JOSE LUIS MORALES et al., Plaintiffs and Appellants, v. 22ND DISTRICT AGRICULTURAL ASSOCIATION OF THE STATE OF CALIFORNIA, Defendant and Respondent.
No. D067247
Fourth Dist., Div. One.
July 13, 2016
504, 513
COUNSEL
Gordon & Rees, James J. McMullen, Matthew G. Kleiner, Autumn Moody and Justin Michitsch for Defendant and Respondent.
AARON, J.—This appeal addresses a collective action alleging nonpayment of overtime, as required by state law under
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Jose Luis Morales and 177 other similarly situated plaintiffs (collectively appellants) sued their employer, the 22nd District Agricultural Association of the State of California (the DAA), alleging nonpayment of overtime, as required by state law under
Appellants are seasonal employees of the DAA who assist with amusement and seasonal operations. Appellants are limited to working 119 days in a calendar year and are internally referred to as “119-day employees.” Appellants are not limited as to the number of hours that they may work in those 119 days. Appellants filed a putative class action against the DAA to recover penalties and damages for alleged violations of state and federal overtime laws. The trial court sustained, without leave to amend, the DAA‘s demurrer to appellants’ section 510 cause of action. After the trial court conditionally certified the case as a collective action, the DAA answered the complaint, asserting the amusement exemption as an affirmative defense to the remaining federal claim. Under this exemption, an employee of an amusement or recreational establishment is not entitled to overtime compensation if certain criteria are met. (
After conclusion of the DAA‘s evidence, the trial court denied appellants’ oral motion for nonsuit. The jury rendered a special verdict in favor of the DAA and the court later entered judgment. Thereafter, the parties submitted a stipulation regarding the form of judgment and attached a proposed judgment. The trial court endorsed the parties’ stipulation, but did not separately enter the agreed form of judgment. Appellants contend, and the DAA does not contest, that the initial judgment, as modified by the order approving the parties’ stipulation, constitutes a final, appealable judgment. Appellants timely appealed from the order sustaining the demurrer and from the judgment.
DISCUSSION
Appellants contend that reversal of the judgment in favor of the DAA on their FLSA claim is required because the trial court (1) improperly denied their nonsuit motion; (2) erred in instructing the jury; (3) provided an erroneous special verdict form; and (4) improperly excluded party witnesses from the courtroom. We address these contentions in part I of this opinion, concluding that appellants have not met their burden to demonstrate reversible error. In part II of the opinion, we conclude that the trial court properly sustained the DAA‘s demurrer to appellants’ section 510 claim, but further conclude that the court erred in denying leave to amend.
I. FLSA Claim
A. Legal and Factual Background
The FLSA requires that an employer pay overtime wages to employees unless those employees are classified as exempt employees under applicable law. (
The amusement exemption thus has two main elements: first, the business must qualify as an “amusement or recreational” establishment and second, the establishment must satisfy either the duration test or the receipts test. (
Appellants contend that they are entitled to overtime wages under the FLSA. As an affirmative defense, the DAA asserted that it is exempt from the FLSA under the amusement exemption. The matter proceeded to trial, at which the DAA presented evidence that it is exempt from the FLSA under the amusement exemption. After the conclusion of the DAA‘s evidence, appellants orally moved for nonsuit, asserting that, as a matter of law, the amusement exemption did not apply because the DAA failed to show (1) that it existed to promote youth summer employment, and (2) that the majority of its income was derived from amusement or recreation. The trial court denied the motion, concluding that the evidence could support a finding that the DAA operated as a single establishment, that the nature of that single establishment was amusement or recreational, and that it satisfied the receipts test.
B. Eligibility for Amusement Exemption
As a preliminary matter before we examine the nonsuit motion, the parties dispute whether eligibility for the amusement exemption turns on (1) the nature of the employer‘s revenue producing activities, or (2) the work
Relying on Brennan v. Six Flags over Georgia, Ltd. (5th Cir. 1973) 474 F.2d 18 (Six Flags), appellants contend that it is the “nature [or character] of the work” and “not the source of the remuneration, that controls” and “gives rise to the need for [the amusement] exemption.” (Id. at p. 19.) About a year after Six Flags, however, the Fifth Circuit came to the opposite conclusion, holding that an employer‘s “principal activity should be determinative of [its] eligibility for an exemption.” (Brennan v. Texas City Dike & Marina, Inc. (5th Cir. 1974) 492 F.2d 1115, 1119 (Texas City).) The Fifth Circuit provided no reason in Texas City regarding its change in position. (Ibid.) The Sixth, First and Tenth Circuits later adopted the Fifth Circuit‘s new position that it is the employer‘s principal activity that controls. (Marshall v. New Hampshire Jockey Club, Inc. (1st Cir. 1977) 562 F.2d 1323, 1331, fn. 4 (Marshall); Brennan v. Southern Productions, Inc. (6th Cir. 1975) 513 F.2d 740, 746-747; Hamilton v. Tulsa County Public Facilities Authority (10th Cir. 1996) 85 F.3d 494, 497; Chessin v. Keystone Resort Management, Inc. (10th Cir. 1999) 184 F.3d 1188, 1193–1194 (Chessin).)3 We find these “numerous and consistent” federal circuit court decisions to be persuasive on the issue. (Conrad v. Bank of America (1996) 45 Cal.App.4th 133, 150.)
Moreover, appellants have not provided a reasonable basis for us to reject these decisions. As one court noted, the plain language of the amusement exemption suggests that the inquiry “turns on the nature of the employer‘s business, not on the nature of the employee‘s work.” (Marshall, supra, 562 F.2d at p. 1331, fn. 4.) Additionally, the applicable federal regulations state that exemptions “depend on the character of the establishment.” (
In summary, we conclude that eligibility for the amusement exemption turns on the nature of the employer‘s revenue-producing activities, not on the nature of the work performed by the employee.
C. Nonsuit Motion
Appellants assert that one of the most important issues in this case in the trial court was whether all of the DAA‘s business operations, locations, buildings, and departments constitute a single establishment because, if it is deemed to be a single establishment, it would satisfy the receipts test for the claimed exemption. Appellants argued in the trial court that they were entitled to a nonsuit because a required element of the amusement exemption is showing that the employment “plainly and unmistakably” falls within the letter and spirit of the exemption, and the DAA had failed to show that all of its operations constitute a single establishment. The trial court denied the motion, finding that the DAA had presented sufficient evidence from which the jury could find that the DAA operated a single establishment, and that the nature of the establishment was amusement or recreational.
The principal purpose in enacting the FLSA was to protect all covered workers from substandard wages and oppressive working hours. (Barrentine v. Arkansas-Best Freight System, Inc. (1981) 450 U.S. 728, 739.) A defendant bears the burden of proof of establishing the applicability of an FLSA exemption as an affirmative defense. (Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, 794–795 (Ramirez); accord, Corning Glass Works v. Brennan (1974) 417 U.S. 188, 196-197.) Determining whether an exemption applies is a fact-specific inquiry. (Vinole v. Countrywide Home Loans, Inc. (9th Cir. 2009) 571 F.3d 935, 945.)
As a general matter, FLSA exemptions “are to be narrowly construed against the employers seeking to assert them and their application [is] limited to those establishments plainly and unmistakably within their terms and spirit.” (Arnold v. Ben Kanowsky, Inc. (1960) 361 U.S. 388, 392; see Guerrero v. Superior Court (2013) 213 Cal.App.4th 912, 941 (Guerrero).) Appellants, however, seek to transform this policy statement into a new standard of proof. Appellants have
The parties stipulated that, if the DAA were viewed in the aggregate as a single establishment, it would meet the receipts test of the amusement exemption. Accordingly, we focus on the first element of the amusement exemption and examine whether the trial court properly denied nonsuit because the DAA presented evidence showing (1) that it is a single establishment, and (2) that the nature of its principal or primary activity is amusement or recreational.
A party is entitled to a nonsuit when, as a matter of law, the evidence presented by the party opposing the nonsuit is insufficient to allow a jury to find in the opposing party‘s favor. (See Saunders v. Taylor (1996) 42 Cal.App.4th 1538, 1541.) In ruling on a nonsuit motion the trial court must interpret all of the evidence most favorably to the party opposing the nonsuit and most strongly against the party seeking the nonsuit, and must resolve all presumptions, inferences, conflicts, and doubts in favor of the party opposing the nonsuit. (Powerhouse Motorsports Group, Inc. v. Yamaha Motor Corp., U.S.A. (2013) 221 Cal.App.4th 867, 887.) We review the ruling on a nonsuit de novo, applying the same standard as the trial court. (Saunders v. Taylor, supra, 42 Cal.App.4th at pp. 1541-1542.) Thus, the issue before us is whether the evidence presented by the DAA, viewed favorably to its cause, was insufficient as a matter of law to show that the DAA operated a single establishment and that the nature of its principal or primary activity was amusement or recreational.
1. Single Establishment
Application of the amusement exemption depends on the general character of the establishment/employer. (
The Doe court examined
Accordingly, reliance by the parties and the court on the three-part test of
The Horsepark is physically separated from the Fairgrounds. Nonetheless, the DAA presented evidence showing that its board of directors oversees the Fairgrounds, the Horsepark and the Recreation Center. The day-to-day operations of the Recreation Center are performed by private companies that run their respective businesses under written leases and operating agreements with the DAA, but the DAA, as the landlord, handles major issues such as
The department heads for all departments report to the executive management of the DAA. The departments do not have separate executive officers or boards of directors. Additionally, the DAA‘s accounting staff is used interchangeably as needed at the Horsepark to track accounts receivables, and the DAA‘s employees perform necessary maintenance, recycling, marketing, security and janitorial work for all departments. The Horsepark and the DAA use the same payroll and human resources departments.
This constitutes substantial evidence showing that the two separate properties qualify as a single establishment, since they are not functionally operated as separate departments, do not have separate records and separate bookkeeping, and there is no interchange of employees between them. Although appellants may have presented conflicting evidence on this element, conflicting evidence is disregarded when evaluating a motion for nonsuit. (Edwards v. Centex Real Estate Corp. (1997) 53 Cal.App.4th 15, 27-28.)
2. Amusement or Recreational Character of Establishment
Appellants next contend that the trial court erred in denying their motion for nonsuit because there was no substantial evidence to support a finding that the DAA derived a majority of its income from amusement or recreation. As appellants note, in determining whether the character of an establishment is primarily amusement or recreational, some courts have utilized an income test to determine the principal activity of the enterprise, under the rationale that the major income source of a business will be the principal activity of the business. (See, e.g., Texas City, supra, 492 F.2d at pp. 1119-1120 [the major income source of the business will be its principal activity].) In contrast, another court declined to require that an establishment derive a certain percentage of revenue from strictly recreational activities in order to be considered recreational. (Chessin, supra, 184 F.3d at p. 1194.) Instead, the Chessin court examined the totality of the circumstances, “including but not limited to the establishment‘s primary purpose; activities and services, such as restaurants and shops, that it offers incidental to its recreational facilities; its relationship to land set aside for recreational use; and its revenue sources.” (Ibid.)
The amusement exemption provides that the establishment must be for “amusement” or “recreation[],” but does not define these terms. (
Because of this ambiguity, in determining whether the exception applies, we may properly consider any legislative history. The Sixth Circuit noted that “[t]he purpose of the seasonal amusement or recreational establishment exemption was not clearly spelled out in the legislative history of either the 1961 or 1966 amendments. However, there is some useful legislative history discussing a proposed 1965 amendment to the FLSA. The House
Another court noted that while the legislative history is “skimpy,” it “suggests that the exemption does not cover establishments whose sole or primary activity is selling goods.” (Texas City, supra, 492 F.2d at p. 1118.) The Texas City court noted the Tenth Circuit‘s statement that the purpose of the amusement exemption is “‘to allow recreational facilities to employ young people on a seasonal basis and not have to pay the relatively high minimum wages required’ ” by the FLSA. (Texas City, at p. 1118, fn. 6, citing Brennan v. Yellowstone Park Lines (10th Cir. 1973) 478 F.2d 285, 288.) The Texas City court commented that “[w]hile that appears to be a logical theory, we can find nothing in the legislative history to confirm it. The legislative history simply does not directly address the purpose of the amusement-recreation exemption.” (Texas City, supra, at p. 1118, fn. 6.)
With this background, we note that the recreational nature of the DAA is established by statute. The statutory purpose of the DAA is to hold “fairs, expositions and exhibitions for the purpose of exhibiting all of the industries and industrial enterprises, resources and products of every kind or nature of the state with a view toward improving, exploiting, encouraging and stimulating them,” and to “[c]onstruct[], maintain[] and operat[e] recreational and cultural facilities of general public interest.” (
The evidence that the DAA presented shows that the primary nature of its establishment is amusement and recreational. The mission statement of the DAA is “[t]o manage and promote a world-class, multi-use, public assembly facility with an emphasis on agriculture, education, entertainment and recreation in a fiscally sound and environmentally conscientious manner for the benefit of all.” The DAA produces numerous events each year, such as the Del Mar National Horse Show, the San Diego County Fair, the Professional Bull Riding Circuit, the annual Scream Zone and, previously, the Holiday of Lights. The DAA also utilizes its premises to host approximately 300 interim events per year, produced by organizations that rent its facilities, including events such as home and garden shows, bridal bazaars, dog shows, cat shows and private events. The trial court could have rationally concluded that the primary character of these interim events is amusement or recreational.
Appellants represent that the DAA derives about 50 percent of its total income from the fair and 1 percent from its lease to the Del Mar Thoroughbred Club. They claim that the jury could infer that about 49 percent of the DAA‘S total income came from interim events that are not amusement or recreational in character. However, in light of our conclusion that the trial court could have rationally found that the primary character of the interim events is amusement or recreational, appellants’ argument works against them. Despite the lack of authority regarding the meaning of “amusement or recreational,” this evidence is sufficient to show that the primary nature of the DAA is to provide amusement or recreation.
In summary, the trial court properly denied appellants’ nonsuit motion because the DAA presented sufficient evidence that it is a single establishment that provides amusement or recreation.5
D. Jury Instructions
1. General Legal Principles
A party is entitled to request that the jury be correctly instructed on any of the party‘s theories of the case that is supported by substantial
2. Analysis
Appellants claim that the trial court erred in refusing nine of their proposed special instructions and in giving one of the DAA‘s proposed special instructions. We address each instruction.
a. Appellants’ Proposed Special Jury Instruction No. 2
The proposed instruction provided: “An employee cannot give up his or her overtime compensation even if he or she agrees to do so, or even if he or she volunteers to work overtime hours. An employer must pay overtime compensation to an employee even if the employee[] volunteered and/or agreed to work more than forty (40) hours without receiving overtime compensation.”
Appellants contend that the trial court erred in refusing to give this instruction because it is an accurate statement of the law. Assuming, without deciding, that the instruction accurately states the law, appellants have not explained how the instruction was relevant to deciding the merits of the DAA‘s affirmative defense, which was the sole issue before the jury in the first phase of this bifurcated trial. As noted, to establish the amusement or recreational exemption, the DAA was required to prove that it is a single establishment, the nature of the establishment is amusement or recreational
b. Appellants’ Proposed Special Jury Instructions Nos. 3, 7 and 15
Proposed instruction No. 3 provided: “In order to find that an employee is ‘exempt’ from the benefits of the overtime law, you must find that the employee‘s employment is plainly and unmistakably within the terms and spirit of the particular exemption claimed by the employer. The exemption claimed by the . . . DAA in this case was designed to facilitate youth summer employment.” (Italics added.)
The trial court refused the instruction, stating that the concept was “nebulous . . . this area of the law is slippery enough. We don‘t have to add spirit and terms.” Appellants assert that the failure to provide this instruction denied them the opportunity to place their full case before the jury and constituted a miscarriage of justice. We disagree.
The italicized language in the proposed instruction originates from a United States Supreme Court case and is often cited. (Arnold v. Ben Kanowsky, Inc., supra, 361 U.S. at p. 392; e.g., Guerrero, supra, 213 Cal.App.4th at p. 941.) The snippet in the instruction stating that the exemption is “designed to facilitate youth summer employment” is taken from a federal circuit opinion addressing the legislative history of the exemption. (Brennan v. Yellowstone Park Lines, supra, 478 F.2d at p. 288.)
The mere fact that language in a proposed jury instruction comes from case authority does not qualify it as a proper instruction. “The admonition has been frequently stated that it is dangerous to frame an instruction upon isolated extracts from the opinions of the court.” (Francis v. City & County of San Francisco (1955) 44 Cal.2d 335, 341 [282 P.2d 496].) As another court noted, judicial opinions are not written as jury instructions, are notoriously unreliable as such, and may have a confusing effect upon a jury. (Merritt v. Reserve Ins. Co. (1973) 34 Cal.App.3d 858, 876, fn. 5 [110 Cal.Rptr. 511].) While the first sentence of the proposed instruction might be an accurate statement of law that appellants could argue to the jury, it is not for the court to make argument to the jury in the form of an instruction. Further, the second sentence, stating that the exemption is “designed to facilitate youth summer employment” is arguably misleading in that it suggests that the exemption properly applies only to such an activity. We agree with the trial court‘s conclusion that the proposed instruction was inappropriate. Thus, the trial court did not err in refusing appellants’ proposed instruction No. 3.
Proposed instruction No. 15 provided: “In order for an establishment to qualify as an amusement or recreation establishment, the majority of the establishment‘s income must be generated by amusement or recreational activities, excluding revenues from food and drink sales, concessions, and gifts.” (Italics added.)
Appellants assert that the proposed instruction is an accurate, nonargumentative statement of the law derived from DOL 2006-39, as cited in Mann v. Falk (11th Cir. 2013) 523 Fed. Appx. 549, 552-553 (Mann). They contend that the evidence presented at trial revealed that the fair generates 50 percent of the DAA‘s gross revenue, but that only 10 to 13 percent of that amount is from the amusement park and rides, with the remainder of the revenue coming from food and beverage sales, parking, commercial space rentals, corporate sponsorships and merchandising. Appellants argue that this latter income does not qualify as amusement or recreational and that the failure to give the proposed instruction likely impacted the verdict.
In DOL 2006-39, the DOL issued an opinion addressing whether employees of a client who provided overnight vacation excursions of three- to 10-days’ duration on small vessels were exempt as amusement or recreational in nature under the FLSA. The DOL found, based on the information provided, that it appeared “your client‘s vessels have an ‘amusement or recreational’ character” since the “primary activities of the vessels include sightseeing, exploring sights and nature, nature-related and sight-related discussions and lectures, group activities and programs, meals, and other similar activities.” (DOL 2006-39.) Citing Texas City, supra, 492 F.2d at pages 1119-1120, the DOL then cautioned, that the establishment‘s primary source of income is examined “in determining the nature of the establishment. Thus, if the majority of your client‘s income is derived from food, drink, lodging, concessions, and gifts, rather than from the premium portion of ticket sales paid for the nature-related and sight-related aspects of the excursion and entertainment, that would weigh against your client‘s vessels having an amusement or recreational character.” (DOL 2006-39.)
We conclude that the trial court did not err in refusing to give proposed instruction No. 15, since there is no authority indicating that it is a correct statement of the law when applied to an entity such as the DAA. Additionally, as noted above, the source of income is but one factor to consider in determining whether an establishment is primarily amusement or recreational in character. (Ante, pt. I.C.2.) The source of the DAA‘s income was an evidentiary issue more appropriately argued by the parties.6
c. Appellants’ Proposed Special Jury Instruction No. 4
This instruction stated: “In this case, the . . . DAA contends that the Plaintiffs’ employment is ‘exempt’ because the . . . DAA assertedly qualifies as an establishment which is an amusement or recreational establishment. Plaintiffs dispute this. Plaintiffs also contend that the . . . DAA actually constitutes multiple establishments for purposes of the exemption law, and Plaintiffs dispute that these assertedly multiple establishments qualify for the claimed exemption.”
Appellants argue that a jury instruction may properly contain a statement of a party‘s contentions and that the trial court erred when it refused the instruction. To support their argument, appellants cited Tesoro del Valle Master Homeowners Assn. v. Griffin (2011) 200 Cal.App.4th 619 [133 Cal.Rptr.3d 167], in which the appellate court noted: “As part of the jury instructions, the trial court informed the jury about the nature of the dispute and the parties’ contentions. . . .” (Id. at p. 628.) Nothing in the opinion addresses the propriety of this practice and ” ‘[i]t is axiomatic that cases are not authority for propositions not considered.’ ” (In re Marriage of Cornejo (1996) 13 Cal.4th 381, 388 [53 Cal.Rptr.2d 81, 916 P.2d 476].)
d. Appellants’ Proposed Special Jury Instruction No. 5
Proposed jury instruction No. 5 stated: “The . . . DAA has the burden to prove all facts necessary to establish its claim of exemption.”
Appellants assert that the proposed instruction is an accurate, nonargumentative statement of the law and, taken together with proposed instruction No. 4, would have instructed the jury that the DAA had the burden of proof as to whether all of the DAA‘s business operations, locations, buildings and departments constitute a single establishment (the “identification-of-establishment” question). Appellants note that the identification-of-establishment question is one of three jury interrogatories presented in the verdict form and claim that they were entitled to an accurate instruction as to the burden of proof. The DAA asserts that the proposed instruction was unnecessary because other jury instructions advised the jury that the DAA had the burden of proof. We agree with the DAA.
A judgment may not be reversed “based upon the failure to give particular instructions if the point is covered adequately by instructions which were given.” (Mathis v. Morrissey (1992) 11 Cal.App.4th 332, 343 [13 Cal.Rptr.2d 819].) The court instructed that the DAA claimed it was exempt from paying overtime and that to prevail, the DAA “must prove” that “[t]he nature of the establishment for which Plaintiffs worked, is amusement or recreational” and that the DAA satisfied the receipts test. The court also instructed the jury on the definition of “establishment” and the phrase “amusement or recreational.” Taken together, these instructions adequately conveyed to the jury that the DAA had the burden of proof on all elements of the amusement exemption.
Even assuming that the trial court erred in refusing to give the proposed instruction, appellants have not shown that a miscarriage of justice resulted from the assumed error such that there is a reasonable probability that in the
e. Appellants’ Proposed Special Jury Instruction No. 8
Proposed jury instruction No. 8 stated: “In considering whether an employee‘s employment is by an establishment which qualifies as an amusement establishment and/or a recreational establishment, you may consider whether the work actually performed by the particular employee is ‘amusement’ and/or ‘recreational’ in nature.”
As discussed above, we have concluded that eligibility for the amusement exemption turns on the nature of the employer‘s activities, not on the type of work performed by the individual employees. (Ante, pt. I.B.) Accordingly, the trial court properly rejected this instruction because it is not a correct statement of law.
f. Appellants’ Proposed Special Jury Instruction No. 9
This instruction stated: “In order to meet the requirement of actual employment by the establishment claimed to be exempt, an employee, whether performing his [or] her duties inside or outside the establishment, must be employed by his or her employer in the work of the exempt establishment itself in activities within the scope of its exempt business.”
Appellants assert that this proposed instruction is a nearly verbatim quotation from
g. Appellants’ Proposed Special Jury Instruction No. 14
Proposed instruction No. 14 stated: “An employee may be overtime-eligible in one week, but not overtime-eligible in the next week. If an employee does some work for an exempt establishment, and some work for a non-exempt establishment, during the same workweek, that employee must be treated as overtime-eligible for that week. The burden to separate between exempt and non-exempt work as between particular workweeks for a given employee, or as between different groups of employees, is imposed by law upon the employer.”
Appellants state that proposed instruction No. 14 is drawn from
h. Respondent‘s Special Instruction No. 3
Appellants claim that the trial court erred in instructing the jury with respondent‘s special instruction No. 3, and that the error was prejudicial. This instruction stated: “In situations involving an Establishment with more than one department, those departments can still collectively constitute a single ‘Establishment.’ More than one department collectively constitutes a single Establishment unless you find all of the following: [] 1. The department is physically separated from the other activities of the Establishment; and [[]] 2. The department is functionally operated separately from the Establishment; and [] 3. The department has separate records and separate bookkeeping from the Establishment; and [[]] 4. There is no interchange of employees between the department and the Establishment. [ In evaluating whether more than one department constitutes a single Establishment, the critical factors are economic, physical, and functional separation between the departments. No single factor controls, but even when an Establishment has many departments, so long as they are operated as integral parts of the same Establishment, they constitute one single Establishment.”
Appellants concede that this instruction is drawn from
E. Verdict Form
1. Background
Appellants submitted a proposed special verdict form that contained eight separate questions. The questions asked the jury to determine whether the DAA had proven that its employees were ineligible to receive overtime compensation based on where they worked (interim events, the Horsepark, the main parcel, Recreation Center or satellite wagering premises) and whether the fair was in session or was not in session. The special verdict form proposed by the DAA contained five questions, some with subparts. The trial court rejected both proposed verdict forms. Instead, the trial court presented the parties with a special verdict form that it had drafted. The three-question special verdict form prepared by the court asked: “1. How many establishments did [the DAA] operate? One [or] Two or more; 2. For each establishment in your answer to question 1 for which Plaintiffs worked, was the nature of the establishment amusement or recreational? Yes [or] No“; and “3. For each establishment in your answer to question 1 for which Plaintiffs worked, was the establishment‘s average receipts for any six months of such year no more than 33 1/3 per centum of the establishment‘s average receipts for the other six months of such year? Yes [or] No.”
The court discussed each question on its proposed verdict form with counsel. Appellants’ counsel expressed no objection to question 1, stating that it was “a good way to start.” Appellants’ counsel had “no problem” with question 2. After discussing question 3 with the court, appellants’ counsel stated that he had “no problem” with question three. When asked whether he had “[a]ny particular objections to the proposed verdict form,” appellants’ counsel responded “no.”
During trial, the court commented that it would ultimately decide whether the amusement exemption applied, based on the jury‘s predicate findings. After the jury rendered its verdict, appellants argued that the judgment should identify each plaintiff in the collective action. Appellants further noted that by
2. Analysis
Appellants contend that the verdict form was fatally defective because it did not allow the jury to resolve every controverted issue. Specifically, they claim that the verdict form failed to ask the jury whether the majority of the DAA‘s revenues are derived from activities that are amusement or recreational in nature, so as to satisfy the “principal activity” test. Assuming that the principal activity test was satisfied, they contend that the jury should have been asked whether the exemption applies when (1) the DAA assigns its employees to perform work to support interim events presented by outside promoters in connection with nonamusement, nonrecreational events, and charges the outside promoters for respondent‘s employees’ labor (plus a markup); (2) appellants perform work that was neither amusement nor recreational in nature; and (3) appellants perform work that is not within the scope of the DAA‘s assertedly exempt business.
The DAA contends that appellants waived any objection to the verdict form by failing to object in the trial court. Appellants dispute this contention, stating that while they found no fault in the three jury interrogatories, they never acquiesced in the trial court‘s refusal to present to the jury the question whether the claimed exemption could be properly applied to appellants. We agree with the DAA.
An objection to the form of questions in a special verdict must be raised in the trial court or the issue is waived on appeal. (Orient Handel v. United States Fid. & Guar. Co. (1987) 192 Cal.App.3d 684, 700 [237 Cal.Rptr. 667].) After the trial court rejected their proposed verdict form, appellants did not attempt to revise their verdict form, nor did they ask the court to revise its proposed verdict form. When specifically asked whether he had “[a]ny particular objections to the proposed verdict form,” appellants’ counsel responded “no,” and did not voice any concerns that the court‘s proposed verdict form, while not objectionable, was incomplete. Moreover, after the jury rendered its verdict, appellants did not raise their concern with the trial court, nor did they ask to have the jury correct or clarify the verdict before the court discharged the jury. (
On this record, we conclude that appellants forfeited any claimed defect in the special verdict form. To the extent that appellants claim that, after the jury rendered its verdict, the trial court failed to determine the ultimate question whether the amusement exemption applied, this issue was also forfeited. The record does not show that appellants raised the issue after the jury rendered its verdict. In any event, under the doctrine of implied findings, we presume that the trial court made all factual findings necessary to support the judgment in favor of the DAA. (Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1271-1272 [78 Cal.Rptr.3d 372].)
F. Exclusion of Class Members
1. Background
During trial, appellants’ counsel noted that his witnesses were in the hallway and stated, “[b]ecause they filed joinders in a collective action, I believe they‘re parties for purposes of [Evidence Code] section 777,” indicating that the witness/parties should be permitted to remain in the courtroom during trial proceedings. Counsel for the DAA objected, stating, “they can have a representative, but I don‘t think the witnesses should be here watching other witnesses.” The trial court sustained the DAA‘s objection. Appellants’ counsel did not argue the matter further and indicated that his assistant would make sure people were “lined up” outside the courtroom.
2. Analysis
Appellants assert that the trial court erred because they are parties in interest that may not be excluded from the courtroom under
The parties have not cited, and we have not found, any case law addressing the application of
On this record, we conclude that the trial court did not err by excluding party witnesses from the courtroom. Additionally, a judgment may not be reversed on appeal unless, after an examination of the entire cause, including the evidence, it appears that the error caused a miscarriage of justice. (
A. Standard of Review
We review an order sustaining a demurrer without leave to amend de novo (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415 [106 Cal.Rptr.2d 271, 21 P.3d 1189]), assuming the truth of all properly pleaded facts as well as facts inferred from the pleadings, and giving the complaint a reasonable interpretation by reading it as a whole and its parts in context. (Palacin v. Allstate Ins. Co. (2004) 119 Cal.App.4th 855, 861 [14 Cal.Rptr.3d 731].) A complaint will be construed “liberally... with a view to substantial justice between the parties.” (
“To the extent issues of statutory interpretation are raised, we apply the rules of statutory construction and exercise our independent judgment as to whether the complaint states a cause of action. [Citation.] Our first task in construing a statute is to ascertain the Legislature‘s intent in order to carry out the purpose of the law. If the statutory language is clear and unambiguous, no judicial construction is required. If the statute is ambiguous, the words must be construed in context in light of the statutory purpose.” (Doe v. Doe 1 (2012) 208 Cal.App.4th 1185, 1189 [146 Cal.Rptr.3d 215].)
B. Analysis
Appellants alleged that under section 510, the DAA was required to pay them overtime compensation for any work in excess of eight hours in one workday and any work in excess of 40 hours in any workweek. (
California law, codified at section 510, requires overtime compensation for “[a]ny work in excess of eight hours in one workday and any work in excess of 40 hours in any one workweek.” (
Applying maxims of statutory construction to the Labor Code, the Johnson court held that the water district, as a public entity, was exempt from section 510, noting that the Legislature expressly refers to public entities when it intends them to be included. (Id. at pp. 736-738.) Thus, the indicia of legislative intent led the Johnson court to conclude that a water district was exempt from section 510, but “[i]n any event, the [water] District [was] also exempt” under the sovereign powers canon of statutory interpretation. (Id. at p. 738.) Specifically, the Johnson court noted that the Water Code granted the water district the statutory power to set employees’ compensation (citing
Appellants assert that Johnson is distinguishable because the water district had the regulatory power to set employees’ compensation under the Water Code. Appellants note that unlike the water district in Johnson, the DAA does not have sovereign power over employee compensation and thus, should be required to comply with section 510. The DAA contends that appellants did not make this argument below and that they have thus forfeited the issue. On the merits, the DAA asserts that applying section 510 would interfere with its sovereign power and its ability to perform its legislative purpose. Because the
Appellants contend that section 510 applies to “any work” and that this plain language permits no exception. However, whether requiring the DAA to comply with section 510 infringes on the DAA‘s sovereign powers (i.e., its governmental purposes and functions) cannot be determined by examining section 510 in isolation. (Johnson, supra, 174 Cal.App.4th at p. 738.) Rather, wage and hour claims in California are governed “by two complementary and occasionally overlapping sources of authority“; namely, the Labor Code as enacted by the Legislature and a series of wage orders adopted by the Industrial Welfare Commission (IWC). (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1026 [139 Cal.Rptr.3d 315, 273 P.3d 513] (Brinker).) The IWC had constitutional and statutory authority to adopt wage orders prescribing, among other things, maximum hours of employment for employees in California. (
The first paragraph of section 1173 provides: “It is the continuing duty of the [IWC] . . . to ascertain the wages paid to all employees in this state, to ascertain the hours and conditions of labor and employment in the various occupations, trades, and industries in which employees are employed in this state, and to investigate the health, safety, and welfare of those employees.” Notably, “section 1173 broadly refers to ‘all employees in this state,’ which necessarily includes employees working in the public sector.” (Sheppard, supra, 191 Cal.App.4th at p. 305.)
Wage orders are codified at title 8 of the California Code of Regulations. (
Similar to the FLSA, the IWC had a wage order regulating the amusement and recreation industry. (
Appellants do not contend that wage order No. 10-2001 does not apply to the DAA, nor could they so argue, since the DAA is a “state institution” (
Notably, a prior version of wage order No. 10-2001 (wage order No. 10-1989) provided that employees in the amusement and recreation industry “shall not be employed more than eight (8) hours in any workday or more than forty (40) hours in any workweek” unless paid overtime compensation. Nonetheless, wage order No. 10-1989 exempted from its provisions “employees directly employed by the State or any county, incorporated city or town or other municipal corporation, or to outside salespersons.”
“[In 1999,] the Legislature passed the ‘Eight-Hour-Day Restoration and Workplace Flexibility Act of 1999.’ (Stats. 1999, ch. 134, § 1, p. 1820, adding and amending provisions of
Thus, when it enacted section 510, the Legislature was aware that wage order No. 10-2001 exempted public employees in the amusement and recreation industry from overtime compensation. (In re Greg F. (2012) 55 Cal.4th 393, 407 [146 Cal.Rptr.3d 272, 283 P.3d 1160] [“The Legislature is presumed to be aware of all laws in existence when it passes or amends a statute.“].)
Accordingly, when section 510 and wage order No. 10-2001 are viewed together, the inescapable conclusion is that public employees in the amusement and recreation industry are exempt from state overtime requirements.
To avoid this result, appellants contend that wage order No. 10-2001 does not create an exemption to the statutory requirement for overtime compensation contained in section 510 because wage order No. 10-2001 states, ”the provisions of this order shall not apply to any employees directly employed by the State or any political subdivision thereof, including any city, county, or special district.” (
Moreover, appellants’ argument ignores section 1173 (in effect at the time the Legislature enacted § 510), which gives the IWC the statutory authority to set maximum hours and refers to ” ‘all employees in this state,’ ” which necessarily includes employees working in the public sector. (Sheppard, supra, 191 Cal.App.4th at p. 305, italics omitted.) Additionally, section 515, which was enacted along with section 510, provides that “nothing in this section
C. Leave to Amend
Appellants contend that this court should hold that the DAA is required to comply with section 510 when it loans out its employees to outside promoters to support “interim events,” such as gun shows, bridal bazaars, private parties, weddings, Christmas tree sales, hot tub sales, home and garden shows, and charges the outside promoters the labor costs of employing the employees, plus a markup. They assert that when they are performing work for these outside entities, they are not public employees performing exempt work. Appellants concede that their complaint did not contain any averments regarding the DAA‘s loaning of its employees to outside promoters to support interim events, but claim that such averments were not required because the DAA bore the burden of proving the exemption from section 510 as an affirmative defense. To the extent that we disagree with this contention, appellants argue that they should be allowed leave to amend to add averments that conform to the evidence presented at trial.
“[A] demurrer based on an affirmative defense will be sustained only where the face of the complaint discloses that the action is necessarily barred by the defense.” (Casterson v. Superior Court (2002) 101 Cal.App.4th 177, 183 [123 Cal.Rptr.2d 637].) As we have discussed, the trial court properly sustained the DAA‘s demurrer because the face of the complaint disclosed that the DAA is exempt from the requirements of section 510. (Ante, pt. II.B.) Thus, we next consider whether appellants should be allowed leave to amend their complaint.
As we have already noted, it is an abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable possibility that the plaintiff can amend the complaint to cure its defects. (City of Atascadero, supra, 68 Cal.App.4th at p. 459.) It is irrelevant that appellants did not seek leave to amend in the trial court, since this issue is always open on appeal. (
Where joint employment exists, all employers are individually responsible for compliance with the FLSA. (Bonnette v. California Health & Welfare Agency (9th Cir. 1983) 704 F.2d 1465, 1469.) Courts examining whether joint employment exists under the FLSA consider a number of factors, including whether the alleged additional employer had the power to hire and fire employees; supervised and controlled employee work schedules or employment conditions; determined the rate and method of payment; maintained employment records; owned the facilities where the employee worked; and made significant investments in equipment and facilities. (Id. at p. 1470.)
Joint employment is also recognized under California law. “Joint employment occurs when two or more persons engage the services of an employee in which the employee is subject to the control of both.” (In-Home Supportive Services v. Workers’ Comp. Appeals Bd. (1984) 152 Cal.App.3d 720, 732 [199 Cal.Rptr. 697] [addressing dual employment and dual workers’ compensation liability].) ” ‘Employ’ means to engage, suffer, or permit to work.” (
In Guerrero, supra, 213 Cal.App.4th 912, an in-home support services (IHSS) worker brought an action against the program recipient, the county and the county‘s IHSS public authority for unpaid wages and overtime under the FLSA and the Labor Code. (Id. at pp. 917-919.) The Guerrero court concluded that the trial court erred in sustaining a demurrer to the Labor Code claims because the applicable wage order did not expressly exempt public employees from its provisions. (Id. at p. 954.) It also concluded that the trial court ignored the “joint employer doctrine,” holding that the plaintiff‘s rendering of services to the program recipient did not preclude her from being a dual employee of the program recipient and real parties, the county and the county‘s IHSS public authority. (Id. at pp. 917, 955.)
We conclude that appellants should be permitted to amend their section 510 claim since they have shown how they can potentially amend their complaint to state a valid claim under the joint employee doctrine. Accordingly, we reverse that part of the order sustaining the demurrer without leave to amend
DISPOSITION
The order sustaining the demurrer to the
Benke, Acting P. J., and Irion, J., concurred.
Petitions for a rehearing were denied August 5, 2016, and the opinion was modified to read as printed above. Appellants’ petition for review by the Supreme Court was denied October 12, 2016, S236550.