Harris v. Best Buy Stores, L.P.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR SUMMARY JUDGMENT; SETTING CASE MANAGEMENT CONFERENCE RE: DKT. NO. 64

          HAYWOOD S. GILLIAM, JR. United States District Judge.

         Re: Dkt. No. 64 Pending before the Court is Defendant Best Buy Stores, L.P.’s motion for summary judgment. Dkt. No. 64. Plaintiff Starvona Harris filed this collective action on February 11, 2015, alleging eight causes of action for violations of state and federal labor code provisions. Plaintiff was a Best Buy employee from October 2013 to September 2014, and she contends that Defendant failed to properly calculate overtime wages, timely pay wages, provide accurate wage statements, reimburse business expenses, and satisfy record-production obligations. The pending summary judgment motion relates only to Plaintiff’s individual claims.

         After reviewing the materials submitted by the parties, hearing oral argument, and considering the issues raised in both, the Court GRANTS IN PART and DENIES IN PART Defendant’s motion.

         I. FACTS

         The basic facts are not in dispute. In addition to hourly wages, Defendant offers employees in Plaintiff’s position three other types of payment: (1) a short-term incentive (“STI”) program that is tied to an individual and store’s performance, (2) the Path to Excellence (“PTE”) Program, which gives employees points based on their performance, and (3) an employee discount program that gives employees discounts on products and services in the store.

         A. Short-Term Incentive

         The parties do not dispute that the STI was a nondiscretionary bonus. See March 24, 2015 recording of oral argument; see also Dkt. No. 64 at 9-12; Dkt. No. 66 at 12. The STI program was tied to individual, store, and company performance. See Dkt. No. 64-9, Ex. A at 1. Defendant used the following formula to calculate a store associate’s STI bonus:

= (Store Associate’s Monthly Eligible Earnings for the Fiscal Month) x (Store All Channel Revenue Incentive Target Percentage) x (Store All Channel Revenue Score^[1]).

Dkt. No. 64-9, ¶ 9; Dkt. No. 64-9, Ex. A at 7. For purposes of the STI program, an employee’s monthly eligible earnings included all regular, overtime, holiday, and other paid leave pay, but did not include the value of any discounts or points that employees received through Defendant’s employee discount program or the Path to Excellence program. Dkt. No. 64-9, ¶ 9. The fiscal year 2015 Store All Channel Revenue Incentive Target was 5% for Plaintiff’s position. Dkt. No. 64-9, Ex. A at 7.

         Starting in fiscal year 2015, Plaintiff was eligible for the STI payment that was determined using the above formula, Dkt. No. 64-9, ¶ 6, and she earned the bonus in fiscal months February, March, April, June, and August. Dkt. No. 64-10 at 11.

         B. Path to Excellence

         The PTE program allows Defendant’s managers to “recognize employees by awarding them points that the employees can use to obtain various products, services, or gift cards.” Dkt. No. 64-4, ¶ 3. Defendant values each point at $0.05 per point. Id. at ¶ 5.

         Defendant’s vendor provides and administers the PTE program, classifying points as either overtime eligible with the code “Points Rcvd GU” or as not overtime eligible with code “NFLSA GU.” Dkt. No. 64-8, ¶ 6. If points were coded as “Points Rcvd GU, ” the vendor also provided the start and end date of the award earnings period. Id. at ¶ 7. Plaintiff received awards that were overtime eligible on July 6, 2014; July 13, 2014; July 15, 2014; July 25, 2014; August 3, 2014; and August 6, 2014. Id.; Dkt. No. 69-11 at 30. The only work week that Harris both received an award of points and worked overtime was July 20-26, 2014; this was for the pay period ending August 2, 2014, and occurred in the fiscal month of July 2015. Dkt. No. 22-2; Dkt. No. 69-11 at 30.

         C. Employee Discount Policy

         The Employee Discount Policy was available to employees after 30 days of continuous employment, and it allowed employees “to purchase most products and services at 5% above cost.” Dkt. No. 64-8. The policy further stated that the policy was not a contract and could be changed or varied in Best Buy’s sole discretion. Additionally, the policy noted the income tax consequences of the discount program:

[T]he IRS considers anything greater than a 20% discount to be taxable income. Therefore, you will be taxed on the difference between the 20% off price and the 5% above-cost Employee Discount price. This amount will appear as Merchandise Recvd on your pay statement.

Id.

         Plaintiff used the discount program a number of times, see Dkt. No. 67, ¶ 9; Dkt. No. 69-11 at 31, and specifically contests Defendant’s failure to include “Merchandise Recvd” earnings in June and August 2014 in the STI calculation for fiscal months June 2015 and August 2015, as well as Defendant’s failure to calculate overtime on the merchandise value. Dkt. No. 68, ¶¶ 5-8.

         II. LEGAL STANDARD

         Summary judgment is proper if “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c).

         The Court must view the facts and draw inferences in the manner most favorable to the nonmoving party. Chevron Corp. v. Pennzoil Co., 974 F.2d 1156, 1161 (9th Cir. 1992). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact for trial, but it need not disprove the other party’s case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986).

         Once the moving party meets its burden, the “adverse party may not rest upon the mere allegations or denials of the adverse party’s pleading, but the adverse party’s response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.” Fed.R.Civ.P. 56(e); see also Anderson, 477 U.S. at 248-49. Furthermore, a party cannot create a genuine issue of material fact simply by making assertions in its legal papers. There must be specific, admissible evidence identifying the basis for the dispute. S.A. Empresa de Viacao Aerea Rio Grandense v. Walter Kidde & Co., Inc., 690 F.2d 1235, 1238 (9th Cir. 1980). The Supreme Court has held that “[t]he mere existence of a scintilla of evidence . . . will be insufficient; there must be evidence on which the jury could reasonably find for [the opposing party].” Anderson, 477 U.S. at 252.

         III. DISCUSSION

         A. First and Second Causes of Action: failure to pay overtime wages under Fair Labor Standards Act and under California Labor Code §§ 204, 510, 1198

         Defendant seeks summary judgment on Plaintiff’s first and second causes of action for unpaid overtime compensation under the Fair Labor Standards Act (“FLSA”) and the California Labor Code.

         1. Applicable Law

         In addressing whether Defendant properly calculated overtime compensation, the Court examines federal and state wage and hour law. While the second cause of action is brought under California law, California courts look to federal labor regulations for guidance in the absence of controlling or conflicting California law. See Huntington Mem’l Hosp. v. Superior Court, 131 Cal.App.4th 893, 903 (2005) (“[E]ven though this case involves California law-the payment of overtime for work in excess of eight hours in one day-and federal law requires overtime pay only for work exceeding 40 hours in one workweek, federal authorities still provide useful guidance in applying state law.” (parenthetical omitted)); see also Marin v. Costco Wholesale Corp., 169 Cal.App.4th 804, 815 (2008), as modified on denial of reh’g (Jan. 21, 2009) (“[N]o California court decision, statute, or regulation governs bonus overtime . . . there is no controlling California authority apart from the directive that overtime hours be compensated at a rate of no less than one and one-half times the regular rate of pay.”).^[2] Accordingly, the Court analyzes the first and second causes of action by looking to federal law.

         FLSA requires that employees be compensated for all hours worked in excess of forty hours each workweek at “a rate not less than one and one-half times the regular rate at which he is employed.” 29 U.S.C. § 207(a). An employee’s regular rate is “the hourly rate actually paid for the normal, non-overtime workweek, ” and is “obtained by dividing the weekly wage payable for the working of the scheduled workweek by the number of hours in such scheduled workweek.” 149 Madison Ave. Corp. v. Asselta, 331 U.S. 199, 204, modified sub nom. 149 Madison Ave. Corp. v. Asselta, 331 U.S. 795 (1947); Brennan v. Valley Towing Co., 515 F.2d 100, 106 (9th Cir. 1975). The FLSA defines “regular rate” to include “all remuneration for employment paid to, or on behalf of, the employee” unless it falls under one of eight statutory exceptions. 29 U.S.C. § 207(e); see also Opinion Letter FLSA, 1997 WL 998000, at *1 (“As a general matter, all remuneration paid to employees except that expressly excluded by the FLSA is included in their total compensation when computing their regular rate for overtime purposes.”). “Bonuses which do not qualify for exclusion . . . must be totaled in with other earnings to determine the regular rate on which overtime pay must be based.” 29 C.F.R. § 778.208. “When including these bonuses in the regular rate of pay, they must be apportioned back over the workweeks of the period during which they may said to have been earned.” Opinion Letter FLSA, 1997 WL 998000, at *1; see 29 C.F.R. § 778.209.

         Alternatively, an employer can calculate overtime compensation without relying on the regular rate: § 778.210 permits employers to satisfy FLSA’s overtime compensation requirements by calculating the bonus as a “percentage of total earnings” by multiplying the employee’s pay by the same fixed percentage of both the employee’s straight-time earnings and overtime earnings. § 778.210; see also Opinion Letter FLSA, 1997 WL 998000, at *1; FLSA 2006-4NA (February 17, 2006). Section 778.503 similarly provides that a “bonus based on a percentage of total wages-both straight time and overtime wages-satisfies the Act’s overtime requirements, if it is paid unconditionally. Such a bonus increases both straight time and overtime wages by the same percentage, and thereby includes proper overtime compensation as an arithmetic fact.” 29 C.F.R. § 778.503. Under §§ 778.210 and 778.503, the lump sum payment is a simultaneous payment of the bonus and overtime compensation on the bonus, satisfying FLSA’s overtime requirements. § 778.210; Opinion Letter FLSA, 1997 WL 998000, at *1. Under this provision, recomputation is not needed and the bonus is excluded from the employee’s regular rate of pay for overtime purposes. § 778.210; Opinion Letter FLSA, 1997 WL 998000, at *1.

         The parties’ primary dispute relates to the definition of “total earnings” under § 778.210. Defendant contends that “total earnings” under the percentage of earnings method only includes straight-time earnings and overtime earnings. Plaintiff relies on Department of Labor (“DOL”) opinion letters to argue a broader definition of “total earnings.” For example, the DOL’s February 5, 2001 letter provides:

[W]here an employer’s payments under a bonus plan are based upon a percentage of total earnings of the employee, the payments may be excluded from the regular rate of pay if the conditions prescribed in 29 CFR § 778.210 are met. Under the method of allocation discussed in this section, where a bonus is paid as a production incentive percentage of the employee’s total compensation, including straight time, overtime, bonuses, and commissions, the ...