The Fair Labor Standards Act and Class Action Suits in California

There are many public policy considerations that favor the use of class actions in the employment context in California.  First, individual awards in employment cases tend to be modest so the availability of a class action claim plays an important function by permitting employees a relatively inexpensive way to resolve their disputes. Additionally, class actions allow many employees, who may not otherwise file an individual suit due to fear of retaliation, to safely have their day in court as a member of the class. Class actions also serve to inform and protect employees who, for one reason or another, may not otherwise become aware that their rights are even being violated.

Meal and rest break claims are specifically suited to class treatment. See Brinker Rest. Corp., 53 Cal.4th at 1033 (certifying a California class with meal and rest break claims).

Sections 206 and 207 of the Fair Labor Standards Act (“FLSA”) require that employers pay non-exempt, hourly employees overtime of at least one and one-half times the regular rate of pay for hours worked in excess of forty per week.  29 U.S.C. §§ 206, 207(a)(1). A person is employed if he or she is suffered or permitted to work. 29 U.S.C. § 203(g). It is not relevant that the employer did not ask the employee to do the work. The reason that the employee performed the work is also not relevant. If the employer knows or has reason to believe that the employee continues to work, the additional hours must be counted. 29 C.F.R. § 785.11. Federal regulation provides:

In all such cases it is the duty of the management to exercise its control and see that the work is not performed if it does not want it to be performed. It cannot sit back and accept the benefits without compensating for them. The mere promulgation of a rule against such work is not enough. Management has the power to enforce the rule and must make every effort to do so.

29 C.F.R. § 785.13.

Furthermore, the calculation of hours worked is not limited to hours “clocked-in” and may include pre-shift and post-shift work. Ramirez, 941 F.Supp.2d  at 1201-06.

Although an FLSA plaintiff bears the burden of proving that he or she worked overtime without compensation, “[t]he remedial nature of this statute and the great public policy which it embodies . . . militate against making that burden an impossible hurdle for the employee.” Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687 (1946). It is the employer’s duty to keep records of the employee’s wages, hours, and other conditions and practices of employment. Id. See also 29 U.S.C. 211(c). The employer is in a superior position to know and produce the most probative facts concerning the nature and amount of work performed and “[e]mployees seldom keep such records themselves.” Anderson, 328 U.S. at 687. In situations where the employer’s records cannot be trusted and the employee lacks documentation, the Supreme Court has held “that an employee has carried out his burden if he proves that he has in fact performed work for which he was improperly compensated and if he produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference.” Id.; In re Perez, 749 F3d 849, 853 (9th Cir. 2014) (If the employer fails to produce evidence, the court may award damages to the employee, even though the result is only approximate.); Anderson, 328 U.S. at 687 (The court may award backpay to non-testifying employees if the testimony of the other employees establishes a violation and is fairly representative of the claims of other employees.); McLaughlin v. Ho Fat Seto, 850 F2d 586, 589 (9th Cir. 1988) (same).

Under the FLSA, the “regular rate” of pay for an employee paid exclusively on an hourly basis is the rate paid for the normal, non-overtime workweek for which he or she is employed. 29 C.F.R. § 778.109. Additionally, 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.’” Dietrick v. Securitas Sec. Servs. USA, Inc., 13-CV-05016-JST, 2014 WL 2880218, *4 (N.D. Cal. June 23, 2014) (citing 29 U.S.C. § 207(a)(1)). “The ‘regular rate’ must account for ‘all remuneration’ . . . .” Id. (citing 29 U.S.C. § 207(e)). Remuneration includes bonuses and commissions like those paid to the class members. See 29 C.F.R.  §§ 778.110(b) , 778.118, 778.211(c); see also Rubin v. Wal-Mart Stores, Inc., 599 F. Supp. 2d 1176, 1178 (N.D. Cal. 2009). An employer who violates the law is liable to its employees in the amount of their unpaid overtime compensation. 29 U.S.C. § 216. “Where a bonus payment is considered a part of the regular rate at which an employee is employed, it must be included in computing his regular hourly rate of pay and overtime compensation.” 29 C.F.R. § 778.209.

An aggrieved employee may file a lawsuit to recover for violations of the FLSA minimum wage. 29 U.S.C. § 216(b). The FLSA allows for recovery of “straight-time” wages for hours worked under 40 per week if employees first establish that they are entitled to overtime pay under the FLSA. See 29 C.F.R. 778.315 (“Payment for all hours worked in overtime workweek is required” and “this extra compensation for the excess hours of overtime work under the Act cannot be said to have been paid to an employee unless all the straight time compensation due him for the non-overtime hours under his contract (express or implied) or under any applicable statute has been paid.”); Ballaris v. Wacker Siltronic Corp., 370 F.3d 901(9th Cir. June 3, 2004) (“One of the principal purposes of the FLSA is to ensure that employees are provided appropriate compensation for all hours worked. See, e.g., 29 C.F.R. § 778.223 (‘Under the Act an employee must be compensated for all hours worked.’); 29 C.F.R. § 778.315 . . . .”); Donovan v. Crisostomo, 689 F.2d 869, 875 fn. 13 (9th Cir. Oct. 7, 1982) (“The Secretary has interpreted the overtime provision as requiring full payment for all straight time hours worked as a prerequisite to satisfying the overtime provision. 29 C.F.R. s 778.315. Our holding recognizes that the Secretary’s interpretation of the statute he administers is entitled to deference.”); Gilb v. Chiang, 186 Cal.App.4th 444, 453 (Cal. Ct. App. July 2, 2010) (“State is obligated . . . to comply with . . .FLSA (29 U.S.C. § 201 et seq.), . . . and requires the State timely to pay the federally-mandated minimum wage rate to nonexempt employees who do not work overtime . . . .”); White v. Davis, 30 Cal.4th 528, 577 (Cal. Sup. Ct. May 1, 2003) (“Whenever a nonexempt employee works overtime, the FLSA requires the employer to pay the employee his or her full regular salary for the employee’s straight time as well as at least one and one-half times the employee’s regular salary for overtime hours worked.”).

Federal regulation provides that “working time” also includes meal or rest periods, when an employee does not actually take a break but instead continues to work. 29 C.F.R. §§ 785.18, 785.19(a). Section 785.18 specifically states that rest periods “must be counted as hours worked.” Likewise, § 785.19(a) provides that bona fide meal breaks are not considered work time; however, this is only the case where “[t]he employee [is] completely relieved from duty for the purposes of eating regular meals.” If the employees is not relieved of all duties during a meal period, the meal period is compensable as work time. Brennan v. Elmer’s Disposal Serv., Inc., 510 F.2d 84, 88 (9th Cir. Jan. 13, 1975) (“An employee cannot be docked for lunch breaks during which he is required to continue with any duties related to his work.”) (citing Biggs v. Joshua Hendy Corp., 183 F.2d 515 (9th Cir. 1950); Mills v. Joshua Hendy Corp.,169 F.2d 898 (9th Cir. 1948); 29 C.F.R. § 785.19). Moreover, “it is the general rule under federal law that breaks of less than thirty minutes are compensable.” Rother v. Lupenko, 515 Fed.Appx. 672, 674 (9th Cir. 2013).

Under the FLSA, an employer that is liable for unpaid overtime wages is also liable to employees for liquidated damages in an amount equal to the unpaid overtime compensation. 29 U.S.C. § 216(b); Haro v. City of Los Angeles, 745 F.3d 1249, 1259 (9th Cir. Mar. 18, 2014). “Double damages are the norm; single damages are the exception . . . . Liquidated damages are ‘mandatory’ unless the employer can overcome the ‘difficult’ burden of proving both subjective ‘good faith’ and objectively ‘reasonable grounds’ for believing that it was not violating the FLSA.” Haro, 745 F.3d at 1259; 29 U.S.C. § 260. Moreover, Under the FLSA, if an employer’s conduct constitutes a “knowing violation” of the statute, the FLSA’s standard two-year statute of limitations period may be extended to three years. 29 U.S.C. § 255(a).

Labor Code §§ 226.7 and 512 and the applicable wage orders require employers to authorize and permit meal and rest periods to their employees.  California law prohibits employers from employing an employee for more than five hours without a meal period of at least 30 minutes, and from employing an employee more than ten hours per day without providing the employee with a second meal period of not less than 30 minutes.  “[A]n employer’s obligation is to provide an off duty meal period: an uninterrupted 30–minute period during which the employee is relieved of all duty.” Brinker Rest. Corp. v. Super. Ct., 53 Cal. 4th 1004, 1035 (2012). “An employer must relieve the employee of all duty for the designated period.” Id. at 1034. An employer cannot “impede or discourage [employees] from [taking breaks].” Id. at 1040. Section 226.7 and applicable wage orders also require employers to authorize and permit employees to take 10 minutes of net rest time per four hours or major fraction thereof of work, and to pay employees their full wages during their rest periods.  “[A]s a general matter,” one rest break should fall on either side of the meal break.” Id. at 1032. Unless the employee is relieved of all duty during the 30-minute meal period and 10-minute rest period, the employee is considered “on duty” and the meal or rest period is counted as time worked under the applicable wage orders.  When an employer fails to provide a rest or meal period in accordance with the applicable wage orders, the employer must pay the employee one additional hour of pay at the employee’s regular rate of pay for each workday that the rest or meal period is not provided.  Cal. Labor Code § 226.7.

The Wage Orders define “hours worked” as the “the time during which an employee is subject to the control of an employer and includes all the time the employee is suffered or permitted to work, whether or not required to do so.”  Labor Code § 1194(a) provides that employees are entitled to recover the unpaid balance of their minimum wage or overtime compensation. Specifically, § 510 requires an employer to pay overtime compensation at one and one-half times the regular rate of pay for an employee where the employee works more than eight hours in a day or forty hours in a week. In addition, “[a]ny work in excess of 12 hours in one day shall be compensated at the rate of no less than twice the regular rate of pay for an employee [; and] . . . any work in excess of eight hours on any seventh day of a workweek shall be compensated at the rate of no less than twice the regular rate of pay of an employee.” Cal. Labor Code § 510(a).

Similar to federal law, for all off-the-clock work that constitutes overtime under California law, the class members are entitled to overtime compensation based on their monthly non-discretionary bonuses earned during the periods in which the unpaid overtime was worked. California law, like Federal law, also requires that non-discretionary bonuses be included in the regular rate of pay for determining overtime. See Alonzo v. Maximus, Inc., 832 F.Supp. 1122, 1129-1132 (S.D.Cal. 2011).

Labor Code § 221 provides that it shall be unlawful for any employer to collect or receive any part of wages theretofore paid by said employer to said employee. In addition, Labor Code § 2802 and the applicable Wage Order provides that an employer must reimburse an employee for necessary expenditures and losses incurred by an employee in the direct consequence of the discharge of his or her duties, including uniforms.

Labor Code §§ 201-203 require an employer to pay all wages owed to an employee who has been discharged or who has quit.  If the employer fails to pay an employee all wages owed within the statutorily required time period, § 203 calls for a penalty on the employer equal to one day’s rate of pay for each day the employer fails to pay, for a time period not to exceed 30 days.

California courts have interpreted § 17200 broadly, and have consistently held that a violation of any law or statute can serve as the predicate for pursuing a § 17200 claim.  Isuzu Motors Ltd. v. Consumers Union of U.S., Inc., 12 F.Supp.2d 1035, 1048 (C.D. Cal. 1998).

The FLSA permits employees to bring a collective action on “behalf of himself or themselves and other employees similarly situated.”  29 U.S.C. § 216(b). Although the FLSA does not explicitly define the term “similarly situated,” district courts have broad discretion to allow a party asserting FLSA claims on behalf of others to notify potential “similarly situated” plaintiffs that they may choose to “opt in” to the suit. Hoffman-La Roche, Inc., v. Sperling, 493 U.S. 165, 169 (1989). District courts, including those in this District, usually exercise their discretion to permit collective actions to proceed. See Ramirez, 941 F.Supp.2d 1197, 1206 (granting plaintiff’s motion for conditional collective action certification). Courts in this District have employed the now well-established, two-tiered approach to these cases. See id. at 1203. First, the court makes an initial, conditional determination of whether plaintiffs are similarly situated, “deciding whether a collective action should be certified for the purpose of sending notice to potential class members.” Id. Then, “prompted by a defendant’s motion for decertification, the court makes a second determination, using a stricter standard.” Id. “At that point, the court ‘must make a factual determination’ as to the “propriety and scope of the class,’ considering ‘(1) the disparate factual and employment settings of the individual plaintiffs; (2) the various defenses available to the defendants with respect to the individual plaintiffs; and (3) fairness and procedural considerations.’” Id. (citing Leuthold v. Destination America, Inc., 224 F.R.D. 462, 467 (N.D. Cal. 2004)). “Even at that second stage, the showing that must be made for collective actions is less stringent than what is required under Federal Rule of Civil Procedure Rule 23 —‘[a]ll that need be shown by the plaintiff is that some identifiable factual or legal nexus binds together the various claims of the class members in a way that hearing the claims together promotes judicial efficiency and comports with the broad remedial policies underlying the FLSA.’” Id. (citing Lewis v. Wells Fargo & Co., 669 F.Supp.2d 1124, 1127 (N.D. Cal. 2009)).

A class may be certified under Federal Rule of Civil Procedure Rule 23 if (1) the class is so numerous that joinder of all members individually is “impracticable”; (2) questions of law or fact are common to the class; (3) the claims or defenses of the class representative are typical of the claims or defenses of the class; and (4) the person representing the class is able to fairly and adequately protect the interests of all members of the class.  Fed. R. Civ. P. 23(a).

Although the amount of time worked off-the-clock and number of missed meal and rest periods may vary, these are damages questions and should not impact class certification. Yokoyama, 594 F.3d at 1094. The fact that individual inquiry might be necessary to determine whether individual employees were able to take breaks despite the defendant’s allegedly unlawful policy (or unlawful lack of a policy) is not a proper basis for denying certification. Benton, 220 Cal.App.4th 701. In addition, there is a simple common method to prove whether each class member worked sufficient hours to be entitled to meal and rest breaks.

“Rule 23(a)(3) requires that the claims of the named parties be typical of the claims of the members of the class.” Fry, 198 F.R.D. at 468. “Under the rule’s permissive standards, a representative’s claims are ‘typical’ if they are reasonably coextensive with those of absent class members; they need not be substantially identical.” Hanlon, 150 F.3d at 1020. To satisfy the requirement of typicality, “a class representative must be part of the class and possess the same interest and suffer the same injury as the class members.” Gen. Tel. Co. of S.W. v. Falcon, 457 U.S. 147, 156 (1982).