JON S. TIGAR, United States District Judge.
In this action for claims of alleged violations of federal and California labor laws, Defendant Securitas moves for summary judgment or, in the alternative, partial summary judgment on all claims asserted in Plaintiff Michael Deatrick's
Plaintiff Michael Deatrick is a former employee of Defendant Securitas Services USA, Inc. ("Securitas"), a national provider of security services. Deatrick worked for Securitas as a security guard for several years prior to being laid off. Deatrick alleges that Securitas failed to pay him and other security guards the full overtime compensation they were owed, because Securitas failed to take into account in the overtime calculation the payments that security guards received in connection with Securitas' "Vacation Pay Plan" ("the Plan"). Am. Compl. ¶¶ 1-6. Deatrick alleges that Securitas improperly treated these payments ("the payments at issue") as vacation payments under the FLSA, even though such payments were, in practice, retention or productivity bonuses.
Deatrick has asserted a claim under the Fair Labor Standards Act ("FLSA") for
The Plan is set forth in the Security Officer Handbook given to security officers upon being hired and each time it is updated. Walsh Decl. ¶ 9 & Ex. T, U, V. Security officers also receive a summary of the Plan's Summary Plan Description. Id. ¶ 10 & Ex. W. The Plan's stated purpose is to provide eligible employees with "funded vacation pay benefits." Walsh Decl., Ex. A at SUSA 0041.
Under the terms of the Plan, eligible "Contract Services Employees" do not receive any pay while on vacation.
Walsh Decl., Ex. A at SUSA 0042-45 (emphasis added); Walsh Decl. Ex. T at 2, Ex. U at 2, Ex. V at 2.
The payments that Deatrick and other employees received under the Plan on a yearly basis were calculated based on (1) years of service; (2) the number of hours worked in the immediately preceding year; and (3) the most frequent rate of pay during the year:
To be eligible for annual payments under the Plan, an employee must have worked at least 1560 hours in the preceding year. Walsh Decl. Ex. A at SUSA 0042-45. Payments were issued on the employee's anniversary date, unless the employment was terminated, in which case the employee did not receive any payments under the Plan for that year:
Walsh Decl., Ex. A at 5; Walsh Decl., Ex. T at 2, Ex. U at 3, Ex. V at 3.
These terms could vary depending on the existence of a client contract or a collective bargaining agreement. Walsh Decl., Ex. T at SUSA 0297; Walsh Decl., Ex. U at SUSA 000301; Walsh Decl., Ex. V at SUSA 000304.
Securitas admits that it excluded payments under the Plan from its overtime calculations. Answer ¶ 65. Deatrick received payments under the Plan from 2009 to 2012. Kaczke Decl. ¶ 2 & Ex. X.
The Plan provides that it "is intended to qualify as an employee welfare benefit plan within the meaning of Section 3(1) of [ERISA]." Walsh Decl., Ex. A at SUSA 0041. Benefits payable under the Plan are funded by Securita's Voluntary Employee Beneficiary Association Trust ("VEBA Trust"). Walsh Decl. ¶ 5; Walsh Decl., Ex. A § 2.18, 5.1. Securitas is required to make contributions to the VEBA Trust so that benefits "will be paid from amounts set aside in the Trust rather than from the general assets of [Securitas]." Walsh Decl., Ex. A § 2.18, 5.1. A Plan Administrator supervises the execution of the Plan. Id. § 6.1. To comply with ERISA's requirements, Securitas has filed required IRS forms and conducted requisite audits. Walsh Decl. ¶ 4 & Ex. B-E.
Summary judgment is proper when a "movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "A party asserting that a fact cannot be or is genuinely disputed must support the assertion by" citing to depositions, documents, affidavits, or other materials. Fed.R.Civ.P. 56(c)(1)(A). A party also may show that such materials "do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed.R.Civ.P. 56(c)(1)(B). An issue is "genuine" only if there is sufficient evidence for a reasonable fact-finder to find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is "material" if the fact may affect the out-come of the case. Id. at 248, 106 S.Ct. 2505. "In considering a motion for summary judgment, the court may not weigh the evidence or make credibility determinations, and is required to draw all inferences in a light most favorable to the non-moving party." Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir.1997).
Where the party moving for summary judgment would bear the burden of proof at trial, that party bears the initial burden of producing evidence that would entitle it to a directed verdict if uncontroverted at trial. See C.A.R. Transp. Brokerage Co. v.
The non-moving party must "identify with reasonable particularity the evidence that precludes summary judgment." Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir.1996). Indeed, it is not the duty of the district court to "to scour the record in search of a genuine issue of triable fact." Id. "A mere scintilla of evidence will not be sufficient to defeat a properly supported motion for summary judgment; rather, the nonmoving party must introduce some significant probative evidence tending to support the complaint." Summers v. Teichert & Son, Inc., 127 F.3d 1150, 1152 (9th Cir.1997) (citation and internal quotation marks omitted). If the non-moving party fails to make this showing, the moving party is entitled to summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
Securitas moves for summary judgment, or, in the alternative, for partial summary judgment on all of the claims asserted in the complaint. First, Securitas contends that Deatrick's FLSA claim fails as a matter of law because the payments at issue fall within the vacation pay exemption to the FLSA's overtime calculation. Second, Securitas argues that all of Deatrick's claims for violations of California's labor laws also fail because they are preempted by ERISA, as the payments at issue are paid out of an ERISA trust and not out of Securita's general funds. Finally, Securitas argues that, to the extent that Deatrick's state claims are not preempted by ERISA, it is entitled to partial summary judgment on the issues of willfulness and intent in connection with these claims.
Deatrick opposes the motion, arguing that the "vacation" payments at issue are actually retention and productivity bonuses, not vacation pay, and therefore must be a part of the overtime calculation under the FLSA. Deatrick also argues that the payments at issue are not governed by ERISA because they do not constitute vacation pay. Finally, Deatrick contends that discovery is incomplete as to the issues willfulness and intent, and therefore, the entry of summary judgment on these issues would be improper at this juncture.
The court addresses each of these issues in turn.
The FLSA requires employers to pay their non-exempt employees overtime for hours worked in excess of forty hours in a workweek at a rate that is at least one-and-a-half times the employee's "regular rate."
29 U.S.C. § 207(e)(2) (emphasis added).
The employer bears the burden to show that a particular exemption applies. Idaho Sheet Metal Workers, Inc. v. Wirtz, 383 U.S. 190, 206, 86 S.Ct. 737, 15 L.Ed.2d 694 (1996) (holding that the employer has the burden of proving that compensation falls within an exemption to the regular rate). Importantly, the Ninth Circuit has held that the exemptions to the FLSA must be "narrowly construed." Cleveland v. City of Los Angeles, 420 F.3d 981, 988 (9th Cir.2005) ("The FLSA is construed liberally in favor of employees; exemptions are to be narrowly construed against the employers seeking to assert them[.]") (citation and internal quotation marks omitted). In determining whether a payment falls within an exemption, the court must look to the character of the payment, not its label. See Walling v. Harnischfeger Corp., 325 U.S. 427, 430, 65 S.Ct. 1246, 89 L.Ed. 1711 (1945) (holding that determination of what constitutes "regular rate" under the FLSA, courts must "look not to contract nomenclature but to the actual payments").
Here, both parties agree that the material facts pertaining to the terms of the Plan and to the payments made under the Plan are undisputed. As such, Securita's motion with respect to this claim is limited to the question of whether it is entitled to judgment as a matter of law on the ground that the payments at issue fall within one of the exemptions to the regular rate calculation, namely § 207(e)(2), which covers vacation pay.
The court concludes that Securitas cannot meet its burden to show that the payments at issue fall within this exemption in light of the plain language of § 207(e)(2), the regulations interpreting § 207(e)(2), and the few available opinions on this issue.
First, the payments contemplated by the plain language of § 207(e)(2) are limited to those made "for occasional periods when no work is performed due to vacation." The payments at issue were not made based on vacation periods when no work was performed. Rather, they were made based on (1) the employee's years of service; (2) the number of hours worked in the immediately preceding year; and (3) the employee's most frequent rate of pay during the year. Indeed, the payments at issue were completely blind as to whether an employee actually took vacation time.
Second, the regulations promulgated by the Department of Labor ("DOL"), which interpret the scope of § 207(e)(2), provide that:
29 C.F.R. § 778.218(a) (emphasis added).
Like the plain language of § 207(e)(2), this regulation also ties the payments that fall within the § 207(e)(2) exemption to payments for time that is spent not working "due to vacation," and it specifies that such payments are exempted precisely because they are "not made as compensation for [] hours of employment." Unlike these exempted payments, the payments at issue here have no connection to time spent not working "due to" vacation, but they do have a direct relationship to the time that an employee worked. Indeed, one of the factors used to determine the payment amount is the number of hours that the employee worked in the preceding year.
Third, the few opinions addressing the applicability of the § 207(e)(2) exemption support the notion that payments based on hours worked and that have no connection to idle time, like the payments at issue here, do not fall within the scope of § 207(e)(2). See Local 246 Util. Workers Union of Am. v. S. California Edison Co., 83 F.3d 292, 295 (9th Cir.1996) (holding that supplemental disability payments do not fall within § 207(e)(2) because "[t]he payments necessarily compensate for hours of employment because they supplement a regular wage paid for work performed."); Hart v. City of Alameda, C-07-5845MMC, 2009 WL 1705612, at *2-3 (N.D.Cal. June 17, 2009) (holding that payments for holidays that had no connection to time spent not working during holidays does not fall within § 207(e)(2) because payments were connected instead to the amount of time an employee had worked during a given year). By contrast, payments that constitute "an additional benefit for employees and not compensation for hours worked" do fall within the scope of § 207(e)(2). See Ballaris v. Wacker Siltronic Corp., 370 F.3d 901, 909 (9th Cir. 2004) (holding that payments for lunch periods fall within the § 207(e)(2) exemption because employees did not work during the lunch period).
Of the opinions addressing the § 207(e)(2) exemption, Hart is the most instructive. 2009 WL 1705612, at *2-3. There, police officers were paid "additional compensation for holidays," and these payments were made regularly "regardless of whether or not the police officer[s] work[ed] the holiday." Id. at *1. The question before the court was whether these payments fell within the § 207(e)(2) exemption and were thus excluded from the regular rate calculation. The court held that the payments did not fall within the exception. In light of the language of § 207(e)(2), the court reasoned that the payments could fall within the exemption only if they were "due to" a holiday. The court held that the payments were not "due to" a holiday because "the payments at issue represent[ed] the total value of a year's holidays, which total is, in essence, spread out over the course of that year, rather than paid in the period in which any given holiday occurs."
Securitas argues that Hart is inapposite to because "comparing vacation pay to holiday pay is like comparing apples to oranges." ECF No. 33 [at 7]. The court is not persuaded by this argument. The "due to" test employed by the court in Hart comes directly from the language § 207(e)(2). Section 207(e)(2) applies to both holiday pay and vacation pay. As such, the "due to" test is directly relevant and applicable to the question before the court, namely whether the "vacation" payments at issue here fall within the scope of § 207(e)(2). Under this test, the payments at issue are not covered by § 207(e)(2), because they are not "due to" vacation. As discussed above, despite their label, the payments have no meaningful connection to when or if employees took vacation; they are based instead on hours worked and on whether the employee made it to his employment anniversary. Accordingly, the payments here are analogous to the ones in Hart: they are labeled as if they pertain to one of the categories of non-work time covered by § 207(e)(2), but they have no meaningful connection to the type of non-work time they purportedly are meant to compensate.
Securitas also contends that the payments at issue are akin to buy-backs of unused vacation time. Under the applicable DOL regulations, buy-backs fall within the scope of § 207(e)(2) because "they are not regarded as compensation for working." 29 C.F.R. § 778.219(a). The problem with this argument is that the regulations that govern buy-backs apply only where the employee is "entitled" to a "paid idle holiday or paid vacation." Id. Here, the express terms of the Plan make clear that Securita's employees are not "entitled" to paid vacation within the meaning of 29 C.F.R. § 778.219(a); indeed, any vacation that the employees take is unpaid. As discussed above, the payments at issue are based on the number of hours and the total number of years the employees worked, not on idle time. Accordingly, all of the authorities cited by Securitas that pertain to vacation buy-backs are inapposite. See Mot. at 9-11 (citing Lemieux v. City of Holyoke, 740 F.Supp.2d 246, 254
Finally, Securitas argues that the payments at issue fall within § 207(e)(2) because it intended such payments to be vacation payments.
The court concludes that, based on their substance, the payments at issue are non-discretionary bonuses, which must be factored into the regular rate calculation:
29 C.F.R. § 778.211(c) (emphasis added).
The payments at issue constitute non-discretionary bonuses under 29 C.F.R. § 778.211(c) because they incentivize employees to continue their employment with Securitas until the anniversary date, which is when the payment is made.
In light of the foregoing, Securita's motion is DENIED as to this claim.
Congress passed ERISA to "safeguard employees from the abuse and mismanagement of funds that had been accumulated to finance various types of employee benefits." Massachusetts v. Morash, 490 U.S. 107, 112-13, 109 S.Ct. 1668,
In addition to covering "employee pension benefit plans," ERISA covers "employee welfare benefit plans," which the statute defines as:
29 U.S.C. § 1002(1) (emphasis added).
"The Act does not further define `plan, fund, or program' or `vacation benefits' and does not specify whether every policy to provide vacation benefits falls within its ambit." Morash, 490 U.S. at 114, 109 S.Ct. 1668.
Securitas contends that the Plan is an employment welfare benefit plan covered by ERISA because the Plan's "vacation benefits" are paid out of a separate fund. Securitas concedes that "vacation benefits" are not defined in the statute, but it nevertheless contends that the Plan provides the type of "vacation benefits" contemplated by ERISA on the ground that the Plan complies with certain administrative, funding, and reporting requirements applicable to ERISA welfare funds.
The court concludes that Securitas has not met its burden to show that the payments at issue are welfare benefits under ERISA. Securitas' arguments assume that the Plan falls within the category of "vacation benefits," but that assumption is far from established. The determination of whether a plan is of a type described in or contemplated by the plain language of 29 U.S.C. § 1002(1) is a threshold one. If a benefits plan is not of a type described in or contemplated by 29 U.S.C. § 1002(1), then it is irrelevant whether that plan complies with ERISA's administrative, funding, and reporting requirements. To hold otherwise would lead to the conclusion that payments of any kind can be subject to ERISA so long such payments are made by an independent trust set up and funded by the employer and the employer complies with other ERISA administrative and reporting requirements.
Unfortunately, no court has defined "vacation benefits," and none of the cases cited by Securitas are helpful, because in each of those cases, the question of whether a plan was covered by ERISA as a vacation benefits plan was not addressed.
Here, the court has already concluded that the payments at issue are not connected in any way to the taking of vacation by security guards. Instead, these payments are based on the hours that security guards worked during the prior year and on whether they continued their employment with Securitas through their anniversary. As such, the payments are de facto retention bonuses designed to incentivize employees to stay with Securitas for whole years at a time. Because the payments are not "payable only upon the occurrence of a contingency outside of the control of the employee" like the welfare plans contemplated by § 1002(1), the court cannot conclude that the payments are "vacation benefits" covered by ERISA.
Accordingly, Securita's motion is DENIED as to this claim.
Securitas moved for partial summary judgment on issues of willfulness and intent
After Deatrick requested more time in his opposition to conduct discovery on these issues, Securitas agreed that Deatrick could have an additional 120 days to complete this discovery in the event that Securitas' summary judgment motion were denied as to the FLSA and ERISA issues.
In light of the parties' agreement that additional discovery is necessary on willfulness and intent, Securita's motion is DENIED AS MOOT with respect to this claim.
This case brings to mind an aphorism frequently attributed to Abraham Lincoln, who once was asked how many legs a horse
Securitas' motion for summary judgment is DENIED in its entirety.
