Sanchez v. Martha Green's Doughlectibles CA4/1 (2016) · DecisionDepot
Sanchez v. Martha Green's Doughlectibles CA4/1
California Court of Appeal May 26, 2016 No. D069677Unpublished
Filed 5/26/16 Sanchez v. Martha Green’s Doughlectibles CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
TRISHA LYNN SANCHEZ, D069677
Plaintiff and Appellant,
v. (Super. Ct. No. CIVDS1302043)
MARTHA GREEN'S DOUGHLECTIBLES, INC.,
Defendant and Respondent.
APPEAL from an order of the Superior Court of San Bernardino County, David
Cohn, Judge. Affirmed.
Valencia & Cywinska, Mark Joseph Valencia and Izabela Cywinska Valencia for
Plaintiff and Appellant.
Reid & Hellyer and Michael G. Kerbs for Defendant and Respondent.
Trisha Lynn Sanchez brought a putative class action against her former employer
Martha Green's Doughlectibles, Inc. (MGD) alleging violations of California's labor and
unfair competition laws. Sanchez asserts the trial court erred in concluding settlement
agreements MGD entered into with the majority of the putative class members after her
complaint was filed were valid. Sanchez also asserts the court improperly denied her
motion for class certification. We reject these arguments and affirm.
Sanchez worked as a waitress for MGD at its restaurant in Redlands, California,
from 2007 to 2012. In early 2013, Sanchez filed a putative class action asserting
violations of the Labor Code, including claims for failure to offer rest breaks (Lab. Code,
§ 226.7),1 failure to offer meal periods (§ 226.7), failure to pay overtime compensation
(§ 510), and failure to provide accurate itemized wage statements (§ 226, subd. (a)).
Sanchez also asserted the Labor Code violations supported a claim under the unfair
competition law (Bus. & Prof. Code, § 17200 et seq.) and sought to represent all
aggrieved employees under the Private Attorney General Act of 2004 (§ 2698, et seq.).
MGD answered the complaint and the parties engaged in discovery. In December
2014, Sanchez filed her motion for class certification of a class she described as
consisting of approximately 105 former and current MGD employees. Sanchez's motion
identified three subclasses: (1) nonexempt hourly employees who were not provided
overtime wages in the four years prior to the date Sanchez's complaint was filed; (2)
nonexempt hourly employees who were not provided rest and meal periods in the four
years prior to the date Sanchez's complaint was filed; and (3) nonexempt hourly
1 Undesignated statutory references are to the Labor Code. 2
employees who were not provided with accurate itemized statements in the four years
prior to the date Sanchez's complaint was filed.
In support of the motion, Sanchez submitted her declaration, which attached: (1)
her timecards; (2) wage statements that showed the hours worked and rate of pay for each
pay period; and (3) an employee detail earnings report showing the hours worked and rate
of pay for each pay period during the entire time Sanchez was employed by MGD. In her
declaration Sanchez asserted that her wage statements and the employee detail earnings
report showed she was not paid at the overtime rate even though her timecards showed
that on some occasions she worked more than eight hours in one day. Sanchez also
submitted excerpted deposition testimony of MGD's manager, J.R. Green. Green
testified the restaurant's employee handbook, which went into effect in 2010, stated,
"Each employee must clock out at the beginning of their lunch period and clock back in
when they return to work." Green also testified that the handbook stated, "The length
of—the time of [an employee's] lunch period would be determined by [a] supervisor."
Sanchez's motion was also supported by time cards and employee detail earnings
reports for 18 other employees. Sanchez asserted the time cards for 10 employees in this
sample showed overtime pay was required, but the employee detail earning reports
indicated it was not paid. Sanchez also argued the records of four other employees
showed the employees were entitled to meal breaks based on the hours on their time
cards, but the employees did not clock out to take a break.
MGD filed its opposition to the motion for class certification in March 2015. In
support MGD submitted settlement agreements it had entered into with 76 of the putative
3
class members after being served with Sanchez's complaint.2 Each agreement
specifically referenced Sanchez's claims and contained a statement that the employee
"agrees that there is a dispute with [MGD] as to whether rest periods, meal periods,
overtime pay and accurate itemized statements were provided in accordance with [the]
law." By signing the agreement, the individual released his or her claims against MGD
and agreed not to participate in Sanchez's purported class action in exchange for $150.
The agreement stated explicitly there would be no retaliation or adverse action taken if
the employee chose not to sign the agreement.
In support of its opposition, MGD also provided evidence that after Sanchez's
complaint was filed it undertook an audit of its employment practices. Specifically,
MGD asserted it located or attempted to locate all putative class members and began a
review of each employee's payroll records. Additionally, MGD asked each member of
the putative class that it located to sign an audit memo, which explained the nature of
Sanchez's claims and requested that the employee (or former employee) advise MGD of
any occasion he or she was not provided with rest or meal breaks, or worked more than
eight hours in one shift or 40 hours in one week and was not paid overtime. The audit
memo indicated MGD would review the information provided and conduct further
investigation if necessary, and that MGD would "promptly provide the employee with
appropriate remuneration to pay for any shortfall or penalties, as may be
appropriate . . . ." At the time it filed its opposition, MGD had obtained 92 signed audit
2 MGD's opposition stated the number of current and former employees in Sanchez's proposed class was between 105 and 115. 4
memos from putative class members. None indicated they were denied meal or rest
breaks, or were owed overtime pay.
MGD also submitted declarations of 11 other MGD employees who stated they
had worked with Sanchez and each had personally observed her taking meal and rest
breaks between eight and 150 times. Each of these declarants also stated they had been
provided with meal and rest breaks, were relieved of all work duties during those breaks,
and were paid for the time they were on breaks. Green and assistant manager Laura
Leyvas each provided declarations stating that, "[a]lthough MGD's employee handbook
did state for a period of time that employees were to clock in and out to take their meal
breaks and that employees would not be paid for meal breaks, MGD did not follow either
of these guidelines. Instead, MGD did not require its employees to clock out/in when
they took their meal breaks, and in fact paid the employees during their meal breaks even
though they were relieved of all duties."
MGD argued in its opposition that as a result of the settlement agreements, the
total number of potential class members was not so numerous that it was impracticable
for each to bring his or her own claim. MGD also asserted that, in light of the evidence
that there was no uniform policy to prohibit meal and rest breaks, individual questions
predominated over common ones. Sanchez filed a reply asserting the settlement
agreements were invalid under section 206.5 and therefore class adjudication of her
claims was superior. Before the hearing on Sanchez's motion, MGD submitted an
additional 13 settlement agreements with putative class members, bringing the total to 89.
5
At the hearing, the trial court found the settlement agreements were valid and that
certification was not appropriate. The court concluded only 21 putative class members
had not settled their claims and, because of the conflicting evidence on the provision of
breaks and overtime pay, class proceedings were not superior to individual actions. The
trial court also found that because Sanchez had presented no evidence of a systematic
policy of not paying overtime or giving breaks (and the defendant presented evidence that
it did provide the requisite breaks, with pay), Sanchez would be required to prove each
class member's claims on an individual, and not common, basis. Sanchez timely
appealed.
DISCUSSION
I
Sanchez first asserts that the trial court's determination that the settlement
agreements are valid was error. She contends that the agreements were not made in good
faith and are, therefore, precluded by section 206.5, subdivision (a).
Section 206.5, subdivision (a) states, "An employer shall not require the execution
of a release of a claim or right on account of wages due, or to become due, or made as an
advance on wages to be earned, unless payment of those wages has been made. A release
required or executed in violation of the provisions of this section shall be null and void as
between the employer and the employee. Violation of this section by the employer is a
6
misdemeanor."3 Under MGD's settlement agreement, each employee or former
employee was paid $150 and agreed that the payment was "full and complete satisfaction
of any and all claims and potential claims . . . against [MGD] based on the claims [in
Sanchez's] lawsuit . . . ." The agreements also contained a recital that the employee
"agrees that there is a dispute with [MGD] as to whether rest periods, meal periods,
overtime pay and accurate itemized statements were provided in accordance with [the]
law."
Sanchez asserts that despite these recitations, there was no bona fide dispute
concerning wages owed to the putative class members, and therefore the release is void
under section 206.5. In support of this assertion Sanchez points to the deposition
testimony of MGD's owner, Martha Green, and J.R. Green, who both testified that they
did not believe MGD violated the law and the payments were not warranted. Sanchez
contends that because MGD did not believe it owed any unpaid wages to the putative
class members, there was no disagreement.
Sanchez's argument is not sound. She misconstrues the bona find dispute
requirement of section 206.5. The legislative history of the statute, and subsequent cases,
clarify that the purpose of the provision is to prevent employers from coercing a
3 Subdivision (b) of section 206.5 provides that "For purposes of this section, 'execution of a release' includes requiring an employee, as a condition of being paid, to execute a statement of the hours he or she worked during a pay period which the employer knows to be false." The related prior statute, section 206, subdivision (a), states, "In case of a dispute over wages, the employer shall pay, without condition . . . , all wages, or parts thereof, conceded by him to be due, leaving to the employee all remedies he might otherwise be entitled to as to any balance claimed." 7
settlement of contested wages by withholding wages that the employer concedes are
owed. (Chindarah v. Pick Up Stix, Inc. (2009) 171 Cal.App.4th 796, 800 (Chindarah);
Reid v. Overland Machined Products (1961) 55 Cal.2d 203, 207 ["An employer and
employee may of course compromise a bona fide dispute over wages but such a
compromise is binding only if it is made after the wages concededly due have been
unconditionally paid."].)
The Court of Appeal in Chindarah addressed arguments similar to those advanced
by Sanchez. There, the defendant employer entered into settlement agreements with
putative members of a class action asserting claims for unpaid overtime and
misclassification of employees as exempt from overtime pay. (Chindarah, supra, 171
Cal.App.4th at p. 798.) Thereafter, the plaintiffs amended their class action complaint to
add as plaintiffs eight current and former employees who had signed the settlement
agreements and claims alleging the agreements violated the Labor Code. In response, the
defendant, Pick Up Stix, Inc., brought a cross-complaint alleging the new plaintiffs had
breached the settlement agreements. (Ibid.) The plaintiffs then brought a motion for
summary adjudication of the cross-complaint asserting the agreements were void under
sections 206 and 206.5 and Pick Up Stix moved for summary judgment claiming the
agreements barred recovery by the new plaintiffs. (Ibid.)
The trial court ruled in favor of Pick Up Stix, finding that because it produced
evidence " 'creating a triable issue of fact as to whether or not [plaintiffs] were owed any
additional wages' " it had shown a " 'good faith dispute with regard to classification of the
employees.' " (Chindarah, supra, 171 Cal.App.4th at p. 799.) The Court of Appeal
8
affirmed, noting that the legislative history of section 206.5 "reveals that it was part of
Assembly Bill 302 (1959 Reg. Sess.), which added section 206.5 to the Labor Code and
section 7110.1 to the Business and Professions Code. (Stats. 1959, ch. 1066, § 1,
p. 3127.) Business and Professions Code section 7110.1 provides that a licensed
contractor who violates section 206.5 would be subject to disciplinary action as well as a
misdemeanor charge. A letter to then Governor Edmund G. Brown from the AFL-CIO,
which sponsored the bill, stated, 'Testimony before legislative committees developed the
fact that there exists a rather widespread use of general release forms, particularly in the
building industry in Southern California, whereby an individual, as a condition of
receiving his payment, is required to forego all his defenses and agree that the payment is
full and complete. [¶] Not infrequently the payments were made by bad checks, and
accordingly the labor commissioner's office was without power to process the case
because of the signing of the release agreement. [¶] The bill is intended to correct this
condition, but at the same time to permit payment by check so long as it is honored.' "
(Chindarah, at p. 801.) The legislation's purpose "was to protect employees from
employers who attempt to coerce a settlement by withholding wages." (Ibid.)
Chindarah rejected the plaintiffs' argument that " 'wages actually due' " under
section 206.5 includes "wages that are disputed, if they are ultimately found to be
owing." (Chindarah, supra, 171 Cal.App.4th at p. 799.) Instead, the appellate court
concluded, based on the language of section 206.5, subdivision (a) and its legislative
history, that " '[w]ages are not "due" if there is a good faith dispute as to whether they are
owed. Because [the employer's] defense that [the plaintiff] was an exempt employee
9
under California law would, if successful, preclude any recovery for [the plaintiff], a
bona fide dispute exists and the overtime pay cannot be considered "concededly due." ' "
(Id. at p. 802.)
Division Three of the Second District also rejected the argument advanced by
Sanchez, concluding that a settlement agreement was not invalid under sections 206 and
206.5 where the putative class representative plaintiff released claims for overtime
compensation that the defendant employer contended was not owed. (Watkins v.
Code of Civil Procedure section 382 authorizes a class action "whenever 'the
question [in a case] is one of a common or general interest, of many persons, or when the
parties are numerous, and it is impracticable to bring them all before the court . . . .'
(Code Civ. Proc., § 382; see Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069,
1078; City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 458.)" (Brinker
Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1021 (Brinker Restaurant
Corp.).) The California Supreme Court has "articulated clear requirements for the
certification of a class. The party advocating class treatment must demonstrate the
existence of an ascertainable and sufficiently numerous class, a well-defined community
of interest, and substantial benefits from certification that render proceeding as a class
superior to the alternatives. [Citations.] 'In turn, the "community of interest requirement
13
embodies three factors: (1) predominant common questions of law or fact; (2) class
representatives with claims or defenses typical of the class; and (3) class representatives
who can adequately represent the class." ' " (Ibid.)
"[I]n determining whether there is substantial evidence to support a trial court's
certification order, we consider whether the theory of recovery advanced by the
proponents of certification is, as an analytical matter, likely to prove amenable to class
treatment. [Citations.] 'Reviewing courts consistently look to the allegations of the
complaint and the declarations of attorneys representing the plaintiff class to resolve this
question.' " (Sav-on Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 327.)
Importantly, even if the community of interest requirement is met, a class action
should not be certified unless " ' " 'substantial benefits accrue both to litigants and the
courts' " ' (Linder, supra, 23 Cal.4th at p. 435), and the moving party proves a class action
is 'superior' to separate lawsuits by class members." (Ali, supra, 176 Cal.App.4th at
pp. 1352-1353.) " '[E]ven if [common] questions of law or fact predominate, the lack of
superiority provides an alternative ground to deny class certification.' " (Id. at p. 1353.)
Four factors are commonly evaluated in determining the superiority of class certification:
The interest of each class member in controlling his or her own case; the " 'difficulties, if
any, that are likely to be encountered in managing' " the class; the extent of existing
litigation by individual class members; and " '[t]he desirability of consolidating all claims
in a single action before a single court.' " (Basurco v. 21st Century Insurance Co. (2003)
108 Cal.App.4th 110, 121 (Basurco).)
14
C
Sanchez asserts that the trial court abused its discretion by concluding that
individual issues predominate over common ones and that the court in effect conceded
this point by stating, "if you had 115 members of the class, the balance of common
questions versus individual questions would come out—would likely come out
differently." Sanchez argues the analysis of commonality is no different if there are 115
class members or 26 class members. In both cases, she asserts, the same common issues
must be adjudicated: "Were the employees paid overtime or not? Did they receive meal
periods or not? Did they receive accurate wage statements or not?"
In contending these questions can be resolved simultaneously for all class
members, Sanchez points to statements in MGD's handbook that (1) employees were
required to clock out for their lunch break and (2) the length of lunch periods was to be
determined by a supervisor. Sanchez also points to her own declaration, in which she
stated that MGD did not allow her to take breaks, and to the sampling of time cards she
submitted that she asserts show employees did not clock out for breaks. As MGD states,
violations of wage and hour requirements have been commonly certified for class
proceedings where the employer has a uniform policy that is facially inconsistent with
California law. (See, e.g., Brinker Restaurant Corp., supra, 53 Cal.4th at p. 1033 ["The
theory of liability—that Brinker has a uniform policy, and that that policy, measured
against wage order requirements, allegedly violates the law—is by its nature a common
question eminently suited for class treatment."].)
15
Here, there was a written policy in MGD's handbook, but the policy did not run
afoul of the labor laws. It did not address whether breaks could be taken, only that the
employee should clock out. The fact that the handbook called for the supervisor to
determine the length of an employee's lunch period was also not evidence of a uniform
policy not to provide a break or to provide breaks that were insufficient. Sanchez's
theory is not that the handbook's instruction that employees must clock out for breaks so
that they would not be paid for that time violated the Labor Code. Rather, she speculates
that because the time cards show employees did not clock out for breaks, and the written
policy was that they should, employees were not uniformly provided with breaks and
were not paid overtime.
MGD, however, refuted this theory of commonality. Its witnesses (managers and
employees) stated that the handbook's clocking out and in requirement was not followed,
and that the restaurant's actual policy was to provide paid breaks to its employees. This
conflicting evidence supports the trial court's finding that the testimony of each putative
class member would be required to determine whether MGD ran afoul of the meal break,
rest break and overtime pay requirements with respect to that employee. Contrary to
Sanchez's assertion, because there was evidence that employees were provided with paid
breaks for which they did not clock out, time cards showing shifts longer than eight hours
could not, on their own, establish that MGD had a policy of not paying overtime wages or
16
failing to provide breaks.4 These facts support the trial court's determination that
individual questions predominated over common ones, and that a class action was not the
best way to resolve the claims of the remaining class members. (See Ali, supra,176
Cal.App.4th at p. 1349 ["[T]here is no precise test for determining whether common
issues predominate, and thus ' "the court must pragmatically assess the entire action and
the issues involved. . . ." ' 'A record presenting facts on which reasonable minds may
differ is not a record establishing an abuse of discretion.' "], citation omitted; Benton v.
Telecom Network Specialists, Inc. (2013) 220 Cal.App.4th 701, 728 ["for purposes of
certification, the proper inquiry is 'whether the theory of recovery advanced by the
plaintiff is likely to prove amenable to class treatment' "].)
We also do not agree with Sanchez that the court's statement that the relatively
small number of remaining potential class members pushed it to conclude that individual
questions outweighed common ones shows there was an abuse of discretion. Other
statements made by the trial court make clear that the court was considering the
community of interest requirement in the context of determining whether the class
mechanism was superior. The court stated that 21 class members is not "so high that a
class action . . . is the best way to go" and that it needed "to look at the other elements to
determine whether or not the class action is the appropriate vehicle." (Italics added.)
The court noted that even if it assumed the claims were worth only the $150 provided for
in the settlements, a class action was not the only method of proceeding. Rather "there
4 For instance, a time card showing a shift of eight and one-half hours would not lead to overtime pay if the employee took a paid half-hour break. 17
are other remedies available for wage/hour claims. There are administrative claims, there
are small claims actions."
As the trial court's statements demonstrate, the issues of commonality and
superiority are intertwined. (See Ali, supra, 176 Cal.App.4th at p. 1353 ["when
individual issues of fact predominate over common issues, as here, 'a class action would
be extremely difficult to manage' "].) If some questions are common and some are
individual, the size of the class necessarily impacts the court's examination of whether the
class mechanism is superior to individual actions. The existence of individual issues may
not preclude certification when the class mechanism is the only method of adjudicating
small claims. (See Basurco, supra, 108 Cal.App.4th at pp. 120-121 ["In general, a class
action is proper where it ' " 'provides small claimants with a method of obtaining
redress' " ' and ' "when numerous parties suffer injury of insufficient size to warrant
individual action." ' "].)
Here, Sanchez concedes that if the settlement agreements are valid, the class she
seeks to represent consists of, at most, 26 members.5 MGD provided evidence that 17 of
the remaining putative class members could not be located or did not respond to MGD's
attempts to contact them. The denial of class certification, therefore, was not likely to
burden the court with multiple actions. Further, any nonsettling employees could join the
current action or bring their own individual claims. As MGD asserted, it would be unfair
5 As noted, the record does not establish the exact number of class members. At the hearing the court referred to 115 class members, and 21 who had not signed a settlement agreement. MGD represented in its opposition that the class consisted of between 105 and 115 former and current employees. 18
"to certify a class of whose members cannot be located or who will not participate insofar
as MGD will have no ability to cross-examine them regarding the claims asserted on their
behalf . . . ."
Sanchez has not shown the trial court applied improper criteria to deny her motion
for class certification. The facts before the court supported its determination that
common issues do not predominate over individual ones and that a class proceeding is
not a superior method of adjudicating the claims of the absent putative class members.
DISPOSITION
The order is affirmed. Respondent is awarded costs on appeal.
HALLER, Acting P. J.
WE CONCUR:
IRION, J.
PRAGER, J.*
* Judge of the San Diego Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. 19
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Holding. The court held that the settlement agreements between the employer and putative class members were valid because a bona fide dispute existed regarding wage claims, and that the trial court did not abuse its discretion in denying class certification due to the predominance of individual questions.
Issues
Whether settlement agreements between an employer and putative class members are void under Labor Code section 206.5 when a bona fide dispute exists regarding unpaid wages.
Whether the trial court abused its discretion in denying class certification based on a lack of commonality and superiority.
Disposition. Affirmed
Quotations verified verbatim against the opinion
“The legislation's purpose "was to protect employees from employers who attempt to coerce a settlement by withholding wages."”
“When a bona fide dispute exists, the disputed amounts are not 'due,' and the bona fide dispute can be voluntarily settled with a release and a payment”