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Pace v. Petsmart Inc.

United States District Court, C.D. California, Southern Division

June 3, 2014

PETSMART INC. ET AL., Defendants.


DAVID O. CARTER, District Judge.

Before the Court is Plaintiff Cassandra Pace's Motion for Class Certification (Dkt. 32). After considering the moving and opposing papers and the oral arguments of counsel, the Court GRANTS IN PART and DENIES IN PART the motion.

I. Background

Plaintiff Cassandra Pace ("Pace") is a former pet groomer at PetSmart. PetSmart provides goods and services related to pet care. Pace is alleging that the following PetSmart practices violate California law: 1) issuing final wages on prepaid ATM Cards ("Money Network Paycards") that do not meet California law requirements for payment under § 212; 2) not paying all commissions to employees within 72 hours of their resignation; 3) continuing to pay commissions after separation of employment without an itemized wage statement; and 4) paying employees at termination using Money Network Paycards without prior authorization (only alleged under PAGA).

a. Plaintiff's Claims

While she was employed, Pace collected her pay from PetSmart by direct deposit. When PetSmart terminated her employment around September 9, 2012, Pace was given her final wages on a Money Network Paycard. Pace then incurred fees to access her wages. She believes the card still holds $3 that she is unable to access. Wages were added to the card more than three days after PetSmart terminated Pace. See Pace Decl. ¶¶ 3-4.

Plaintiff's Second Amended Complaint ("SAC") alleges two class claims and several individual claims. The first class claim relevant to this motion is that "Defendants violated Labor Code §§ 201-203 by, among other unlawful acts, issuing ATM cards as final payment of wages to employees who have been discharged and/or resigned." SAC ¶ 38. The second class claim is that "Defendants did not pay all commissions owed to employees at the time of their discharge or within 72 hours of their resignation, as required by Labor Code§§ 201-203." SAC ¶ 38.

California Labor Code §§ 201 and 202 require employers to pay final wages to terminated or resigning employees promptly. If an employer discharges an employee, wages earned and unpaid are due and payable immediately upon discharge. Cal. Lab. Code § 201. If an employee resigns, final wages are due and payable within 72 hours. Cal. Lab. Code § 202. If an employee gives at least 72 hours' notice, however, the employee is entitled to receive final wages at the time of quitting. Id. Under § 203, if an employer "willfully fails to pay" terminating wages according to sections 201 and 202, "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." Cal. Lab. Code § 203. However, an employee "who secretes or absents himself or herself to avoid payment to him or her, or who refuses to receive the payment when fully tendered to him or her, including any penalty then accrued under this section, is not entitled to any benefit under this section for the time during which he or she so avoids payment." Id.

Plaintiff also brings class claims for violations of California Labor Code §§ 212 and 213. Under § 212(a), an employer may not pay wages in any way that is not "negotiable and payable in cash, on demand, without discount, at some established place of business in the state, the name and address of which must appear on the instrument..." Cal. Lab. Code § 212(a). An employer also may not pay wages using "[a]ny scrip, coupon, cards, or other thing redeemable, in merchandise or purporting to be payable or redeemable otherwise than in money." Id. Under § 213, an employer may pay employees by "depositing wages due or to become due or an advance on wages to be earned in an account in any bank, savings and loan association, or credit union of the employee's choice with a place of business located in this state, provided that the employee has voluntarily authorized that deposit." Cal. Lab. Code § 213.

Pace argues that §§ 212 and 213 require an employer to obtain an employee's voluntary authorization before paying the employee his or her wages with an ATM card. Pace also alleges that the ATM card must be negotiable and payable in cash, on demand, and without discount at established businesses in the State of California. Pace argues that PetSmart issued its employees final wages in the form of an ATM card without their consent, which required that employees incur fees to use, was not fully cashable, and was not usable at all financial institutions. The California Division of Labor Standards Enforcement ("DLSE") has issued opinion letters regarding the compliance with the Labor Code of other payroll debit card programs, similar to the one at issue here. See DLSE Opinion 2008.07.07, dated July 7, 2008; DLSE Opinion 2008.07.07-2, dated July 7, 2008. While DLSE opinion letters are not entitled to deference, district courts have looked to them as a source of persuasive authority. See Cardenas v. McLane FoodServices, Inc., 796 F.Supp.2d 1246, 1251-52 (C.D. Cal. 2011). The Court grants Plaintiff's request for judicial notice of these opinion letters, attached as Exhibit A and B to Plaintiff's Request for Judicial Notice. A court may take judicial notice of "matters of public record." Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (citing MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986)).

b. Plaintiff's Classes

Pace identifies two classes based on a list of employees who resigned or were terminated during the class period (the "Class List"). PetSmart provided this list by spreadsheet during discovery. The Class List shows individual identifiers for all putative class members during the class period, the termination date for each, the last day on which any money was paid to the putative class member, the putative class member's authorized payment option, and whether the putative class member was paid terminating wages by paycard. See Glenville Dep. 130, 167-169, 175. Pace has identified individuals who were paid via paycard without authorization as individuals who were paid on a paycard but whose authorized payment method is designated direct deposit or live check. Pace has also identified individuals who received their terminating wages late by comparing the termination date for each employee to the date of most recent payment.

Pace seeks certification of two classes. First, Pace seeks certification of the "Late Pay Class, " comprised of:

All employees who were employed by Defendant in the State of California at any time from February 20, 2010, through the present, whose employment was separated for any reason (voluntary or involuntary), including without limitation, resignation, termination, and/or lay-off, and who were paid any wages more than 72 hours/3 days after an employee's last date of employment.

Mot. at 11. Second, Pace seeks certification of the "Money Network Paycard Class, " comprised of:

All former employees who were employed by Defendants in the State of California at any time from February 20, 2010, through the present, who during their employment received their normal payroll wages through check or direct deposit, but upon their separation of employment received their terminating wages in the form of a Money Network Paycard.


c. PetSmart's Termination Procedures and Databases

i. Payment Method

During the class period, PetSmart offered employees three options for receiving wages: live check, direct deposit, or the ATM-like "Money Network Paycard." See Glenville Dep. at 42, 49. The default payment method is live check, and an employee must submit a specific authorization form to be paid by direct deposit or Money Network Paycard. See Glenville Dep. 42-43, 47, 57.

When an employee is terminated or resigns, however, PetSmart always pays out the final owed wages on a Money Network Paycard, even if the authorized method of pay is direct deposit or live check. See id. at 169. To access funds on a paycard, employees can use the card like an ATM card to withdraw funds or pay for items. Id. at 59-60. An employee can also use the three blank checks that are distributed with the paycard. Id. There are fees associated with both methods. See id. at 92, Ex. 56.

ii. Termination Date and Payment Timing

PetSmart's precise policies on employee separation and termination dates are difficult to discern. First, there is limited evidence on PetSmart's official policies and recordkeeping for departing employees. PetSmart's Rule 30(b)(6) expert Dayna Reum testified that the date of termination for a California employee could be ascertained from the database in question. See Reum Dep. at 75. PetSmart's other Rule 30(b)(6) expert, Tammy Glenville, testified that PetSmart has a "general policy" of processing all separations, whether voluntary with notice, voluntary without notice, or involuntary, in the same way. For all of these separations, PetSmart uses the same "pay adjustment process." See Glenville Dep. at 168-69. This process includes filling out an "Emergency Payment Request" form and issuing a Money Network paycard kit. See id. All other details of this process, however, remain unclear to the Court.

Second, the database system that PetSmart uses to record termination dates relies on manual inputs from store managers. See Reum Decl. ¶ 6. The Class List in this case pulls termination dates from the "Last Date Worked" field in PetSmart's payroll software. Id. ¶ 9. The "Last Day Worked" is recorded by a store manager, and reflects only the employee's last day worked, which may not be their actual date of termination. Id. ¶¶ 9, 11. The database also includes an "Effective Date" field, "which is supposed to reflect the effective date of one's separation." Id. ¶ 7. However, the field automatically adopts the date for the day on which the termination data was entered, and will stay that way unless the manager manually corrects it. Id. With respect to both fields, the system records the actual "termination date" as the following day, as this is the day the employee is actually ineligible for benefits. Id. ¶¶ 7, 9. When PetSmart provided discovery, it used the "Last Day Worked" field to supply the "termination date." The result is that "the termination dates' listed on the spreadsheet may or may not be the actual termination dates for each associate because the information is dependent on what date a manager inputted" as the employee's termination date. Id. ¶ 10.

Compounding this confusion is the fact that declarations from PetSmart managers in California suggest that at least some PetSmart managers do not appear to follow any systematic method of determining or recording an employee's termination date. In fact, the managers have widely divergent methods for determining and entering an employee's termination date. These methods include: (1) entering the last date the employee worked as their termination date in the HR system, Boone Decl. ¶ 4; (2) recording an employee's termination date as the date the employee indicates as his or her last day of work, Contreras Decl. ¶ 4; (3) entering a fired employee's termination date as "the associate's last day worked, which is a date earlier than the date on which a decision was made to terminate his or her employment, " Cushman Decl. ¶ 5; (4) tendering payment to resigning employees on their last day of work Dabrowski Decl. ¶ 4; (5) when an employee stops coming to work, recording their termination date as "the second shift for which the employee failed to report to work, ... ...

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