Frausto v. Bank of America, N. A.

          ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR SUMMARY JUDGMENT RE: ECF NO. 99

          LAUREL BEELER, UNITED STATES MAGISTRATE JUDGE.

         INTRODUCTION

         In this putative class action, named plaintiff Irma Frausto sued her former employer, Bank of America, for state-law wage-and-hour violations, raising six class claims and one representative claim under California's Private Attorneys General Act (“PAGA”): (1) failure to calculate overtime wages at the correct rate by not including certain bonuses (claim one); (2) failure to provide meal breaks (claim two); (3) failure to provide rest breaks (claim three); (4) failure to pay final wages on time (claim four); (5) failure to provide accurate wage-and-hour statements (claim five); (6) unfair business practices in violation of California's Unfair Competition Law (“UCL”) (claim six); and (7) a PAGA claim for civil penalties predicated on the overtime and meal-and-rest breaks claim (claim seven).^[1] Bank of America moved for summary judgment on the following grounds: (1) it did not err by excluding discretionary bonuses from the wage rate (claim one) because they are not part of regular pay; (2) Bank of America's meal-and-rest break policy complied with the law, and the plaintiff cannot show that she was forced to forego the breaks (claims two and three); (3) the plaintiff has no standing to pursue waiting-time penalties (claim four) because Bank of America paid her for penalties on her late final paycheck, the claim is predicated on her defective claims one through three, and she has not provided any evidence showing Bank of America willfully failed to pay her wages on time; (4) her claim for wage-statement penalties (claim five) fails because it is predicated on the overtime and meal-and-rest breaks claims, she suffered no cognizable injury, the statements were accurate, and she cannot show Bank of America knowingly and intentionally failed to provide accurate wage statements; and (5) the UCL and PAGA claims (claims six and seven) fail because they are predicated on the overtime and meal-and-rest breaks claims.^[2]

         The court grants Bank of America's motion for summary judgment on claim one because the bonuses were discretionary (and there are no disputes of material fact to support a contrary conclusion) and on claims four through seven to the extent that they are predicated on claim one. The court otherwise denies the summary-judgment motion.

         STATEMENT

         1. Ms. Frausto's Job at Bank of America

         Ms. Frausto worked at Bank of America as a Treasury Services Advisor from September 1999 until August 11, 2017, when Bank of America terminated her.^[3] She spent most of her day fielding inbound calls from Bank of America's commercial clients, financial centers, and other business partners to verify wires, provide the status of cash stored in vaults, and verify checking, savings, and credit-card accounts.^[4]

         2. The Global Recognition Program

         Bank of America launched the Global Recognition Program in 2010 as a way for employees to acknowledge their co-workers' achievements.^[5] Under the Global Recognition Program, employees nominated other employees to receive “Recognition Points” for achievements reflecting Bank of America's “core values.”^[6] Employees could redeem Recognition Points through a third-party vendor's website for merchandise and $100 gifts cards but could not redeem the points for cash.^[7]For internal accounting and tax purposes, Bank of America assigned each point a cash value of five cents and reported the value of the points on employee-wage statements as imputed income.^[8]

         A nominating party's decision to submit a nomination for a Global Recognition Program award for a co-worker was voluntary and “within the complete discretion of the nominating party.”^[9] There were different levels of Global Recognition Program awards, each with a different number of Recognition Points.^[10] For example, the lowest-level award was a “High Five” award, which was worth 100 Recognition Points, and the highest-level award was the “Diamond” award, which was worth 10, 000 Recognition Points.^[11] When a nominating party submitted an award, it was “expected to assess the impact, value[, ] and effort of the achievement being recognized and then recommend an appropriate award level.^[12] Once an employee nominated a co-worker, managers reviewed the nomination and had complete discretion to approve or reject a nomination or to adjust the number of Recognition Points awarded.^[13] In some cases, reviewing managers did not approve nominations that they deemed meritless.^[14]

         Global Recognition Program awards were not tied to the number of hours worked, the completion of any defined task, or any performance-based metrics.^[15] Ms. Frausto alleges, however, that her direct manager told her that she would be eligible to receive Recognition Points if she received four or more customer-satisfaction surveys with a perfect score.^[16]

         Ms. Frausto received three Global Recognition Program awards on November 8, 2016, February 10, 2017, and May 2, 2017, ranging from 500 to 2000 points each.^[17]

         3. Meal-and-Rest Breaks

         During Ms. Frausto's employment, Bank of America maintained policies that required meal-and-rest breaks free of all duties and interruptions and required employees to accurately record the beginning and end times of their meal breaks on their timecards.^[18] The relevant policies are listed below:

MEAL PERIODS

California employees who work more than 5 hours are entitled to one meal period of at least 30 minutes. It should start no later than the beginning of the 5th hour of work. California employees are not entitled to a second meal period unless they have worked over 10 hours in that day.

Associates who work more than 10 hours but less than 12 hours in a work day may voluntarily waive their second meal period if the employee received his/her first meal period (as required) as long as he/she does not work more than 12 hours that day. If the meal period is waived, the employee must be paid for the time worked. Once 12 hours is exceeded, neither . . . meal period can be waived.

REST PERIODS

Rest periods are considered time worked (i.e., employee is compensated and does not clock out for rest periods.)

A 10-minute rest period is required per 4 hours worked or a major fraction thereof (a major fraction thereof of 4 hours is defined as 50% or 2 hours or more).

. To the extent practicable, it should be taken in the middle of the work schedule.

. A rest period is not required for less than 3.5 hours of total daily time.

A second rest period of 10 minutes is required if total daily work time is 6 hours or more. A third rest period of 10 minutes is required if total daily work time is 10 hours or more. Rest periods should be scheduled so they do not immediately precede or follow any meal periods.^[19]

         Bank of America conducted annual training on its timekeeping and meal-break policies and procedures, and Ms. Frausto completed the training “numerous times.”^[20]

         As a call-center employee, Ms. Frausto was entitled to a 30-minute meal break no later than the end of her fifth hour of work and two 15-minute rest breaks each day.^[21] Ms. Frausto's supervisors advised her to log out of the phone system before the start of a scheduled meal or rest break so that she would not receive calls during her scheduled break.^[22]

         When the system alerted Ms. Frausto that it was time to take her meal or rest break, she could put her phone in “Follow Up State” so that it stopped receiving calls.^[23] Approximately four to six times per week, a technical error prevented Ms. Frausto from placing her phone in “Follow Up State.”^[24] When this happened, Ms. Frausto was unable to prevent her phone from receiving incoming calls.^[25] She had to answer the calls even if she missed a break to do so.^[26] Ms. Frausto's managers instructed her to email them whenever she missed a break.^[27] The performance metrics that rated her job performance recorded any missed calls as “abandoned calls, ” which “could result in censure or even termination.”^[28] The metrics did not identify whether the “abandoned calls” really were calls received when Ms. Frausto was on an official break when the call dropped.^[29]

         Even when she missed a break, Bank of America required Ms. Frausto to record her meal-and-rest breaks, “regardless of what happened during the day.”^[30] She was unable to record the time that she worked during meal-and-rest breaks because recording extra time worked required preapproval.^[31]

         When Ms. Frausto notified her managers that she was missing a break, she was told to “[d]o the best you can[, ] it is what it is, ” and to take a break “when [she] could.”^[32] Her managers “encouraged [her] to stay on the phone to handle the call volume” and told her that she “couldn't just hang up on the person.”^[33] In 2017, a “manager of Ms. Frausto's manager” sent an email instructing employees “do not go to break” and “[s]tay on the phone. Don't go to break” to handle the high-call volume.^[34] Ms. Frausto did not skip breaks as a result of this email, but she continued to skip breaks when the computer system did not allow her to stop calls.^[35]

         Ms. Frausto recorded her meal-and-rest breaks at the beginning of the day after her manager emailed her daily schedule.^[36] After Ms. Frausto recorded her time, she could not change her data entry, even if she was unable to take a break.^[37] She missed four to six breaks a week.^[38]

         4. Wage Statements

         Bank of America paid Ms. Frausto on a biweekly basis and issued her electronic-wage statements for each biweekly pay period.^[39] The wage statements accurately listed the hours worked (also reflected on the time cards) and wages paid for the corresponding pay period.^[40] The statements did not include amounts that Ms. Frausto alleges are owed for meal-and-rest break premiums and overtime payments.^[41]

         Bank of America sent Ms. Frausto her final paycheck on August 15, 2017, four days after it terminated her on August 11, 2017, and it included payment for four days' pay attributable to “Penalty Pay.”^[42]

         5. Relevant Procedural History

         The FAC contains the following class claims and one representative claim under PAGA: (1) claim one charging a failure to pay overtime wages, in violation of the California Labor Code; (2) claim two charging a failure to provide meal breaks, in violation of the California Labor Code; (3) claim three charging a failure to provide rest breaks, in violation of the California Labor Code; (4) claim four charging a failure to pay final wages on time, in violation of the California Labor Code; (5) claim five charging a failure to provide accurate wage-and-hour statements, in violation of the California Labor Code; (6) claim six charging unfair business practices, in violation of the UCL; and (7) a PAGA claim for civil penalties predicated on the overtime and meal-and-rest breaks violations.^[43] Bank of America moved for summary judgment on all claims.^[44] The court held a hearing on September 26, 2019.^[45]

         STANDARD OF REVIEW

         The court must grant a motion for summary judgment if the movant shows that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). Material facts are those that may affect the outcome of the case. Anderson, 477 U.S. at 248. A dispute about a material fact is genuine if there is enough evidence for a reasonable jury to return a verdict for the non-moving party. Id. at 248-49.

         The party moving for summary judgment has the initial burden of informing the court of the basis for the motion, and identifying portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate the absence of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). To meet its burden, “the moving party must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial.” Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000); see Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001) (“When the nonmoving party has the burden of proof at trial, the moving party need only point out ‘that there is an absence of evidence to support the nonmoving party's case.'”) (quoting Celotex, 477 U.S. at 325).

         If the moving party meets its initial burden, the burden shifts to the non-moving party to produce evidence supporting its claims or defenses. Nissan Fire & Marine, 210 F.3d at 1103. The non-moving party may not rest upon mere allegations or denials of the adverse party's evidence, but instead must produce admissible evidence that shows there is a genuine issue of material fact for trial. Devereaux, 263 F.3d at 1076. If the non-moving party does not produce evidence to show a genuine issue of material fact, the moving party is entitled to summary judgment. Celotex, 477 U.S. at 323.

         In ruling on a motion for summary judgment, inferences drawn from the underlying facts are viewed in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

         ANALYSIS

         Bank of America moves for summary judgment on all claims. The court grants the motion for summary judgment on claim one (and on claims four through seven to the extent that they are predicated on claim one) and otherwise denies the motion.

         1. Claim One: Failure to Pay Overtime Compensation

         In claim one, the plaintiff claimed that the wages used to calculate overtime pay necessarily include the Global Recognition Program bonuses.^[46] Bank of America moved for summary judgment on the ground that the bonuses are discretionary bonuses.^[47] Non-discretionary bonuses are part of the regular rate of pay, 29 C.F.R. § 778.209(a), and discretionary bonuses are not, 29 C.F.R. § 778.211(b). The court grants the motion because the bonuses were discretionary.

         The California Labor Code requires overtime pay for hours worked “in excess of eight hours in one workday and any work in excess of 40 hours in any one work week . . . at the rate of no less than one and one-half times the regular rate of pay for an employee.” Cal. Labor Code § 510(a). California courts have not addressed whether bonus payments - discretionary or not - are part of the “regular rate of pay.” See Marin v. Costco Wholesale Corp., 169 Cal.App.4th 804, 815 (2008). The parties agree that the applicable standard is the Fair Labor Standards Act (“FLSA”).^[48]It defines how to calculate the rate of pay, including how to account for bonuses.

         “Under the FLSA, the ‘regular rate' of pay ‘at which an employee is employed shall be deemed to include all remuneration for employment paid to, or on behalf of, the employee,' subject to certain enumerated exceptions.” Alonzo v. Maximus, Inc., 832 F.Supp.2d 1122, 1129 (C.D. Cal. 2011) (citing 29 U.S.C. § 207(e)(3)). The burden is on the defendant to establish that its bonus payments fall within one of the exceptions in § 207(e). Id. at 1130 (citing Idaho Sheet Metal Works, Inc. v. Wirtz, 383 U.S. 190, 209 (1966) (under the FLSA, “the burden of proof respecting exemptions is upon the company”).

         Section 207(e)(3)(a) excludes from the “regular rate:”

Sums paid in recognition of services performed during a given period if . . . both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly.

Id.; see also DLSE Manual § 49.1.2.4(3) (incorporating text of 29 U.S.C. § 207(e)(3)).

         The Department of Labor has interpreted that section to permit an employer to exclude a “discretionary bonus, ” but not a “promised bonus, ” from the “regular rate” of pay:

In order for a bonus to qualify for exclusion as a discretionary bonus under section 7(e)(3)(a)[, ] the employer must retain discretion both as to the fact of payment and as to the amount until a time quite close to the end of the period for which the bonus is paid. The sum, if any, to be paid as a bonus is determined by the employer without prior promise or agreement. The employee has no contract right, express or implied, to any amount. If the employer promises in advance to pay a bonus, he has abandoned his discretion with regard to it.

The bonus, to be excluded under section 7(e)(3)(a), must not be paid “pursuant to any prior contract, agreement, or promise.” For example, any bonus which is promised to employees upon hiring or which is the result of collective bargaining would not be excluded from the regular rate under this provision of the Act. Bonuses which are announced to employees to induce them to work more steadily or more rapidly or more efficiently or to remain with the firm are regarded as part of the regular rate of pay. Attendance bonuses, individual or group production bonuses, bonuses for quality and accuracy of work, bonuses contingent upon the employee's continuing in employment until the time the payment is to be made and the like are in this category. They must be included in the regular rate of pay.

29 C.F.R. § 778.211 (2011); see also DLSE Manual § 49.1.2.4(3) (incorporating 29 C.F.R. § 778.211).

         Here, there is no genuine issue of material fact: the Global Recognition Program's Recognition Points were discretionary. Bank of America had “discretion both as to the fact of payment and as to the amount until a time quite close to the end of the period for which the bonus is paid.” Id. Bank of America's managers had a veto power for any nomination, for example.^[49] Crediting Ms. Frausto's contention that four or more perfect customer-satisfaction surveys led to a nomination, ^[50]supervisors had discretion to approve or reject nominations or to adjust the awarded points.^[51] The court grants the Bank summary judgment on claim one (and on claims four, six, and seven to the extent that they are predicated on claim one).

         2. Claims Two and Three: Meal-and-Rest Breaks

         In claims two and three, the plaintiff claimed that Bank of America did not allow her to take meal-and-rest breaks.^[52] Bank of America moved for summary judgment on the grounds that it complied with the law (by requiring the breaks), and there is no evidence that it forced the plaintiff to miss breaks.^[53] Genuine disputes of material fact preclude summary judgment.

         2.1 Governing Law

         Under California Labor Code § 512:

An employer shall not employ an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than 30 minutes

An employer shall not employ an employee for a work period of more than 10 hours per day without providing the employee with a second meal period of not less than 30 minutes.

Cal. Labor Code § 512(a).

         Section 226.7 prohibits employers from “requir[ing] an employee to work during a meal or rest or recovery period . . . .” Cal. Labor Code § 226.7(b). “If an employer fails to provide an employee a meal or rest or recovery period[, ] . . . the employer shall pay the employee one additional hour of pay at the employee's regular rate of compensation for each workday that the meal or rest or recovery period is not provided.” Cal. Labor Code § 226.7(c).

         “The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted thirty[-]minute break, and does not impede or discourage them from doing so.” Cleveland v. Groceryworks.com, LLC, 200 F.Supp.3d 924, 946 (N.D. Cal. 2016) (citing Brinker v. Sup. Ct., 53 Cal.App.4th 1004, 1040 (2012)). “Over and above this, however, an employer is not obligated to police meal breaks and ensure no work is performed during that time.” Id. (citing Brinker, 53 Cal.App.4th at 1040-41). “Bona fide relief from duty and the relinquishing of control satisfies the employer's obligations, and work by a relieved employee during a meal break does not thereby place the employer in violation of its obligations and create liability for premium pay under California IWC Wage Order No. 5, subdivision 11(b) and California Labor Code section 226.7(c).” Id. “Nor does an employer's knowledge that an employee is working during a meal period, alone, give rise to liability for breach of the employer's obligation to provide the break, although it does require the employer to pay for that time worked. Id. (citing Brinker, Cal.App.4th at 1040).

         An employer, however, “may not undermine a formal policy of providing meal breaks by pressuring [its] employees to perform their duties in ways that omit breaks.” Id. (citing Brinker, 53 Cal.App.4th at 1040-41) (recognizing that a “common scheduling policy that made taking breaks extremely difficult would show a violation” of California's meal break laws). “Liability for failure to provide meal breaks and rest breaks is premised on the employer's actions, and not necessarily the employee's actions.” Id. (citing Carrasco v. C.H. Robinson Worldwide, Inc., No. 1:13-CV- 01438-LJO, 2013 WL 6198944, at *9 (E.D. Cal. Nov. 27, 2013) (an employer did not undermine a formal policy of providing meal-and-rest periods where the employee alleged that she forewent meal-and-rest breaks “to be able to timely complete the tasks assigned” by her employer and otherwise feared ridicule, but failed to identify any actions on employer's part that would give rise to liability).

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