Lawrence J. O'Neill, United States District Judge.
Plaintiff Troy M. Lindell was employed as a sales consultant for Defendants Synthes USA, Synthes USA Sales, and Synthes Spine Company (collectively "Synthes Companies") and was responsible for certain territories in California. He argues, on behalf of himself and other similarly situated class members, that Defendants' employment practices violate several California Labor Codes.
Plaintiff filed this class action lawsuit on December 13, 2011. Doc. 1. An amended complaint was filed on February 27, 2012.
On September 20, 2013, Plaintiff moved to certify two classes pursuant to the Class Action Fairness Act, 28 U.S.C. §§ 1332(d) and 1711-15. Doc. 87. One class (the "Expense Class") includes employee sales consultants from Defendants' Trauma and Spine and Craniomaxillofacial ("CMF") Divisions, who earned wages based on commission. Id. at 2. Plaintiff claims that Defendants had a policy of not reimbursing these employees for business expenses. Id. The other class (the "Deduction Class") includes "all former, current, and future Sales Consultants" employed by Defendants for the time period beginning December 13, 2007 through the date of the final disposition of this lawsuit. Id. Plaintiff claims that Defendants deducted money from these employees' paychecks and failed to pay them in full when their employment was terminated. FAC ¶ 83, 90. On March 4, 2014, Magistrate Judge Barbara A. McAuliffe issued Findings and
On September 24, 2015, Defendants filed for summary judgment and Plaintiff filed for partial summary judgment. Defs.' Notice of Mot. and Mot. for Summ. J., Doc. 207; Mem. in Supp. of Defs.' Mot. for Summ. J. ("DMSJ"), Doc. 207-1; Pl.'s Notice of Mot. and Mot. for Partial Summ. J., Doc. 211; Mem. of P. & A. in Supp. of Pl.'s Mot. for Partial Summ. J. ("PMSJ"), Doc. 212.
The Parties filed oppositions on October 21, 2015. Pl.'s Opp'n to Defs.'Mot. for Summ. J. ("Pl. Opp'n"); Defs.' Opp'n to Pl.'s Mot. for Partial Summ. J. ("Defs. Opp'n"), Doc. 218. Along with his Opposition, Plaintiff filed responses to the DSSUF, ("PDSUF") Doc. 220, as well as objections to some of the evidence on which Defendants rely, Doc. 221. Defendants also responded to factual assertions made in the PSUF. Defs.' Response and Objections to PJSUF ("DPSUF"), Doc. 218-1.
The Parties filed replies on November 20, 2015. Reply in Supp. of Defs.' Mot. for Summ. J. ("Defs. Reply"), Doc. 225; Reply in Supp. of Pl.'s Mot. for Partial Summ. J. ("Pl. Reply"), Doc. 228. Also on November 20, 2015, Defendants also filed a response to Plaintiff's evidentiary objections. Defs.' Resp. to Pl.'s Objections to Evidence, Doc. 227.
The hearing set for the pending motions was vacated on November 23, 1015 pursuant to L. R. 230(g). Doc. 230.
Plaintiff filed voluminous evidentiary objections, to which Defendants have responded. Docs. 221 & 227. "At the summary judgment stage, [a court] do[es] not focus on the admissibility of the evidence's form. [A court] instead focus[es] on the admissibility of its contents." Fraser v. Goodale, 342 F.3d 1032, 1036 (9th Cir. 2003). To the extent that Plaintiff's objections are based on arguments that evidence is "conclusory," "vague" or "abstract," such objections are unnecessary because they duplicate the summary judgment standard. Burch v. Regents of Univ. of Cal., 433 F.Supp.2d 1110, 1119 (E.D.Cal. 2006) ("[S]tatements in declarations based on speculation or improper legal conclusions, or argumentative statements, are not facts and likewise will not be considered on a motion for summary judgment. Objections on any of these grounds are simply superfluous in this context."). Similarly, objections brought on the basis of a failure to comply with the best evidence rule are also inappropriate. Alvarez v. T-Mobile USA, Inc., No. CIV. 2:10-2373 WBS, 2011 WL 6702424, at *4 (E.D.Cal. Dec. 21, 2011). Plaintiff's objections brought on any of the above grounds are therefore OVERRULED.
The Ninth Circuit does mandate that "documents which have not had a proper foundation laid to authenticate them cannot support [or defend against] a motion for summary judgment." Beyene v. Coleman
Synthes Companies design, manufacture, market, and distribute implants and instruments for surgery. PDSUF #2. Defendants have a number of operating divisions, including the three divisions at issue in this case: Trauma, Spine, and CMF. Id. #12. Prior to 1990, Defendants hired sales consultants on an independent contract basis. Id. #26. In 1990, Defendants offered to employ their sales consultants directly. Id. #28.
At the time sales consultants are hired, they are required to read and sign an offer letter. PDSUF, #74, 216. The offer letter sets forth the conditions regarding their initial compensation package including base salary, commission rate, car allowance and in-territory expense reimbursement allowance. Id. Defendants also gave new employees hard copies of their sales policy manuals. Id. #78. Employees were required to acknowledge in writing that they read and understood the manuals. Id. #79. Defendants issued updated versions of their policy manuals in 1999, 2007, and 2010. Id. #80; "1999 Policy," Doc. 207-11, Ex. 61, at CR 4
Summary judgment is proper if the movant shows "there is no genuine dispute
If the moving party would bear the burden of proof on an issue at trial, that party must "affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party." Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir.2007). In contrast, if the non-moving party bears the burden of proof on an issue, the moving party can prevail by "merely pointing out that there is an absence of evidence" to support the non-moving party's case. Id. When the moving party meets its burden, the non-moving party must demonstrate that there are genuine disputes as to material facts by either:
Fed. R. Civ. P. 56(c).
In ruling on a motion for summary judgment, a court does not make credibility determinations or weigh evidence. See Anderson, 477 U.S. at 255, 106 S.Ct. 2505. Rather, "[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. Only admissible evidence may be considered in deciding a motion for summary judgment. Fed. R. Civ. P. 56(c)(2). "Conclusory, speculative testimony in affidavits and moving papers is insufficient to raise genuine issues of fact and defeat summary judgment." Soremekun, 509 F.3d at 984.
Plaintiff moves for summary judgment on hisclaim that Defendants violated Cal. Labor Code § 2802 by failing to reimburse Expense Class members for business expenses for the period December 13, 2007 — December 30, 2012. PMSJ at 2. Defendants move for summary judgment on this issue for the period between December 13, 2007 and September 2012 as well as for the period beginning in September 2012 through the present. DMSJ at 13.
Sales consultants in the Trauma, Spine, and CMF divisions generally begin their employment under a compensation plan that includes at least $35,000 annual salary, a 4% or 8% commission rate, a $450 to $500 monthly car allowance, and a $900 to $1000 monthly allowance for direct reimbursement for in-territory business expenses. PDSUF #45, 161, 202. Employees
Whether and how Defendants reimburse straight-commission employees for business expenses is a central issue in this case. Plaintiff claims that the Defendants have a policy under which these employees are "not eligible for an automobile allowance or in-territory business expense reimbursements." DPSUF #10-11, 48. In support of this argument, Plaintiff points to 2007 and 2010 corporate policy documents that state, "[f]ield employees who are on straight (or full) commission will
Defendants claim that under the straight commission plan, the enhanced commission rate was "designed to include and indemnify all of the elements of the base plan, including the full allowances for regular in-territory car and business expenses." DPSUF #10-11. In support of this argument, Defendants point to the deposition testimony of their Fed. R. Civ. P. 30(b)(6) ("30(b)(6)") corporate representative witness, who states that the reimbursement methodology for straight-compensation employees is that "their expenses are covered within that enhanced commission rate." Dep. of Jacqueline Meister ("Meister Dep."), Doc. 209-4 at
The parties do not dispute that employees may submit expenses for in-territory work if something is "outside the norm." PDSUF #251.
Section 2802 provides that "[a]n employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties..." Cal. Lab. Code § 2802(a). To establish liability under section 2802, an employee must show that "(1) the employee made expenditures or incurred losses; (2) the expenditures or losses were incurred in direct consequence of the employee's discharge of his or her duties, or obedience to the directions of the employer; and (3) the expenditures or losses were necessary." Cassady v. Morgan, Lewis & Bockius LLP, 145 Cal.App.4th 220, 230, 51 Cal.Rptr.3d 527 (2006), as modified (Dec. 21, 2006).
For the period between December 13, 2007 and December of 2012, Defendants argue that Plaintiff failed to show that class members incurred business expenses on a class-wide basis because he only produced receipts or tax returns for a small fraction of the class. DMSJ at 24-25. Defendants do not actually assert that class-members did not incur any business related-expenses. Rather, they argue that the manner in which Plaintiff proffers evidence of expenses is "insufficient on summary judgment." DPSUF #27. For example, Plaintiff testified in a declaration that he incurred regular expenses for cell phone service, internet access, shipping and office supplies. Decl. of Troy Lindell ("Lindell Decl."), Doc. 89-8, ¶ 7. Defendants claim that these are "conclusory statements." DPSUF #27. The Court disagrees with Defendants' characterization of the evidence. Plaintiff's statement that he incurred "regular" expenses does not call for a legal conclusion but rather reflects Plaintiff's experience that he incurred such expenses on a regular or consistent
The parties strenuously disagree as to whether class members were actually reimbursed for such expenses. Plaintiff maintains that he is entitled to summary judgment because Defendants' sales policy manuals "leave no question that Defendant did not reimburse expenses for Expense Class members." PMSJ at 8. In support of this argument, Plaintiff points to the 2007 and 2010 Policy Manuals. Id. For example, the 2010 Manual contains the following statement: "Sales Consultants who convert to straight commission are not eligible for an automobile allowance or in-territory business expense reimbursements." Doc. 214-8 at Ct. R. 58. Defendants argue that the enhanced commission that straight commission employees receive indemnifies these employees as a matter of practice. DMSJ at 12; Defs.' Opp'n at 5. While Defendants state that they have "never claimed that its expense indemnification is an `unwritten practice,'" DPSUF #46, they produce no evidence that, prior to December of 2012, such policies were documented in writing.
As both parties recognize, the issues raised in this case are similar to those raised in Gattuso v. Harte-Hanks Shoppers, Inc., 42 Cal.4th 554, 67 Cal.Rptr.3d 468, 169 P.3d 889 (2007). In Gattuso, the California Supreme Court held that Section 2802 allows an employer to reimburse employees through an increase in base salary or commission rate. However, an employer "may not combine the payments for [labor and expenses] in such a way would seriously hamper or effectively preclude enforcement of the various statutory and contractual obligations." Id. at 572, 67 Cal.Rptr.3d 468, 169 P.3d 889. Therefore, an employer can only satisfy the requirements of 2802 through enhanced salary or commission if it "establishes some means to identify the portion of overall compensation that is intended as expense reimbursement, [and] that the amounts so identified are sufficient to fully reimburse the employees
Id. at 576, 67 Cal.Rptr.3d 468, 169 P.3d 889.
While the Gattuso Court did not identify which party bears the burden on each of these three prongs, it held that it is the employee's duty to show that a reimbursement method did not cover his actual expenses. Id. at 569, 67 Cal.Rptr.3d 468, 169 P.3d 889. ("If the employee can show that the reimbursement amount that the employer as paid is less than the actual expenses that the actual expenses that the employee has necessarily incurred ... the employer must make up the difference.") Similarly, a California appellate court held that it is generally the plaintiff's responsibility to prove all elements of a cause of action brought under Section 2802. Cassady v. Morgan, Lewis & Bockius LLP, 145 Cal.App.4th 220, 239, 51 Cal.Rptr.3d 527 (2006), as modified (Dec. 21, 2006); see also Mireles v. Paragon Sys., Inc., No. 13CV122 L BGS, 2014 WL 4385453, at *7 (S.D.Cal. Sept. 4, 2014) (recognizing that plaintiff has the burden of proving 2802 elements). Thus, for Plaintiff to be entitled to summary judgment, it is his burden to produce evidence that shows that either (a) Defendants had a policy of not reimbursing class members for expenses, or (b) that Defendants did reimburse employees, but not in a manner that communicated to employees how expenses were apportioned in paychecks or (c) that Defendants reimbursed employees but did not fully reimburse them for their expenses. See Gattuso, 42 Cal.4th at 573, 67 Cal.Rptr.3d 468, 169 P.3d 889 ("Because providing an apportionment method is a practical necessity for effective enforcement of section 2802's reimbursement provisions, it is implicit in the statutory scheme."
Plaintiff maintains that the language in Defendants' 2007 and 2010 policies
Plaintiff also argues that the plain language of Defendants' written policies must control as a matter of law. In support of this argument, Plaintiff first cites to the parol evidence principle that "[w]hen a dispute arises over the meaning of contract language, the first question to be decided is whether the language is `reasonably susceptible' to the interpretation urged by the party." People ex rel. Lockyer v. R.J. Reynolds Tobacco Co., 107 Cal.App.4th 516, 524, 132 Cal.Rptr.2d 151 (2003). Under California law, however, the parol evidence rule applies only "[w]hen the parties to a written contract have agreed to it as an `integration' — a complete and final embodiment of the terms of an agreement." Masterson v. Sine, 68 Cal.2d 222, 225, 65 Cal.Rptr. 545, 436 P.2d 561 (1968); see also Sussex Fin. Enterprises, Inc. v. Bayerische Hypo-Und Vereinsbank AG, 460 Fed.Appx. 709, 711 (9th Cir.2011). "When only part of the agreement is integrated, the same rule applies to that part, but parol evidence may be used to prove elements of the agreement not reduced to writing." Id. Here, Plaintiff does not argue (or point to any evidence that suggests) that either of the 2007 or 2010 policies (or any part within them) is an integrated writing; thus there is no basis for this Court to find that the parol evidence rule applies.
Plaintiff also argues that "the law does not allow an employer to `selectively abide' by its own employment policies." Pl. Opp'n at 5. This misses the point, because Plaintiff is not actually arguing that Defendants did not abide by their manuals. Rather, he argues that the policies espoused in the manuals are unlawful. Further, the cases Plaintiff cites in support of this argument dealt with whether personnel manuals had the potential to alter employment contracts; not whether such manuals precluded the introduction of evidence interpreting these contracts. Huey v. Honeywell, Inc., 82 F.3d 327, 332 (9th Cir.1996) ("Summary judgment was improper because a material question of fact existed as to whether Huey's employment contract had been modified by Honeywell's representations and course of conduct."); Guz v. Bechtel Nat. Inc., 24 Cal.4th 317, 100 Cal.Rptr.2d 352, 8 P.3d 1089 (2000) ("When an employer promulgates formal personnel policies and procedures in handbooks, manuals, and memoranda disseminated to employees, a strong inference may arise that the employer intended workers to rely on these policies as terms and conditions of their employment, and that employees did reasonably so rely."). Thus, these cases do not touch on whether the Court may properly consider Defendants' testimonial evidence as to how they interpreted their own policies.
Plaintiff further argues that statements in the 2007 and 2010 Policies constitute a "judicial admission" because Defendants attached and referred to them in
Defendants also argue that Plaintiff's reimbursement claim must fail because he has not shown that, to the extent that employees incurred expenses, those expenses were not reimbursed. DMSJ at 12. This argument is unpersuasive. As discussed above, Gattuso does not require a plaintiff to show that he was inadequately reimbursed if his employer did not communicate an apportionment method to him to establish liability. 42 Cal.4th at 576, 67 Cal.Rptr.3d 468, 169 P.3d 889. This is only logical because a plaintiff cannot be expected to show that he was not reimbursed if his employer's failure to comply with 2802 prevents him from doing so.
As discussed above, Gattuso requires a reimbursement policy to have "some means to identify the portion of overall compensation that is intended as expense reimbursement" and that an employer must communicate this method to employees. 42 Cal.4th at 574-75, 67 Cal.Rptr.3d 468, 169 P.3d 889.
Defendants cite to the deposition testimony and declarations of numerous employees who attest that their business expenses are "built into the commission structure." Wilkin Depo. at 31-32. Doc 209-4 at 709.
Some regional managers testified that the system reimbursed employees in a lump-sum manner. E.g. Decl. of Rick Gennett ("Gennett Decl."), Doc. 209-5, ¶ 15. ("The compensation system was designed and implemented to include an allocation of expenses at the maximum amount allowable on the base package.");
Other testimony tended to show Defendants did not provide employees with a
Tellingly, the evidence also shows that there was no objective way for an employee to obtain additional reimbursement for business expenses. If Defendants actually had a lump-sum system in place, one would expect that employees would be able to recover for any expenses they incurred that exceeded this value. Instead, the witnesses testify that they were able to seek reimbursement for in-territory expenses only if they were "outside the norm." PDSUF #251; E.g. Decl. of William Thiele ("Thiele Decl."), Doc. 207-10, ¶ 7.
The evidence clearly shows that there is a genuine dispute as to whether the Defendants had a lump-sum apportionment system in place, and whether such a system was communicated to employees, as required by section 2802. For the reasons discussed above, the Court DENIES Plaintiff's motion for summary judgment as to the expense class for the period between December 13, 2007 and December 30, 2012, as well as Defendants' motions for the period between December 13, 2007 and September 2012.
Defendants argue that they are entitled summary judgment as to the Expense
In support of this argument, Defendants first point to what it refers to as the 2012 Sales Policy for the Trauma, Spine, and CMF Divisions. DSSUF #95 and Doc. 207-4 ¶ 95, referring to "2012 Policy," Doc. 209-14. Plaintiff objects to this document, first on the basis that is not properly authenticated. Pl.'s Opp'n at 19. The Court OVERRULES Plaintiff's objection on the basis of Counsel's declaration affirming that the document is "a true and correct copy" of a document it refers to as the "2012 Sales Policies for the Trauma, Spine and CMF divisions." Doc. 207-4 ¶ 95. However, the Court agrees with Plaintiff that Defendants have not provided credible evidence supporting their assertion that the document was published or posted on their intranet in September 2012. The document itself is undated and contains no cover or title page referring to a time period. Doc. 209-14. While Defendants submit in their briefings that it became effective in September 2012, the deposition testimony Defendants cite in support is not consistent with that assertion. Defs.' MSJ at 12. In reference to the document, Defendants' 30(b)(6) witness states that it "covers the Trauma division, it covers the CMF division, and covers the Spine division in the 2011 time period." PDSUF #93-95, referring to Meister Depo. at 201-204. In response to Counsel's question as to how she knew it was 2011, the witness stated, "Because it was prior to the merger..." Meister Depo. at 202. In their Reply, Defendants cite to additional testimony. Defs.' Reply, at 4, fn. 4. In this additional testimony, the witness confirms that she doesn't know when "in 2011" the policy was posted to the intranet. Meister Depo. at 205. Because the underlying testimony refers to a document that was posted sometime in 2011 and Defendants' argument discusses 2012 events, it is unclear that the document referred to in the deposition is actually the document Defendants produced at 209-14. Thus, the Court concludes that Defendants did not put evidence to show that the Document produced at 209-14 changed the status quo regarding Defendants' expense policies in September of 2012. It cannot support their motion for summary judgment.
Defendants also assert that they changed their practices in January 2013. They cite to the declaration of manager Laurie Hurley, who states that she sent out an electronic copy of their 2013 Compensation Plan ("2013 Plan") to Trauma sales consultants in December 2012. Decl. of Laurie Hurley ("Hurley Decl."), Doc. 209-4, ¶ 2.
Plaintiff also argues that the 2013 Plan still fails to full the requirements put forth in Gattuso. Pl.'s Opp'n at 19-20. In support of this argument, Plaintiff refers to a Q & A Document obtained in discovery that states, "LSYN Consultants on straight commissions and no expenses before Oct. 1st will continue to be ineligible for expense reimbursement through 2013." Doc. 223-23 at CR 5. Plaintiff, however, provides little context for this document. Counsel for Plaintiff authenticates the document as a "document titled Expense Reporting produced by Synthes in this matter..." Doc. 223 ¶ 24. The email attached to it states that it is a "deck on expenses which we hope will provide guidelines and clarify some recent questions." Doc. 223-23 at Ct. R. 2. The email also states that it is a "work in progress." Plaintiff, however, does not identify the sender of the email or provide any basis for assuming that the statements in the Q & A Document were ever adopted in policy or practice. Plaintiff also refers to a statement in the 2013 Policy as evidence that Defendants did not reimburse employees for some expenses. Pl.'s Opp'n at 19. This statement provides that sales consultants will receive expenses "if their normal compensation package includes direct in-territory business expense reimbursement." 2013 Policy at Ct. R. 65. While this language suggests that some employees might not be eligible for expense reimbursement, it is not evidence that any employee actually incurred expenses that were not reimbursed. Critically, Plaintiff does not point to any evidence that he or any other class member incurred expenses after January of 2013. Doc. 218-1 #29 (citing to Lindell Decl., Declaration of Peter Harrison ("Harrison Decl."), Doc. 89-9; Declaration of Edwin Hayes ("Hayes Decl."), Doc. 89-14; Decl. of Charles Warne ("Warne Decl."), Doc. 89-16; Declaration of Robert Marsh ("Marsh Decl."), Doc. 89-15). In fact, not one of the witnesses who provided testimony regarding expense was employed by Defendants after December of 2012. Lindell Decl. ¶ 3; Harrison Decl. ¶ 3; Hayes Decl. ¶ 3; Warne Decl. ¶ 3; Marsh Decl. ¶ 3. Because Plaintiff has not provided evidence that of a threshold element of a section 2802 case was met; the Court need not reach the Gattuso analysis.
For the above reasons, the Court GRANTS Defendants' motion for summary judgment as to Plaintiff's expense class claims for the period between January 2013 and the present.
Defendants also seek summary judgment on the first counterclaim asserted in its Amended Answer. Doc. 207 (citing Doc.
Plaintiff's second cause of action alleges that Defendants improperly deducted money from class members' wages in violation of California Labor Code sections 221, 223, and 300. FAC ¶¶ 82-84. Plaintiff moves for summary judgment on behalf of himself and the Deductions Class as to liability for his second cause of action for the period between December 13, 2007 and December 30, 2012. PMSJ at 2. Defendants oppose Plaintiff's motion and move for summary judgment in their favor. DMSJ at 29.
Under Synthes Companies' compensation plans, sales consultants earn commissions upon completion of a sale. DPSUF #56; PDSUF #261. Payment is disbursed once an invoice is received, however the money is considered an advance until payment is received from the customer. DPSUF #57.
Defendants' internal policies allow them to take at two primary types of deductions from a sales consultant's paycheck. PDSUF #291. These deductions are up to 50% of a product's list price. DPSUF #59; PDSUF #289. Customer service, or "PPOR," deductions are authorized in certain circumstances where a product is shipped without a customer purchase order and the Sales Consultant fails to timely obtain the purchase order. PDSUF #292. Accounts receivable, or "PINVR," deductions are authorized in certain circumstances where a sales consultant (a) fails to provide proof of delivery for a product, (b) fails to provide a valid purchase order for a product, or (c) fails to provide proof that a product was returned to Defendants. PDSUF #293. Several class members testified that Defendants took such deductions from their paychecks. DPSUF #60. Defendant argues that because deductions were only applied to advances, they cannot be considered deductions from actual wages. Id.
Defendants contend that the Spine division suspended all deductions by October 2012, PDSUF #309 and that the Trauma and CMF divisions suspended PPOR deductions by September 2013, PDSUF #311. Pointing to the deposition testimony of one of the Defendants' 30(b)(6) witnesses, Plaintiff maintains that PINVR deductions are still being taken from employees. DPSUF #65 (quoting Deposition of Karen Hummel ("Hummel Depo.") at 64, 74, Doc. 214-31); see also Doc. 209-4. Defendants state that this testimony shows that the Spine division stopped taking deductions in 2012. DPSUF #65 (quoting Hummel Depo., Doc. 209-4 at 65).
California Labor Code section 221 provides that "[i]t shall be unlawful for any employer to collect or receive from an
Under these laws, an employer may make an advance on commissions to employees "and later reconcile[] any overpayments by deductions from future commissions." Steinhebel v. Los Angeles Times Commc'ns, 126 Cal.App.4th 696, 707, 24 Cal.Rptr.3d 351 (2005). "The essence of an advance is that at the time of payment the employer cannot determine whether the commission will eventually be earned because a condition to the employee's right to the commission has yet to occur or its occurrence as yet is otherwise unascertainable." Id. at 705, 24 Cal.Rptr.3d 351. "The right of a salesperson or any other person to a commission depends on the terms of the contract for compensation." Koehl v. Verio, Inc., 142 Cal.App.4th 1313, 1330, 48 Cal.Rptr.3d 749 (2006).
Defendants argue that where a contract stipulates conditions precedent to the accrual of commissions, California law does not prohibit taking deductions from money advanced to employees prior to that accrual. DMSJ at 29-30 ("`[A]dvances' are not `wages' and, as a matter of law, commission advances are not subject to the wage payment and deduction requirements of the Labor Code."). In support of this argument, Defendants cite California appellate court decisions finding that advances, by definition, are not wages. E.g. Steinhebel, 126 Cal.App.4th at 705, 24 Cal.Rptr.3d 351 ("An advance, therefore, by definition is not a wage because all conditions for performance have not been satisfied."). In these cases, however, employers only sought to recover the amounts that were originally advanced and to enforce the conditions on accrual. For example, the Koehl Court found that "an employer may legally advance commissions to its employees prior to the completion of all conditions for payment and, by agreement, charge back any excess advance over commissions earned against any future advance should the conditions not be satisfied." 142 Cal. App.4th at 1332, 48 Cal.Rptr.3d 749. Similarly, the court in Deleon v. Verizon Wireless, LLC, discussed that "when a charge back occurs, the retail sales representative receives a reduced amount of the next advance to account for the earlier advance that never became a commissionable sale." 207 Cal.App.4th 800, 810, 143 Cal.Rptr.3d 810 (2012); see also Steinhebel, 126 Cal. App.4th at 708, 24 Cal.Rptr.3d 351 (describing deductions at issue as where "[r]espondent merely reduces the amount of the next advance to the employee to account for the fact that the earlier advance
Defendants' policies are markedly different than the ones described in the above cases. Under Defendants' 2007 and 2010 policies, Defendants were able to "recover" from an employee more than was advanced for a particular sale. Defendants do not dispute that the amount of the deduction (50% of list price) is larger than the maximum amount an employee may receive as commission for a particular sale (up to 12.5% of list price). DPSUF #58. Therefore, a portion of the deduction must (eventually) be subtracted from something other than the amount advanced. That `something' was the wage the employee would have earned from the accrual of other sales. Defendants' argument that it took the deductions from monies that were advances at the time of the deduction is an unpersuasive in light of the fact that California law does not allow employers to shield deductions under the rubric of advances. Cal. Lab. Code § 223 ("Where any statute or contract requires an employer to maintain the designated wage scale, it shall be unlawful to secretly pay a lower wage while purporting to pay the wage designated by statute or by contract."); Ralphs, 42 Cal.4th at 238, n. 11, 64 Cal.Rptr.3d 407, 165 P.3d 133 (observing that where cash and merchandise losses were assessed against expected wages, "[t]he order in which calculations were performed to achieve that prohibited result was irrelevant."); Sciborski v. Pac. Bell Directory, 205 Cal.App.4th 1152, 1168, 140 Cal.Rptr.3d 808 (2012) ("[A]n employer may not require an employee to agree to a wage deduction in the guise of recouping an advance based on conditions that are unrelated to the sale and/or that merely reflect the employer's attempt to shift the cost of doing business to an employee."). Defendants' policy, therefore, necessarily resulted in deductions from wages.
In California, "the Legislature has recognized the employee's dependence on wages for the necessities of life and has, consequently, disapproved of unanticipated or unpredictable deductions because they impose a special hardship on employees." Hudgins, 34 Cal.App.4th at 1119, 41 Cal.Rptr.2d 46. Similarly, California appellate courts have found that the employee bond laws expressed in sections 400 to 410 of the Labor Code dictate a public policy prohibiting an employer from subjecting an employee's compensation "to unanticipated or undetermined deductions." Quillian v. Lion Oil Co., 96 Cal.App.3d 156, 163, 157 Cal.Rptr. 740 (1979); see also Kerr's Catering Serv. v. Dep't of Indus. Relations, 57 Cal.2d 319, 328, 19 Cal.Rptr. 492, 369 P.2d 20 (1962). The California Supreme Court's most recent opinion on this topic holds that "sections 221 through 224, in combination with other statutes, establish a public policy against any deductions, setoffs, or recoupments by an employer from employee wages or earnings, except those deductions specifically authorized by statute." Ralphs, 42 Cal.4th at 241, 64 Cal.Rptr.3d 407, 165 P.3d 133 (2007) (citing Phillips v. Gemini Moving Specialists 63 Cal.App.4th 563, 574, 74 Cal.Rptr.2d 29 (1998)). Defendants do not argue that the deductions in this case are permitted by any of exceptions identified in section 224 (or any other statute).
Plaintiff's third cause of action alleges that Defendants are liable to Deductions Class members because they deducted money from their paychecks at termination for unlawful purposes. FAC ¶¶ 87-89. Specifically, Plaintiffs allege that Defendants deducted sums from their final
While Defendants do not dispute they deducted amounts from employees' paychecks at separation, they maintain that these amounts are only deducted from advances as opposed to wages. DMSJ at 33. Accordingly, Defendants claim that Plaintiff must show that "cumulative deductions during the class period exceeded the unaccrued advances that Synthes paid through the separation date." Id. As discussed above, the Court has found that this "rolling bank" approach necessarily dips into wages because deductions can eclipse the amount an employee is advanced (and ultimately earn) for a particular sale. At the point where an employee separates from the company, the situation changes slightly because the final paycheck includes commissions which may or may not eventually accrue into earned wages. Under California law, in the absence of a governing contractual agreement, an employee is entitled to commissions that he has earned, even if they have not vested at the time of his departure. Schachter v. Citigroup, Inc., 47 Cal.4th 610, 622, 101 Cal.Rptr.3d 2, 218 P.3d 262 (2009) ("He who shakes the tree is the one to gather the fruit."). Thus, under California's default approach, any deductions taken from a final paycheck would be suspect.
Defendants argue that the default rule does not apply because the 2007 and 2010 policy manuals functioned as contracts on the issue. DMSJ at 32-33. They argue that the manuals clearly stated that employees could not accrue commissions after their separation date. DMSJ at 32. Therefore, Defendants argue, employees "do not have any right to advances that accrue after termination." Id. Plaintiff both denies the force of the policy manuals as contracts and disagrees that the manuals preclude the right to accrue commissions after separation. For the sake of evaluating this argument, the Court will assume without finding that the policy manuals function as contractual agreements. The statement at issue provides that "if a Sales Consultant's employment is terminated for any reason, and his/her commissions do not accrue for any of the reasons specified...the Sales Consultant is responsible for the return of the advance to the Company." PDSUF #269. The Court agrees with Plaintiff that Defendants' interpretation of their policy language — essentially that employees forfeit their rights to earned income at separation — could be determined to be unreasonable by a trier of fact. The statement gives no reason for an employee to believe that he may be relinquishing any rights to advances or earned income at separation. Rather, it seems only to reserve Defendants' right to seek reimbursement for sums that were advanced but never accrued. Thus, the Court cannot find that employees were not entitled to amounts that may have been considered advances in their final paychecks. Accordingly, the Court does not agree with Defendants' theory that Plaintiff must show that "cumulative deductions during the class period exceeded the unaccrued advances that Synthes paid through the separation date" to survive their motion for summary judgment. Thus, the Court DENIES Defendants' motion for summary judgment as to Plaintiff's third cause of action.
Defendants argue that they are entitled to summary judgment on Plaintiff's derivative PAGA and UCL claims if they are also awarded summary judgment as to Plaintiff's first three causes of action.
The Court GRANTS IN PART and DENIES IN PART Plaintiff's and Defendants' motions for summary judgment, Docs. 207 and 212, as follows:
The Court DENIES Plaintiff's motion for summary judgment as to the expense class for the period between December 13, 2007 to December 30, 2012, as well as Defendants' motion for the period between December 13, 2007 to September 2012.
The Court GRANTS Defendants' motion for summary judgment as to Plaintiff's expense class claims for the period between January 2013 to the present.
The Court DENIES Defendants' motion for summary judgment as to its first counterclaim.
The Court GRANTS Plaintiff's motion for summary judgment as to Defendants' liability to Deduction Class members pursuant to his second cause of action, for the period between December 13, 2007 and December 30, 2012. The Court DENIES Defendants' motion for summary judgment as to this same issue.
The Court DENIES Defendants' motion for summary judgment as to Plaintiff's third, fourth and fifth causes of action.
