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Fowler Packing Co., Inc. v. Lanier

United States District Court, E.D. California

July 7, 2016

FOWLER PACKING COMPANY, INC. and GERAWAN FARMING, INC., Plaintiffs,
v.
DAVID M. LANIER, CHRISTINE BAKER, and JULIE A. SU, Defendants.

          ORDER GRANTING MOTION TO DISMISS (Doc. No. 10)

         This matter is before the court on defendants' motion to dismiss the complaint for failure to state a claim. A hearing on the motion was held on June 7, 2016. Deputy Attorney General Thomas Patton and Deputy Attorney General Enrique Monagas appeared on behalf of defendants. Attorneys David Schwarz and Michael Harbour appeared on behalf of plaintiffs. Attorney Wencong Fa appeared on behalf of amici curiae. The court has considered the parties' briefs and oral arguments, and for the reasons set forth below, will grant defendants' motion to dismiss.

         BACKGROUND

         A. Piece-Rate Compensation and AB 1513

         This case concerns legislation addressing the compensation of employees on a piece-rate basis. Piece-rate compensation involves a method of calculating compensation based on the type and number of tasks completed, rather than by the number of hours worked. Under the California Industrial Welfare Commission's Wage Order No. 4, promulgated in 2002, "[e]very employer shall pay to each employee, on the established payday for the period involved, not less than the applicable minimum wage for all hours worked in the payroll period, whether the remuneration is measured by time, piece, commission, or otherwise." Cal. Code Regs. tit. 8, § 11040(4)(B).[1] In the piece-rate compensation context, it is not immediately apparent that an employee, who is paid on a per-task basis, is being compensated in accordance with minimum wage laws, which requires payment on a per-hour basis. Accordingly, to ensure piece-rate employees are paid "not less than the applicable minimum wage, " some employers calculated a "minimum wage floor" by multiplying the number of hours worked by the applicable minimum wage. If an employee's compensation under a piece-rate system did not exceed the minimum wage floor over a particular period of time, her compensation would be supplemented up to the minimum wage floor. See Gonzalez v. Downtown LA Motors, 215 Cal.App.4th 36, 41-42 (2013).

         1. Gonzalez and Bluford

         In 2013, California appellate courts issued two decisions concerning the application of California's minimum wage laws to piece-rate compensation.

         In Gonzalez v. Downtown LA Motors, the California Court of Appeal for the Second Appellate District held that Wage Order No. 4 applies to piece-rate compensation in the same manner it does for hourly compensation. 215 Cal.App.4th 36, 49 (2013). With regard to the requirement that employees be paid the minimum wage "for all hours worked, " the court concluded that piece-rate employees are entitled to "be compensated at the minimum wage for each hour worked, " rather than by averaging compensation over a period of time. Id. at 45 (emphasis in original) (quoting Armenta v. Osmose, Inc., 135 Cal.App.4th 314, 323 (2005)). Thus, the court held that under California law, piece-rate employees are entitled to separate hourly compensation for non-productive time, including time spent waiting for tasks, attending meetings and trainings, or performing other work for an employer. Gonzalez, 215 Cal.App.4th at 40-41.

         Months later, in Bluford v. Safeway Stores, Inc., the California Court of Appeal for the Third Appellate District further held that for piece-rate compensation, rest and meal periods are considered "hours worked" and must be compensated separately. 216 Cal.App.4th 864, 872 (2013) (citing Armenta, 135 Cal.App.4th at 323).

         2. AB 1513 and California Labor Code § 226.2

         Following the Gonzalez and Bluford decisions, many employers expressed concern about liability given that their existing wage calculation methods were inconsistent with the courts' holdings in those cases. This potential liability, employers believed, would likely lead to increased litigation.[2] Recognizing these concerns, in 2015, California enacted Assembly Bill 1513 ("AB 1513") to address claims for recovery of wages, damages, and penalties with respect to piece-rate employees.

         AB 1513 added § 226.2 to the Labor Code. Section 226.2 includes two primary provisions. First, subdivision (a) provides that employees compensated on a piece-rate basis must be compensated for rest and recovery periods and other nonproductive time separate from any piece-rate compensation. In addition, it establishes certain wage statement requirements as well as a methodology for calculating wages for these employees. Second, subdivision (b) creates a safe harbor by which employers may assert an affirmative defense to any claim for recovery of wages, damages, and penalties "based solely on the employer's failure to timely pay the employee the compensation due for rest and recovery periods and other nonproductive time, " so long as the employer complies with certain requirements by December 15, 2016. Notably, an employer electing to assert this affirmative defense must pay its employees for previously uncompensated or undercompensated rest and recovery periods and other nonproductive time from July 1, 2012, to December 31, 2015, using one of two stated formulas. Cal. Lab. Code § 226.2(b)(1).

         Employers, however, cannot access the safe harbor in a number of circumstances, enumerated in subdivision (g) of Labor Code § 226.2. Two exceptions are particularly relevant to the instant case:

(2) Claims based on the failure to provide paid rest or recovery periods or pay for other nonproductive time for which all of the following are true:
(A) The claim was asserted in a court pleading filed prior to March 1, 2014, or was asserted in an amendment to a claim that relates back to a court pleading filed prior to March 1, 2014, and the amendment or permission for amendment was filed prior to July 1, 2015.
(B) The claim was asserted against a defendant named with specificity and joined as a defendant, other than as an unnamed (DOE) defendant pursuant to Section 474 of the Code of Civil Procedure, in the pleading referred to in subparagraph (A), or another pleading or amendment filed in the same action prior to January 1, 2015.
(5) Claims for paid rest or recovery periods or pay for other nonproductive time that were made in any case filed prior to April 1, 2015, when the case contained by that date an allegation that the employer has intentionally stolen, diminished, or otherwise deprived employees of wages through the use of fictitious worker names or names of workers that were not actually working.

Cal. Lab. Code § 226.2(g). These safe harbor provisions take effect on January 1, 2016, and remain in effect until January 1, 2021. See Cal. Lab. Code § 226.2(k).

         B. Related Wage Disputes Before This Court

         Plaintiffs Gerawan Farming, Inc. ("Gerawan") and Fowler Packing Company, Inc. ("Fowler") are named defendants in two related cases pending before this court concerning piece-rate compensation.

         On February 3, 2014, agricultural piece-rate employees commenced a putative class action against Gerawan, claiming in part that Gerawan failed to pay wages due for rest periods and other nonproductive time. Amaro v. Gerawan Farming, Inc., No. 1:14-cv-00147-DAD-SAB, Doc. No. 2. Because these claims were alleged prior to March 1, 2014, and because Gerawan was a named defendant in the complaint, the affirmative defense set forth in Labor Code § 226.2(b) is unavailable to Gerawan in the Amaro case, pursuant to § 226.2(g)(2). (See also Doc. No. 1 ¶ 26.) Similarly, on March 17, 2015, agricultural piece-rate workers commenced a putative class action against Fowler, claiming in part that Fowler failed to pay wages due for rest periods and other nonproductive time. Aldapa v. Fowler Packing Co., Inc., No. 1:15-cv-00420-DAD-SAB, Doc. No. 2. In addition, the plaintiffs in Aldapa alleged Fowler willfully used fictitious worker names (referred to as "ghost workers" or "muertitos") in order to undercompensate employees who were actually working. Id. ¶¶ 32-34. Because the case was filed prior to April 1, 2015, and because the complaint contained so-called "ghost worker claims" relating to the use of fictitious worker names, the affirmative defense set forth in § 226.2(b) is unavailable to Fowler in the Aldapa case, pursuant to § 226.2(g)(5). (See also Doc. No. 1, ¶ 27.)

         C. Procedural Background

         On January 22, 2016, plaintiffs Fowler and Gerawan commenced the instant action against defendants David M. Lanier, in his official capacity as Secretary of the California Labor and Workforce Development Agency; Christine Baker, in her official capacity as the Director of the California Department of Industrial Relations; and Julie A. Su, in her official capacity as California Labor Commissioner. (Doc. No. 1.) Specifically, plaintiffs through this action challenge subdivisions (g)(2) and (g)(5) of California Labor Code § 226.2 under the United States Constitution and the California Constitution. First, plaintiffs allege that subdivisions (g)(2) and (g)(5) violate the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution and Article 1, Section 7 of the California Constitution. (Id. ΒΆ 52.) Second, plaintiffs allege these same subdivisions violate the prohibition against bills of attainder of Article I, Section 10 of the United States Constitution and Article I, Section 9 of ...


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