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Kao v. Holiday

California Court of Appeals, First District, Third Division

June 15, 2017

MING-HSIANG KAO, Plaintiff and Appellant,
v.
JOY HOLIDAY et al., Defendants and Appellants.

         Superior Court of San Mateo County, No. CIV 509729 Honorable Gerald J. Buchwald Judge

          Counsel for plaintiff and appellant: LOHR RIPAMONTI & SEGARICH LLP Roberto Ripamonti Alec Segarich

          Counsel for defendants and appellants: LAW OFFICE OF BRIAN E. SORIANO Brian E. Soriano

          Pollak, J.

         Plaintiff Ming-Hsiang Kao was employed by defendant Joy Holiday, a travel tour company. He brought an action alleging, among other things, breach of contract and violation of federal and state statutes regulating wages and overtime pay. After a bench trial, the court ruled against Kao on his breach of contract and statutory claims but awarded damages for unpaid labor under the equitable doctrine of quantum meruit. Defendants appeal the quantum meruit finding and Kao cross-appeals the denial of his statutory claims. We conclude that Kao is entitled to compensation under the wage statutes, making an equitable remedy unnecessary. We shall reverse the judgment and remand for a calculation of statutory damages.

         Statement of Facts

         Joy Holiday is a tour company based in Millbrae, California that specializes in bus tours across the United States and China for Chinese-speaking travelers. Defendant Joy Express, Inc. is a related company and defendants Jessy Lin and Harry Chen are a married couple who own and operate the companies. Kao is a Taiwanese national who holds a bachelor's degree in management information systems from an English university. Kao was living in Taiwan in late 2008 when he met Lin through mutual friends and began assisting her as a Joy Holiday tour organizer in China.

         In early 2009, Kao was invited to work for Joy Holiday in the United States and he accepted. Lin testified she told Kao that his initial job duties would be information technology with the potential to become a manager. According to Chen, Kao was promised that he would receive $2, 500 monthly. Chen testified defendants intended from the beginning to sponsor Kao for an H-1B work visa, although no visa application was filed until October 2009.[1]

         Meanwhile, in March 2009, Kao arrived in California on a tourist visa, moved into the home of Chen and Lin, and began work for Joy Holiday at its Millbrae office.[2] Joy Holiday employed about 11 individuals at the time, all but one on a salary basis. Kao usually worked at the office weekdays from 9:00 a.m. to 6:00 p.m. and most Saturdays from 9:00 a.m. to 2:00 p.m. Initially, Kao worked on website management but his duties soon expanded to fielding sales calls and distributing travel brochures.

         Kao received $1, 700 monthly, representing a gross amount of $2, 500 less an $800 rent deduction. Chen characterized the payment as an “allowance” or “stipend” while Kao awaited his H-1B visa. When asked at trial if he was concerned that Kao had no work permit, Chen replied that he thought of Kao as a “student” eager to learn. Chen testified: “So I felt... while you are learning, we will just give you what we intend to give you.” Chen's testimony differed from that of Sylvia Sun, Joy Holiday's chief financial officer and accountant, who said the payments to Kao were “salary.” Kao was not on Joy Holiday's company payroll at this time but the payments to Kao were recorded in a handwritten “salary record” maintained by Sun. Payments were often made in cash but some payments were made by check. Several of those checks contain the notation “salary” on the memo line. Kao received no itemized statement of wages or hours worked in connection with these payments.

         In February 2010, following receipt of an H-1B visa, Kao was put on the company payroll and signed a one-paragraph “work agreement” saying he was “officially hired as the office manager of Joy Holiday.” Kao assumed the duties of a recently departed office manager, which included booking hotels and coordinating bus tours. The written work agreement states: “The salary is $2, 500 per month. You are obligated to work 20 hours a week. If you stay in the office beyond 20 hours a week, it will be your personal choice.” Kao testified that as office manager he normally worked a minimum of 10 to 12 hours daily. The trial court found that Kao “worked roughly fifty (50) hours per week.”

         Kao continued to receive $1, 700 monthly but in May 2010 the rent deduction was reduced to $600, so that the monetary portion of his monthly compensation became $1, 900. In January 2011, Kao was demoted to “non-manager status, ” as Chen phrased it, and his gross monthly salary was reduced to $2, 000. It is unclear whether a rent deduction continued to be applied to this lesser amount. Kao moved into his own apartment sometime in 2011. Sun testified she was instructed not to deduct rent after Kao moved but she did not recall when he moved, and there are payroll statements in the record through April 2011 listing a $600 deduction. Kao's employment was terminated on or about May 25, 2011.

         Trial Court Proceedings

         Kao filed suit alleging multiple causes of action, only a few of which are at issue on appeal. Kao alleged breach of contract on the theory he was a third party beneficiary of the H-1B visa application and entitled to the hourly rate stated in the application. Kao also alleged violations of federal and state statutes regulating minimum wage and overtime pay, asserting that his monthly salary of $2, 000 to $2, 500 was below statutory standards for work in excess of 40 hours a week. (29 U.S.C. § 201 et seq.; Lab. Code, §§ 1194, 1194.2.) Kao further alleged defendants failed to provide adequate wage and hour statements (Lab. Code, § 226) and timely payment of wages upon his termination (Lab. Code, § 203).

         Defendants maintained that defendant was not an employee while awaiting his H-1B visa and, thereafter, an administrative employee receiving a sufficient salary to be exempt from minimum wage and overtime compensation requirements. At trial, defendants presented a forensic accountant who valued Kao's “total compensation package” at $34, 304 annually or $2, 858.67 monthly. This compensation package included $2, 500 gross salary (monetary payment and rent value) and the calculated value of a company car, cell phone and employer-provided meals.

         In its statement of decision, the trial court rejected all of Kao's statutory wage claims. It concluded Kao was a non-employee “guest” entitled to no compensation for the 11 months he worked at Joy Holiday before receiving his H-1B visa. It further found, in reliance on the testimony of defendants' accountant, that the value of plaintiff's total compensation package after receiving the H1-B visa “placed plaintiff over the minimum salary for an exempt employee.” The court found no failure to provide adequate wage and hour statements given Kao's status as a non-employee then as an exempt employee and ruled permissible Joy Holiday's delay in paying final compensation.

         On the breach of contract cause of action, the court found the visa application to be a petition submitted by the employer to the government that “cannot be relied upon as an employment contract by the employee” or to provide third party beneficiary rights of enforcement. The court found, however, that the complaint's concluding prayer for “any other relief that is just and proper” supported an award for unpaid labor under the theory of quantum meruit. The court found that Kao worked 50 hours a week, not 20 as stated in the work agreement, and “defendants directly benefitted from plaintiff's additional work.” The court awarded $58, 284 in ...


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