Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC352595, Susan Bryant-Deason, Judge.
Law Offices of Michael Tracy, Michael Tracy and Megan Ross Hutchins for Plaintiff and Appellant.
Knee, Ross & Silverman, Howard M. Knee and Michael L. Ludwig for Defendants and Respondents.
MANELLA, J.
INTRODUCTION
Appellant Jay Kurian appeals from a summary judgment entered in favor of respondents U.S. Mortgage Capital, Inc., (U.S. Mortgage), as well as Amber Scholer, a corporate officer of U.S. Mortgage, and Ryan Scholer (the Scholers), dismissing appellant’s actions for minimum, overtime and other wages due under the California Labor Code and the Federal Fair Labor Standards Act (FLSA). The trial court found that this action was barred under the doctrine of res judicata, and that the statute of limitations had run on the eighth and ninth causes of action against the Scholers individually. We conclude that the prior judgment does not bar this action, but we do not reach the statute of limitations, as we agree with respondents that appellant failed to exhaust his administrative remedies against the Scholers. We reject respondents’ contention that all appellant’s claims have been released under a settlement agreement. We therefore affirm the dismissal of the Scholers from the eighth and ninth causes of action, but otherwise reverse the judgment.
Title 29 United States Code section 204 et seq.
BACKGROUND
The second amended complaint (SAC) -- the operative pleading -- alleged that appellant was a nonexempt employee of U.S. Mortgage from mid-January 2004 to mid-June 2005, and during that time, respondents failed to pay minimum and overtime wages, failed to provide meal breaks and furnished inaccurate paystubs. The SAC alleged that the Scholers were responsible for and controlled the payment of wages and the provision of meal breaks.
The SAC sought damages from U.S. Mortgage, as well as statutory penalties from U.S. Mortgage and the individual respondents under California and federal law. The SAC included a cause of action for civil penalties under Labor Code section 2698 et seq., the Private Attorney General Act of 2004 (PAGA), brought on behalf of appellant and respondents’ other current or former employees who were not paid overtime or given meal breaks and accurate paystubs.
All further statutory references are to the Labor Code, unless otherwise indicated.
Respondents had demurred to the first amended complaint, and after their demurrer was overruled, they filed an answer and a motion for summary judgment. The parties then stipulated to the filing of the SAC. Respondents answered the SAC and went forward on their previously filed motion for summary judgment. The motion asserted that all wage claims were barred by the doctrine of res judicata, and had been released under a written compromise executed by appellant. The motion also sought dismissal of the Scholers from the eighth and ninth causes of action, on the ground that these claims were barred by the one-year statute of limitations. Appellant filed a cross-motion for summary adjudication of several of respondents’ affirmative defenses, including res judicata and the statute of limitations. The court granted respondents’ motion and took appellant’s motion off calendar as moot.
Other than immaterial details, appellant did not dispute respondents’ statement of undisputed facts. We summarize those which were undisputed. Appellant was employed by U.S. Mortgage from January 2004 to June 2005 as a loan officer on a commission basis. When appellant left the employ of U.S. Mortgage, he claimed that commissions were still owed him. Upon investigation, respondent Amber Scholer determined that U.S. Mortgage owed appellant approximately $1,200, although appellant believed the sum to be greater. The parties entered into a settlement agreement by which U.S. Mortgage agreed to pay appellant $2,221, in exchange for a comprehensive release of claims. Appellant signed the agreement, which stated that appellant released U.S. Mortgage, as well as its directors, officers, employees and others from all “Claims,” defined as “all charges, complaints liabilities, obligations, promises, agreements, damages, suits, costs, losses, debts, and expense . . . of any nature, known or unknown, . . . includ[ing] . . . wage and hour claims [and] overtime claims. [Appellant] confirms that upon receipt of payment in this matter . . . he is not owed any compensation of any kind by [U.S. Mortgage].” The release extended to known and unknown claims, and included a waiver of Civil Code section 1542.
We summarize only material facts, disregarding legal and procedural conclusions such as the nature of appellant’s cause of action in this case and what remedies he sought. (See Code Civ. Proc., § 437c, subd. (b)(1).)
Civil Code section 1542 provides: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”
In November 2005, appellant brought a small claims action against U.S. Mortgage and the Scholers for approximately $4,700 in unpaid commissions. In January 2006, the small claims court entered judgment against appellant, finding that U.S. Mortgage did not owe any money on the claim. The original complaint in the instant action was filed May 18, 2006. The Scholers were first named in this action in the first amended complaint, filed July 3, 2006.
In their statement of undisputed facts, respondents alleged that the small claims action was dismissed, but the small claims judgment shows that only the Scholers were dismissed. We construe the small claims order as a judgment of dismissal as to the two individual defendants and a judgment on the claim as to the remaining defendant, U.S. Mortgage.
The trial court granted respondents’ motion for summary judgment upon finding the entire action barred under the doctrine of res judicata. In addition, the court found the statute of limitations had run on the PAGA causes of action (the eighth and ninth causes of action) against the Scholers individually. The court entered a judgment of dismissal June 13, 2007, and appellant timely filed a notice of appeal.
DISCUSSION
1. Contentions
Appellant contends the trial court erred in finding the action barred by the doctrine of res judicata because, he argues, a cause of action for commissions is different from one for minimum and overtime wages and penalties. He also contends the court erred in finding the action against the Scholers barred by the statute of limitations, arguing that the statute was tolled while he exhausted his administrative remedies.
Respondents counter that commissions are wages; thus, they argue, a small claims action for commissions comprises the same cause of action as one for minimum, overtime and mealtime wages, and appellant had the opportunity to litigate all wage issues in the same action, but chose not to do so. Respondents also contend that the statute of limitations could not have been tolled, because appellant failed to exhaust his administrative remedies as to the Scholers. Finally, respondents contend that the judgment should be confirmed on a ground not reached by the trial court, viz., that all appellant’s claims have been compromised and released under the parties’ settlement agreement.
2. Standard of Review
We independently review motions for summary judgment. (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.) Issues of law are reviewed under a de novo standard. (Harustak v. Wilkins (2000) 84 Cal.App.4th 208, 212.) Dismissal on res judicata grounds presents a question of law we also review de novo. (Noble v. Draper (2008) 160 Cal.App.4th 1, 10.) Where the relevant facts are undisputed, as here, issues relating to the statute of limitations and the exhaustion of administrative remedies are decided as questions of law. (See, e.g., International Engine Parts, Inc. v. Feddersen & Co. (1995) 9 Cal.4th 606, 611 [statute of limitations]; Humbert v. Castro Valley County Fire Protection Dist. (1963) 214 Cal.App.2d 1, 10 [exhaustion].)
3. The Doctrine of Res Judicata: General Principles
“‘Res judicata’ describes the preclusive effect of a final judgment on the merits. Res judicata, or claim preclusion, prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them. Collateral estoppel, or issue preclusion, ‘precludes relitigation of issues argued and decided in prior proceedings.’ [Citation.] Under the doctrine of res judicata, if a plaintiff prevails in an action, the cause is merged into the judgment and may not be asserted in a subsequent lawsuit; a judgment for the defendant serves as a bar to further litigation of the same cause of action.” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896-897, fn. omitted (Mycogen).)
“Res judicata applies if (1) the decision in the prior proceeding is final and on the merits; (2) the present proceeding is on the same cause of action as the prior proceeding; and (3) the parties in the present proceeding or parties in privity with them were parties to the prior proceeding. [Citation.] Res judicata bars the litigation not only of issues that were actually litigated but also issues that could have been litigated. [Citation.]” (Federation of Hillside and Canyon Associations v. City of Los Angeles (2004) 126 Cal.App.4th 1180, 1202 (Federation).) “It is well established that the claim preclusion aspect of the doctrine of res judicata applies to small claims judgments.” (Pitzen v. Superior Court (2004) 120 Cal.App.4th 1374, 1381.)
Here, it is undisputed that the parties were the same in the small claims action and that the small claims action resulted in a final judgment on the merits. Thus, the unresolved element of res judicata is whether “the present proceeding is on the same cause of action as the prior proceeding.” (Federation, supra, 126 Cal.App.4th at p. 1202.) Whether the prior proceeding and the present proceeding involve the same cause of action is determined under the “primary right theory.” (Mycogen, supra, 28 Cal.4th at p. 904.) “‘[A] “cause of action” is comprised of a “primary right” of the plaintiff, a corresponding “primary duty” of the defendant, and a wrongful act by the defendant constituting a breach of that duty. [Citation.] The most salient characteristic of a primary right is that it is indivisible: the violation of a single primary right gives rise to but a single cause of action. [Citation.] . . . [¶] As far as its content is concerned, the primary right is simply the plaintiff’s right to be free from the particular injury suffered. [Citation.] It must therefore be distinguished from the legal theory on which liability for that injury is premised: “Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief.” [Citation.] The primary right must also be distinguished from the remedy sought: “The violation of one primary right constitutes a single cause of action, though it may entitle the injured party to many forms of relief, and the relief is not to be confounded with the cause of action, one not being determinative of the other.” [Citation.]’” (Ibid., italics omitted.)
“‘“[I]f two actions involve the same injury to the plaintiff and the same wrong by the defendant then the same primary right is at stake even if in the second suit the plaintiff pleads different theories of recovery, seeks different forms of relief and/or adds new facts supporting recovery. [Citations.]”’ [Citation.] ‘On the other hand, different primary rights may be violated by the same wrongful conduct.’ [Citation.]” (Le Parc Community Assn. v. Workers’ Comp. Appeals Bd. (2003) 110 Cal.App.4th 1161, 1170; see also Agarwal v. Johnson (1979) 25 Cal.3d 932, 954-955, disapproved on another ground in White v. Ultramar (1999) 21 Cal.4th 563, 574, fn. 4 [Federal Title VII action for discriminatory employment practices does not supplant state remedies for defamation and intentional infliction of emotional distress based upon same conduct].)
4. Commissions and Minimum/Overtime Wages: Two Primary Rights
Appellant’s small claims action resulted in a determination that U.S. Mortgage owed no commissions to appellant. The present action is one to enforce the statutory obligation to pay minimum, overtime and mealtime wages. It follows that res judicata bars this action only if the contractual right to commissions and the statutory right to minimum, overtime and mealtime wages constitute a single primary right. (See Mycogen, supra, 28 Cal.4th at p. 904.)
All nonexempt employees are entitled to minimum and overtime wages. (See Harris v. Investor’s Business Daily, Inc. (2006) 138 Cal.App.4th 28, 37; § 510, subd. (a); Cal.Code Regs, tit. 8, § 11040, subd. 3(D).) “Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation. . . .” (§ 1194, subd. (a).) Further, employers must pay one additional hour of pay for each day that the employee is denied a meal break or rest period. (§ 226.7, subd. (b).) Whether commissions are payable in addition to minimum wage is determined by the parties’ contract. (Steinhebel v. Los Angeles Times Communications, LLC (2005) 126 Cal.App.4th 696, 701, 705.)
Public policy and the nature of the two types of compensation suggest two separate primary rights: “‘An employee’s right to wages and overtime compensation clearly have different sources. Straight-time wages (above the minimum wage) are a matter of private contract between the employer and employee. Entitlement to overtime compensation, on the other hand, is mandated by statute and is based on an important public policy. . . . “The duty to pay overtime wages is a duty imposed by the state; it is not a matter left to the private discretion of the employer. [Citations.] California courts have long recognized [that] wage and hours laws ‘concern not only the health and welfare of the workers themselves, but also the public health and general welfare.’ [Citation.] . . . .”’” (Gentry v. Superior Court (2007) 42 Cal.4th 443, 456.)
Respondents contend that the two actions are based upon the same primary right because they sought compensation for the same injury -- the nonpayment of wages. Respondents point out that commissions are defined as wages in both California and federal law. Respondents’ argument suggests that the primary right should be determined solely by the general nature of the injury. To support their argument, respondents cite Federation, supra, 126 Cal.App.4th 1180, which was not a wage case, but a challenge to the land-use findings in a general plan amendment, after a previous challenge to an environmental impact report. The court in Federation held that several claims alleged in the second action were barred by the first, but did not articulate the broad test respondents suggest. (Federation, supra, 126 Cal.App.4th at pp. 1204-1206.) The court held: “The plaintiff’s primary right is the right to be free from a particular injury, regardless of the legal theory on which liability for the injury is based. [Citation.]” (Id. at p. 1202, citing Mycogen, supra, 28 Cal.4th at p. 904, italics added.) The court in Federation concluded from this language in Mycogen that “[t]he scope of the primary right therefore depends on how the injury is defined. . . . [¶] An injury is defined in part by reference to the set of facts, or transaction, from which the injury arose.” (Federation, supra, 126 Cal.App.4th at pp. 1202-1203, italics added.) Thus, the court did not hold that a primary right is determined by the simple definition of the general category in which the injury falls, without regard to the particular facts surrounding the injury. We thus reject respondents’ invitation to look only to the general category of damages -- wages -- to determine the primary right.
As used in the California Labor Code article regulating the payment of wages, the term “‘[w]ages’ includes all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation.” (§ 200, subd. (a).) Thus, commissions are recoverable in a wage claim under section 206. (Reid v. Overland Machined Products (1961) 55 Cal.2d 203, 207-208 (Reid) [“Any implication . . . that commissions are different from other wages is inconsistent with . . . section 200, subdivision (a) and is disapproved.”].) As respondents note, the FLSA treats commissions as wages. (See 29 U.S.C. §§ 201 et seq., & 207(i).) Thus, “earnings may be determined on a piece-rate, salary, commission, or other basis . . . .” (29 C.F.R. § 778.109.)
Nor should the focus be on the general nature of the harm without regard to the defendant’s conduct. (See Sawyer v. First City Financial Corp. (1981) 124 Cal.App.3d 390, 402 [“breach of contract by failing to pay a note violates a ‘primary right’ which is separate from the ‘primary right’ not to have the note stolen”].) In Sawyer, the seller of real estate had taken a note for more than half the purchase price, secured by a deed of trust, and agreed to subordinate his security to a development loan. After the lender foreclosed, the seller sued in contract on the note and deed of trust, and after losing the lawsuit, sued in tort, alleging a fraudulent conspiracy among the defendants to structure the transaction to permit a sham foreclosure sale, thereby eliminating the debt owed to seller. (Id. at pp. 396-397.) The court held that res judicata was not a bar to the action, although “the monetary loss [was] measurable by the same promissory note amount, and hence in a general sense the same ‘harm’ [had] been done in both cases. . . .” (Id. at p. 403.)
Appellant contends that there are two primary rights, either because the actions involve a breach of contract on the one hand and a tort on the other, or because they involve the breach of two separate contractual covenants. We agree with the latter contention. Commissions are payable only as provided by an employment contract. (Steinhebel v. Los Angeles Times Communications, LLC, supra, 126 Cal.App.4th at p. 705.) Claims for minimum wage and overtime are quasi-contractual. (See Hays v. Bank of America. (1945) 71 Cal.App.2d 301, 306-307 [overtime under FLSA].) Although the obligation to pay such wages is statutory, it is deemed to be a part of the employment contract. (Id. at p. 306.) As the California Supreme Court held in Mycogen, there are two primary rights “where separate and distinct contract covenants were breached at different times.” (Federation, supra, 126 Cal.App.4th at p. 1203 citing Mycogen, supra, 28 Cal.4th at pp. 907-908.) Both the small claims action and this action concern appellant’s right to be paid under different covenants of the parties’ employment contract. However, the two contractual obligations in this case did not arise from a single covenant to pay wages, as respondents suggest; the obligation to pay commissions was necessarily an express term of the employment contract, while the obligation to pay minimum, overtime and mealtime wages was a separate and distinct contractual covenant implied by law. “That the two causes of action might have been joined in one lawsuit under our permissive joinder provisions [citation] does not prevent the plaintiff from bringing them in separate suits if he elects to do so.” (Sawyer v. First City Financial Corp., supra, 124 Cal.App.3d at pp. 402-403.)
With some exceptions, wages are payable twice per month. (See § 204.) The time and manner in which commissions are paid or advanced may vary according to the contract and the sales upon which they are based. (See Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, 803-804.) Thus, commissions may or may not be due at the time of each semi-monthly wage payment.
Respondents contend that unless both theories are asserted in one action appellant could have a double recovery. There will be no double recovery, as the small claims court held that no commissions were due, and appellant may not relitigate that issue. (See Pitzen v. Superior Court, supra, 120 Cal.App.4th at pp. 1384-1385 [issue preclusion against plaintiff in separate cause of action after adverse small claims judgment].)
Neither the parties nor we have found any California case in which an employee sued for commissions the employer was bound by contract to pay and, in a subsequent action, sought minimum, overtime or mealtime wages the employer was bound by statute to pay. Our research has, however, revealed two analogous federal cases. Although neither expressly applied the doctrine of res judicata, they provide some guidance. A federal district court in this state held that a plaintiff who had settled her claim for commissions continued to have standing as a class representative in a wage dispute, because her state and federal claims for unpaid overtime and missed mealtime wages were separate claims unaffected by the settlement. (Maddock v. KB Homes, Inc. (C.D.Cal. 2007) 248 F.R.D. 229, 238-239.) In a case arising under the FLSA, the United States Supreme Court held that employees may arbitrate the provisions of a collective bargaining agreement, without giving up their right to bring an action to enforce their statutory rights to minimum wage and overtime pay. (Barrentine v. Arkansas-Best Freight System, Inc. (1981) 450 U.S. 728, 740.) Thus, federal courts view statutes mandating employers to pay minimum wage and overtime as creating rights separate and distinct from those created by obligations to pay other types of wages.
Appellant contends that this case is analogous to Chao v. A-One Medical Services, Inc. (9th Cir. 2003) 346 F.3d 908 (Chao). In Chao, the Ninth Circuit, applying Washington law, held that a claim for overtime pay was not barred by a previous judgment in a small claims action seeking vacation pay and medicare taxes. (Id. at pp. 921-922.) Respondents note that Washington does not apply the “primary rights” test to define a cause of action, and that in Chao, the court applied the federal transactional test set forth in Costantini v. Trans World Airlines (9th Cir. 1982) 681 F.2d 1199, 1201-1202.)
The transactional test has some relevance to our discussion. Although California applies the primary rights test (Gamble v. General Foods Corp. (1991) 229 Cal.App.3d 893, 898), our courts have recognized that “in defining the injury suffered, primary rights theory incorporates to some degree a transactional standard.” (Federation, supra, 126 Cal.App.4th at p. 1203.) In applying a transactional analysis, the court in Chao held that a court must “consider four factors: (1) whether rights or interests established in the prior judgment would be destroyed or impaired by prosecution of the second action; (2) whether substantially the same evidence is presented in the two actions; (3) whether the two suits involve infringement of the same right; and (4) whether the two suits arise out of the same transactional nucleus of facts. [Citation.]” (Chao, supra, 346 F.3d at p. 921.)
The definition of a cause of action urged by respondents -- that both actions arise from the nonpayment of wages under a single employment relationship -- arguably meets Chao’s fourth factor: “the two suits arise out of the same transactional nucleus of facts.” (Chao, supra, 346 F.3d at p. 921.) However, application of the first three Chao factors to the small claims case and the instant case does not suggest the two involved a single injury. (See ibid.) No rights or interests would be destroyed or impaired by this action, because the ruling that no more commissions are due is binding on appellant. (See Pitzen v. Superior Court, supra, 120 Cal.App.4th at pp. 1381, 1384-1385.) The evidence will differ, because calculating commissions involves a percentage of sales, whereas calculating minimum and overtime wages involves evidence of hours worked. And, as explained above, the right to be paid minimum wage and overtime is a statutory entitlement independent of any contractually negotiated right to commissions. In short, the use of transactional factors to assist in defining the injury in this case does not result in the all-encompassing definition urged by respondents.
Significantly, the Chao court acknowledged that the employee’s claim for overtime pay “arose from the same transactional nucleus of facts” as her prior suit. (Chao, supra, 346 F.3d at p. 922.) Nevertheless, the court held that because the employee “did not actually pursue a claim for overtime wages” in her prior suit, res judicata did not apply to bar the later action seeking overtime pay. (Ibid.)
We conclude that the obligation to pay commissions under an employment contract constitutes a duty separate from the statutory obligation to pay minimum, overtime and mealtime wages, and that the failure to pay the former constitutes an injury separate from the failure to pay the latter. Accordingly, we hold that the contractual right to commissions and the statutory right to minimum, overtime and mealtime wages constitute separate primary rights, and the small claims action for commissions does not bar this action. (See Mycogen, supra, 28 Cal.4th at p. 904.)
5. The Statute of Limitations/Exhaustion of Remedies
Appellant contends the trial court erred in ruling that the statute of limitations had run on the PAGA causes of action for the imposition of civil penalties against the Scholers individually (counts eight and nine). Appellant also contends that he exhausted his administrative remedies before adding these causes of action to the lawsuit on July 3, 2006. We turn first to the exhaustion issue, as we find it to be dispositive.
Code of Civil Procedure section 340, subdivision (a), prescribes a one-year statute of limitations on actions by an individual to recover a statutory penalty, unless the statute imposing the penalty provides otherwise.
Appellant recognizes that under California wage law, unlike the FLSA, individual corporate officers or supervisors are not liable for unpaid wages, because they do not fall within the common law definition of “employer.” (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1085-1088 (Reynolds); Jones v. Gregory (2006) 137 Cal.App.4th 798, 803-804.) Appellant notes that the California Supreme Court suggested in Reynolds that the only wage provision which might permit recovery of penalties against corporate officers and supervisors is section 558. (Reynolds, supra, 36 Cal.4th at p. 1089.) Section 558 applies to “[a]ny employer or other person acting on behalf of an employer who violates” wage laws. (Italics added.) If such an action exists, it must be brought as a PAGA action pursuant to section 2699, subdivision (a). (Reynolds, supra, at p. 1089; see also id. at p. 1094 (conc. opn. by Moreno, J.).)
Section 2699, subdivision (a), provides: “Notwithstanding any other provision of law, any provision of this code that provides for a civil penalty to be assessed and collected by the Labor and Workforce Development Agency [(Agency)] or any of its departments, divisions, commissions, boards, agencies, or employees, for a violation of this code, may, as an alternative, be recovered through a civil action brought by an aggrieved employee on behalf of himself or herself and other current or former employees pursuant to the procedures specified in Section 2699.3.”
Prior to commencing an action pursuant to section 2699, subdivision (a), the aggrieved employee must comply with the provisions of section 2699.3, which include giving “written notice by certified mail to the [Agency] and the employer of the specific provisions of this code alleged to have been violated, including the facts and theories to support the alleged violation.” (§ 2699.3, subd. (a)(1).) Here, appellant’s attorney sent a letter to the Agency, stating that U.S. Mortgage had violated section 1197 by failing to pay minimum wages, as well as section 226, subdivision (a), by failing to provide adequate paystubs. In addition, the notice stated that appellant “was not provided an ample meal period or break periods as required under California law.” As the trial court found, the notice did not allege facts amounting to a violation of law by the Scholers individually, and did not indicate an intent to hold the Scholers personally liable for the employer’s violations described in the notice. Indeed, there was no mention of section 558 penalties.
One certified mail receipt attached to the notice shows delivery to the Agency, and the other shows delivery to Amber Scholer and U.S. Mortgage together. The record contains no certified mail receipt showing delivery to Ryan Scholer.
Appellant contends that he was not required to send the notice to the Scholers as individuals, because the statute requires notice be sent to the Agency and the employer, and the Scholers were neither. He relies upon the Supreme Court’s holding in Reynolds that the definition of “employer” did not include corporate agents for purposes enforcing overtime claims. (Reynolds, supra, 36 Cal.4th at p. 1087.) By focusing on the question of who must be served, appellant begs the question of the adequacy of the notice. Assuming, arguendo, that delivery to the employer was sufficient without a separate mailing to the individuals, the notice sent to the employer remains inadequate, because it failed to include “the facts and theoriesto support the alleged violation” by the Scholers, and failed to indicate that the employee intended to hold individual corporate agents liable for penalties under section 558. (§ 2699.3, subd. (a)(1).)
Appellant contends he was not required to set forth the facts and theories to support the alleged violation, because section 558 cannot be violated; it is merely a provision for penalties for the violation of other wage laws and orders. Appellant’s contention suggests that an action under section 558 could lie against an individual corporate agent or employee for the corporation’s violation of other wage laws -- laws that only the employer can be deemed to have violated. (See Reynolds, supra, 36 Cal.4th at pp. 1085-1089.) We found no published opinion holding that section 558 provides a cause of action against individual corporate agents or employees; the right to sue individuals for section 558 penalties under the PAGA is “untested.” (Reynolds, supra, 36 Cal.4th at p. 1094 (conc. opn. of Moreno, J.).) However, it need not be tested here, because the notice is silent as to any such theory or the facts to support it. Thus, if such a cause of action were held to exist, appellant’s notice would still be inadequate. (See § 2699.3, subd. (a)(1).)
The SAC alleged no facts to justify “piercing the corporate veil” under the alter-ego doctrine. Nor did the SAC allege what the Scholers did to cause the alleged underpayment of wages.
Appellant also contends that the Scholers would not be prejudiced by the lack of notice, apparently suggesting that we insert into the statute an exception to the exhaustion requirement. In construing statutes, our task “is to ascertain and effectuate legislative intent. [Citations.] . . . Where the words of the statute are clear, we may not add to or alter them to accomplish a purpose that does not appear on the face of the statute or from its legislative history. [Citation.]” (Burden v. Snowden (1992)2 Cal.4th 556, 562.) Section 2699.3, subdivision (a), unambiguously provides that an action “shall commence only after the . . . requirements have been met.”
Further, it is likely that the Legislature intended strict compliance with the statute’s detailed and specific provisions. Section 2699.3 was enacted as an emergency measure in 2004 to prevent “‘shakedown lawsuits,’” and to give employers the opportunity to cure violations. (Dunlap v. Superior Court (2006) 142 Cal.App.4th 330, 339, quoting Sen. Rules Com., Off. of Sen. Floor Analyses, analysis of Sen. Bill No. 1809 (2003-2004 Reg. Sess.) as amended July 27, 2004, pp. 5-6.)
We conclude that appellant failed to exhaust his administrative remedies, and no cause of action may be prosecuted against the Scholers pursuant to section 2699, subdivision (a). Because we so conclude, we deem it unnecessary to determine whether the statute of limitations has run on appellant’s eighth and ninth causes of action against the Scholers.
6. The Compromise and Release
Respondents contend, as an additional reason to affirm the judgment in its entirety, that appellant’s action is barred by the settlement agreement executed by the parties, whereby U.S. Mortgage agreed to pay appellant $2,221, in exchange for a comprehensive release of all claims “of any nature, known or unknown, . . . includ[ing] . . . wage and hour claims [and] overtime claims.” Appellant contends the release is void.
“[A]ny employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney’s fees, and costs of suit.” (§ 1194, subd. (a).) “By its terms, the rights to the legal minimum wage and legal overtime compensation conferred by the statute are unwaivable.” (Gentry v. Superior Court, supra, 42 Cal.4th at p. 455; see also Barrentine v. Arkansas-Best Freight System, Inc., supra, 450 U.S. at p. 740 [right to a minimum wage and overtime pay unwaivable under FLSA].) Because an employee’s FLSA claims are nonwaivable, they “are not subject to negotiation or bargaining between employers and employees.” (Lynn’s Food Stores, Inc. v. United States, etc. (1982) 679 F.2d 1350, 1352, citing Brooklyn Savings Bank v. O’Neil (1945) 324 U.S. 697, 709-711; see also Schulte Co. v. Gangi (1945) 328 U.S. 108, 114-115.)
a. Wage Claim Settlements under California Law
California law is “designed to secure to the wage earner prompt payment of all wages concededly due and it expressly precludes an employer’s coercing a settlement of disputed claims by offering conditional payment.” (Reid, supra, 55 Cal.2d at p. 208.) “In case of a dispute over wages, the employer shall pay, without condition and within the time set by this article, all wages, or parts thereof, conceded by him to be due, leaving to the employee all remedies he might otherwise be entitled to as to any balance claimed.” (§ 206, subd. (a).) “No employer shall require the execution of any release of any claim or right on account of wages due, or to become due . . ., unless payment of such wages has been made. Any release required or executed in violation of the provisions of this section shall be null and void as between the employer and the employee and the violation of the provisions of this section shall be a misdemeanor.” (§ 206.5.)
“This is not to say, however, that an employer and employee may not compromise a bona fide dispute over wages. But such a compromise is binding only if made after wages concededly due have been unconditionally paid.” (Sullivan v. Del Conte Masonry Co. (1965) 238 Cal.App.2d 630, 634 (Sullivan), italics added.) From this language, we discern the following elements of a valid wage compromise under California law: (1) A bona fide dispute over wages, (2) the employer’s unconditional payment, (3) prior to the execution of any release, (4) of wages concededly due.
Reid and Sullivan involved only a dispute over commissions due. There was no issue relating to minimum or overtime wages.
Compromise and release must be asserted as an affirmative defense. (Hastings v. Matlock (1980) 107 Cal.App.3d 876, 882.) As the defendant moving for summary judgment, it was respondents’ burden to produce evidence sufficient to make a prima facie showing of each element of their defense. (See Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850; Code Civ. Proc., § 437c, subd. (o)(2).) However, we find no evidence in the record to support the elements of respondents’ defense. Respondents’ statement of undisputed facts states only that there was a dispute regarding commissions due, and that U.S. Mortgage paid the full amount that Amber Scholer conceded was due on account of commissions, plus an additional amount. The statement included no undisputed facts relating to any dispute regarding pay stubs, meal breaks, overtime, or minimum wage. Indeed, the statement does not even allude to a discussion of such claims.
“For a bona fide dispute to exist, there must be some claim on behalf of the employee that she is entitled to overtime payment. And to settle such a bona fide dispute, there must be some resolution of the number of hours worked or amount of money due. A bona fide dispute is not compromised when an employer simply pays an employee a lump sum of money in exchange for a promise not to bring a suit for overtime wages. . . . [Citation.]” (Hohnke v. U.S. (2005) 69 Fed.Cl. 170, 175 -176 [holding compromise of FLSA claims unenforceable], citing Brooklyn Savings Bank v. O’Neil, supra, 324 U.S. at pp. 703-704; see also Brooklyn, at p.703, fn. 12 [no discussion of FLSA liability or the amount of any such liability].) In Hohnke, as in this case, the settlement agreement purported to compromise any claim for overtime pay, but there was no evidence that the parties had negotiated or even discussed a potential overtime claim. (See Hohnke, at pp. 172-173.)
Further, as appellant notes, Scholer’s “concession” that a certain amount was owing conflicts with the following language of the release: “The liability for any and all claims by Employee is denied by Company.” Finally, as appellant also notes, respondents did not claim to have paid any amount prior to appellant’s execution of the release, which states: “Company shall pay Employee $2221.70 after Employee signs a copy of [the] agreement.” (Italics added.)
Respondents contend that they satisfied the requirement of payment prior to execution, referring to Amber Scholer’s declaration, filed with respondents’ reply to appellant’s opposition to the motion for summary judgment. Scholer stated that she never told appellant he would be paid only if he signed the agreement, and that she would have paid him before he signed it had he objected. Far from satisfying the prior-payment element of respondents’ defense, Scholer’s statement is an admission that the conceded amounts were not paid prior to the execution of the release agreement.
Respondents contend that even if the settlement agreement were found ineffective to waive appellant’s wage claims, it was a valid waiver of penalties sought pursuant to the PAGA, because sections 206 and 206.5 require only the payment of wages concededly due. Respondents cite no authority for this contention, and we need not linger over it. We have already determined that respondents’ failure to pay wages concededly due prior to appellant’s execution of the agreement resulted in an invalid compromise of “any claim or right on account of wages due.” (§ 206.5, italics added; see Sullivan, supra, 238 Cal.App.2d at p. 634.) Penalties are, in fact, a claim or right arising on account of wages due. (See §§ 206, subd. (b), 1197.1, 2699, subd. (f).)
b. Compromise of FLSA Claims
Respondents contend that the settlement agreement effected a valid compromise and release of appellant’s FLSA claims. We have reviewed the agreement, and find no mention of the FLSA. Further, “FLSA rights cannot be abridged by contract or otherwise waived because this would ‘nullify the purposes’ of the statute and thwart the legislative policies it was designed to effectuate.” (Barrentine v. Arkansas-Best Freight System, supra, 450 U.S. at p. 740.) Thus, all settlements must be approved in an administrative or court proceeding. (Lynn’s Food Stores, Inc. v. United States, etc., supra, 679 F.2d at pp. 1352-1353; Hohnke v. U.S., supra, 69 Fed.Cl. at p. 178 [even compromise after bona fide dispute requires supervision by a court or the Secretary of Labor].)
Respondents cite Martinez v. Bohls Bearing Equipment Co. (W.D.Tex. 2005) 361 F.Supp.2d 608, referring extensively to the district court’s discussion at pages 627-629, to support their conclusion that private agreements are permissible to compromise FLSA claims that are the subject of a bona fide dispute. We need not agree or disagree with the court’s conclusion, because, as we have previously discussed, respondents’ motion for summary judgment included no facts suggesting a bona fide dispute regarding minimum, overtime or mealtime wages. Accordingly, we conclude that respondents failed to carry their burden to establish their affirmative defense.
DISPOSTION
The judgment is affirmed insofar as it dismissed Amber Scholer and Ryan Scholer from the eighth and ninth causes of action. In all other respects, the judgment is reversed. Appellant shall have costs on appeal.
We concur: EPSTEIN, P. J., WILLHITE, J.