stokes, concedes that Wal-Mart employees suffer the statutorily-defined injury by being unable to determine from the face of the statement of final pay the pay period for which employees are being paid. The California Labor Code statutorily defines injury as the inability to "promptly and easily determine from the wage statement alone" items required to be disclosed on a wage statement.
ii. Harm to Plaintiffs' Conсrete Interests under § 226(a)(9) (regarding the OVERTIME/INCT claim)
In relation to Plaintiffs' claim under § 226(a)(9), without sufficient information on their wage statements, Plaintiffs would not be able to tell if they are owed additional money from their employer and if there are mistakes on their wage statements. This is especially important given that Wal-Mart employees' OVERTIME/INCT line item is calculated over a quarterly basis, meaning that many months elapse until employees are able to see the line item on their wage statements. Without the requisite "applicable hourly rates in effect...and the corresponding number of hours worked at each hourly rate by the employee," it is especially difficult for employees to assess whether they have been paid correctly.
Stokes also concedes that Wal-Mart employees suffer the statutorily-defined injury by being unable to determine from the wage statement alone the hours worked and rate paid for the OVERTIME/INCT line item (regarding Plaintiffs' claim under § 226(a)(9) ). Stokes testified: "Q. If you look at an OVERTIME/INCT line item on a particular pay stub, is an employee able to tell how the OVERTIME/INCT is calculated without looking at anything else?....A. I would say no." Tr. at 137:14-19. Furthermore, Magadia testified as to his confusion stemming from his inability to determine the rate and hours for the OVERTIME/INCT line item. Magadia testified: "Q. Are you confused by the way those, either of those two items are displayed on the wage statement? A. Yes, sir. Q. What is confusing about them? A. Because I don't see the, for OVERTIME/INCT, I don't see the rate and hours."
The cases Wal-Mart cites in its post-trial briefing are inapposite. In support of Wal-Mart's claim that Plaintiffs must allege monetary damages to allege injury, Wal-Mart
In addition, Wal-Mart cites Mie Yang v. Francesca's Collections, Inc. , where a § 226 claim was dismissed at the pleadings stage because the "injury requirement cannot be satisfied simply because one of the nine itemized requirements in in section 226(a) is missing from a wage statement."
In addition, other courts have held that so long as a plaintiff suffers from the statutorily-defined injury, that is sufficient to state a claim for damages under § 226(e). Brewer v. General Nutrition Corp. ,
As discussed above, Magadia's confusion meets the requirements of injury in fact under Spokeo and is a sufficient showing of injury under
In sum, Plaintiffs have standing to pursue both claims under both § 226(a)(6) and § 226(a)(9) because they have suffered the statutorily-defined injury under § 226(e)(2)(B). Spokeo poses no obstacle to the Plaintiffs' standing here.
3. Summary
a. § 226(a)(6) (regarding the statement of final pay claim)
The Court finds that (1) Wal-Mart failed to provide compliant wage statements under
b. § 226(a)(9) (regarding the OVERTIME/INCT claim)
The Court finds that (1) Wal-Mart failed to provide compliant wage statements under
4. Damages
Plaintiffs request § 226(e) statutory damages as well as PAGA penalties for Wal-Mart's violation of § 226. First, the Court discusses § 226(e) statutory damages and PAGA penalties for Wal-Mart's violations of § 226(a)(9), Plaintiffs' OVERTIME/INCT claim. Second, the Court discusses § 226(e) statutory damages and PAGA penalties for Wal-Mart's violations of § 226(a)(6), Plaintiffs' statement of final pay claim. After a discussion of the damages, the Court addresses Wal-Mart's arguments for why Plaintiffs' recovery here should be reduced or eliminated.
a. Damages for Violation of § 226(a)(9) (regarding the OVERTIME/INCT claim)
The Court first discusses § 226(e) statutory damages for Wal-Mart's violation of § 226(a)(9), Plaintiffs' OVERTIME/INCT claim, then turns to PAGA penalties.
i. § 226(e) Statutory Damages
Dr. Kriegler calculated § 226(e) statutory damages for Wal-Mart's violation of § 226(a)(9) (regarding the OVERTIME/INCT line item) to total $ 48,046,000. The Court found Wal-Mart liable for violating § 226(a)(9) after the statute of limitations date of December 2, 2015. Therefore, the Court awards the OVERTIME/INCT Wage Statement class $ 48,046,000 in § 226(e) statutory damages for Wal-Mart's violation of § 226(a)(9).
Next, the Court addresses the award of PAGA penalties.
ii. PAGA Penalties
Plaintiffs request $ 131,427,750 in PAGA penalties for the OVERTIME/INCT Wage Stаtement Class for Wal-Mart's violation of § 226(a)(9). Ex. 201-7.
Wal-Mart argues that if the Court were to award any PAGA penalties, they should be reduced from the maximum amount requested so that the penalties are not unjust, arbitrary, and oppressive. ECF No. 215 at 15. Moreover, Wal-Mart argues that any PAGA award should be proportional to actual damages and any non-PAGA penalties awarded, and take into consideration whether Wal-Mart acted willfully or in good faith.
The California Labor Code grants courts discretion to reduce a PAGA penalty if, "based on the facts and circumstances of the particular case, to do otherwise would result in an award that is unjust, arbitrary and oppressive, or confiscatory."
Here, the Court finds that awarding the maximum amount of the requested PAGA penalties would be unjust and oppressive, as explained below. As such, the Court awards $ 48,046,000 in PAGA penalties to the OVERTIME/INCT Wage Statement class for Wal-Mart's violation of § 226(a)(9). The amount of PAGA penalties awarded to the OVERTIME/INCT Wage Statement class would therefore match 100% the amount of § 226(e) statutory damages awarded, and is approximately 36% of the original amount of PAGA penalties Plaintiffs requested. The law supports the Court's decision to reduce the PAGA penalties.
In Aguirre v. Genesis Logistics , the defendant was potentially liable up to $ 500,000 in § 226(e) statutory damages for violating § 226. The Aguirre court reduced PAGA penalties from $ 1.8 million to $ 500,000 (approximately 28% of the original amount requested) "[g]iven that the potential PAGA penalty is substantially greater than the penalty under Section 226."
In Fleming v. Covidien Inc. , the court found that awarding the maximum PAGA penalty of $ 2.8 million would be unjust because "Defendants were not aware that the wage statements violated the law and took prompt steps to correct all violations once notified."
In Thurman v. Bayshore Transit Management, Inc. , the California Court of Appeal affirmed a 30% reduction of the maximum PAGA penalties requested because it would be unjust to award the maximum penalty amount when "defendants took their obligations under Wage Order No. 9 seriously and attempted to comply with the law."
As mentioned above, Plaintiffs request $ 131,427,750 in PAGA penalties for the OVERTIME/INCT Wage Statement Class for Wal-Mart's violation of § 226(a)(9). If Plaintiffs were to recover the maximum PAGA penalties available to the OVERTIME/INCT Wage Statement class, then the PAGA penalty for the OVERTIME/INCT Wage Statement class would be 273% greater than Plaintiffs' § 226(e) statutory damages of $ 48,046,000. The Court has not found any case that awards such a disproportionate PAGA penalty relative to statutory damages. The amount of PAGA penalties awarded and the amount of statutory penalties awarded for the underlying Labor Code violation should not be too disparate. Aguirre ,
Here, the Court is awarding $ 48,046,000 in PAGA penalties out of a total requested of $ 131,427,750. The Court has not found any case awarding a PAGA penalty as high as $ 131,427,750. PAGA penalties are paid 75% to the California Labor and Workforce Development Agency and 25% to aggrieved employees. Thus, in wage and hour class action cases that settle, which are the overwhelming majority of such cases, very little of the total settlement is paid to PAGA penalties in order to maximize payments to class members. See, e.g. , Ceja-Corona v. CVS Pharmacy, Inc. ,
In all the wage and hour class action settlements the Court found, the amount of statutory damages awarded far exceeded the amount of PAGA penalties awarded, like in Franco . For instance, the Chu court approved the allocation of $ 10,000 in PAGA penalties out of a total settlement fund of $ 6,900,000.
Moreover, the OVERTIME/INCT line item is predicated on the award of Wal-Mart's discretionary MyShare bonus. The Court recognizes that Wal-Mart had no duty to pay employees any bonuses in the first instance. To penalize Wal-Mart so disproportionately relative to statutory
Additionally, the Court recognizes the difficulty in calculating the OVERTIME/INCT line item. As aforementioned, the OVERTIME/INCT line item is predicated on the award of a MyShare discretionary bonus, which is awarded quarterly. Once the quarterly MyShare bonus is awarded, Tr. at 158:4-7, Wal-Mart adjusts the base rate of pay as well as any overtime accrued over the entire quarter by the employee to account for the additional MyShare bonus that has been paid, id. at 158:11-17. In essence, the OVERTIME/INCT line item is "an additional amount of overtime dollars that [employees have] earned based on the fact that the regular rate of pay needs to be adjusted up" to take into account the MyShare discretionary bonus award. Id. at 158:18-21.
However, as discussed above, Wal-Mart's on-cycle wage statements are biweekly, and every time an employee accrues overtime, the overtime is listed on the employee's biweekly wage statement. Id. at 159:2-3. Thus, in order for Wal-Mart to calculate the OVERTIME/INCT line item, Wal-Mart must add together all the hours of overtime an employee worked over the quarter that the MyShare bonus is paid, prorate the MyShare bonus to account for the number of overtime hours worked in the quarter, then adjust the overtime hourly rate for overtime already paid upward based on the prorated amount of the MyShare bonus. Id. at 394:14-25. Admittedly, the Court has difficulty in understanding how this calculation works, as it was not explained in any amount of detail at trial or in any evidence. Thus, this calculation is not a simple matter of multiplying an hourly wage by the number of hours worked. However, this also underscores the importance of Wal-Mart providing the hours and rate on the wage statements. As discussed above, employees cannot calculate the hours and rate from the face of the wage statements, which makes challenging the accuracy of the wage statements difficult.
Because the Court recognizes the challenges Wal-Mart faces in calculating and displaying the OVERTIME/INCT line item, the Court believes that a decrease in the amount of PAGA penalties awarded for Wal-Mart's failure to display the hours worked and rate paid for the OVERTIME/INCT line item is warranted. However, that does not excuse Wal-Mart's failure to comply with the Labor Code. Wal-Mart admits that the OVERTIME/INCT line item is representable by an hourly rate multiplied by the hours worked. Tr. at 395:16-18.
b. Damages for Violation of § 226(a)(6) (regarding the statement of final pay claim)
Plaintiffs request § 226(e) statutory damages as well as PAGA penalties for Wal-Mart's violation of § 226(a)(6), Plaintiffs' statement of final pay claim. "It is within the sound discretion of the trier of fact to select the formula most appropriate to compensate the injured party. The law requires only that some reasonable basis of computation of damages be used, and
i. § 226(e) Statutory Damages
First, the Court notes that Wal-Mart was found liable to the Final Wage Statement Class for violations of § 226(a)(6) occurring after May 11, 2018, the date the Court issued its summary judgment order giving notice to Wal-Mart that its statements of final pay were out of compliance with the Labor Code. ECF No. 121. However, Plaintiffs have not provided any § 226(e) statutory damages calculations for the period after May 11, 2018. Plaintiffs' request of $ 5,823,900 in § 226(e) statutory damages for Wal-Mart's violations of § 226(a)(6) is calculated from a start date of December 2, 2015, not May 11, 2018. Ex. 201-7. Thus, Plaintiffs' monetary request is inapplicable here because the Court does not find liability until May 11, 2018.
"It is 'one of the most basic propositions of law...that the plaintiff bears the burden of proving his case, including the amount of damages .' " Tourgeman v. Nelson & Kennard ,
ii. PAGA Penalties
Second, Plaintiffs request $ 28,928,500 in PAGA penalties for the Final Wage Statement Class. Ex. 201-7. The Court notes that the award of any PAGA penalties here is not limited to the period of time after May 11, 2018. Because a PAGA claim seeks penalties on the LWDA's behalf, plaintiffs "seeking civil penalties under PAGA for a violation of section 226(a) do[ ] not have to satisfy the 'injury' and 'knowing and intentional' requirements of section 226(e)(1)." Lopez v. Friant & Assocs., LLC ,
However, as the Court discussed above, the court has discretion to reduce the amount of PAGA penalties awarded if, "based on the facts and circumstances of the particular case, to do otherwise would result in an award that is unjust, arbitrary and oppressive, or confiscatory."
First, the Court found there was uncertainty in the law allowing Wal-Mart to claim there was a good faith dispute from December 2, 2015 to the Court's May 11, 2018 summary judgment order. Specifically, § 226(a)(6) provides: "[a]n employer, semimonthly or at the time of each payment of wages, shall furnish to his or her employee...an accurate itemized statement in writing...." (emphasis added). The statute uses the disjunctive "or," implying that the provision of "an accurate itemized statement" could take place either semimonthly or at the time wages were paid. By using the disjunctive "or," § 226(a)(6) implied that employers could be in compliance with the law so long as a compliant wage statement was issued semimonthly, and not necessarily at the time of the payment of any wages. Thus, Wal-Mart had a good faith belief that its final wage statements complied with § 226(a)(6) from December 2, 2015, to May 11, 2018, approximately two and a half years. Wal-Mart did not have a good faith belief of its compliance with § 226(a)(6) only from the May 11, 2018 summary judgment order to the November 30, 2018 trial, which is approximately 6 months. Because Wal-Mart had a good faith belief for such an extended period of time, the Court finds that awarding the full $ 28,928,500 in PAGA penalties requested by the Plaintiffs would be unjust and oppressive, and that a significant rеduction is appropriate. California courts have held that a defendant's attempt to comply with the law is a basis for reduction in a PAGA penalties award. Thurman ,
Second, as the Court discussed above, the Aguirre , Fleming , and Thurman courts all exercised their broad discretion under California law in reducing the amount of PAGA penalties awarded. For instance, the Aguirre court reduced PAGA penalties from $ 1.8 million to $ 500,000 so that the PAGA penalty would be proportional to the amount of § 226(e) statutory damages awarded.
Accordingly, the Court awards $ 5,785,700 in PAGA penalties to the Final Wage Statement Class for Wal-Mart's violations of § 226(a)(6).
c. Wal-Mart's Additional Arguments for Why Recovery Should be Reduced or Eliminated
Additionally, Wal-Mart advances six main arguments for why any recovery should be reduced or eliminated. First, Wal-Mart claimed at trial that damages should terminate at the date of class certification. Id. at 58:23-59:10. Second, Wal-Mart argues that recovery under PAGA along with § 226(e) penalties would constitute
i. Whether Damages Terminate at the Date of Class Certification
Wal-Mart provides no support for its assertion that damages must terminate at the date of class certification. In fact, no less an authority than the United States Supreme Court has held this is not so. The United States Supreme Court has upheld the legality of "front pay" in the context of labor actions under Title VII of the Civil Rights Act of 1964. Pollard v. E.I. du Pont de Nemours & Co. ,
ii. Whether Awarding PAGA Penalties and § 226(e) Damages Constitutes Impermissible Double Recovery
Awarding both PAGA damages and § 226(e) penalties would not constitute impermissible double recovery. The California Court of Appeal has held that for violations of § 226(a), "[t]here are three different potential remedies available...(1) actual damages or statutory penalties; (2) injunctive relief; and (3) civil penalties ." Raines v. Coastal Pac. Food Distribs., Inc. ,
This interpretation of California law is reinforced by PAGA's statutory text, which provides that "nothing in this part shall operate to limit an employee's right to pursue or recover other remedies available under state or federal law, either separately or concurrently with an action taken under this part."
The Court acknowledges, and Wal-Mart points out, that there is countervailing authority that stands for the proposition that recovery under both PAGA and additional Labor Code sections would be impermissible. See, e.g. , Guifu Li v. A Perfect Day Franchise, Inc. ,
iii. Whether Awarding PAGA Penalties Would Violate Due Process and the Excessive Fines Clause
Wal-Mart claims that awаrding PAGA penalties would first, violate the Eighth Amendment's Excessive Fines Clause, and second, violate due process. First, the Court finds that under current law, the Eight Amendment's Excessive Fines Clause is inapplicable here. The United States Supreme Court has held: "[w]hile we agree with petitioners that punitive damages advance the interests of punishment and deterrence, which are also among the interests advanced by the criminal law, we fail to see how this overlap requires us to apply the Excessive Fines Clause in a case between private parties ." Browning-Ferris Indus. of Vermont, Inc. v. Kelco Disposal, Inc. ,
In the instant case, there are two private parties litigating civil penalties. Admittedly, 75% of the PAGA award goes to the State of California by statute.
Second, the award of PAGA penalties does not violate due process. Wal-Mart plucks a quote out from the United States Supreme Court's decision in State Farm that states that the penalty must have "a nexus to the specific harm suffered." State Farm Mutual Auto. Ins. Co. v. Campbell ,
In sum, the Eighth Amendment's Excessive Fines Clause does not apply here because the instant case only involves private parties. Moreover, there is a nexus between PAGA penalties awarded and the harm suffered via an underlying violation of the Labor Code because a PAGA cause of action is available for litigants to vindicate their rights under the Labor Code. Thus, awarding PAGA penalties does not violate due process.
iv. Whether PAGA Penalties Should be Limited to Past Labor Code Violations for which the LWDA has been Provided Notice
California law requires that an aggrieved employee first give notice to the LWDA identifying the Labor Code provisions alleged to have been violated by an employer.
Additionally, the Schiller v. David's Bridal, Inc. court considered post-LWDA letter PAGA penalties as well. There, the court estimated PAGA penalties for the purpose of calculating the amount in controversy.
The Court's interpretation of the PAGA statute is also supported by the legislative history. In allowing for the private right of action if the LWDA declined to investigate an alleged violation of the Labor Code, the bill sponsors noted that "private actions to enforce the Labor Code are needed because [the] LWDA simply does not have the resources to pursue all of the labor violations occurring in the garment industry, agriculture, and other industries." California Assembly Committee on Judiciary, Bill Analysis, S.B. 796 (Dunn), June 26, 2003; see also Arias ,
Wal-Mart argues that the statutory text supports its argument that PAGA is limited to only redressing violations of the Labor Code prior to the LWDA notice letter. PAGA requires that an aggrieved employee provide notice to the LWDA for "specific provisions of this code alleged to have been violated ."
In sum, the Court holds that PAGA penalties are not limited to redressing past violations of the California Labor Code for which the LWDA has been provided notice. Rather, parties may seek to recover PAGA penalties on continuing violations of the Labor Code even after the LWDA notice letter is sent. This conclusion is buttressed by prior case law and legislative intent, which indicate that the LWDA does not have the capacity to pursue all violations of the Labor Code, so PAGA empowers employee plaintiffs to seek redress.
v. Whether PAGA's Default Civil Penalties or those Penalties under
Under PAGA, the "default" penalty is $ 100 per each aggrieved employee per pay period for the initial violation and $ 200 per pay period for a subsequent violation.
The only non-federal, California state court case interpreting the interplay between PAGA and § 226 the Court has found, and the parties have cited, is Raines . In Raines , the California Court of Appeal held:
Some courts have read section 226.3 to limit civil penalties [under PAGA] to only those instances where the employer failed to provide any wage statement or keep records....We find more persuasive a decision that found section 226.3 sets out a civil penalty for all violations of section 226 (Culley v. Lincare, Inc. (E.D. Cal. 2017) , 1194 )....Section 226(a) is intended to require employers to provide an adequate wage statement, itemizing the information to be included, to assist the employee in determining whether he or she has been compensated properly. Section 226.3 provides the civil penalty for failure to comply. 236 F. Supp. 3d 1184
"[F]ederal courts sitting in diversity cases, when deciding questions of substantive law, are bound by state court decisions as well as state statutes." Hanna ,
vi. Whether Dr. Kriegler's Damages Calculations are Reliable
Wal-Mart asserts that because Dr. Kriegler "failed to show his work," his damagеs calculations should not be trusted. ECF No. 215 at 16-17. The Court disagrees. "[I]f an expert reliably applies the appropriate legal formula to determine damages in a particular case, then that expert's methodology is reliable." Nationwide Trans. Fin. v. Cass Info. Sys., Inc. ,
C. Judicial Notice
Wal-Mart has filed a request that the Court take judicial notice of the California Labor Commissioner's Memorandum of Points and Authorities re New Trial and the California Labor Commissioner's Memorandum of Points and Authorities In Opposition to Petition For Writ of Mandate in an action entitled Bodega Latina Corp. v. Labor Commissioner of the State of California , Los Angeles Superior Court, Case No. BS162695. ECF No. 215-1. Both of these documents are briefs submitted in the Bodega case that argue that the Bodega court should allow the LWDA to investigate Labor Code violations years after the LWDA first declined to investigate them. Plaintiffs object to this request for judicial notice because "the materials attached thereto were never submitted at trial to permit Plaintiff to object and/or question witnesses about said documents." ECF No. 216 at 3. Plaintiffs' argument is not well-taken and is beside the point. A court "may take notice of proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct relation to matters at issue." United States ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc. ,
In response to Wal-Mart's request for judicial notice, Plaintiffs submit a request to address the documents Wal-Mart provided. ECF No. 216 at 3. This request is DENIED. Also in response to Wal-Mart's request for judicial notice, Plaintiffs submit their own request for judicial notice of the settlement in Brown v. Wal-Mart Store, Inc. , No. 09-cv-3339-EJD, "which further supports Defendants' ability to pay the PAGA penalties." ECF No. 216 at 3. The proceedings in Brown do not have a direct relation to matters at issue in this case as required under Robinson Rancheria Citizens Council -the question of Wal-Mart's ability to pay any PAGA penalties has never been litigated in the instant case-so Plaintiffs' request for judicial notice is DENIED.
III. CONCLUSION
For the foregoing reasons, the Court decertifies the Meal Period Regular Rate Class, and denies Magadia's individual claim for Wal-Mart's violation of
Moreover, the Court awards Plaintiffs statutory damages under
As aforementioned, Plaintiffs did not calculate the damages amount for Wal-Mart's violations of § 226(a)(6) (regarding the statement of final pay claim) occurring after May 11, 2018, and thus did not meet their burden of proof on damages for the statement of final pay claim. Therefore, the Court does not award § 226(e) statutory damages to the Final Wage Statement Class. However, the Court awards $ 5,785,700 in PAGA penalties to the Final Wage Statement Class for Wal-Mart's violations of § 226(a)(6).
Thus, Plaintiffs are awarded $ 48,046,000 in total § 226(e) statutory damages, and $ 53,901,700 in total PAGA penalties for an overall total of $ 101,947,700.
IT IS SO ORDERED.
Notes
Plaintiffs also argue that if the Court were to find that Magadia lacks Article III standing, the Court should remand the matter to state court. Here, the Court has not found a lack of Article III standing, so the Court declines to remand the instant action to state court. Furthermore, remand is only required if the Court lacks subject matter jurisdiction over all claims in the matter. Lee v. American Nat'l Ins. Co. ,
Courts have interchangeably used a good faith exemption, a good faith defense, and a good faith dispute when analyzing claims under
Because the unpublished portion of Canales is available neither on Westlaw nor LexisNexis, the Court relies on the document Wal-Mart submitted in its request for judicial notice, ECF No. 131-1, which was granted, ECF No. 157 at 4 n.1.
December 2, 2015 is the statute of limitations date for Plaintiffs' actions brought under § 226.
For context, the full quote is: "Lawful out-of-state conduct may be probative when it demonstrates the deliberateness and culpability of the defendant's action in the State where it is tortious, but that conduct must have a nexus to the specific harm suffered by the plaintiff."