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Safeway Wage and Hour Cases

California Court of Appeals, Second District, Fourth Division

December 18, 2019

SAFEWAY WAGE AND HOUR CASES.

          APPEAL from a judgment of the Superior Court of Los Angeles County No. BC349382 JCCP No. 4772, Ann I. Jones, Judge. Affirmed.

          Arias, Sanguinetti, Wang & Torrijos, Mike Arias, Alfredo Torrijos and Craig Momita for Plaintiff and Appellant.

          Littler Mendelson, Margaret H. Gillespie, Philip L. Ross and J. Kevin Lilly for Defendant and Respondent.

          MANELLA, P. J.

         INTRODUCTION

         This is another in a series of cases in which former managers of Safeway supermarket stores sought unpaid overtime wages, claiming they had been misclassified as exempt executives under regulations applicable to the mercantile industry. Following trial, a jury found respondent Safeway, Inc. had proven that appellant William Cunningham had been an exempt employee (and thus was not entitled to overtime pay). On appeal, appellant asserts the trial court committed instructional error. In particular, he challenges an instruction based on language in this court's decisions in Batze v. Safeway, Inc. (2017) 10 Cal.App.5th 440 (Batze) and Heyen v. Safeway Inc. (2013) 216 Cal.App.4th 795 (Heyen), directing the jury to classify any given task as exempt work whenever a manager engages in it “because it is helpful in supervising employees in the store or because it contributes to the smooth functioning of the store....” Appellant also claims the court abused its discretion in admitting certain expert testimony, arguing it was speculative.

         We clarify that a task does not become exempt merely because the manager undertakes it in order to contribute to the smooth functioning of the store. An instruction on the consideration of the manager's purpose, where appropriate, must inform the jury of relevant limiting principles outlined in the applicable regulations and recognized by our prior decisions. However, we conclude the trial court's instruction did not affect the jury's verdict.

         Additionally, we find no abuse of discretion in the admission of the contested expert testimony under the circumstances of this case. We therefore affirm the judgment.

         BACKGROUND

         A. The Parties and This Action

         Respondent operates a national chain of supermarkets. From March 2002 to October 2004, appellant worked at several of respondent's stores, serving as a First Assistant Manager (FAM) for most of that time. In 2002, two former Safeway managers filed a putative class action on behalf of all Safeway store managers and assistant store managers in California, alleging failure to pay overtime wages, among other claims. The trial court denied class certification. (Batze, supra, 10 Cal.App.5th at pp. 445-446; Heyen, supra, 216 Cal.App.4th at p. 799.)

         Before and after the denial of class certification, numerous former Safeway managers, including appellant, filed complaints seeking unpaid wages on an individual basis. Appellant's action proceeded to trial in 2017.

         B. Evidence at Trial

         Before trial, respondent conceded appellant had worked overtime during his employment, and the trial therefore focused on respondent's affirmative defense -- that appellant was subject to the executive exemption and was not entitled to overtime wages. (See Heyen, supra, 216 Cal.App.4th at p. 817 [“Exemptions are narrowly construed and, as affirmative defenses, must be proved by the employer”].) Because respondent bore the burden to prove this affirmative defense, the parties agreed respondent would present its case first, followed by appellant. At trial, the main dispute was whether appellant had spent most of his work time stocking shelves and checking (nonexempt work) as he claimed, or performing managerial tasks such as supervising, training, and disciplining employees, assessing store conditions, and filling out financial reports (exempt work), as respondent contended.

         1. Respondent's Evidence

         i. Lay Testimony

         George Arias, a retired Safeway District Manager who had overseen stores at which appellant worked, testified about the duties of FAMs. According to Arias, when the store manager was present, a FAM's primary responsibilities were to ensure checkers' productivity and service, sufficient stocking of products on the shelves, store cleanliness, and proper organization of stock in the back room of the store. FAMs were to direct subordinate hourly employees in carrying out these tasks, not to perform them on their own. Safeway stores could have as many as 145 employees, and FAMs would not be able to manage store activities if they were preoccupied with physical functions like checking or stocking. As part of their duties, FAMs walked the aisles of their stores to assess store conditions and respond to any issues (performing a “store walk”), trained subordinates, scheduled shifts based on sales projections, and filled out financial reports.

         When the store manager was not present, a FAM was responsible for the entire operation of the store. Based on his observations of appellant, Arias did not think appellant spent more than half his time engaged in physical labor. During his testimony, Arias recounted transferring appellant to a particular store to help prepare the store's back room for a “show-and-tell, ” a production of a model store demonstrating how a Safeway store should operate.

         Corrine Fernando, who had worked alongside appellant as a bakery manager at one store, testified she had never seen appellant stock shelves, though she acknowledged her view of the store was obstructed. She explained that her department was responsible for stocking the bread aisle, and that hourly employees were specifically assigned to stock that aisle. According to Fernando, appellant would usually be found in the office. Amanda Deschner, who had worked with appellant as a night crew head clerk at another store, described receiving product orders from appellant. She recounted an instance in which she disagreed with one of appellant's order requests and discussed it with the store manager, only to be told, “if [appellant] asked you to do it, you do what he says.” Deschner testified she had never seen appellant stock shelves, though she acknowledged occasionally seeing him checking. Finally, Jennifer Hansen, another night crew head clerk who had worked with appellant, testified she did not recall ever seeing appellant stock shelves or check out customers.

         ii. Banks's Expert Testimony

         Christina Banks, an industrial organizational psychologist, testified about the results of an observational study she had conducted at Safeway stores. She designed this observational study to measure how a representative sample of Safeway FAMs performed the job. During the study, observers followed 28 randomly selected FAMs and recorded the time they spent on every activity. The study was conducted after appellant's employment with respondent had ended and did not include any of the stores at which he had worked.[1]

         The study showed the observed FAMs spent an average of 72.7 percent of their worktime on “managerial” activities, such as overseeing customer service, and only 27.3 percent of their time on “non-managerial” activities, such as stocking shelves. Only three of the 28 observed FAMs failed to spend more than half their worktime doing managerial work.[2] Based on these results, Banks opined the vast majority of FAMs spent more than half their time performing managerial work, and that it was realistic for respondent to expect its FAMs to do so.

         On cross-examination, when asked if her study was representative of how appellant spent his worktime, Banks explained the study was “representative of what [FAMs] do” but she could not “speak to what [appellant] did in his job.” She later confirmed on redirect that she was not attempting to “predict... what [appellant] did on any particular day.”

         2. Appellant's Evidence

         Appellant testified at trial. He described his typical shift as mostly physically stocking and rearranging products on shelves. According to appellant, at one store, he spent 60-70 percent of his time stocking and 20 percent checking. At two other stores, he spent 70-80 percent of his time stocking, checking, and cleaning. He testified he never managed anyone in the various departments of his stores. Appellant admitted occasionally preparing various reports, but claimed they took very little time to complete. On cross-examination, he also admitted conducting store walks and delegating tasks to other employees, and confirmed he was responsible for correcting employees' performance deficiencies and for discipline.

         Albert Kruger, a former store manager who oversaw appellant at one store, testified appellant was a “work horse, ” responsible for physically replenishing products. Appellant was usually the only employee available to stock the shelves, and would spend 80-90 percent of his time stocking. He did very little office work and managed only himself.

         Two other current and former FAMs testified they had spent the majority of their time doing physical work or checking customers. Both were observed in Banks's study and one of them, Lyle Parker, claimed he had been instructed to do only management work on the day of his observation and therefore did less checking than he normally did. When confronted with check-register data on cross-examination, however, he admitted he had spent similar time checking in the days surrounding the study.

         C. Jury Instructions

         Aside from standard CACI jury instructions, the trial court also instructed the jury that respondent bore “the burden of proving by a preponderance of the evidence that [appellant] was an exempt employee and therefore not entitled to overtime compensation.” The court instructed the jury on the elements of the executive exemption, including the requirement that the employee be “primarily engaged in” exempt work, and reiterated that respondent had the burden to prove each element by a preponderance of the evidence. In Instruction No. 31, the court gave lists of examples of exempt work (e.g., “interviewing, selecting, and training of employees, ” “directing the work of employees, ” and “disciplining employees”) and nonexempt work (e.g., “stocking shelves, ” “cleaning the store, ” and “checking out customers”).

         Instruction No. 31 continued: “These examples of different tasks are not determinative of whether such tasks should be classified as exempt or non-exempt. A task may be exempt or non-exempt based on the reason that the person is doing the task. Understanding the manager's purpose in engaging in such tasks, or a task's role in the smooth operation of the store, is critical to the task's proper categorization as exempt or non-exempt. A task performed because it is helpful in supervising employees in the store or because it contributes to the smooth functioning of the store or any subdivision of the store is exempt, even though the identical task performed by an hourly employee for a different, non-managerial reason would be non-exempt.

         “In making your decision, you may consider whether the manager is doing tasks that also are done by hourly employees. If the purpose of the manager in doing those tasks is to supervise employees and/or contribute to the smooth operations of the store or a recognized ...


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