PHYLLIS J. HAMILTON, District Judge.
This is a wage and hour case that was originally filed in state court on November 26, 2013, then removed to federal court on February 26, 2014. Dkt. 1. This matter was tried for the purposes of liability before a jury for a period of three days commencing October 2, 2017. The court then held a one day bench trial on October 10, 2017. In lieu of closing arguments at the bench trial, the parties submitted post-trial briefs.
Plaintiffs Harold Robinson, Jr., a former employee of Open Top, and Lawrence Muse, a current employee of Open Top ("plaintiffs") represent three overlapping certified classes of former or current bus operators for defendant Open Top Sightseeing San Francisco, LLC ("defendant" or "Open Top"). First, the court certified three Rule 23 subclasses. A California subclass consisting of current or former Open Top bus operators employed by Open Top any time on or after November 26, 2010. This subclass relates to the waiting time penalties and accurate wage statement causes of action. Dkt. 95 at 2. A Section 17200 subclass consisting of current or former Open Top bus operators employed by Open Top on or after November 26, 2009. This subclass relates to the claim brought under California Business and Professions Code § 17200 ("the UCL"). An injunctive relief subclass consisting of all people employed by Open Top as a bus operator. This subclass relates to claims for injunctive relief. Second, there is a Fair Labor Standards Act (the "FLSA") collective action consisting of 29 plaintiffs. Third, there is a "PAGA" representative action consisting of 23 plaintiffs who are making claims for missed rest breaks. The subclass or collective action that each plaintiff is a member of is shown in the parties' Joint Pretrial statement, Exhibit A, Dkt. 165.
Open Top is a tour bus company providing "hop on/hop off" sightseeing bus tours in the San Francisco Bay Area using double-decker, open-top buses.
Plaintiffs allege a number of wage and hour violations. The operative second amended complaint filed May 21, 2014, contains ten claims, but only six remained in the case at the beginning of trial: (1) violations of the FLSA for failure to pay overtime; (2) failure to provide accurate wage statements under California Labor Code § 226 and Wage Order 9; (3) waiting time penalties under California Labor Code §§ 201-203; (4) failure to provide rest breaks under California Labor Code § 226.7; (5) violations of the UCL, California Business and Professions Code § 17200; and (6) violations of the Private Attorneys General Act ("PAGA"), § 2699.
On May 24, 2017, the court granted plaintiffs' motion for summary judgment on Open Top's liability on the overtime claim under the FLSA, the UCL claim (predicated on the FLSA overtime claim) with a four-year statute of limitations, the California Labor Code Section 203 claim (waiting time penalties), and the claim for liquidated damages under the FLSA.
On September 7, 2017, after the pretrial conference, the court granted plaintiffs' motion to bifurcate the trial. Dkt. 200. The jury trial phase was set to address willfulness under the FLSA, liability on the rest break claim for more than 10 operators, and Open Top's liability for issuing wage statements that failed to include all applicable overtime worked and Open Top's full legal name. Dkt. 200. The second phase would be conducted as a bench trial and address PAGA liability, all damages and penalties, and injunctive relief. Dkt. 200.
In accordance with discussion with the parties, the pretrial order set aside 7 days for the jury trial, beginning on October 2, 2017. Dkt. 200. The court allocated approximately 30 hours of time, of which 17 hours was allotted for plaintiffs and 13 for defendant. Dkt. 200. The court also set an 8-hour bench trial for October 26, 2017. Dkt. 200.
The parties stipulated to the following undisputed facts for incorporation into the trial record:
Dkt. 165 at 4.
On Monday, October 2, 2017, before voir dire, the court noted that plaintiffs planned on calling only four live witness and presenting the video depositions of two other witness. This plan represented a significant reduction from the dozens of witnesses plaintiffs originally listed in their pretrial disclosures. In fact, it also represented a significant reduction from plaintiffs' counsel's representations at the pretrial conference, where plaintiffs stated they expected to call at least 7 additional witnesses just on the topic of rest breaks. Defense counsel stated that defendant would call three live witnesses and possibly rebuttal witnesses.
Given this change in circumstance, the court noted that with the reduced witness list the trial was likely to be much shorter than the time allotted and suggested that the revised estimate be provided to prospective jurors. Plaintiffs agreed to some extent, stating that it was "possible it could be done this week or possibly going into just one or two days of next week." Trial Tr. 14:1-13. Defense counsel stated its intention to use the full 13 hours allotted to his client, so a jury was empaneled for a two week trial.
After the jury was selected, opening statements began a little after 1:00 P.M. Not even three hours later, plaintiffs concluded their case-in-chief at about 3:50 P.M. with the exception of submitting documents into evidence.
While surprising given plaintiffs' counsel's representations earlier that same day, counsel's expeditious completion of plaintiffs' case-in-chief was unsurprising in light of plaintiffs' counsel's approach to trial. Plaintiffs' counsel tried the case as though there were significant stipulated facts in the record or significant limitations on evidence or significant time constraints, and operated, it seemed, as if the jury had significant prior knowledge of the case. Plaintiffs presented a paltry amount of evidence related to their rest break claim, used only a handful of exhibits (out of the dozens that were designated for use), and plaintiffs' witnesses barely testified on those exhibits that were used. In lieu of calling live witnesses, plaintiffs showed a number of hours of videotaped deposition testimony, and for many of plaintiffs' exhibits, the jurors were not shown the exhibit in conjunction with testimony on the exhibit.
Defendant's case and closing arguments took about one and a half days. Defendant called five witnesses and, including plaintiffs' cross examination, used a total of about seven hours.
The jury's verdict was published on October 5, 2017. The jury returned a verdict that Open Top's violation of the FLSA was willful, that Open Top did not fail to provide rest breaks, and that Open Top knowingly and intentionally failed to provide operators with accurate wage statements because the wage statements failed to set forth the applicable overtime worked and Open Top's full legal name. Dkt. 220.
Because the parties completed the jury trial several days early, the court advanced the bench trial to October 10, 2017.
Shortly before the bench trial, the parties notified the court that the parties had stipulated to $410,000 in damages for plaintiffs' UCL overtime claim. Dkt. 224.
The October 10, 2017 bench trial was litigated just as cursorily as the jury trial. Despite the court setting aside an entire day for the bench trial, the parties presented their damages and PAGA liability case in under two-and-a-half hours.
The only exhibit admitted into evidence during the bench trial was Exhibit 78, which sets out the operators' termination dates that plaintiffs' expert used to calculate § 203 waiting time penalties. Bench Tr. 55:18-56:22.
Towards the end of the bench trial, plaintiffs offered Exhibit 11 into evidence. By plaintiffs' own admission, Exhibit 11 contained raw, voluminous payroll data that the experts had relied on. Plaintiffs did not attempt to present any testimony on Exhibit 11, the experts never specifically mentioned Exhibit 11, and neither expert summarized or explained the contents of Exhibit 11. The parties, however, agree that a previous stipulation deemed "defendant's payroll records [ ] authentic and admissible to show the amounts that Open Top paid to operators for the time periods covered by those records." Bench Tr. 59:3-23;
The record reflects that the court neither explicitly admitted nor refused to admit Exhibit 11 into evidence. Bench Tr. at 56:25-59:24. Instead, the court attempted, to no avail, to ascertain why a summary witness was not called to explain the voluminous records particularly given that the expert did not offer any testimony on the records. Subsequent to trial and after receipt of the post-trial briefs, the court struggled with plaintiffs' damages calculations which were not entirely consistent with the summary evidence that had been admitted and turned to the payroll records contained in Exhibit 11 to try to make sense of the calculations. Given the lack of clarity as to the status of Exhibit 11, the court informed the parties on November 17, 2017, that the court was inclined to reopen the record to admit Exhibit 11 into evidence because it added to the court's understanding of the statistical evidence presented at trial. Dkt. 235. In the same notice, the court informed the parties that if admitted, as no summary was provided, the court would rely on Exhibit 11 only to the extent the court understood its contents.
The court allowed the parties to file objections to the court's stated intention. Defendant objected. Plaintiffs responded to that objection but did not lodge any objection themselves. Having considered defendant's objection and good cause appearing, in light of the parties' stipulation that the payroll records contained in the exhibit were authentic and admissible, the court hereby overrules defendant's objection and admits Exhibit 11 into evidence.
During the bench trial, the only two witnesses were plaintiffs' purported expert witnesses, Aaron Woolfson and Jeff Petersen. As is typical with expert reports, the court did not admit Petersen's and Woolfson's expert reports or related attachments into evidence. During the bench trial, however, both witnesses testified and relied upon their reports as demonstrative exhibits and to refresh their recollection on numerous topics.
Plaintiffs offered Woolfson as an "expert with respect to structuring data" to "establish[] the foundation" for Petersen's testimony. Bench Tr. 20:13-22; Bench Tr. 19:22-20:2. The court refused to accept Woolfson as an expert because Woolfson failed entirely to show he had the appropriate credentials and explain exactly what task he performed for plaintiffs and how he completed that task. Bench Tr. 26:10-25. The court informed the parties, however, that Woolfson would be treated as a percipient witness. Bench Tr. 26:10-25. Although the court considered Woolfson's testimony as a percipient witness, his testimony was not particularly helpful and had little effect on the court's conclusions, especially in light of the court's admission of Exhibit 11 into evidence.
Petersen has a B.S. in economics, and a Ph.D. in economics from the University of Utah. Amongst other qualifications, Petersen completed a health economics training program at University of California, Berkeley as part of his post-doctoral fellowship, is a professor at St. Mary's College in Moraga, is on the board of the American Academy of Economic and Financial Experts, and has experience conducting surveys and using inferential statistics similar to the techniques he used in this case.
Petersen testified that he analyzed summaries of payroll data to calculate damages and penalties covering the period November 26, 2009, through April 30, 2016. Bench Tr. 36:5-37:2.
For the period in which payroll data was available, March 7, 2011 through April 30, 2016 (the "payroll period"), Petersen testified he used actual payroll data. Bench Tr. 37:11-38:4. Petersen also testified that Woolfson apportioned the total hours for each payroll period between the two separate weeks in that payroll period. Bench Tr. 37:13-38:4. Looking at this data, Petersen determined first whether a threshold of 40 hours per week had been crossed and, if so, calculated the overtime due. He calculated overtime due by multiplying the "hours worked in excess of 40 during a specific work week" "by the hourly wage and then multipl[ied] that by .5." Bench Tr. 36:5-11;
No payroll data was available for the period November 26, 2009, through March 6, 2011 (the "non-payroll period"). Bench Tr. 37:11-13. For this period Petersen used "inferential statistical methods" to extrapolate how many hours in excess of 40 each driver worked per week. Bench Tr. 31:11-13. The inferential statistical method entailed using available payroll data to project (here, determine an average) overtime hours per week for the non-payroll period. Petersen first calculated the average payment of overtime that was due per year of work for those drivers where payroll data was available. This amount was $4,286 with a margin of error of 4.7%, which was low in Petersen's opinion. Next, Petersen adjusted the average overtime due per year to account for the change in hourly wage between the payroll period ($18.86/hour) and the non-payroll period ($17.00/hour). Petersen accordingly reduced the average yearly overtime premium to $3,863.
Petersen "verified" this result by conducting a survey of individuals who had no payroll data available. Bench Tr. 43:10-12. Petersen testified that there were twenty-two individuals who worked outside of the payroll period. Bench Tr. 44:20-22. Petersen telephoned 13 of these people and 11 responded to the survey. Bench Tr. 45:1-6. Survey respondents indicated that on average they worked approximately 66 hours per week. Bench Tr. 44:9-13. In comparison, the methodology described above projected that non-payroll period drivers worked an average of 8.73 overtime hours per week (48.73 hours per week). Bench Tr. 43:6-9. Petersen testified that the survey result, therefore, showed the inferential methodology yielded a conservative result. Bench Tr. 44:17-19.
Petersen testified that he used the inferential statistical method to determine overtime for twenty-two individuals. Bench Tr. 44:2-22. The court, however, notes that Petersen's testimony on this matter is inconsistent. Petersen also testified that eighty-eight of ninety-six class members had payroll data and that for those eighty-eight people no extrapolations or averages were used. Bench Tr. 92:23-93:6. And some of the same drivers appear on both Table 1 (with payroll data) and Table 3 (without payroll data) of Petersen's Report. Further muddying the water, Petersen's expert report shows that he calculated overtime due for only 16 individuals where payroll data was unavailable.
Petersen concluded that drivers with payroll data available were owed UCL overtime premiums totaling $302,707 and non-payroll period drivers were owed overtime premiums totaling $63,595, for a total of $366,302. Bench Tr. 36:12-15.
Using a three-year statute of limitations based upon when each of the 29 collective action members filed his or her opt-in, Petersen used the methodologies described above to calculate the amount of FLSA overtime ($114,524) and liquidated damages ($114,524) due. Bench Tr. 38:23-39:8, 41:4-8.
Lastly, Petersen used the results from the above analysis to calculate penalties due under Labor Code § 203 (waiting time penalties for drivers who were terminated between November 26, 2010 and the beginning of trial), § 226(e) (inaccurate wage statements issued between November 26, 2012 to April 20, 2016), and § 2699 (waiting time and inaccurate wage statements calculated for the period December 22, 2012 to April 20, 2016). Bench Tr. 46:2-48:9. As discussed below, penalties under these sections are triggered by Open Top's failure to pay overtime. However, the amount of penalties under § 203, unlike §§ 226 and 2699, is not determined by how frequently Open Top failed to pay a driver overtime.
Other than stating a summary of the totals due for overtime and penalties under these sections, Petersen did not testify on any underlying data or provide any examples of his analysis. Though the court has now admitted Exhibit 11 showing, to some degree, the raw payroll data, no evidence has been submitted on how many violations of each Labor Code section occurred. For example, other than Petersen's opinion about the total dollar amount of the violations, there is no testimony about how many inaccurate wage statements have been issued, much less how many per driver.
"It is within the sound discretion of the trier of fact to select the formula most appropriate to compensate the injured party. The law requires only that some reasonable basis of computation of damages be used, and the damages may be computed even if the result reached is an approximation. This is especially true where . . . it is the wrongful acts of the defendant that have created the difficulty in proving the amount of loss of profits. [T]he fact that the amount of damage may not be susceptible of exact proof or may be uncertain, contingent or difficult of ascertainment does not bar recovery."
Where an employer fails to maintain accurate payroll records, an employee carries his burden under the FLSA if he shows he performed work for which he was improperly compensated and produces some evidence to show the amount and extent of that work "as a matter of just and reasonable inference."
Plaintiffs also seek statutory and civil penalties under various California Labor Code Sections. The relevant subsections state:
The statutory amounts provided for in § 203(a) and § 226(e)(1) do not preclude recovery of civil penalties under § 2699. Civil "PAGA penalties are separate and apart from the actual damages that a Plaintiff may recover under other labor code sections."
"The law requires only that some reasonable basis of computation of damages be used, and the damages may be computed even if the result reached is an approximation."
Generally, the court finds that Petersen's methodology was reasonable, including the inferential statistical method.
As discussed, Petersen testified that he calculated overtime amounts due by multiplying the hours worked in excess of 40 by the hourly wage and then multiplied that number by 0.5. During cross examination, defendant questioned Petersen on whether Petersen accounted for the driver's taking paid but off-duty meal breaks at least once a day. Defendant insinuates that Petersen's failure to do so is fatal to his overtime calculation.
Plaintiffs argue that the Ninth Circuit has repeatedly rejected this argument because defendant cannot reduce overtime owed by the amount defendant paid drivers for off-duty meal breaks. The court agrees that a defendant cannot reduce the amount of overtime due by pointing to defendant's policy to pay its employees for meal breaks, the latter of which is not required under the FLSA.
However, plaintiffs mischaracterize the thrust of defendant's cross examination. Open Top is not seeking an "offset" for meal breaks. Rather, Open Top argues that the fact that the operators were not working during their meal break should be taken into account when calculating how many overtime hours each operator actually worked. That is, for example, if a driver was at work from 9:00 A.M. to 6:00 P.M. and Open Top paid the driver for that entire period but also provided the driver with the required 30 minute off-duty meal break, then the number of hours "worked" would only be 8.5 hours, even though the driver was paid for 9 hours. In sum, defendant's argument is that for the purposes of calculating total overtime, Petersen used the number of hours the driver was paid (in the court's example, 9 hours), rather than the number of hours the driver actually worked (in the example, 8.5 hours). If this error is present, then Petersen's calculation systematically overestimates the number of overtime hours each driver worked.
As explained below, the court finds that Petersen's analysis commits this error, which ultimately undermines his entire damages calculation. The court, however, also notes that defendant's oblique reference to this error without providing any of its own support made the court's job considerably harder than it otherwise should have been.
It is undisputed that under the FLSA time spent during an "off-duty" meal break (whether paid or unpaid) does not count towards the 40 hour threshold for overtime. "The Supreme Court has held that time spent waiting for work is compensable if the waiting time is spent `primarily for the benefit of the employer and his business.' Whether time is spent predominately for the employer's benefit is dependent upon all the circumstances of the case."
Plaintiffs did not argue at trial that drivers were in fact "working" during their meal breaks. Indeed, at trial plaintiffs often suggested that drivers engaged in personal activities were on a "meal break" rather than a "rest break."
Accordingly, the court finds that operators were "off duty" during their meal breaks. The court's determination regarding Petersen's analysis thus turns on whether drivers were paid for meal breaks and, if so, whether Petersen's analysis took that properly into account.
Rather than doing the more difficult work of sifting through the raw data to find direct evidence on this issue, the parties opted to argue over circumstantial evidence. The court begins by addressing that evidence and argument.
Arguing that Open Top did not pay drivers for their off-duty meal break, plaintiffs first point to Open Top's employee handbook that states "employees who work five hours or more may take a paid ten-minute break and an unpaid thirty (30) minute break, which should be scheduled with your supervisor." Exhibit 44 at 31; Trial Tr. 167:15-22 (admitting Exhibit 44).
Plaintiffs, however, omit that this Open Top policy only applies to "nonexempt and temporary employees." Exhibit 44 at 31. The court finds that it is at least plausible, if not likely, that this policy did not apply to the operators because Open Top treated drivers as exempt employees. Indeed, the present dispute arose because Open Top improperly characterized the operators as exempt for other purposes.
Further, Open Top's Head of Operations Jamie White testified that drivers "are paid for their lunches," Trial Tr. 399:11-17; 413:8-415:5, and that Open Top "pay[s] for all of our — our lunch breaks," Trial Tr. 410:6-18.
Plaintiffs argue that White's testimony is unpersuasive because it is in the present tense and is vague as to the type of payment drivers received for their meal break. The court is unpersuaded. As to the latter challenge, plaintiffs cannot call into question a witness' testimony by merely listing other forms of payment when no other form of payment was discussed at trial. With respect to plaintiffs' former argument, White testified that there was a logistics problem in ensuring operators clocked out for meal breaks. Trial Tr. 410:6-18. That problem would extend to any reduction in pay to account for meal breaks actually taken.
In addition, the court gives more weight to White's testimony about Open Top's actual practice than an employee handbook policy that
Plaintiffs next argue that Muse's paystubs and wage statements, which are identical to other operator paystubs, do not indicate any payment for meal breaks. Though true, this argument does not hold as much water as plaintiffs think. As shown below, the paystubs do not indicate any meal break payment because Open Top paid its drivers based on the total number of hours without distinguishing between time spent off duty or on duty. Following this practice, it is not unexpected that Muse's wage statements and paystubs do not show payments for off-duty meal breaks.
The court finds that the data in Exhibit 11 definitively confirms that the drivers were paid for the entire time they were at work, including meal breaks.
Muse's payroll data in Exhibit 11 shows the following for the pay period 4/15/13 — 4/29/13:
This data, which is generally representative of other operators' payroll data, reveals a number of important details. First, the court understands this data to mean that if an employee clocked in and out for a meal break, multiple in/out times would be shown for a single day.
Accordingly, because operators were off duty during meal breaks but were paid for their entire workday, the court finds that the number of hours an operator was paid does not equal the number of hours the operator "worked," as defined by the FLSA.
The next question, which the court answers in the negative, is: "Does Petersen's analysis account for this key fact?"
Petersen testified that he did not account for operators taking paid meal breaks. Bench Tr. 66:1-70:19. Shortly thereafter, Petersen confirmed that he "assumed that [the drivers took] a half an hour unpaid meal break, so that's what I had in my analysis." Bench Tr. 70:10-11. That is, Petersen assumed that the number of paid hours matched the number of hours worked. Under this assumption, Petersen calculated each driver's overtime premium by multiplying the number of "hours worked in excess of 40 during a specific work week . . . by the hourly wage and then multipl[ied] that by .5." Bench Tr. 36:5-11. Petersen did not testify as to how he determined what constituted a "work" hour.
As explained above, Petersen's assumption is incorrect. Open Top drivers were paid for off-duty meal breaks. To properly gauge the number of overtime hours worked, Petersen could not base his analysis purely on how many hours over 40 an operator was paid for each week. Petersen should have based his calculation on the number of hours a driver was paid in excess of 42.5 hours per week. This is because the California Labor Code requires that employers provide employees with a 30-minute off-duty meal break every 5 hours. Cal. Labor Code §§ 226.7, 512. Accordingly, if an operator is paid for his meal break, but does not work during his meal break, overtime should only be calculated for hours in excess of 8.5 paid hours per day. Hence, 42.5 hours per week.
The payroll data and Muse's paystubs confirm that Petersen's calculation was based on the faulty assumption.
Exhibit 11 contains spreadsheets showing how many hours the operators worked and the number of hours per week. This data is sufficient—at least for some class members—to recreate the overtime compensation calculation that Petersen performed. The table below, for example, recreates Petersen's overtime calculation for Jimmy Walton's entire tenure at Open Top.
As the table shows, Walton only worked more than 40 hours in a week on three occasions. The $71.10 amount of overtime due (based on 8.43 hours of overtime) matches Petersen's conclusion that Walton was owed $71 of overtime. Petersen Report Table 1. This confirms that Petersen calculated overtime based on 40 paid hours per week, rather than 40 hours worked per week.
The above also shows how significantly this error affects Petersen's overtime calculation. If Walton worked a normal five day week and took five off-duty meal breaks, and there is nothing to suggest he did not, then for week 2 of pay periods 1 and 2, he is not entitled to any overtime because he actually only
Muse's wage statements (the only wage statements admitted into evidence) further confirm that Petersen failed to account for Open Top paying drivers for off-duty meal breaks. Muse's April 19, 2013 pay stub shows: 106.48 hours worked, $1810.16 paid (excluding commissions) between 04/01/13 and 04/14/13, and a $17/hour wage. Exhibit 33. Exhibit 11 shows that Muse "worked" 66.21 hours and 40.27 hours in week 1 and 2, respectively, of that pay period. A total of 106.48 hours—the same amount Muse was paid for, which, as discussed above, includes at least 5 hours of paid off-duty meal breaks.
Petersen's analysis therefore fails to account for the off-duty meal breaks and, therefore, systematically overestimates the amount of overtime due by at least 2.5 hours per week that a driver "worked" over 40 hours.
The court cannot save Petersen's analysis by simply subtracting 2.5 hours from each week an operator worked over 40 hours. First, plaintiffs have not offered sufficient testimony or evidence enabling the court to make the calculation. Plaintiffs' evidence regarding how many hours each driver worked per week is contradictory at best.
Second, testimony on the records shows that many drivers worked more than ten hours per day. As noted above, on those days California law required Open Top to provide an additional off-duty meal break that, based on Open Top's practice, drivers would be paid for. Accordingly, for each of those days an additional half-hour set-off should be calculated. This compounds the problems discussed above.
Third, even if the court had sufficient weekly information for each driver, the court could not simply subtract 2.5 hours per week that overtime was worked because that would fail to account for weeks where a driver worked a sixth day. In those weeks, the court would be required to subtract 3 hours per week for paid off-duty meal breaks.
Fourth, the court has no information about whether some drivers held positions that were actually overtime exempt as well as driving positions that were not overtime exempt. There is evidence that is the case for at least some drivers. This would also affect the amount of overtime due per week.
In sum, Petersen's overtime calculation systematically overestimates the amount of overtime due and even if the court were inclined to do plaintiffs' work for them, the court does not have sufficient information to do so.
Petersen's systematic overestimation also creates problems with Petersen's other calculations.
Both the prejudgment interest and liquidated damages calculation rely on Petersen's overtime totals. Petersen testified that he calculated prejudgment interest by "taking the date when the overtime was due, and [ ] calculate[ing] the number of years until the present. And then [ ] multiply[ing] that number by the amount of overtime due as of that date and then multiply that number by 10 percent." Bench Tr. 52:5-20. Because Petersen's "overtime due" amount is inaccurate, so is his calculated prejudgment interest amount.
Petersen's liquidated damages calculation cannot be relied upon for the same reason.
Further, the above discussed error permeates through to Petersen's California Labor Code § 226(a) and § 2699 penalty calculations. It does not, however, fatally undermine his § 203 calculation.
With regards to §§ 226(a) and 2699, an example derived from Exhibit 11 illustrates the scope of the problem succinctly. For the pay period 12/08/14 to 12/21/14, Muse worked 30.08 hours the first week and 42.15 hours the second week. Ex. 11. Under Petersen's calculation, Muse would be due 2.15 hours of overtime pay (or $20.42) for that pay period.
But, as discussed at length above, taking into account paid off-duty meal breaks of 2.5 hours per week, Muse did not work any overtime during this pay period. Therefore, there was neither overtime due nor an inaccurate wage statement and Open Top should owe nothing to Muse based on this pay period.
On the other hand, Petersen's § 203 Waiting Time Penalty calculations are largely unaffected. Under § 203, "If an employer willfully fails to pay . . . any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days." Cal. Labor Code § 203. Exhibit 78, admitted into evidence during the bench trial, is Open Top's interrogatory responses regarding each operator's termination date or dates. Bench Tr. 55:14-56:24 (admitting Exhibit 78 into evidence); Ex. 78 (showing each operator's termination date or dates, if hired and terminated multiple times). Petersen attested that he relied on this data to calculate § 203 waiting time penalties. Bench Tr. 55:18-22. If an employee was owed any wage, including overtime, upon the employee's termination, Petersen calculated § 203 penalties "based on the formula of number of days up to 30, times 8 hours per day, times the average wage during the employment period." Bench Tr. 46:2-20. This calculation only required Petersen to determine whether, at some point during the employee's time at Open Top, the employee was not paid for overtime worked. Though Petersen made this determination based on a 40 hours per week threshold, the court finds it more likely than not that the same class members met the applicable 42.5 hour per week threshold discussed above at least once during their tenure at Open Top. Accordingly, Petersen's § 203 calculation need not be thrown out based on the paid off-duty meal break error.
As noted above, Petersen used an inferential statistical method for those class members who worked during the non-payroll period. The court finds that there are also a number of reasons, independent from the above, to question this analysis.
First, for those drivers who worked very few days during the non-payroll period but a significant number of days during the payroll period, Petersen used the overall average number of overtime hours worked rather than that driver's actual payroll period average. For example, Hanming Wu worked one month during the non-payroll period and worked about 20 weeks during the payroll period. Ex. 11 (paycheck report for Wu between 3/21/2011 and 8/7/11). Petersen calculated that Open Top owed Wu $2,440 for overtime worked during the payroll period. Petersen Report Table 1. On average during this period, Wu worked 53.91 hours of per week or, under Petersen's calculation, 13.91 hours of overtime. Rather than using that average to calculate the amount Wu was owed for the one-month period where payroll data was not available, Petersen used 8.73 hours per week, the overall average number of overtime hours Open Top drivers worked per week during the non-payroll period. Petersen Report Table 3 (awarding Wu $275). As is clear from the above, using the overall average rather than Wu's individual average potentially
Second, neither plaintiffs nor Petersen explained why Petersen projected overtime due for four people who worked during the payroll period. For one of these people, Huber Ochoa, the projected overtime due is negligible because he only worked three weeks during the payroll period. Petersen Report Table 3. However for the other three, Steven Rohner (5 months), James Ratchford (3.27 years), and Paul Bolich (6.41 years, 4 years in the payroll period), the projected overtime due is not at all negligible, $1,523, $12,617, and $24,759, respectively.
Third, as discussed above, Petersen provided inconsistent testimony regarding the number of drivers for which he used the inferential method to calculate overtime.
Lastly, Petersen testified that in performing his inferential analysis, he reduced the average yearly overtime due from $4,286 to $3,863 to account for the difference in average pay between the 2009-2011 non-payroll period ($17/hour) and the 2011-2016 payroll period ($18.86/hour). Bench Tr. 42:3-43:5. For drivers who worked during the non-payroll period, this makes sense. However, when projecting for the four above-mentioned employees, all of whom worked during the payroll period, Petersen still used the lesser non-payroll period average (i.e., $3,863), instead of the average applicable to the years the drivers actually worked (i.e., $4,286).
The jury did not determine the number of violations and neither of plaintiffs' bench trial witnesses testified about the number of violations. For reasons similar to those discussed above with respect to recalculating overtime, Exhibit 11 does not have enough data for the court to be sure that it is making a non-arbitrary calculation. Accordingly, the court cannot calculate the total penalties the operators are due under § 226 and § 2699. Muse is the single exception because plaintiffs submitted his paystubs into evidence.
The jury found for defendant on plaintiffs' rest break claim. Plaintiffs take nothing.
On May 24, 2017, the court granted plaintiffs' motion for summary judgment on this claim and concluded a four-year statute of limitations applies. The parties have stipulated that UCL overtime restitution is $410,000.
In light of the court's summary judgment ruling and the jury's verdict that the defendant's violation of the FLSA was willful, a three-year statute of limitations applies to plaintiffs' unpaid overtime claim. Plaintiffs may also recover liquidated damages equal to the same. 29 U.S.C. § 216(b); Dkt. 154, Summary Judgment Order, at 18. The UCL overtime restitution, however, subsumes FLSA overtime damages, and plaintiffs do not seek double recovery. Bench Tr. 61:17-62:2 ("We are not seeking double recovery . . . the FLSA overtime is already covered by the UCL restitution."). Therefore, only liquidated damages are at issue.
At trial plaintiffs were required to prove liquidated damages. Petersen calculated that the 29 collective action members were owed $114,524 in liquidated damages, calculated based on overtime wages over a three year period.
As discussed, the court cannot rely on this amount because it depends entirely on Petersen's flawed overtime calculation. Thus, the FLSA collective action members take nothing for their liquidated damages claim.
Plaintiffs seek prejudgment interest totaling $166,195 on the Rule 23 class members' UCL restitution recovery.
The court finds that it cannot award prejudgment interest totaling $166,195 because that amount is based on Petersen's flawed overtime calculation. However, the court finds that the Rule 23 class members are entitled to prejudgment interest totaling $130,217.26. This amount is based on the court's own calculation which, as explained below, applies a 7% per annum interest rate to the stipulated $410,000 overtime amount.
Plaintiffs argue that under Labor Code § 218.6 and Cal. Civ. Code. § 3289(b) the court should apply a 10% interest rate.
In short, plaintiffs argue that their UCL claim is an action brought for the nonpayment of wages and that therefore § 3289(b)'s 10% interest rate applies.
The court disagrees. "Plaintiffs have brought a claim for unfair competition; simply because such action is predicated on defendants' conduct in wrongfully withholding wages does not make the action one for nonpayment of wages. The action is still one for unfair competition."
At least one California appellate court agrees with this analysis. In
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"In the absence of a rate set by the Legislature, Article XV, Section 1 of the California Constitution states that the rate of interest shall be 7% per annum."
Using a 7% per annum simple interest rate and the stipulated $410,000 UCL overtime amount, the court awards Rule 23 class members a total of $130,217.26. Each individual class member's prejudgment interest award is shown in Appendix A to this order.
The court's calculation matched Petersen's method of calculating simple interest. Specifically, the court calculated prejudgment interest by taking the date when the overtime was due and calculating the number of years until trial, then multiplying that number by the amount of overtime due as of that date by 7 percent. However, nothing in evidence directly spoke to the date overtime was due for each driver, i.e., the number of years the overtime was due ("years due"). Similarly, though the court had the total stipulated overtime amount of $410,000, the parties did not submit any evidence regarding how that would be apportioned between individual class members. The court took additional steps to fill in the blanks.
First, the court calculated "years due" by reversing Petersen's overtime and prejudgment interest calculation for each driver. As discussed, Petersen calculated prejudgment interest by multiplying total overtime by "years due" and multiplying that number by 10%. That is,
For drivers in the payroll period, Table 1 and Table 6 of Petersen's supplemental expert report show each driver's overtime due and prejudgment interest due, respectively, as calculated using Petersen's methodology. The same is true for Tables 3 and 7, showing the amount due to non-payroll period drivers. Using each driver's overtime and prejudgment interest due and the 10% interest rate, the court determined the "years due" input. For example, for the payroll period Petersen awarded Juan Alcaron overtime of $7,590 and prejudgment interest of $4,345.
Second, because the court had no information about how much each driver was due under the new overtime amount, the court used a proportional method to determine this missing value. Specifically, the court determined each driver's overtime award as a percentage of Petersen's total overtime award ($366,302) and then multiplied that percentage by the stipulated $410,000 amount. Continuing the example above,
For the purposes of calculating prejudgment interest, the court finds this proportional method to be a fair and reasonable approximation. The court recognizes that this proportional method may not be one-hundred percent accurate because the increase from $366,302 to $410,000 may not be spread evenly across all drivers. However, nothing on the record suggests the increase is spread disproportionately. Further, the court notes that it is not inconsistent to rely on Petersen's overtime premium award to calculate each driver's proportional award because Petersen's above-described error would have likely affected each driver approximately equally.
With these two blanks filled in, the court performed the prejudgment interest calculation described above for each driver. For example, completing the calculation for Alcaron:
Adding each driver's prejudgment interest award totals $130,217.26.
Plaintiffs seek to recover statutory and civil penalties under §§ 226 and 2699, respectively, for Open Top's issuance of inaccurate wage statements.
The jury rendered its verdict that Open Top knowingly and intentionally failed to provide the operators with wage statements that included Open Top's full legal name. The jury also found that Open Top knowingly and intentionally failed to provide operators with wage statements that set forth all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee. The plaintiffs, however, did not request nor did the jury make any findings as to how many discrete violations of §§ 226 or 2699 occurred, and plaintiff Muse's wage statements were the only wage statements received into evidence.
During the bench trial, plaintiffs introduced expert testimony on the total amount of penalties due each driver under § 226 and § 2699 based on the wage statements' failure to accurately reflect overtime worked. Plaintiffs, however, again presented no evidence on the total number of violations of these two sections.
Despite the jury's verdict in plaintiffs' favor on this issue, during the bench trial no evidence or testimony was presented regarding penalties under § 226 or § 2699 for Open Top's failure to include its full legal name on the operators' wage statements.
Accordingly, plaintiffs take nothing under this theory of plaintiffs' § 226 and § 2699 claims.
Based on Petersen's testimony, plaintiffs seek to recover penalties under § 226 totaling $74,950 and under § 2699(f)(2) totaling $177,500 for the period November 26, 2012, through April 20, 2016. Bench Tr. 47:10-14, 49:16-50:6. Petersen calculated the § 226 total using the following formula: "$50 for initial pay period violation and $100 per pay period for subsequent pay period violations up to a maximum of $4,000 per individual." Petersen Report ¶ 31; Bench Tr. 46:2-47:24, 77:22-78:2 (referencing ¶ 31). The same description was given for § 2699 but with penalties at $100 for the initial pay period violation and $200 for each subsequent pay period violation. Petersen Report ¶ 31; Bench Tr. 46:2-47:24, 77:22-78:2 (referencing ¶ 31). On cross examination, Petersen confirmed that he assessed the lower penalty for the "first violation and all other violations were" assessed at the higher amount. Bench Tr. 81:22-82:6.
For the reasons discussed above, Petersen's penalty calculations under these two sections are unreliable. Further, for all except one driver, there is no direct evidence that supports awarding penalties under these sections because plaintiffs submitted neither the wage statements themselves nor testimony about how many of each driver's wage statements failed to reflect overtime worked.
The one exception is Muse. At trial, plaintiffs submitted a complete set of Muse's paystubs for the relevant time period.
Though there is no direct evidence on the matter the court finds that Open Top violated § 226 and § 2699 an additional eighty times. This finding is supported by the parties' stipulated undisputed facts that Open Top's wage statements displayed neither the applicable overtime rates nor reflected that all hours above 40 hours in a week were overtime hours. Dkt. 165 at 4. Given these two stipulated facts, any driver who worked overtime during the relevant period almost necessarily received at least one wage statement that was inaccurate because it failed to reflect that overtime worked. The court finds it more likely than not that those 80 drivers whom Petersen calculated were due an overtime premium,
During the bench trial and in the post-trial briefing, the parties disputed whether §§ 226 and 2699(f)(2)'s "initial" violation rate applies to only the first violation or whether that lower rate can apply to all violations. Neither party cites any controlling authority on this issue nor could the court find any. As explained below, the court holds that in this case the "initial" violation rate applies to all violations of § 226 and § 2699.
Resolution of this issue depends on the language of the statutes:
In
The court finds this reasoning persuasive and federal courts in this Circuit frequently rely on this holding to interpret other sections of the Labor Code.
Pointing to
In
The
As a whole, the court does not find
Given this distinction between "knowing and intentional" and "willful,"
On May 24, 2017, the court granted plaintiffs' motion for summary judgment on Open Top's liability on the waiting time penalties claim under § 203. Dkt. 154. During the bench trial, plaintiffs presented expert testimony on the amount of applicable penalties under § 203 and § 2699. Specifically, Petersen testified plaintiffs were due $311,417 under § 203 and $7,400 under § 2699. Bench Tr. 48:2-49:8. As explained below, the court finds that plaintiffs are entitled to the § 203 award but are not entitled to the § 2699 award.
Section 203 provides that "[i]f an employer willfully fails to pay . . . any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid" but for not more than 30 days. Cal. Labor Code § 203(a). The California Supreme Court has interpreted this to be a statutory penalty.
As explained above, unlike the other Labor Code sections at issue in this case, Petersen's § 203 damages calculation is not fatally affected by the unpaid off-duty meal break error. Accordingly, the court finds and awards plaintiffs $311,417 in statutory penalties under § 203, in accordance with Column 1 of Table 4 and 4A as attached to Petersen's Supplemental Expert Report.
The court concludes that plaintiffs are not entitled to any civil penalties under § 2699 for violations of § 203. Plaintiffs seek $7,400 for civil penalties under § 2699, Bench Tr. 63:17-23, which provides the above discussed civil penalty "[f]or all provisions of [the Labor Code] except those for which a civil penalty is specifically provided." Cal. Labor Code § 2699(f). However, the civil penalty for § 203 violations is specifically provided for by § 256: "The Labor Commissioner shall impose a civil penalty in an amount not exceeding 30 days' pay as waiting time under the terms of Section 203." Cal. Labor Code § 256;
Plaintiffs requested that the bench trial include a determination of whether injunctive relief should issue. There was no argument at either the jury or bench trial on this issue. The court thus DENIES plaintiffs' request for injunctive relief.
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