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N.D.Cal.: Agreement to Shorten Statute of Limitations to Six Months Procedurally and Substantively Unconscionable Under California Law
Bowlin v. Goodwill Industries of Greater East Bay, Inc.
This case was before the court on the plaintiff’s motion for partial summary judgment as to the defendant’s twenty-sixth affirmative defense, which asserted that the claims were barred based on the six-month limitations provision contained in an agreement between the parties that the plaintiff was required to sign as part of his employment with the defendant. The plaintiff argued that the clause in the agreement between the parties shortening the time in which the plaintiff had to bring his claims was unconscionable, rendering the agreement unenforceable, and his claims timely. The court granted the plaintiff’s motion holding that the six-month limitations period was in fact unconscionable under California law.
Initially the court held the agreement was procedurally unconscionable, because the agreement was a contract of adhesion. Discussing this issue, the court reasoned:
The threshold inquiry in California’s unconscionability analysis is whether the … agreement is adhesive.” Nagrampa v. MailCoups, Inc., 469 F.3d 1257, 1281 (9th Cir.2006) (quoting Armendariz, 99 Cal.Rptr.2d 745, 6 P.3d at 689). A contract of adhesion is “a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.” Armendariz, 99 Cal.Rptr.2d 745, 6 P.3d at 689. A finding that a contract is adhesive is essentially a finding of procedural unconscionability. Nagrampa, 469 F.3d at 1281;Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 893 (9th Cir.2002) (“The [contract] is procedurally unconscionable because it is a contract of adhesion….); Flores v. Transamerica HomeFirst, Inc., 93 Cal.App.4th 846, 113 Cal.Rptr.2d 376, 382 (Cal.Ct.App.2001). The critical factor for determining both adhesion and procedural unconscionability is whether the contract “was presented on a take-it-or-leave-it basis” and “oppressive due to an inequality of bargaining power that result[ed] in no real negotiation and an absence of meaningful choice.” Nagrampa, 469 F.3d at 1281.
Goodwill’s senior human resources administrator, Grizelda Guzman, states that “all employees were presented with [agreement at issue] in 2008.” Dkt. No. 32–1 ¶ 5. This suggests that the agreement was a standard contract, drafted by Goodwill. As the moving party, however, it is Bowlin’s burden to show that there is no genuine factual dispute that the manner in which the contract was presented to him renders it procedurally unconscionable. To this end, Bowlin submits a declaration and avers that “a manager presented [him] with a copy of the agreement … to initial and sign while [he] was working,” that no one “reviewed the terms or content of the agreement with [him],” and that he “was not able to discuss, negotiate or modify any of the terms or content of the agreement.” Dkt. No. 29–1 ¶¶ 2–4… Accordingly, the Court finds that as a matter of law, the agreement is procedurally unconscionable.
The court then held that the agreement was also substantively unconscionable, holding that, as a matter of law, applying a six-month limitations period to wage and hour claims is unduly harsh.
Because the court held that the agreement was both procedurally and substantively unconscionable, it struck the six-month limitations period from the parties’ agreement and granted the plaintiff’s motion for partial summary judgment.
Click Bowlin v. Goodwill Industries of Greater East Bay, Inc. to read the entire Order Granting Motion for Partial Summary Judgment.
Alonzo v. Maximus, Inc.
In this case, brought under the FLSA and California State laws, plaintiffs alleged a variety of wage and hour violations, including failure to include all appropriate compensation when calculating regular rates (and resulting overtime premiums), unpaid off-the-clock work and impermissible rounding of work-time. Following discovery, the case was before the court on defendant’s motion for summary judgment. As discussed here, the court granted defendant’s motion with regard to plaintiffs’ rounding claim, because the evidence demonstrated that the rounding was facially neutral and did not have the overall effect of reducing plaintiffs’ reported time and resulting wages.
Significant to the rounding claim, it was undisputed that defendant’s timekeeping policy required plaintiffs to round their time worked to the nearest quarter of an hour (whether higher or lower) and that plaintiffs self-reported and thus self-rounded their reported time each day/week.
Discussing the rounding issue the court reasoned:
“Defendant moves for summary judgment on Plaintiffs’ Rounding Claim on the basis that Defendant’s time rounding policy is facially neutral, and, therefore, permissible under California law. For the reasons set forth below, Defendant’s Motion is GRANTED.
While no California statute or regulation expressly addresses the permissibility of using a rounding policy to calculate employee work time, the United States Department of Labor has adopted a regulation regarding rounding pursuant to the Fair Labor Standards Act (the “FLSA”) that permits employers to use time rounding policies under certain circumstances:
It has been found that in some industries, particularly where time clocks are used, there has been the practice for many years of recording the employees’ starting time and stopping time to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour. Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work. For enforcement purposes this practice of computing working time will be accepted, provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked. 29 C.F.R. § 785.48(b) (2011).
While few Courts have interpreted this regulation, those that have recognize that the regulation permits employers to use a rounding policy for recording and compensating employee time as long as the employer’s rounding policy does not “consistently result[ ] in a failure to pay employees for time worked.” See, e.g., Sloan v. Renzenberger, Inc., No. 10–2508–CM–JPO, 2011 WL 1457368, at *3 (D.Kan. Apr.15, 2011).
That is, an employer’s rounding practices comply with § 785.48(b) if the employer applies a consistent rounding policy that, on average, favors neither overpayment nor underpayment. East v. Bullock’s, Inc., 34 F.Supp.2d 1176, 1184 (D.Ariz.1998) (granting summary judgment in employer’s favor where “evidence show[ed] that [employer’s] rounding system may not credit employees for all the time actually worked, but it also credits employees for time not actually worked” so that the employer’s “rounding practices average[d] out sufficiently to comply with § 785.48(b)”); see also Adair v. Wis. Bell, Inc., No. 08–C–280, 2008 WL 4224360, at *11 (E.D.Wis. Sept.11, 2008) (approving policy where there was no evidence to suggest it systematically favored employer); Contini v. United Trophy Mfg., No. 6:06–cv–432–Orl–18UAM, 2007 WL 1696030, at *3 (M.D.Fla. June 12, 2007) (granting employer’s motion for summary judgment where the “[employer], throughout [the employee’s] employment, [used] a consistent policy as to the rounding of clocking-in and clocking-out, which [was] both fair and evenly applied to all employees.”).
An employer’s rounding practices violate § 785.48(b) if they systematically undercompensate employees. See, e.g., Russell v. Ill. Bell Tel. Co., 721 F.Supp.2d 804, 820 (N.D.Ill.2010) (time rounding and log-out policies may violate FLSA if they “cause[ ] plaintiffs to work unpaid overtime”); Austin v. Amazon .com, Inc., No. C09–1679JLR, 2010 WL 1875811, at *3 (W.D.Wash. May 10, 2010) (denying defendant’s motion to dismiss where policy “allows rounding when it benefits the employer without disciplining the employee; but disciplines the employee when the rounding does not work to the employer’s advantage”); Eyles v. Uline, Inc., No. 4:08–CV–577–A, 2009 WL 2868447, at *4 (N.D.Tex. Sept.4, 2009) (granting summary judgment for plaintiff where defendant’s rounding policy “encompasses only rounding down”); Chao v. Self Pride, Inc., No. Civ. RDB 03–3409, 2005 WL 1400740, at *6 (D.Md. June 14, 2005) (ruling that employer’s practice of rounding employee time down violated FLSA).
The parties concede that the federal standard governs this case, as California courts look to federal regulations under the FLSA for guidance in the absence of controlling or conflicting California law, Huntington Mem’l Hosp. v. Superior Court, 131 Cal.App.4th 893, 903, 32 Cal.Rptr.3d 373 (2005), and the California Division of Labor Standards Enforcement (the “DLSE”) has adopted the Department of Labor regulation in its Enforcement Policies and Interpretation Manual (“DLSE Manual”), DLSE Manual §§ 47.1–47.2.
It is undisputed that Defendant employed a facially neutral time rounding policy. Defendant’s Corporate Employee Manual required employees to self-report their time “on a daily basis by recording hours worked to the nearest quarter hour” on timesheets provided at the beginning of the pay period. (Doc. 127–13, Ex. R at 110; id., Ex. S at 127.) And Defendant’s human resources managers testified that Employment Case Managers in each of Defendant’s San Diego, Orange County, and Los Angeles locations adhered to this policy by rounding their hours worked to the nearest quarter hour and entering that figure on a daily basis into an electronic time sheet on Defendant’s computer system. (Doc. 127–17 ¶ 5 (San Diego); Doc. 130–15 ¶ 5 (Orange County); Doc. 130–14 ¶ 5 (Los Angeles).)
Plaintiffs do not dispute the mechanics of Defendant’s time reporting policy. In fact, their expert acknowledges that “class members were required to and did round [the total hours worked] to the nearest quarter hour” on their self-reported time sheets. (Doc. 126–5 ¶ 12.) Rather, Plaintiffs contend that “[o]ver a period of time, such rounding resulted in putative class members being paid for less than all the time they actually worked” in violation of § 785.48. (Doc. 126–5 ¶ 12.)
In support of their contention, Plaintiffs point to records generated at Defendant’s San Diego locations by an electronic system used to record when employees entered and exited Defendant’s offices (the “Simplex System”). The Simplex System was “essentially the electronic equivalent of a sign in/sign out sheet. An employee could punch in their number when they arrived at the workplace and then punch in the number when they left the workplace.” (Doc. 127–17 ¶ 6.; see also Doc. 136–2, Ex. A. 52:9–22.) Based on those entries, the Simplex System generated reports “in a variety of formats [showing] various clock-in and clock-out times for each employee for each date” (the “Simplex Records”). (Doc. 127–18 ¶ 16.) At least some employees also used the Simplex System to record the beginning and end of their lunch breaks. (Doc. 136–2, Ex. A. at 54:8–13.)
Plaintiffs used a sample of these Simplex Records to perform two statistical analyses. In the first, Plaintiffs compared the clock-in/clock-out times recorded by Simplex on a particular day with shift beginning and end times for that day. Plaintiffs conclude that their analysis shows that the number of minutes that would have been subtracted from employees’ time under Defendant’s rounding policy was 5.4% more than the number of minutes that would have been added to their time under Defendant’s rounding policy. (Doc. 129–4 ¶ 5; Doc. 127–18 ¶ 19.) In the second, Plaintiffs compared the total hours reflected on Simplex Records for a given employee on a particular day with the total amount paid to that employee reflected on his or her timesheets. Plaintiffs conclude that analysis reveals a net underpayment of 472.72 minutes for the sample group. (Doc. 129–4 ¶ 8.) Based on these statistical comparisons, Plaintiffs assert a triable issue of fact as to whether Defendant’s rounding policy is invalid under California law because it “result[ed], over a period of time, in failure to compensate the employees properly for all the time they have actually worked.” 29 C.F.R. § 785.48(b). Plaintiffs are mistaken.
Even assuming the accuracy of Plaintiffs’ mathematical calculations, which Defendant disputes, Plaintiffs’ statistical analysis of Simplex Records does not create a genuine issue of material fact as to their Rounding Claim. At oral argument, Plaintiffs’ counsel conceded that the evidentiary record is devoid of evidence that Simplex Records reflect time actually worked by Plaintiffs, as opposed to time Plaintiffs may have been present on Defendant’s premises but not engaged in work activities. Rather, Plaintiffs’ counsel clarified that the Rounding Claim is based on Plaintiffs’ contention that all on-premises time reflected by Defendant’s Simplex Records constitutes time during which Plaintiffs were subject to Defendant’s control, and, therefore, compensable as a matter of law under the California Supreme Court’s decision in Morillion v. Royal Packing Co., 22 Cal.4th 575, 94 Cal.Rptr.2d 3, 995 P.2d 139 (2000). The Court disagrees with Plaintiffs’ reading of Morillion.
In Morillion, the California Supreme Court considered whether employees who were required by their employer to travel to a work site on the employer’s buses were “subject to the control of [the] employer” such that their travel time constituted compensable “hours worked” under Industrial Welfare Commission wage order No. 14–80. Id. at 578. The Court concluded that the employees were “subject to the control of [their] employer” during the time they traveled to the employer’s work site because the employer “require[d] plaintiffs to meet at the departure points at a certain time to ride its buses to work,” “prohibited them from using their own cars,” and “subject[ed] them to verbal warnings and lost wages if they [did not use the employer’s transportation].” Id. at 587. Accordingly, the employees’ compulsory travel time constituted compensable “hours worked.” Id. at 594. In so ruling, however, the Court clarified that:
[E]mployers do not risk paying employees for their travel time merely by providing them with transportation. Time employees spend traveling on transportation that an employer provides but does not require its employees to use may not be compensable as ‘hours worked .’ Instead, by requiring employees to take certain transportation to a work site, employers thereby subject those employees to its control by determining when, where, and how they are to travel. Id. at 588 (emphasis added). “The level of the employer’s control over its employees, rather than the mere fact that the employer requires the employee’s activity, is determinative.” Id . at 587.
This case does not present a situation in which Plaintiffs were “subject to the control of [Defendant]” such that all time spent on Defendant’s premises is compensable under the reasoning and holding of Morillion. Here, unlike in Morillion, Plaintiffs have presented no evidence that Defendant required them to arrive at its offices before their shifts began or to remain on the premises after their shifts ended. Nor have they presented evidence that Plaintiffs were engaged in work during any of the on-premises time reflected on their Simplex Records that was not accounted for in their electronic time sheets. In the absence of such evidence, the Simplex Records are simply immaterial to whether Defendant’s rounding policy systematically undercompensated Plaintiffs, and, therefore do not create a genuine issue of material fact as to the legality of Defendant’s rounding policy.
Accordingly, Defendant’s Motion for Summary Judgment is GRANTED as to Plaintiffs’ Rounding Claim.”
Click Alonzo v. Maximus, Inc. to read the entire Order Granting in Part and Denying in Part Defendant’s Motion for Summary Judgment and Granting in Part and Denying in Part Plaintiffs’ Motion for Summary Judgment.
Reuters is reporting that Wal-Mart has agreed to pay up to $86 Million to settle a class-action lawsuit accusing it of failing to pay vacation, overtime and other wages to thousands of former workers in California.
According to Reuters, “[a]bout 232,000 people will share in the settlement, which was disclosed on Tuesday in a federal court filing.
It requires a minimum payout of $43 million, and “far exceeds other recent settlements” involving Wal-Mart, the filing shows. The accord requires court approval.”
To read the entire story click here.
9th Cir.: Complaint That Failed To Allege Entity Exercised Control Over Nature And Structure Of The Employment Relationship Did Not Properly Allege Defendant Was “Employer”
Dianda v. PDEI, Inc.
Plaintiff-appellant Joseph Dianda worked for two days as a “best boy” in the production of a television commercial, but was allegedly paid three days late. Dianda sued the production company and PDEI, Inc. (“PDEI”) for various violations under the Fair Labor Standards Act (“FLSA”) and California law. In the case below, all defendants moved to dismiss the action. The district court denied the motion as to the production company, but granted the motion as to PDEI after determining that PDEI was not Dianda’s “employer” under the FLSA or California law. Dianda appealed and the 9th Circuit affirmed, discussing the requirements for an “employer” under both the FLSA and California law. Here, because the Complaint failed to adequately allege that PDEI exercised control over the nature and structure of the Plaintiff’s employment, the Court affirmed the dismissal as to PDEI.
“I. ‘Employer’ Status Under California’s Labor Code and FLSA
The essence of the test for “employer” status under the California Labor Code is “whether the principal has the right to control the manner and means by which the worker accomplishes the work.” Estrada v. FedEx Ground Package Sys., Inc., 64 Cal.Rptr.3d 327, 335 (Cal.Ct.App.2007). FLSA’s test is broader, asking whether the “individual [here, PDEI] exercises control over the nature and structure of the employment relationship.” Boucher v. Shaw, 572 F.3d 1087, 1090-91 (9th Cir.2009) (quotation marks omitted).
Dianda has not shown that PDEI had the right to control the details of his work or that PDEI exercised control over his employment relationship. In his deposition, Dianda admitted that PDEI did not tell him how to do his job, PDEI did not hire him, PDEI did not terminate him, PDEI never communicated with him in any way, and Dianda never took instructions or directions from PDEI concerning the commercial. Nonetheless, Dianda argues that his pay stub and W-2 form identify PDEI as the “employer.” However, “[t]he parties’ label is not dispositive and will be ignored if their actual conduct establishes a different relationship.” Estrada, 64 Cal.Rptr.3d at 335-36. See also Real v. Driscoll Strawberry Assocs., Inc., 603 F.2d 748, 755 (9th Cir.1979) (“Economic realities, not contractual labels, determine employment status for the remedial purposes of the FLSA.”). Furthermore, PDEI’s alleged use of its own account to pay wages and PDEI’s maintenance of payroll records are explainable as part of the service it provides as a payroll company. See, e.g., Moreau v. Air France, 356 F.3d 942, 950-52 (9th Cir.2004) (determining that Air France was not a joint employer of contracted service workers where Air France’s involvement was to ensure compliance with regulatory requirements).”