DEV ANAND OMAN еt al., Plaintiffs and Appellants, v. DELTA AIR LINES, INC., Defendant and Respondent.
S248726
IN THE SUPREME COURT OF CALIFORNIA
June 29, 2020
Ninth Circuit 17-15124; Northern District of California 3:15-cv-00131-WHO
Justice Kruger authored the opinion of the Court, in which Chief Justice Cantil-Sakauye and Justices Chin, Corrigan, Liu, Cuéllar, and Groban concurred.
Justice Liu filed a concurring opinion, in which Justice Cuéllar concurred.
In this case, as in the companion cases Ward v. United Airlines, Inc., and Vidrio v. United Airlines, Inc. (June 29, 2020, S248702) ___ Cal.5th ___ (Ward), we confront a question about the application of various California wage and hour laws to flight attendants who work primarily outside California’s territorial jurisdiction. Consistent with our holding in those cases, we conclude that California’s wage statement laws apply only to flight attendants who have their base of work operations in California, and that the same is true of California laws governing the timing of wage payments. Finally, we hold that, whether or not California’s minimum wage laws apply to work performed on the ground during the flight attendants’ brief and episodic stops in California, the pay scheme challenged here complies with the state requirement that employers pay their employees at least the minimum wage for all hours worked.
I.
Defendant Delta Air Lines, Inc., is a national and international air carrier incorporated in Delaware and based in Georgia. Delta offers service in and out of rоughly one dozen California airports, connecting cities as small as Palm Springs and as large as Los Angeles to the rest of the country and the world.
Plaintiffs Dev Anand Oman, Todd Eichmann, Michael Lehr, and Albert Flores are or were flight attendants for Delta. Oman lived in New York and had a New York airport as a home base. Lehr lives in Nevada but has a California airport as his home base. Eichmann and Flores both live in California and have California airports as their home bases. All four employees have served on flights in and out of California airports, as well as airports outside the state.
On cross-motions for summary judgment, the district court concluded Delta’s pay scheme does not violate California’s minimum wage requirements. (Oman v. Delta Air Lines, Inc. (N.D.Cal. 2015) 153 F.Supp.3d 1094, 1095.) Oman argued that Delta fails to pay any compensation at all for certain hours worked in California and, under Gonzalez v. Downtown LA Motors, LP (2013) 215 Cal.App.4th 36 (Gonzalez) and Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314 (Armenta), Delta is prohibited from borrowing compensation due for other hours worked to make up for any shortfall. The district court examined the pay formulas set out by Delta’s Work Rules and concluded they adequately compensate flight attendants for all hours worked, without any impermissible borrowing or reduction in agreed-to contractual rates. (Oman, supra, 153 F.Supp.3d at pp. 1102–1107.)
The parties then filed cross-motions for summary judgment on Oman’s remaining wage statement and timing claims. The district court granted judgment in favor of Delta, concluding thаt the relevant California statutes, sections 204 and 226, do not apply to Oman. The court held that the jurisdictional reach of the statutes should be determined according to a multifactor analysis that examines “the particular Labor Code provision invoked, the nature of the work being performed, the amount of work being performed in California, and the residence of the plaintiff and the employer.” (Oman v. Delta Air Lines, Inc. (N.D.Cal. 2017) 230 F.Supp.3d 986, 992–993.) Here, “[f]ocusing on the purpose of Section 226 (to give employees clarity as to how their wages are calculated, so they can verify that their wages are
On appeal, the Ninth Circuit asked that we resolvе three unsettled questions of California law underlying Oman’s claims. (Oman v. Delta Air Lines, Inc. (9th Cir. 2018) 889 F.3d 1075, 1076–1077.) We accepted the request and agreed to resolve the following issues:1
- Do sections 204 and 226 apply to wage payments and wage statements provided by an out-of-state employer to an employee who, in the relevant pay period, works in California only episodically and for less than a day at a time?
- Does California minimum wage law apply to all work performed in California for an out-of-state employer by an employee who works in California only episodically and for less than a day at a time? (See
Lab. Code, §§ 1182.12 ,1194 ;Cal. Code Regs., tit. 8, § 11090, subd. (4) .) - Does the Armenta/Gonzalez bar on averaging wages (see Armenta, supra, 135 Cal.App.4th 314; Gonzalez, supra, 215 Cal.App.4th 36) apply to a pay formula that generally awards credit for all hours on duty, but which, in certain situations
resulting in higher pay, does not award credit for all hours on duty?
II.
A.
Our precedent makes clear that the application of California wage and hour protections to multistate workers like Oman may vary on a statute-by-statute basis. (See Sullivan v. Oracle Corp. (2011) 51 Cal.4th 1191, 1201 (Sullivan).) We thus consider separately each of the wage and hour statutes on which Oman relies, beginning with section 226. That provision requires an employer to supply each employee
As we explained in Ward, supra, ___ Cal.5th ___, section 226 does not, in so many words, define its geographic reach. (Ward, at p. ___ [p. 21].) But we ordinarily presume the Legislature drafts laws with domestic conditions in mind (id. at p. ___ [p. 16]), and thus requires some degree of connection between the subject matter of the statutory claim and the State of California. In Ward, we addressed the nature of the connection required to trigger the wage statement requirements set forth in section 226 and held that section 226 applies when an employee’s principal place of work is in California. Ordinarily, this test is met if an employee works primarily (i.e., the majority of the time) in California. In the case of interstate transportation workers and others who do not spend a majority of their working time in any one state, this test is satisfied when California serves as their base of work operations. (Ward, at pp. ___–___ [pp. 26–28].) Under this rule, because plaintiffs here never worked more than half the time in California (or in any other state), whether they are entitled to California-compliant wage statements hinges on whether they were based for work purposes in California.
The Ninth Circuit’s question in this case appears to ask whether it is also relevant that Delta is a nonresident corporation. Delta now concedes that its foreign domicile does not foreclose the application of state law. We accept the concession. Section 226 contains no exemption based on the employer’s location. This is in contrast to, for example, the worker’s compensation scheme, which expressly exempts some out-of-state employers. (See
This argument fails under the terms of section 226. Section 226 provides for the documentation of wages and other information over an entire pay period, not fractions thereof. A wage statement must specify not only “total hours worked” and “all applicable hourly rates,” but also “gross wages,” “net wages,” and “all deductions” for the full period. (§ 226, subd. (a).) The statute cоntains no indication that the employer of an out-of-state worker must report fractions of wages earned during brief trips to the state, as well as attempt to calculate the fraction of wage deductions attributable to these sojourns. The statute requires “an accurate itemized statement” reflecting “the inclusive dates of the period for which the employee is paid” and all relevant information concerning the employee’s pay during that period—that is, a single comprehensive statement of pay. (Ibid.)
Oman argues that our recent decision in Troester v. Starbucks Corp. (2018) 5 Cal.5th 829 supports his proposed fractional approach, but Troester has nothing to do with the question before us. There, stressing that the IWC’s wage orders ensure compensation for “ ‘all hours worked’ ” (Troester, at p. 840, quoting IWC wage order No. 5–2001, §§ 3(A), 4(A)), we rejected the contention that state wage law would not concern itself with unpaid work on the order of a few minutes a day. Instead, we held that an “employer that requires its employees to work minutes off the clock on a regular basis or as a regular feature of the job may not evade the obligation to compensate the employee for that time by invoking the de minimis doctrine.” (Troester, at p. 847.) That holding has no relevance here. The issue before us is not whether brief periods of work must be compensated—no one disputes the point—but whether a few minutes or hours of work in California necessarily trigger the detailed pay-period documentation requirements of California law. The answer to that question is no: Employees are entitled to California-compliant wage statements only if California is the principal place of their work.
It is, in the end, Oman’s approach that poses greater practical concerns. By insisting on Californiа-compliant wage statements, but only for the fraction of hours worked on the ground in California, Oman would effectively require that employers either (1) accompany each California-specific wage statement with multiple similar separate statements under the laws of each and every additional state in which an employee worked during a pay period, or (2) issue a single wage statement, but allow California law effectively to dictate the form and contents for documenting work predominantly performed in foreign jurisdictions. The first option would undermine the very purpose of section 226, which is “to ensure an employer ‘document[s] the basis of the employee compensation payments’ to assist the employee in determining whether he or she has been compensated properly.” (Soto v. Motel 6 Operating, L.P. (2016) 4 Cal.App.5th 385, 390, quoting Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4th 554, 574.) This informational purpose would be ill-served by a rule that led to employees receiving a blizzard of wage statements every pay period, each documenting only a state-specific sliver of their work, and from this paper snowdrift trying to discern what they had actually been paid. As to the second option, allowing any work in California, no matter how fleeting, to effectively impose California law on documentation оf all work in a pay period would raise the very sorts of conflict-of-laws problems we generally presume the Legislature seeks to avoid. (Ward, supra, ___ Cal.5th at pp. ___–___ [pp. 16–17].) It is presumably for this reason that Oman has avoided arguing that California law requires this result. We decline to construe section 226 as putting employers to the choice of either issuing a single California-compliant wage statement for every interstate worker who works for any amount of time, however brief, within the state, or issuing a multiplicity of statements, when the statute envisions that employees will receive just one.
The principal place of work rule we have articulated in Ward means that some short periods of work in California will not be covered by section 226’s documentation requirements. Conversely, some periods of work outside
We thus conclude section 226 does not apply to work performed in California during pay periods in which the employee, based outside California, works primarily outside California. A non-California-based employee who works in California “only episodically and for less than a day at a time” (Oman v. Delta Air Lines, Inc., supra, 889 F.3d at p. 1077) is not entitled to a wage statement prepared according to the requirements of California law.
B.
We turn now to Oman’s section 204 claim. That statute guarantees employees full payment on a semimonthly basis, providing: “All wages,” with certain exceptions not relevant here, “earned by any person in any employment are due and payable twice during each calendar month, on days designated in advance by the employer as the regular paydays.” (§ 204, subd. (a).) Section 204 goes on to establish specific deadlines by which wage payments must be made. (Id., subd. (a).)2 As is true of section 226, nothing in the statute explicitly specifies its intended geographic scope.
As Oman conceded in the federal district court (see Oman v. Delta Air Lines, Inc., supra, 230 F.Supp.3d at p. 994), there is no reason to interpret section 204’s geographic coverage differently from that of section 226. That is because section 204 works hand in hand with section 226. Section 226 regulates the information an employer must provide in connection with wage payments, while section 204 regulates when an employer must pay an employee for hours worked. The Legislature has recognized that when an employee must be paid (the subject of § 204), and what information must accompany each such required payment (the subject of § 226) are necessarily linked. (See § 204, subd. (b)(2) [coordinating the application of these provisions].)
The first interpretation, aside from the administrative headaches it would generate, runs headlong into the text of section 204, which applies to “[a]ll wages . . . earned,” with exceptions not significant here. (§ 204, subd. (a), italics added.) As with section 226, nothing in the text suggests the Legislature contemplated fragmenting wages earned according to the state in which labor was performed and requiring whatever sliver of wages might be attributable to California to be paid on section 204’s timeline, with other slivers for work elsewhere paid according to whatever other state law might apply. Nor is it clear how such a reading would advance the policy underlying section 204. Section 204 serves the “public policy in favor of full and prompt payment of an employee’s earned wages,” which “is fundamental and well established: ‘ “Delay of payment or loss of wages results in deprivation of the necessities of life, suffering inability to meet just obligations to others, and, in many cases may make the wage-earner a charge upon the public.” ’ ” (Smith v. Superior Court (2006) 39 Cal.4th 77, 82, quoting Kerr’s Catering Service v. Department of Industrial Relations (1962) 57 Cal.2d 319, 326; see Voris v. Lampert (2019) 7 Cal.5th 1141, 1148 [“prompt and complete wage payments are of critical importance to the well-being of workers, their families, and the public at large”].) Section 204, insofar as it apрlies to the entirety of an employee’s wages, directly serves this policy. It is less apparent how the policy is meaningfully advanced by requiring payment of California-earned wages on a California-specified timeline when those wages represent just a small fraction of the earnings an employee relies on for support.
The second interpretation accords section 204 a broad reach, allowing California law to dictate the timing of payment for wages earned predominantly outside California for work performed outside California. Granting section 204 such an expansive scope would generate significant complications. Given the nature of the flight attendants’ work, treating any work performed on the ground in any given state as sufficient to trigger application of payment timing requirements could subject the payment for work in a given pay period to the often-conflicting laws of a dozen or more states.
In sum, we conclude section 204 is subject to the same limits as section 226 and applies only to pay periods during which an employeе predominantly works inside California.
III.
We turn, finally, to the minimum wage claims. The Ninth Circuit asks two questions related to these claims: First, whether California minimum wage law applies to the hours (or fractions thereof) that Oman worked on the ground in California, and second, whether Delta’s method of computing Oman’s wages complies with the state law. As discussed, the application of labor protections must be analyzed on a provision by provision basis in light of the nature of the protection afforded, and so the rules we articulate for sections 204 and 226 do not resolve whether the state’s minimum wage laws might apply. (See Ward, supra, ___ Cal.5th at pp. ___, ___ & fn. 10 [pp. 21, 28 & fn. 10]; Sullivan, supra, 51 Cal.4th at p. 1201; ante, at p. ___ [p. 5].) But we need not settle the reach of the state’s minimum wage laws if we can determine that, even were those laws to apply, Delta’s pay scheme would not violate them. Because the record establishes Delta complies with state minimum wage law, we address only that question.
Like other industry wage orders, Wage Order No. 9 requires that “[e]very employer shall pay to each employee, on the established payday for the period involved, not less than the applicable minimum wage for all hours worked in the payroll period, whether the remuneration is measured by time, piece, commission, or otherwise.” (Id., § 4(B).) Here, pursuаnt to the Work Rules, the remuneration provided to Delta flight attendants is measured by the “rotation,” a given sequence of flights over a day or a period of days that the attendant will serve on. Compensation for each rotation is calculated according to four different formulas; flight attendants are paid according to whichever formula yields the largest amount for the complete rotation. (See post, at pp. 22–23.) It is undisputed that under this compensation scheme, flight attendants are always paid, on an hourly average, above the minimum wage. Oman contends that the scheme nonetheless violates California’s minimum wage law, principally because one of Delta’s four formulas—the formula that most often determines how much flight attendants will be paid, because it generally yields the greatest compensation—is based solely on flight time and does not factor in the hours flight attendants spend working on the ground before and after flights.
The dispute between the parties does not concern the substance of California’s minimum wage guarantee. It is common ground that the law
A.
To understand the nature of the dispute, some background is required. Beginning several decades ago, federal courts confronting questions about minimum wage compliance commonly interpreted federal law to require only that employers pay in each week an average wage at or above the federal minimum. (See
The Division of Labor Standards Enforcement (DLSE) and the unanimous Courts of Appeal, however, have embraced a more stringent understanding of state law that forbids taking compensation contractually due for one set of hours and spreading it over other, otherwise un- or undercompensated, hours to satisfy the minimum wage—a practice that has often, perhaps misleadingly, been referred to as “wage averaging.” As we will explain, the practice these authorities prohibit might be more accurately characterized as “wage borrowing,” and we employ that phraseology here.
The DLSE was first to consider the issue. (See Dept. of Industrial Relations, DLSE Opn. Letter No. 2002.01.29 (Jan. 29, 2002) (hereafter DLSE Opinion Letter No. 2002.01.29).) In response to a question by parties to a collective bargaining agreement, the DLSE determined that particular employee travel time for which no compensation was being paid, because the employer apparently viewed it as off-duty and noncompensable, was in fact on-duty hours worked and compensable. (Id. at pp. 1–7.) The DLSE then considered whether payments for other compensable hours, contractually promised under the collective bargaining agreement, could be borrowed to satisfy the employer’s minimum wage obligations, as would have been true under the rule generally articulated in the federal courts.
wage obligations for those activities that are compensated at less than the minimum wage under the CBA or contract” (fn. omitted)].) In practical terms, this means that an employer who contracts to pay $18 per hour for two hours of work, but who then demands a third hour of unpaid work, cannot argue that it has complied with a $12 hourly minimum wage (see, e.g.,
The Court of Appeal in Armenta, supra, 135 Cal.App.4th 314, endorsed the DLSE’s reasoning in a similar context. The employer in Armenta, which maintained utility poles, had promised in a collective bargaining agreement to pay set hourly rates for hours spent engaged in “productive” tasks directly related to pole maintenance. But employees were
Since Armenta, other Courts of Appeal have uniformly followed its lead. These decisions have extended the no-borrowing rule to employees under a collective bargaining agreement (Bluford v. Safeway Inc. (2013) 216 Cal.App.4th 864, 872–873 (Bluford)) and an ordinary contract (Gonzalez, supra, 215 Cal.App.4th at pp. 50–51), and without regard to whether the basis for compensation is hourly (Sheppard v. North Orange County Regional Occupational Program (2010) 191 Cal.App.4th 289, 297–298, fn. 5), by piece rate (Bluford, at p. 872; Gonzalez, at pp. 51–52), or by commission (Vaquero v. Stoneledge Furniture, LLC (2017) 9 Cal.App.5th 98, 108–114 (Vaquero)). Although we have not previously had occasion to address the issue, we agree with this consensus: State law prohibits borrowing compensation contractually owed for one set of hours or tasks to rectify compensation below the minimum wage for a second set of hours or tasks, regardless of whether the average of paid and unpaid (or underpaid) time exceeds the minimum wage. Even if that practice nominally might be thought to satisfy the requirement to pay at least minimum wage for each hour worked, it does so only at the expense of reneging on the employer’s contractual commitments, in violation of the contract protection provisions of the Labor Code.
Synthesizing the authorities, we summarize the principles this way. The compensation owed employees is a matter determined primarily by contract. Compensation may be calculated on a variety of bases: Although nonexempt employee pay is often by the hour, state law expressly authorizes
employers to calculate compensation by the task or piece, by the sale, or by any other convenient standard. (See
Whatever the task or period promised as a basis for compensation, however, an employer must pay no less than the minimum wage for all hours worked. (See Wage Order No. 9, §§ 2(H), 4.) The employer must satisfy this obligation while still keeping any promises it has made to provide particular amounts of compensation for particular tasks or periods of work. (
For purposes of evaluating whether an employee has received at least the hourly minimum wage for tasks or periods compensated under the contract, it is generally permissible to translate the contractual compensation—whether it be done by task, work period, or other reasonable basis—into an hourly rate by averaging pay across those tasks or periods. An employer can, for example, pay by the day, with daily pay averaged across all hours worked to determine whether the resulting hourly wage exceeds the minimum. But an employer who instead promises to pay by the hour may not compensate any given hour at less than minimum wage. Nor may the employer make up for the shortfаll by pointing to other hours for which contractual compensation exceeds the minimum wage. As the DLSE explained in its letter, if a contract or bargaining agreement expressly guarantees compensation for one set of tasks or one specific period, that compensation may not be reduced to supplement pay for other tasks or periods within the purview of the contract or bargaining agreement, but otherwise undercompensated by them. (DLSE Opn. Letter No. 2002.01.29, supra, at p. 11;
B.
So far, we have described common ground: Delta does not challenge the no-borrowing principle as it has been elaborated in the Armenta line of cases. The parties’ disagreement concerns whether Delta‘s flight attendant compensation scheme violates this no-borrowing principle. Because the relevant provisions of the Labor Code prohibit borrowing only when it results in failure to maintain the wage scale designated by contract, the resolution necessarily turns on the nature of Delta‘s contractual commitments. (See
Delta‘s Work Rules, which are disclosed to all its flight attendants, promise to compensate attendants by the rotation rather than by particular hours worked. This is evident both from the structure of the compensation scheme outlined in the Work Rules and the procedures Delta employees follow to obtain work assignments.
Each rotation contains one or more duty periods, interspersed with layovers between duty periods. A duty period begins when a flight attendant reports to an airport before a flight. Thereafter, the flight attendant may have preboarding obligations, in-flight obligations, posttouchdown obligations, transit or sit time—the period in another airport before the next flight is ready for boarding—and a similar set of оbligations during the next or each subsequent flight until the end of the duty period. As Delta acknowledges, flight attendants are on duty continuously during a duty period, from first reporting until release after the last flight of the period. For his part, Oman does not contend flight attendants are on duty or entitled to compensation for layovers between duty periods.
Under the Work Rules, compensation is first determined for each duty period within a rotation by comparing three calculations and choosing the highest pay from among these: “Each duty period of a rotation pays the
The promise to pay by rotation is also reflected in the procedures Deltа uses for distributing work assignments. The nature of these procedures is undisputed: Each month, Delta circulates a bid packet to its flight attendants listing rotations each employee can request. The bid packet presents the number of duty periods and length of each duty period within each rotation; report times and total scheduled flight times for the flights within each rotation; and the amount of time the flight attendant can expect to be away from base. The bid packet also shows which formula will apply and the minimum amount flight attendants would be paid for the rotation at their particular contractually established “flight pay” rate. (See Oman v. Delta Air Lines, Inc., supra, 153 F.Supp.3d at pp. 1096-1098.) Flight attendants then submit their rotation preferences, with the understanding that their pay for each rotation will be no less than the amount derivable from the bid packet. That Delta pays flight attendants by the rotation, and what it will pay for any particular rotation, are fully disclosed. Delta then gives flight attendants access to electronic databases that track credits and pay earned for each assigned rotation.
Delta‘s four-formula method for calculating compensation guarantees that flight attendants are always paid above the minimum wage for the hours worked during each rotation without borrowing from сompensation promised for other rotations. Under one of the four formulas—the one-for-two duty period credit formula—pay is calculated by multiplying the attendant‘s established flight pay rate by the total hours in the duty period, divided by two. To borrow the simple example contained in Delta‘s 2014 Work Rules, a flight attendant working a duty period that lasts 12.5 hours would receive 6.25 hours of credit at the flight pay rate—a rate that in 2014 ranged from $23.28 to $53.52 depending on the employee‘s years of service. So long as the flight pay rate equals or exceeds twice the applicable minimum wage, this formula ensures a flight attendant is paid for all hours worked in every duty period at no less than the minimum wage. And because pay for a rotation is
Oman does not contend that any flight attendant‘s flight pay rate was ever less than twice the applicable minimum wage. But he nevertheless contends that the duty period credit formula fails to compensate flight attendants for all hours worked and instead compensates them for only half the hours worked—leaving the other half entirely uncompensated, contrary to state minimum wage law. Specifically, as Oman reads the Work Rules, the flight attendant working a 12.5-hour duty period is being paid for only half of that time, 6.25 hours, with the remaining 6.25 hours unpaid.
Oman‘s reading is unsound. The Work Rules do not, as he suggests, purport to compensate flight attendants only for every other hour—which is to say, they do not require a flight attendant to work an hour for free in order to earn full flight pay credit for working a second hour. Instead, flight pay credit accumulates continuously as the duration of the duty period lengthens: Every additional minute on duty earns an employee an additional 30 seconds of flight pay credit. As an example, a flight attendant subject to a $40 flight pay rate who works an eight-hour duty period would receive $160; for an 8.5-hour duty period, $170; for a nine-hour duty period, $180; and so on.7 Each and every increment of on-duty time is compensated under the formula, and at a rate equal to or greater than the hourly minimum wage. There is no impermissible borrowing from hours for which full flight pay was promised to cover hours for which no compensation is provided, both because every hour is compensated at the same rate (half flight pay) and because Delta never promised full flight pay for any particular hour under this formula.
The duty period credit formula is, however, only one of four formulas that may determine flight attendant compensation; if any one of the other formulas yields a greater amount of compensation, it will instead control. Oman argues that when pay is based on one of these other formulas, Delta violates the state minimum wage law.
Oman focuses in particular on a second formula, the flight time formula, which supplies the measure of pay for most duty periods. (Oman v. Delta Air Lines, Inc., supra, 153 F.Supp.3d at pp. 1100-1101.) Under this formula, an attendant is paid at the contractually established flight pay rate for each period between flight “block out” and “block in“—the period between when
As Oman observes, there are on-duty periods to which the flight time formula does not directly attribute compensation, such as preflight briefings. Oman contends that Delta‘s failure to specify a particular pay rate specific to these periods of time violates the obligation to pay at least minimum wage for all hours worked. And, according to Oman, any attempt to satisfy the minimum wage law by averaging the flight attendant‘s pay over the entire span of the duty period would violate the no-borrowing rule of Armenta and its progeny.
Oman‘s argument depends on a particular view of the role of the flight time formula under the parties’ contract: That, by offering flight attendants a fixed amount of compensation for a particular rotation, but also disclosing the formula on which it has arrived at that amount, Delta has in effect promised to compensate flight attendants at their full flight pay rate for hours in flight, and not to compensate them at all for their other hours worked. But even if this were a plausible view of the flight time formula in isolation, it is not a plausible view of the formula as it operates in the broader context of the Work Rules. Under those rules, the flight time formula is just one of four components of a single compensation scheme that constitutes Delta‘s contractual promise to its flight attendants. Flight attendants are presented with information about the entire scheme and bid on their work assignments according to the entire scheme. And the scheme, taken as a whole, does not promise any particular compensation for any particular hour of work; instead, as discussed above, it offers a guaranteed level of compensation for each duty period and each rotation. Because there are no on-duty hours for which Delta contractually guarantees certain pay—but from which compensation must be borrowed to cover other un- or undercompensated on-duty hours—the concerns presented by the compensation scheme in Armenta, supra, 135 Cal.App.4th 314 and like cases are absent here.
The same logic applies when either of Delta‘s remaining two formulas is used to calculate flight attendant compensation. In all cases, flight attendants
Resisting this commonsense conclusion, Oman leans heavily on Gonzalez, supra, 215 Cal.App.4th 36, but Gonzalez will not support the weight. There, the employer auto dealership and service center compensated auto technicians on a piece-rate basis. Each repair task was assigned a set number of “flag hours” roughly corresponding to the length of time it ought to take to complete. The service center promised its technicians a flat rate tied to their experience level multiplied by the number of flag hours completed. Technicians also had significant wait time, during which no repair orders were pending and so no flag hours could be accrued, but during which the employer required them to remain on premises in case new customers arrived. The employer also calculated a ” ‘minimum wage floor,’ ” which equaled the total hours a technician remained on the premises multiplied by the applicable minimum wage. (Id. at p. 41.) If a technician‘s “flag hour” compensation fell below the minimum wage floor, the employer supplemented the technician‘s pay to make up for the difference. (Id. at pp. 41-42.) Employees sued for minimum wage violations based on the failure to pay for wait time.
The Court of Appeal concluded that the employer‘s compensation scheme violated California minimum wage law. It explained that the Armenta no-borrowing rule “applies whenever an employer and employee have agreed that certain work will be compensated at a rate that exceeds the minimum wage and other worktime will be compensated at a lower rate.” (Gonzalez, supra, 215 Cal.App.4th at p. 51.) In such circumstances, pay at an agreed higher rate cannot be borrowed to make up for sub-minimum wage pay during other worktime. As the Gonzalez court read the pаrties’ contract, the case before it involved such a situation: The employer‘s contractual commitment
This case is different from Gonzalez in critical respects. In Gonzalez, the court understood the contract at issue to prоmise pay at a certain rate for certain tasks completed. The minimum wage floor, which “supplement[ed]” employee pay only when “necessary,” did not alter the nature of that promise. (Gonzalez, supra, 215 Cal.App.4th at p. 40.) We do not address here, and express no opinion concerning, a scenario in which a minimum wage floor was written into a contract that otherwise promised pay by the piece.8 Because the employer in Gonzalez required technicians to remain at work while waiting for customers—time not accounted for by the piece-rate system—the Court of Appeal concluded the employer violated the no-borrowing rule by attempting to use piece-rate pay as a credit against its obligations to pay for wait time. By contrast, as we have explained, Delta‘s Work Rules reflect a promise to pay by the rotation, and for each rotation, the compensation Delta promises will, no matter which of the four formulas applies, always exceed the state minimum wage per hour worked. Thus, Delta satisfies state minimum wage law without ever needing to compromise its contractual commitments.
(1947) 331 U.S. 199, 203-204.) Delta‘s arrangement may be relatively unusual, but it is not unlawful.
IV.
We answer the Ninth Circuit‘s questions as follows:
(1)
(2) State law limits on wage borrowing permit compensation schemes that promise to compensate all hours worked at a level at or above the minimum wage, even if particular components of those schemes fail to attribute to each and every compensable hour a specific amount equal to or greater than the minimum wage.
(3) In light of the answer to the question about the substantive application of the state‘s minimum wage laws, we do not address the separate question concerning the geographic scope of that law‘s application.
KRUGER, J.
We Concur:
CANTIL-SAKAUYE, C. J.
CHIN, J.
CORRIGAN, J.
LIU, J.
CUELLAR, J.
GROBAN, J.
OMAN v. DELTA AIR LINES, INC.
S248726
Concurring Opinion by Justice Liu
Today‘s opinion endorses the rule against wage borrowing established in Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314 (Armenta) and reaffirmed in subsequent decisions. (Maj. opn., ante, at p. 19.) The court holds that an employer may not satisfy its obligation to pay at least the minimum wage for all hours worked by “borrowing compensation contractually owed for one set of hours or tasks to rectify compensation below the minimum wage for a second set of hours or tasks.” (Ibid.) Delta Air Lines, Inc.‘s (Delta) flight attendant compensation scheme does not violate this “no-borrowing” rule. (Id. at pp. 22-31.)
While agreeing with today‘s opinion, I write to highlight the first step in applying the no-borrowing rule: identifying the nature of the employer‘s contractual commitment to its employees. Because the rule requires employers to keep their contractual commitments in the course of fulfilling their
Although Armenta established the no-borrowing rule in the context of a “minimum wage” claim, it is important to clarify that the rule‘s purpose is not to ensure that employees are paid, on average, hourly wages at or above a minimum threshold. In no-borrowing cases, there is no dispute that the employees are paid at least the minimum wage when total compensation is averaged over all hours worked. The question is whether the employer is using contractually promised pay for certain tasks or hours worked to make up for failing to pay the minimum wage for other tasks or hours worked. As today‘s opinion explains, the purpose of the no-borrowing rule is to prevent employers from using clever accounting to effectively “reneg[e] on the employer‘s contractual commitments, in violation of the contract protection provisions of the Labor Code.” (Maj. opn., ante, at p. 19.) Plaintiff flight attendants do not claim that their average pay ever fell below the minimum wage. Rather, they claim that the pay structure Delta promised did not compensate them for all the hours they worked.
Whether Delta or any other employer violates the no-borrowing rule thus turns on the nature of the pay structure the employer has promised. “The compensation owed employees is a matter determined primarily by contract.” (Maj. opn., ante, at p. 19.) Employers may legally compensate their employees on any number of bases, including “by the standard of time, task, piece, commission basis, or other method of calculation.” (
Correctly identifying an employer‘s contractual commitment is critical to ensuring that employers do not circumvent the no-borrowing rule simply by inserting into employment agreements a minimum wage floor—i.e., an agreement to make up the difference if an employee‘s promised pay, averaged over all hours worked, falls below the applicable minimum wage. A minimum wage floor, by incorporating the concept of borrowing into the contract, would seem to be an easy way for an employer to inoculate itself against a no-borrowing claim. Courts applying Armenta have rejected such compensation schemes. In Vaquero, a furniture store paid its salespeople on a commission basis and did not separately compensate them for legally mandated rest breaks. (Vaquero, supra, 9 Cal.App.5th at p. 103.) The employer also calculated employee pay based on the total number of hours an employee worked, including rest breaks. If a salesperson failed to earn more than an average of $12.01 per hour on commission, the employer made up the difference and subtracted that amount from the salesperson‘s earnings in the next pay period. (Ibid.) Construing the compensation scheme to promise payment by commission, the Court оf Appeal concluded that the scheme failed to separately pay employees for rest breaks and therefore failed to pay for all hours worked. (Ibid.) The no-borrowing rule barred the employer from using pay promised for an employee‘s commission to fulfill its obligation to pay for rest breaks. (Id. at pp. 114-117.) The fact that the employer supplemented an employee‘s commission if it fell below a specified hourly floor did not cure the violation. (Ibid.)
Likewise, in Gonzalez, an automobile servicing company paid its mechanics for each repair they completed but did not compensate them for wait time between repairs. (Gonzalez, supra, 215 Cal.App.4th at p. 41.) The employer also calculated what it called a ” ‘minimum wage floor’ ” (ibid.): If a mechanic‘s compensation for repairs fell below what the mechanic would have made if paid the minimum wage for all hours worked, including wait time, the employer made up the difference. (Id. at pp. 41-42.) Despite such a
Although Vaquero and Gonzalez did not extensively discuss the nature of each employer‘s respective contractual commitments, the reasoning of those decisions recognizes that employers cannot circumvent their obligation to pay employees for all hours worked or to pay the full amount of commissions, piece rates, or other compensation promised to employees simply by inserting a minimum wage floor into an employment agreement. A contrary conclusion would make it all too easy to evade the rule; a minimum wage floor would become a standard term in many employment contracts, and the rule would be emptied of real substance. The rule developed in Armenta is grounded in the protections of the Labor Code that prohibit an employer from diluting an employee‘s contractually promised wages. (Armenta, supra, 135 Cal.App.4th at p. 323 [discussing
LIU, J.
I Concur:
CUELLAR, J.