United States District Court, N.D. California, San Francisco Division
IRMA FRAUSTO, individually and on behalf of all others similarly situated, Plaintiff,
BANK OF AMERICA, NATIONAL ASSOCIATION, Defendant.
ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR
SUMMARY JUDGMENT RE: ECF NO. 99
BEELER, UNITED STATES MAGISTRATE JUDGE.
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). 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.
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.
Ms. Frausto's Job at Bank of America
Frausto worked at Bank of America as a Treasury Services
Advisor from September 1999 until August 11, 2017, when Bank
of America terminated her. 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
The Global Recognition Program
America launched the Global Recognition Program in 2010 as a
way for employees to acknowledge their co-workers'
achievements. Under the Global Recognition Program,
employees nominated other employees to receive
“Recognition Points” for achievements reflecting
Bank of America's “core
values.” 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.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.
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.” There were different levels of Global
Recognition Program awards, each with a different number of
Recognition Points. 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. 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. 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. In some cases, reviewing managers did
not approve nominations that they deemed
Recognition Program awards were not tied to the number of
hours worked, the completion of any defined task, or any
performance-based metrics. 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
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.
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. The relevant policies are listed below:
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 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.
America conducted annual training on its timekeeping and
meal-break policies and procedures, and Ms. Frausto completed
the training “numerous times.”
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. 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
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. Approximately four to six times per
week, a technical error prevented Ms. Frausto from placing
her phone in “Follow Up State.” When this
happened, Ms. Frausto was unable to prevent her phone from
receiving incoming calls. She had to answer the calls
even if she missed a break to do so. Ms. Frausto's
managers instructed her to email them whenever she missed a
break. The performance metrics that rated her
job performance recorded any missed calls as “abandoned
calls, ” which “could result in censure or even
termination.” The metrics did not identify whether the
“abandoned calls” really were calls received when
Ms. Frausto was on an official break when the call
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.” She was unable to record
the time that she worked during meal-and-rest breaks because
recording extra time worked required
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.” 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.” 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. 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
Frausto recorded her meal-and-rest breaks at the beginning of
the day after her manager emailed her daily
schedule. After Ms. Frausto recorded her time, she
could not change her data entry, even if she was unable to
take a break. She missed four to six breaks a
America paid Ms. Frausto on a biweekly basis and issued her
electronic-wage statements for each biweekly pay
period. The wage statements accurately listed
the hours worked (also reflected on the time cards) and wages
paid for the corresponding pay period. The
statements did not include amounts that Ms. Frausto alleges
are owed for meal-and-rest break premiums and overtime
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.”
Relevant Procedural History
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. Bank of America moved for summary
judgment on all claims. The court held a hearing on September
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.
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).
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.
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
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.
Claim One: Failure to Pay Overtime Compensation
claim one, the plaintiff claimed that the wages used to
calculate overtime pay necessarily include the Global
Recognition Program bonuses. Bank of America moved for
summary judgment on the ground that the bonuses are
discretionary bonuses. 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
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”).It defines how to calculate the rate
of pay, including how to account for bonuses.
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”).
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 § 184.108.40.206(3)
(incorporating text of 29 U.S.C. § 207(e)(3)).
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 § 220.127.116.11(3) (incorporating 29 C.F.R. §
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. Crediting Ms. Frausto's contention
that four or more perfect customer-satisfaction surveys led
to a nomination, supervisors had discretion to approve or
reject nominations or to adjust the awarded
points. 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).
Claims Two and Three: Meal-and-Rest Breaks
claims two and three, the plaintiff claimed that Bank of
America did not allow her to take meal-and-rest
breaks. 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. Genuine disputes of
material fact preclude summary judgment.
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).
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
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).
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).