Plaintiff Kimberly Aleksick, individually and on behalf of a class of those similarly situated, appeals a judgment following an order granting defendant 7-Eleven Inc.'s (7-Eleven) motion for summary judgment. 7-Eleven provides payroll services to its franchisees. Aleksick contends reversal is required because 7-Eleven's payroll system violates both the "unlawful" and "unfair" prongs of Business and Professions Code section 17200.
We affirm the judgment. Aleksick's complaint does not allege any statutory predicate for her unfair competition law (UCL) claim of unlawfulness, and she did not seek leave to amend. Thus, the principle of forfeiture applies. Moreover, even without forfeiture, she cannot pursue a UCL claim for unlawfulness because the Labor Code wage statutes govern the employee-employer relationship, and undisputed evidence shows 7-Eleven was not the class members' employer. For the same reason, Aleksick cannot pursue her claim of unfairness under the UCL, which is tethered to the public policy in favor of requiring employers to comport with Labor Code wage statutes and promptly and fully pay their employees. The trial court correctly determined 7-Eleven is entitled to judgment as a matter of law.
Michael Tucker owns franchises for two 7-Eleven stores. His relationship with 7-Eleven is governed by a franchise agreement that designates him an independent contractor. He is responsible for overall store operations, including all matters pertaining to employees, such as hiring and firing, setting pay, and scheduling work.
In August 2005 Tucker hired Aleksick to work as a clerk in his 7-Eleven stores. Her employment ended in February 2007. She sued 7-Eleven, individually and as a proposed class representative, for violation of the UCL.
To avoid protracted litigation over certification issues, the parties stipulated to certification of the following class: "All individuals who received employment compensation at any time between April 16, 2003, and (Date of class certification) based on an hourly rate multiplied by the total hours worked in a work week whose compensation was processed by the 7-Eleven payroll system and involved the application of the practice of truncating the total hours worked in a work week to two decimal places and who worked for a 7-Eleven franchisee in California who had signed a Store Franchise agreement with 7-Eleven." (Italics omitted.)
Aleksick moved for summary adjudication. She sought findings that 7-Eleven "had a duty to refrain from committing unfair business practices," and that it breached the duty.
In support of its motion, 7-Eleven submitted evidence that Tucker, not 7-Eleven, was Aleksick's employer. 7-Eleven also submitted the expert declaration of an economist and statistician, Dwight Steward, Ph.D., on the issue of damages. The declaration states Dr. Steward reviewed the timesheets and earnings statements of 158 randomly drawn 7-Eleven employees for a total of 1,072 pay periods. Disregarding salaried employees, who are not members of the class, Dr. Steward found that 348 of the pay periods were subjected to truncation by 7-Eleven. In 336 of those pay periods, Dr. Steward calculated "there was no difference between the employee's pay based on the non-truncated hours and the employee's pay based on the truncated hours."
As to the remaining 12 pay periods reviewed, which involved eight employees, Dr. Steward attached a table to his declaration to show the potential damages. His declaration states: "As the table shows in column 9, the largest discrepancy for any employee or pay period was 0.0067 hours or about 24 seconds of lost time for the entire week of work. The majority of pay periods that were affected by 7-Eleven's truncation policy potentially lost 12 seconds of time per week of work. The average amount per pay period that was affected by the 7-Eleven truncation policy was $0.04 per week." The declaration also states the table shows that "[c]ollectively, for the 12 pay periods that were affected by truncation, there is a total potential loss of 2.60 minutes of work time or a total wage loss of $0.48."
Aleksick did not present any expert evidence. She submitted timecards and earnings statements for herself and a few other employees. Most of the copies of earnings statements in the clerk's transcript, however, are too dark to decipher. The timecards show the time an employee clocked in and out each day, and 7-Eleven's conversion of the hours and minutes to hours and decimal hours. Aleksick claimed the timecards show the class members were shorted on their time, but she did not present mathematical calculations required to support the showing. Thus, without performing the math itself, the trial court could not ascertain whether the timecards support Aleksick's claim.
After a hearing, the court granted 7-Eleven's motion for summary judgment and denied Aleksick's motion for summary adjudication. The court did
The court held "the practice of calculating employee pay based upon the decimal system, rather than using a fractional system, is inherently reasonable, and does not constitute a violation of [the UCL]." The court also held the practice of "truncating the decimal point after the second digit once a week is inherently reasonable," and does not violate the UCL. The court explained "the plaintiff class will never be able to prove harm from this," because the law "requires that all wages be paid in the context of . . . the human ability to measure and the human ability to deal with the world." The court noted the "[m]aximum value of [the third] decimal is .009. By my calculation, simple enough, .009 applied to an hour results in a little over 30 seconds."
Further, the court determined there was no unfair business practice because the potential for error in 7-Eleven's truncation practice was less than the potential for error in the input data—the recording of time in whole minutes twice per work shift. For instance, an employee clocking in at 7:00:59 and clocking out at 7:25:01 would be paid for 25 minutes of work rather than the 24 minutes and two seconds actually worked.
"The standard of review of an order granting summary judgment is well established. Our review is de novo. [Citation.] We independently review the entire record, except as to evidence to which objections were timely made and sustained, in the same manner as the trial court. [Citation.] First, we review the issues framed by the operative pleadings to determine the scope of material issues. We then determine if the moving party has discharged its initial movant's burden of production. If we determine the moving party made the requisite prima facie showing of the nonexistence of a triable issue of fact, we then review the opposing party's submissions to determine if a material triable issue exists. [Citations.] `In performing our de novo review, we must view the evidence in a light favorable to plaintiff as the losing party [citation], liberally construing [his or] her evidentiary submission while strictly scrutinizing [defendant's] own showing, and resolving any evidentiary
As the predicate for her claim of unlawfulness under the UCL, Aleksick cites Labor Code sections 204, subdivision (a) (requires employer to pay wages twice a month), 223 (prohibits employer from secretly paying lower wages while purporting to pay wages designated by statute or contract), 510, subdivision (a) (requires employer to pay overtime compensation), 1182.12 (requires employer to pay minimum wages), and 1194, subdivision (a) (authorizes civil action by employee for unpaid minimum wages or overtime compensation). Aleksick contends the court erred by not finding 7-Eleven's payroll method, specifically the practice of truncating decimal hours to the hundredth place, violates these Labor Code wage statutes.
Aleksick, however, cites the Labor Code wage statutes for the first time on appeal. Her complaint does not allege any statutory predicate for the UCL cause of action. The complaint merely alleges 7-Eleven "has violated both California law and/or its own contractual promise, thereby depriving the class members of money earned by them." This vague allegation did not notify 7-Eleven that in moving for summary judgment it was required to address Labor Code sections 204, subdivision (a), 223, 510, subdivision (a), 1182.12, and 1194, subdivision (a).
In its motion, 7-Eleven argued it was entitled to judgment on the UCL claim of unlawfulness because the complaint "failed to cite any underlying law or statutory violation." In opposition, Aleksick nonetheless neither cited any statutory predicate for the UCL claim nor sought leave to amend the complaint to do so. She merely argued "[e]ntitlement to wages and overtime compensation is based on an important public policy," and "the Legislature's
Even if Aleksick's complaint had cited the Labor Code wage statutes, however, we would find against her because they govern the employer-employee relationship, and undisputed evidence shows 7-Eleven was not the class members' employer. Again, the trial court did not address this theory, but
In Martinez, the court addressed the nature of an employment relationship for purposes of an action for minimum wages under Labor Code section 1194. Agricultural workers sued their employer (Munoz), who operated a strawberry picking operation, and several produce merchants with whom the employer had contractual relationships, for unpaid minimum wages and the concomitant violation of the UCL. The issue was whether the produce merchants were joint employers with Munoz. The trial court held that definitions of the employment relationship included in wage order No. 14-2001, issued by the Industrial Welfare Commission (IWC), entitled "Order Regulating Wages, Hours, and Working Conditions in Agricultural Occupations" (see Cal. Code Regs., tit. 8, § 11140), applied to the action. (Martinez, supra, 49 Cal.4th at pp. 42, 62, 66.) The trial court interpreted wage order No. 14 to include three alternative definitions of the term "to employ." (Martinez, supra, at p. 64.) "It means: (a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship." (Ibid.)
The court added, "This is not to say the common law plays no role in the IWC's definition of the employment relationship. In fact, the IWC's definition of employment incorporates the common law definition as one alternative." (Martinez, supra, 49 Cal.4th at p. 64.) Under common law, the principal test of an employment relationship is whether the alleged employer "`has the right to control the manner and means of accomplishing the result desired.'" (S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 350 [256 Cal.Rptr. 543, 769 P.2d 399].) The Martinez court affirmed a summary judgment for the produce merchants on the ground they were not employers under any of the definitions in wage order No. 14-2001. (Martinez, supra, at pp. 74-75, 77.)
Futrell also explained there "is no evidence . . . Payday allowed [the plaintiff] to suffer work, or permitted him to work, because there is no evidence showing Payday had the power to either cause him to work or prevent him from working." (Futrell, supra, 190 Cal.App.4th at p. 1434, citing Martinez, supra, 49 Cal.4th at p. 70.) Additionally, Payday did not meet the common law definition of an employer because it did not and could not hire or fire the plaintiff, and it did not direct or supervise his work. (Futrell, supra, at p. 1435.) Futrell affirmed summary judgment for Payday. (Id. at pp. 1426-1429.)
Futrell also cited Singh v. 7-Eleven, Inc. (N.D.Cal., Mar. 8, 2007, No. C-05-04534 RMW) 2007 U.S.Dist. Lexis 16677 (Singh) (Futrell, supra,
Here, 7-Eleven argued the UCL claim is not viable because it was not the class members' employer. 7-Eleven submitted evidence that its relationship with Tucker is governed by a franchise agreement, which designates him an independent contractor. He is responsible for overall store operations, including hiring and firing employees, setting rates of pay and raises, scheduling work and vacations, and giving performance reviews. 7-Eleven also submitted evidence pertaining to the processing of payroll. At the end of each week, Tucker submits to 7-Eleven the hourly rate and number of hours worked by his employees. He then transmits the information to 7-Eleven for its processing of payroll checks.
This case does not pertain to an IWC wage order. 7-Eleven's evidence, however, satisfies its prima facie burden of showing it was not the employer of Aleksick or other class members under any definition of the employment relationship, whether based strictly on common law or on the additional IWC wage order definitions of the type considered in Martinez and Futrell. 7-Eleven exercised no control over Tucker's employees, including their hiring or firing, rate of pay, work hours and conditions; 7-Eleven did not "suffer or permit" the employees to work; and it did not engage them in work. (Martinez, supra, 49 Cal.4th at p. 64.)
Aleksick did not meet her burden of raising a material issue of fact on the employment issue. Indeed, in supplemental briefing we requested, Aleksick concedes "it is undisputed that 7-Eleven is
Aleksick cursorily contends 7-Eleven's truncation policy was illegal for purposes of the Labor Code wage statutes although it was not the class members' employer. She asserts, "Whether 7-Eleven was the Class' employer is not relevant . . . because 7-Eleven was indisputably the party responsible for payment of wages." She cites to a provision of the franchise agreement that merely discusses 7-Eleven's provision of payroll services to franchisees. The provision does not suggest 7-Eleven actually funded the payroll.
Further, Aleksick cites Sullivan v. Oracle Corp. (2011) 51 Cal.4th 1191 [127 Cal.Rptr.3d 185, 254 P.3d 237] (Sullivan), to show 7-Eleven's payroll method was unlawful under the Labor Code. In Sullivan, however, employees sued their employer. Sullivan held Labor Code sections 510 and 1194, which pertain to overtime compensation, apply to nonresident employees of a California-based employer, for time worked in California. (Sullivan, supra, at p. 1194.) Of course, insofar as employers are concerned, there is a strong public policy in favor of the payment of overtime, as Sullivan explains. (Id. at p. 1198.) Aleksick's reliance on Securitas Security Services USA, Inc. v. Superior Court (2011) 197 Cal.App.4th 115, 118, 121 [127 Cal.Rptr.3d 883] (Securitas), is misplaced for the same reason. As a matter of law, Aleksick cannot maintain a claim for unlawful conduct under the UCL.
Aleksick also contends there are triable issues of material fact on the unfair practice prong of the UCL. We disagree.
The UCL does not define the term "unfair" as used in section 17200, and the California Supreme Court has not decided the issue in the context of a consumer action. In Cel-Tech, supra, 20 Cal.4th 163, the court held in the context of a competitor action that the term "unfair" in section 17200 "means conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition." (Cel-Tech, supra, 20 Cal.4th at p. 187.) The court also held that "to guide courts and the business community adequately and to promote consumer protection, we must require that any finding of unfairness to competitors under section 17200 be tethered to some legislatively declared policy or proof of some actual or threatened impact on competition." (Id. at pp. 186-187.)
Following Cel-Tech, appellate courts have differed on the proper definition of the term "unfair" in consumer cases. (Bardin v. DaimlerChrysler Corp. (2006) 136 Cal.App.4th 1255, 1267 [39 Cal.Rptr.3d 634]; Puentes, supra, 160 Cal.App.4th at p. 646.) In Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 720, footnote 23 [113 Cal.Rptr.2d 399], the court concluded "we are not to read Cel-Tech as suggesting that such a restrictive definition of `unfair' should be applied in the case of an alleged consumer injury." The court applied the test used in People v. Casa Blanca Convalescent Homes, Inc., supra, 159 Cal.App.3d at page 530, set forth ante. (Smith, supra, at pp. 718-719.)
This court has followed the Gregory line of cases. (Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 940 [134 Cal.Rptr.2d 101];
Aleksick contends "7-Eleven's `unfair' practice is directly tethered to a legislatively declared policy," the public policy in favor of full payment to employees for all hours worked. This issue involves the legal significance of undisputed facts, and thus the issue may be resolved as a matter of law. (Puentes, supra, 160 Cal.App.4th at pp. 642-643.)
For a discussion of public policy, however, Aleksick relies on inapt opinions in which employees sued their employers for unpaid wages. (See Smith v. Superior Court (2006) 39 Cal.4th 77, 82 [45 Cal.Rptr.3d 394, 137 P.3d 218], citing Kerr's Catering Service v. Department of Industrial Relations (1962) 57 Cal.2d 319, 326 [19 Cal.Rptr. 492, 369 P.2d 20] [employer who knows wages are due, has ability to pay, and refuses to pay, "`acts against good morals and fair dealing'"]; In re Trombley (1948) 31 Cal.2d 801, 810 [193 P.2d 734] [same]; Pineda v. Bank of America, N.A. (2010) 50 Cal.4th 1389, 1400 [117 Cal.Rptr.3d 377, 241 P.3d 870]; Pressler v. Donald L. Bren Co. (1982) 32 Cal.3d 831, 837 [187 Cal.Rptr. 449, 654 P.2d 219]; Phillips v. Gemini Moving Specialists (1998) 63 Cal.App.4th 563, 570 [74 Cal.Rptr.2d 29]; Sullivan, supra, 51 Cal.4th at pp. 1194, 1198; Securitas, supra, 197 Cal.App.4th at pp. 118, 121.)
As Aleksick acknowledges, the "policy in favor of full and prompt payment of wages is specifically tied to the statutory provisions of the Labor Code." The Labor Code wage statutes, however, are inapplicable to 7-Eleven because it was not the class members' employer. Thus, the "unfairness" claim against 7-Eleven fails. The summary judgment for 7-Eleven is proper.
The judgment is affirmed. 7-Eleven is entitled to costs on appeal.
Huffman, J., and Nares, J., concurred.