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Raines v. Coastal Pacific Food Distributors, Inc.

California Court of Appeals, Third District, San Joaquin

May 22, 2018

TERRI RAINES, Plaintiff and Appellant,
v.
COASTAL PACIFIC FOOD DISTRIBUTORS, INC., Defendant and Respondent.

          APPEAL from a judgment of the Superior Court of San Joaquin County, Nos. STK-CV-UOE-2014-0005703, 39-2014-00312169-CU-OE-STK Linda L. Lofthus, Judge. Reversed in part and affirmed in part.

          Mayall Hurley, William J. Gorham III and Nicholas J. Scardigli for Plaintiff and Appellant.

          Weintraub Tobin Chediak Coleman Grodin, Charles L. Post, Brendan J. Begley, Meagan D. Bainbridge and James Kachmar for Defendant and Respondent.

          DUARTE, JUDGE.

         After defendant Coastal Pacific Food Distributors, Inc. (Coastal Pacific) terminated plaintiff Terri Raines from her employment there, Raines sued Coastal Pacific for age and disability discrimination and other related claims. In addition, she sought recovery, both individually and in a representative capacity under the Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.), [1] for Coastal Pacific's failure to provide and maintain accurate wage statements as required by section 226, subdivision (a) (section 226(a) and its provisions). Raines appeals from a judgment in favor of Coastal Pacific after the trial court reversed its original ruling denying Coastal Pacific's motion for summary adjudication and instead granted the motion as trial was about to begin.

         Raines contends triable issues of fact remain on her individual claim for statutory penalties under section 226, subdivision (e) (section 226(e) and its provisions). Section 226(e) authorizes an “employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a)” to recover damages or statutory penalties. Raines contends there are triable factual issues as to whether she sustained an injury and whether Coastal Pacific's failure to provide accurate wage statements was knowing and intentional. She next contends the trial court erred in granting summary adjudication on her PAGA claim by improperly finding injury was required. Finally, she contends the trial court committed procedural error in reversing its original order denying summary adjudication.

         We find merit only in the second contention. As we explain, a representative PAGA claim for civil penalties for a violation of section 226(a) does not require proof of injury or a knowing and intentional violation. This is true even though these two elements are required to be proven when bringing an individual claim for damages or statutory penalties under section 226(e). Because the trial court erroneously required proof of injury on the PAGA claim, the grant of summary adjudication was improper and we therefore reverse the judgment as to that claim.

         FACTUAL AND PROCEDURAL BACKGROUND

         Coastal Pacific hired Raines as a billing clerk in 1998 and terminated her employment in 2014. Raines filed suit against Coastal Pacific, alleging age discrimination, disability discrimination, and related claims. As relevant here, the first amended complaint alleged Coastal Pacific failed to furnish Raines and other employees accurate itemized wage statements showing the applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate and failed to maintain copies of accurate wage statements, as required by section 226(a). Raines sought to recover both statutory penalties on an individual basis and civil penalties on a representative basis under PAGA, as well as attorney fees, costs, and interest.

         Coastal Pacific filed a motion for summary judgment or summary adjudication, seeking dismissal of all of Raines's claims. While Coastal Pacific was successful with respect to many of the claims, the trial court denied summary adjudication as to the claim for age discrimination and failure to prevent age discrimination, and the claims for failure to furnish and maintain accurate wage statements. As to the Labor Code violations, the court found recovery under PAGA was permissible and there was a triable issue as to whether the information necessary to determine applicable hourly rates was on the pay stub.

         The parties then settled the age discrimination claims, leaving only the section 226(e) and PAGA claims to be resolved.

         The parties stipulated that from November 28, 2013, through February 28, 2015, the wage statements issued by Coastal Pacific did not include the overtime hourly rate of pay. Those wage statements did include both the number of overtime hours worked by the employee and the total overtime pay. The parties further stipulated that Raines had provided notice to the Labor and Workforce Development Agency of her allegations of section 226 violations, a prerequisite for a PAGA claim.

         The parties stipulated that before the issues of injury and a knowing and intentional violation, as those terms are defined in section 226(e), were submitted to the jury, the trial court should determine the legal issue of whether Raines was required to prove she suffered injury in order to obtain civil penalties under PAGA. If the court found proof of injury was not required to prove a PAGA claim, the parties stipulated there were 16, 252 violations for failure to furnish an accurate wage statement, and zero violations for failure to maintain wage statements.

         Coastal Pacific submitted a trial brief in which it argued that if the trial court determined a jury trial was appropriate, it should first resolve two legal questions. First, it argued the question of injury could be decided as a matter of law, asking the court to find the overtime hourly rate was “readily ascertainable” under the “reasonable person” standard because it required only simple math to calculate. Second, Coastal Pacific argued that if Raines were not entitled to statutory penalties under section 226(e) because of the absence of injury, she could not recover civil penalties under PAGA.

         In her trial brief, Raines stated her remaining claims as (1) an individual claim for statutory penalties under section 226(e) for failure to furnish accurate wage statements; (2) an individual claim for statutory penalties under section 226(e) for failure to maintain copies of accurate wage statements; and (3) a representative PAGA claim for civil penalties for failure to furnish accurate wage statements. Raines argued the threshold issue of whether an injury was required for a PAGA claim had already been decided by the trial court in its ruling on the summary judgment motion.

         The court ruled Raines had not suffered an injury, as required for the individual claim under section 226(e), because the hourly overtime rate could be determined from the wage statement by simple math. The court reversed its earlier decision on the motion for summary adjudication as to the causes of action pertaining to Labor Code violations.

         Raines objected, claiming the trial court was granting an untimely motion for reconsideration and that it modified its summary adjudication order without notice to the parties. The court rejected these objections, finding it was not bound by its previous ruling. In its judgment in favor of Coastal Pacific, the court noted it was modifying its earlier order. It determined a reasonable person could determine the overtime hourly rate from the wage statement; consequently, there was no injury. Without an injury, the section 226(e) claim failed. The court found an injury was also necessary for the PAGA claim. Because the failure to furnish claim failed, so did the failure to maintain claim.

         Raines moved for a new trial. The trial court denied the motion.

         DISCUSSION

         I

         Section 226 and Its Enforcement

         Section 226(a) requires an employer to provide employees with an accurate itemized wage statement including nine specified items. One of the items to be included in the wage statement is “all applicable hourly rates in effect during the pay period.” (§ 226(a)(9).) Here, the parties stipulated that Raines received wage statements that did not show the overtime hourly rate. Thus, it was undisputed there was at least a technical violation of section 226(a). The remaining issue is the remedy, if any.

         There are three different potential remedies available for a violation of section 226(a): (1) actual damages or statutory penalties; (2) injunctive relief; and (3) civil penalties. First, “An employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not to exceed an aggregate penalty of four thousand dollars ($4, 000), and is entitled to an award of costs and reasonable attorney's fees.” (§ 226(e)(1).) As discussed in detail post, the statute further defines “injury.” Second, an employee may bring an action for injunctive relief to ensure compliance. (§ 226, subd. (h).) Third, there are civil penalties for a violation of section 226(a). Section 226.3 provides: “Any employer who violates subdivision (a) of Section 226 shall be subject to a civil penalty in the amount of two hundred fifty dollars ($250) per ...


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