Opinion
H045418
04-06-2020
ISABEL MARQUEZ MURCIA, Plaintiff and Appellant, v. TANIMURA & ANTLE FRESH FOODS, INC., Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Monterey County Super. Ct. No. M130964)
Appellant Isabel Marquez Murcia (Murcia) worked for Respondent Tanimura & Antle Fresh Foods, Inc. (Tanimura) as a harvester. Murcia alleges, on behalf of himself and other similarly situated class members, that Tanimura failed to pay harvesters separate wages for rest periods and other non-productive times on days where it paid what it termed a "Group Production Incentive Bonus" (GPI). The trial court denied Murcia's motion for summary adjudication, finding that Tanimura's system was not a piece-rate payment system. The parties then stipulated to entry of judgment in favor of Tanimura based on the trial court's ruling.
On appeal from the judgment, Murcia contends the trial court erred, arguing the GPI is effectively a piece-rate wage, such that Tanimura had to make separate payments for rest periods and other non-productive times. He further contends that Tanimura failed to pay harvesters the safe harbor amount required by Labor Code section 226.2, subdivision (b). We agree with the trial court that Tanimura's wage payment system is not a piece-rate system, and thus uphold the judgment.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Tanimura's Compensation System
As we find Tanimura's compensation system was not a piece-rate system, we focus the discussion on the facts related to that finding. We need not address Murcia's contention that Tanimura failed to comply with the safe harbor provisions of Labor Code section 226.2, subdivision (b), and thus do not recite facts related to that claim here.
Tanimura grows various crops, including lettuce, broccoli, cauliflower, and celery. Tanimura employs workers to harvest crop vegetables. The trial court certified four classes of plaintiffs, in which members worked for Tanimura at various times between February 10, 2011, and December 31, 2015. Murcia, the class representative, worked for Tanimura in 2014, as a member of a cauliflower harvesting crew.
During the relevant period, Tanimura paid harvesters pursuant to a system referred to as "Base Hourly Wage & Potential Group Production Incentive Bonus." The notice describing the system to harvesters stated, "Harvest employees earn a fixed Base Hourly Wage (BHW), which is set by the Company, and initially disclosed to employees at the time of hire, rehire or increase. In addition, the Company may make available, at its complete discretion, a Group Production Incentive (GPI) Bonus whenever the crew's daily production value (i.e., GPI rate per item multiplied by the crew's collective production, divided by the total hours worked by the crew) exceeds the crew's daily BHW earnings. The GPI bonus, when awarded, is the difference between the crew's daily BHW earnings and the crew's daily GPI production value. The GPI Bonus is prorated to each employee based on his or her portion of the daily total hours worked. . . . In no event shall an employee be paid less than the minimum wage required by law. . . . [¶] . . . [¶] . . . The Company reserves the right to review, amend and withdraw the GPI Bonus and GPI rates at any time. . . . The GPI is NOT a PIECE RATE because it is not earned by individual effort nor guaranteed to be paid." The notice also included the BHW, GPI range per item, depending on the particular crop, and the availability of overtime.
For the 2014 cauliflower harvest season—the season during which Murcia worked—the BHW was $10.25 per hour, with overtime after eight hours worked per day and 48 hours worked per week; the GPI range was "$0.0000-$1.5000" per item, measured by carton or pound based on a specified schedule provided with the notice. By comparison, for the 2015 celery harvest season, the BHW remained $10.25, with overtime after 10 hours worked per day and 60 hours worked per week, and the GPI range was $0.0000-$2.2000, based on the schedule provided with the notice.
Tanimura calculated the GPI as follows: "The cartons produced by the crew are summarized and the total GPI value for the crew is calculated using rates from the GPI rate file. This file is maintained by the Finance Department. [¶] The hours and wages for the employees in the crew are summarized from the time card file. [¶] If the GPI value is greater than the employee wages, GPI is paid as the difference between the two. This amount is prorated to each employee based on his or her portion of the total hours worked." According to Tanimura's senior director of human resources, Lorraine Ingram, the company determined the GPI by "projecting an ideal amount of crops that should be picked in a given number of hours and then paying a bonus for the extent to which the employees' work activity exceeds the expected norm. In other words, there is no payment simply for picking a larger number of pieces; instead, the worker is rewarded based on the efficiency within which the harvesting is completed. The system in its totality therefore provides employees a guaranteed hourly wage with meaningful overtime-pay opportunities while still encouraging efficient work. The GPI bonus thresholds are designed to reward superior performance and are therefore not always met; for example, [Murcia's] crew earned the GPI bonus on less than half of the shifts he worked on at Tanimura." Thus, on days where a crew's production exceeded the BHW, the crew was paid the BHW plus the GPI bonus.
During the relevant period, Tanimura employees were paid the BHW the full time they were working, regardless of the type of work being performed, such as harvesting and packing crops, or attending meetings. Employees received a fully paid rest break of at least 15 minutes for every four-hour work period (or "major fraction thereof"). They were not paid during legally authorized and required meal periods. Prior to January 2016, Tanimura did not include a separate line on its paystubs reflecting pay for exercise time, rest period time, or unrecorded travel time (travel of less than 30 minutes).
For each day in a given pay period, Murcia's paystubs for the pay periods ending July 26, 2014, through November 22, 2014, reflected how many hours he worked at the "regular" rate of $10.25, how many hours he worked at the "overtime" rate, and how much he earned in "GPI Bonus." Several Tanimura employees confirmed their paychecks reflected all hours paid at the BHW, with a separate line for the GPI bonus, if and when they received the bonus. These employees also confirmed they were paid the BHW for all hours worked, including break time, travel time between fields, training time, and other non-productive time.
B. The Litigation
In February 2015, Murcia filed a class action lawsuit against Tanimura, alleging causes of action for failure to pay minimum wages, failure to pay overtime wages, unfair competition, failure to provide accurate wage statements, and failure to pay all wages owed upon termination; he amended his complaint in May 2015, alleging the same causes of action. Tanimura responded to the first amended complaint, denying each and every allegation, and raising 24 separate affirmative defenses; relevant to this appeal, in its 23rd affirmative defense, Tanimura argued that each cause of action in the first amended complaint was "barred, in whole or in part, by the safe harbor provision pursuant to Section 226.2 of the California Labor Code."
As discussed in more detail below, Labor Code section 226.2 applies to employees compensated on a piece-rate basis effective January 1, 2016; among other things, it requires employers to compensate employees "for rest and recovery periods and other nonproductive time separate from any piece-rate compensation." (Lab. Code, § 226.2, subd. (a)(1).) Subdivision (b) of section 226.2 sets forth an affirmative defense to certain claims made by employees "based solely on the employer's failure to timely pay the employee the compensation due for rest and recovery periods and other nonproductive time for time periods prior to and including December 31, 2015, if, by no later than December 15, 2016, an employer complies" with all of the requirements listed in the statute.
The trial court certified the class action with respect to four classes, all of which worked for Tanimura during various periods as non-exempt employees harvesting agricultural products, and who "received what [Tanimura] calls a 'production incentive bonus.' " The trial court appointed Murcia as representative of the class.
Murcia thereafter filed a motion for summary adjudication, asking the court to make the following findings based on allegedly undisputed material facts: "For days when harvesters were paid what [Tanimura] calls a 'production incentive bonus,' [Tanimura] was obligated to pay harvesters, separately from the wages paid to them for those days based on their units of production, minimum wages for rest periods and other non-productive time"; and, "[Tanimura's] Twenty-Third Affirmative Defense has no merit because [Tanimura] did not pay harvesters the safe harbor amount required by Labor Code Section 226.2(b)." Murcia cited 11 undisputed material facts in support of the request, relying on Ingram's 2016 deposition testimony and exhibits thereto as evidence.
Tanimura contemporaneously filed a motion for summary judgment, or, in the alternative, summary adjudication; Tanimura identified the following issues as ripe for summary adjudication: "1. The First Cause of Action (failure to pay minimum wages) lacks merit because Tanimura paid all Plaintiffs with an hourly wage that exceeded the applicable minimum wage for each and all hours worked (including paid rest periods). 2. All of the pending Causes of Action lack merit because the GPI bonus is not a piece rate. 3. The Third Cause of Action (unfair competition) lacks merit because it is derivative of Plaintiffs' First Cause of Action, which lacks merit. 4. The Fourth Cause of Action (failure to provide accurate wage statements) lacks merit, because: (a) part of the claim is derivative of Plaintiffs' First Cause of Action, which lack [sic] merit; and (b) the remainder of the claim wrongly alleges that Tanimura 'knowingly and intentionally' declined to disclose 'piece rate' payments to Plaintiffs. 5. The Fifth Cause of Action (failure to pay all wages owed upon termination) lacks merit, because it is derivative of Plaintiffs' First Cause of Action, which lacks merit. 6. The Fifth Cause of Action (failure to pay all wages owed upon termination) lacks merit because Tanimura did not 'willfully' decline to pay all wages owed upon termination. 7. The First, Third, and Fifth Causes of Action are barred by the affirmative defense afforded by A.B. 1513 (2015-2016 Reg. Sess.). 8. The Fourth Cause of Action, other than those relating simply to the failure to disclose 'piece rate' information, are [sic] also barred by the affirmative defense afforded by A.B. 1513 (2015-2016 Reg. Sess.). 9. Plaintiffs' claim for penalties pursuant to Section 1194.2 of the California Labor Code is barred by the affirmative defense afforded by subdivision (b) of that section."
Murcia abandoned his second cause of action for failure to pay overtime wages.
Following a hearing, the trial court issued a written ruling, first addressing Tanimura's motion. The court did not explicitly grant Tanimura's motion for summary judgment. Rather, it determined the "key issue" in that motion was "whether [Tanimura's] compensation method is an 'hourly pay, plus bonus' system, or actually a piece rate system," calling the other issues "derivative." Citing information provided by Ingram, the court found Tanimura paid its workers at an hourly rate above the minimum wage, plus, when eligible, a bonus "based on the production of the entire crew," which is "calculated and accrued on a daily basis and is intended to reward efficiency." While the number of pieces picked by the crew factored into the calculation of the bonus, the trial court determined "[t]he bonus is not based solely on the number of 'pieces[.'] The same number of pieces can generate different numbers depending on the efficiency with which the crew picked the crops." Thus, the court found that "the pay system is not a piece rate system." Based on this finding, the trial court explicitly denied Murcia's motion for summary adjudication on both issues.
Based on the trial court's decision, the parties stipulated to entry of judgment in Tanimura's favor, as the decision "effectively resolves all of [Murcia's] claims in favor of [Tanimura] and leaves [Murcia] without any viable claims." In doing so, the parties confirmed neither's intent to waive any rights on appeal. In October 2017, the trial court entered judgment in favor of Tanimura and against the plaintiff class, including Murcia, finding that Murcia and the class take nothing by way of his complaint. Murcia timely filed a notice of appeal pursuant to Code of Civil Procedure section 904.1, subdivision (a)(1).
II. DISCUSSION
A. Standard of Review
The application of law to undisputed facts presents a question of law which we review de novo. (Boling v. Public Employment Relations Board (2018) 5 Cal.5th 898, 912; Haworth v. Superior Court (2010) 50 Cal.4th 372, 384-385; see Vaquero v. Stoneledge Furniture, LLC (2017) 9 Cal.App.5th 98, 108 (Vaquero) [trial court's conclusions and interpretations regarding Industrial Welfare Commission promulgated wage orders are reviewed de novo].) In pleadings filed with the trial court as part of the competing motions for summary judgment and/or summary adjudication, each party contended there existed a factual dispute in response to the other's separate statement of facts supporting each motion. In reality, the dispute concerns not the underlying facts, but rather whether the undisputed facts support a finding that Tanimura's compensation system was effectively a piece-rate system.
This is reflected in Tanimura's reply separate statement in support of its motion for summary judgment, in which it argues the facts relevant to the determination of the nature of the compensation system were not actually disputed. Although Murcia contended to the trial court that a factual dispute existed regarding this issue, on appeal he concedes there was an implicit agreement between the parties that there were no disputed facts for the trial court to adjudicate.
Similarly, we review the trial court's denial of Murcia's motion for summary adjudication de novo. (Certain Underwriters at Lloyd's of London v. Superior Court (2001) 24 Cal.4th 945, 972; Jackpot Harvesting Co., Inc. v. Superior Court (2018) 26 Cal.App.5th 125, 142 (Jackpot Harvesting).)
In ruling that Tanimura's compensation system was not a piece-rate system, the trial court did not explicitly grant Tanimura's motion for summary judgment or summary adjudication; the parties stipulated to enter judgment against Murcia, noting, "the Summary Judgment Decision did not expressly address all issues raised by the parties' cross-motions and is thus not an appealable final judgment but, as a practical matter, the Summary Judgment Decision effectively resolves all of [Murcia's] claims in favor of [Tanimura] and leaves [Murcia] without any viable claims."
Given the strong public policy reflected in the state's wage and hour laws, we liberally construe them in favor of protecting workers. (Vaquero, supra, 9 Cal.App.5th at pp. 107-108.)
B. General legal principles
Murcia contends Tanimura—on days it paid harvesters a GPI bonus—was required to pay each worker separately for rest periods and other non-productive time, arguing the GPI bonus is effectively a piece-rate wage rather than an hourly wage. Two sources of authority govern wage and hour claims in California: the Labor Code, enacted by the Legislature, and a series of wage orders adopted by the Industrial Welfare Commission (IWC). (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1026; Certified Tire & Service Centers Wage & Hour Cases (2018) 28 Cal.App.5th 1, 7, fn. 8, review granted Jan. 16, 2019, S252517, request to depub. denied, further Supreme Court action deferred pending dispo. of S248726 (Certified Tire).) These wage orders set forth California's minimum wage requirements. (Nisei Farmers League v. Labor & Workforce Development Agency (2019) 30 Cal.App.5th 997, 1005, fn. 3 (Nisei).) The relevant wage order governing agricultural workers, known as Wage Order No. 14 (Order 14), applies to "all persons employed in an agricultural occupation whether paid on a time, piece rate, commission, or other basis . . . ." (Cal. Code Regs., tit. 8, § 11140, subd. (1).) Order 14 requires employers to pay at least the minimum wage rate "per hour for all hours worked"; "Every employer shall pay to each employee, on the established payday for the period involved, not less than the applicable minimum wage for all hours worked in the payroll period, whether the remuneration is measured by time, piece, commission, or otherwise." (Cal. Code Regs., tit. 8, § 11140, subd. (4)(A), (B).) At the beginning of the relevant period in 2011, the state minimum wage was $8 per hour; it increased to $9 per hour effective July 1, 2014. (Stats. 2006, ch. 230, § 1; Stats. 2013, ch. 351, § 1.) Order 14 defines "piece rate basis" as "a method of payment based on units of production or a fraction thereof." (Cal. Code Regs., tit. 8, § 11140, subd. (2)(L).)
While Order 14 requires employers to pay minimum wage to all agricultural workers, it provides limited guidance in determining whether a particular compensation system should be classified as hourly versus piece-rate. Both the trial court, in its written decision, and the parties, in their pleadings filed in the trial court and their briefs on appeal, reference the California Division of Labor Standards Enforcement (DLSE) Policies and Interpretations Manual. (DLSE, The 2002 Update Of The DLSE Enforcement Policies and Interpretations Manual (Revised) (August 2019) <https://www.dir.ca.gov/dlse/DLSEManual/dlse_enfcmanual.pdf> [as of April 3, 2020], archived at <https://perma.cc/E6VE-2MHJ> (DLSE Manual).) "The DLSE is the state agency charged with enforcing California's labor laws, including the IWC wage orders. [Citations.] Of course, enforcement of a law, especially an ambiguous law, necessarily requires interpretation of that law, and with the benefit of many years' experience, the DLSE has developed numerous interpretations of California's labor laws, which it has compiled in a series of policy manuals. [Citation.] . . . [T]he DLSE's policy manuals 'reflect[ ] "an effort to organize . . . interpretive and enforcement policies" of the agency and "achieve some measure of uniformity from one office to the next.". . .' [Citation.]" (Alvarado v. Dart Container Corp. of California (2018) 4 Cal.5th 542, 554-555.) While the statements in the DLSE Manual are not binding on this court, they can be considered for their persuasive value. (Troester v. Starbucks Corp. (2018) 5 Cal.5th 829, 841; DLSE Manual at pp. 1-1 to 1-2.)
Murcia asked the trial court to take judicial notice of Section 2.5.1 of the DLSE Manual; Tanimura asked the court to take judicial notice of "Chapter 2" of the DLSE Manual, which includes Section 2.5.1. The trial court did not explicitly rule on either party's request; it did cite Section 2.5.5 of the DLSE Manual in its decision.
Citing Labor Code section 200, the DLSE Manual provides that the amount of money received as wages can be "a fixed sum, or it may be ascertained or determined by standard of time, task, piece, commission or by other method of calculation." (DLSE Manual, supra, at p. 2-2, § 2.4.2.) It defines "piece rate" or " 'piece work' " as " 'Work paid for according to the number of units turned out.' [Citation.] Consequently, a piece rate must be based upon an ascertainable figure paid for completing a particular task or making a particular piece of goods." (Id. at p. 2-2, § 2.5.1.) By comparison, "A bonus is money promised to an employee in addition to the monthly salary, hourly wage, commission or piece rate usually due as compensation. The word has been defined as: 'An addition to salary or wages normally paid for extraordinary work. An inducement to employees to procure efficient and faithful service.' [Citation.] Bonuses may be in the form of a gratuity where there is no promise for their payment; or they may be a contractually required payment where a promise is made that a bonus will be paid in return for a specific result (i.e., exceeding a minimum sales or piece quota)." (Id. at p. 2-3, § 2.5.5.) According to the DLSE Manual, an employer can offer piece-rate plans in addition to a salary or hourly rate, or as an alternative to an hourly rate or salary. (Id. at p. 2-3, § 2.5.5.1.) It distinguishes bonuses as follows: "Bonuses are in addition to any other remuneration rate and are predicated on performance over and above that which is paid for hours worked, pieces made or sales completed. A bonus is paid over and above wages earned for extraordinary work performance or as an inducement to employees to remain in the employ of the employer." (Id. at p. 2-3, § 2.5.5.2.)
"As used in this article [Lab. Code, § 200 et. seq.]: (a) 'Wages' 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. [¶] (b) 'Labor' includes labor, work, or service whether rendered or performed under contract, subcontract, partnership, station plan, or other agreement if the labor to be paid for is performed personally by the person demanding payment." (Lab. Code, § 200.)
Case law provides further description of piece-rate work: "Under a piece-rate system, employees are not paid by the hour, but rather are compensated based on activities, tasks, or units of production completed (see [Vaquero, supra,] 9 Cal.App.5th 98, 109, fn. 7, 214 Cal.Rptr.3d 661; [Jackpot Harvesting, supra, 26 Cal.App.5th at p. 135]), such as the quantity of produce picked, the number of yards of carpet installed, or the number of miles driven. . . . California has long recognized that wages may be paid on a piece-rate basis. ([Lab. Code] § 200 [defining 'wages' as including all amounts for labor performed by employees 'whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation'].)" (Nisei, supra, 30 Cal.App.5th at p. 1003.)
Effective January 1, 2016, the Legislature adopted Labor Code section 226.2, which specifically governs employees "compensated on a piece-rate basis for any work performed during a pay period." (Lab. Code, § 226.2.) The statute codifies the requirement, developed in case law, that employers compensate employees, at a rate no less than the applicable minimum wage, for "rest and recovery periods and other nonproductive time separate from any piece-rate compensation." (Lab. Code, § 226.2, subd. (a)(1), (3)(A); Nisei, supra, 30 Cal.App.5th at p. 1006.) Prior to 2013, employers in various industries used averaging to ensure employees working under a non-hourly compensation system, such as a piece-rate system, were being paid at least minimum wage for every hour worked in a given pay period. (See Bluford v. Safeway Inc. (2013) 216 Cal.App.4th 864 (Bluford); Gonzalez v. Downtown LA Motors, LP (2013) 215 Cal.App.4th 36 (Gonzalez).) The Courts of Appeal in Bluford and Gonzalez determined that the California minimum wage law required that employees be separately compensated for rest periods and other nonproductive times at the legal minimum wage or contractual hourly rate, and that a system wherein the employer meets the minimum wage requirement by averaging hourly compensation does not comply with the law. (Bluford, at p. 872; Gonzalez, at pp. 48-49.)
Thus, in Bluford, the appellate court determined Safeway's system of compensating truck drivers based on activity (i.e., miles driven, numbers of pallets picked up or delivered, etc.), without specific, separate compensation for rest periods, did not comply with the state's minimum wage requirements, despite Safeway's contention the mileage rate negotiated by the drivers' union included paid time for rest periods. (Bluford, supra, 215 Cal.App.4th at pp. 867, 871-872.) "[A] piece-rate compensation formula that does not compensate separately for rest periods does not comply with California minimum wage law. [Citations.] [¶] . . . Pay was calculated based on mileage rates applied according to the number of miles driven, the time when the trips were made, and the locations where the trips began and ended. None of these components directly compensated for rest periods. Driver pay was also based on fixed rates for certain tasks and hourly rates for other tasks and delays. There is no dispute that none of these fixed rates were applied to rest periods." (Id. at p. 872.)
Similarly, the Gonzalez court found an employer's piece-rate system of paying automotive service technicians more than minimum wage for designated "flag hours" (hours assigned by the manufacturer for tasks performed on its automobiles), but not making separate payments for non-flag hours, violated the minimum wage requirements, even though the technicians earned at least minimum wage when the employer averaged the flag and non-flag hours; the employer would supplement the technicians' pay if the flag hour pay fell short of the "minimum wage floor." (Gonzalez, supra, 215 Cal.App.4th at pp. 41-42, 48-49.) In doing so, the Gonzalez court adopted the reasoning of Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314 (Armenta), in which the appellate court determined hourly employees had to be paid the minimum wage for each hour worked, such that an employer violated the minimum wage law if it averaged employees' hours in a given pay period to compute its minimum wage obligation; the Gonzalez court found that reasoning to be equally applicable to piece-rate pay. (Gonzalez, at pp. 48-49, citing Armenta, at p. 324.)
The decisions in Bluford and Gonzalez "upended the expectations of any employers who may have assumed that a piece-rate system carried out in the manner described above would fully comply with the law." (Nisei, supra, 30 Cal.App.5th at p. 1004.) The Legislature enacted Labor Code section 226.2 to not only codify the holdings of those cases, but also to create "certain 'safe harbors' that would provide an affirmative defense to employers regarding past failures to separately pay piece-rate employees for rest periods and nonproductive time. [Citations.]." (Id. at p. 1006.) The statute provides a defense to claims based on the employer's failure to pay separate compensation for rest periods and nonproductive times for periods prior to and including December 31, 2015, if, by December 15, 2016, the employer complied with the enumerated requirements to make certain payments to the employees, gave designated notice to the Department of Industrial Relations, and provided the employees a statement containing specified information. (Lab. Code, § 226.2, subd. (b); Jackpot Harvesting, supra, 26 Cal.App.5th at pp. 146-147.) Notably, Labor Code section 226.2 does not include its own definition or description of piece-rate work.
Because the statute came into effect after the period at issue in this appeal, neither party suggests we apply its terms to determine whether Tanimura had an hourly wage system versus a piece-rate system. Tanimura did raise the safe harbor provision of the statute as an affirmative defense, which is at issue on appeal. We will address that separately, post.
C. Tanimura's Compensation System is Hourly , Not Piece-Rate
Relying primarily on Vaquero, Murcia argues Tanimura effectively paid its harvesters piece-rate wages on the days they received the GPI, as the total amount of wages was based on the units of production; thus, he contends Tanimura had to separately compensate harvesters for rest periods and other non-productive time. In Vaquero, the employer paid its employees on a commission basis; if an employee failed to earn a minimum hourly amount in commissions in any pay period, the employer paid the employee a draw against future commissions, ensuring the employee always received an amount over minimum wage for each hour worked. (Vaquero, supra, 9 Cal.App.5th at p. 103.) The Court of Appeal determined the employer's system violated the state's minimum wage requirements, because it did not directly compensate for rest periods and other non-productive work hours, similar to the rulings in Bluford and Gonzalez. (Id. at p. 115.) "[U]nder the commission agreement in effect during the class period, the company did in fact keep track of hours worked, including rest periods. We also agree that the company treated 'break time identically with other work time.' The problem with [the employer's] compensation system, however, is that the formula it used for determining commissions did not include any component that directly compensated sales associates for rest periods. [The employer] merely multiplied weekly 'Delivered Sales' (less returns and credits) by an applicable commission rate and paid that amount if it exceeded the minimum contractual rate." (Id. at pp. 114-115.) While the employer gave associates who did not meet the minimum contractual rate a draw against future commissions to meet the minimum contractual rate, the appellate court found "[t]he advances or draws against future commissions were not compensation for rest periods because they were not compensation at all. At best they were interest-free loans. . . . [T]aking back money paid to the employee effectively reduces either rest period compensation or the contractual commission rate, both of which violate California law. [Citations.]" (Id. at p. 115.)
In Respondent's Brief, Tanimura contends a federal district court "rejected" an argument similar to Murcia's, finding the GPI system to be one of hourly pay plus bonus rather than a piece-rate system. The record includes an order filed by the United States District Court for the District of Arizona in Gonzalez v. Tanimura & Antle, Inc., case No. CV 06-2485-PHX-MHM, on September 30, 2008. While the federal court did distinguish the GPI from a piece-rate system, as the workers earned an hourly wage plus a bonus, the plaintiffs in that case conceded that the GPI was not a piece-rate system of pay; the federal court did not have to make an independent determination of that issue. Thus, we are not bound by this ruling. The relevant holding of the order was a requirement that Tanimura include the GPI as a separate line on its paystubs, as it is a "basis on which wages are paid." Based on this order, Tanimura started separately itemizing GPI payments on its paystubs, without displaying the bonus as a piece rate (i.e., without reference to the number of pieces produced). --------
We can easily distinguish Tanimura's compensation system from that in Vaquero. The Vaquero system is akin to the DLSE Manual's definition of a piece-rate system—the employer essentially paid its employees " '. . . according to the number of units turned out[,]' " using an "ascertainable figure paid for completing a particular task . . . ." (DLSE Manual, supra, at p. 2-2, § 2.5.1.) Tanimura paid harvesters the BHW—an hourly amount above minimum wage—for each hour worked, except for legally mandated meal breaks. Harvesters received the GPI on certain days in addition to the BHW, not in lieu of it. Neither the BHW nor the GPI served as a draw against future compensation; there is no allegation or evidence indicating on days where harvesters did not receive the GPI that Tanimura took money back from its employees. Rather, the GPI fits within the DLSE Manual's definition of a bonus; Tanimura paid the GPI as " '[a]n inducement to employees to procure efficient . . . service,' " paying, "over and above wages earned for extraordinary work performance . . . ." (DLSE Manual, supra, at p. 2-3, § 2.5.5.2.) Moreover, the DLSE Manual allows for payment of a bonus based on a "piece quota." (Id. at p. 2-3, § 2.5.5.)
In addition to distinguishing Tanimura's wage payment system from that in Vaquero, we can similarly distinguish this case from the compensation systems in Gonzalez and Bluford. In each of those cases, the defendants averaged the payments made to their employees in an effort to meet the minimum wage requirements. (Bluford, supra, 216 Cal.App.4th at p. 872; Gonzalez, supra, 215 Cal.App.4th at pp. 48-49.) Tanimura did not average paid time with unpaid time to ensure its employees received at least minimum wage—it actually paid each employee for every hour he or she was on the clock. It paid a bonus based on efficiency, making its system akin to that in Certified Tire.
In Certified Tire, the employer paid automobile technicians a guaranteed hourly rate above minimum wage for every hour worked; however, the rate a technician ultimately earned varied from pay period to pay period based on a formula that "reward[ed]" the technicians for work billed to customers as a "labor charge," referred to as "the technician's 'production dollars.' " (Certified Tire, supra, 28 Cal.App.5th at p. 4.) The formula calculates a "base hourly rate" for each technician by "multiplying the technician's production dollars by 95 percent, multiplying that amount by a fixed 'tech rate' assigned to the technician depending on experience and qualifications, [fn. omitted] and then dividing by the total hours worked by the technician during the pay period." (Ibid.) If the base hourly rate exceeded the minimum guaranteed hourly rate, the technician would be paid the base hourly rate for all hours worked in a pay period, including rest breaks and other non-productive time except lunch breaks; otherwise, the technician earned the minimum guaranteed hourly rate for all work. (Id. at pp. 4-5.) The employer designed this system "to incentivize technicians 'to hustle' to get things done, and to make Certified Tire a more competitive employer in the industry by allowing technicians to significantly increase their hourly compensation based on their efficiency . . . ." (Id. at p. 5.)
The appellate court found Certified Tire's compensation system did not violate California's minimum wage laws, distinguishing it from Gonzalez, Bluford, and Vaquero. "[T]he [compensation system] is not an 'activity-based compensation system' as plaintiffs contend. Instead, it is an hourly-rate system in which technicians are paid at a single hourly rate for all hours worked during a pay period. Armenta, Gonzalez, Bluford and Vaquero are not applicable, as those cases involved either (1) an hourly compensation system including off the clock work; (2) a piece-rate system; or (3) a commission-based system. In contrast, Certified Tire applies an hourly based system that compensates technicians for all the time that they are at work. Technicians earn wages for every single work activity that they perform, including waiting for customers and performing tasks that do not have billed labor costs associated with them. Although the hourly rate differs from pay period to pay period because technicians have the opportunity to increase their guaranteed minimum hourly rate based on the generation of production dollars, the technicians are always paid on an hourly basis for all hours worked at a rate above minimum wage regardless of their productivity, and regardless of the type of activity in which they were engaged during those hours." (Certified Tire, supra, 28 Cal.App.5th at p. 13, italics in orig.)
The court rejected the plaintiffs' contention that the system resulted in the technicians not being separately compensated for time spent at work performing "non-productive" tasks (i.e., time where they were not generating production dollars). In doing so, the court considered a hypothetical in which one technician worked 30 hours, all of which generated production dollars, and one worked 40 hours, 30 generating production dollars and 10 that did not; each earned the same amount of pay during a 40 hour period, although the first had a higher base hourly rate. (Certified Tire, supra, 28 Cal.App.5th at p. 13.) "[T]he second technician is paid at an hourly rate that is above the minimum wage for all hours worked regardless of the type of work involved. The technician also receives paid rest breaks at above minimum wage for all the time on the clock, even if no production dollars are being generated during the rest period. Put simply, all time on the clock is directly and expressly compensated by Certified Tire at an hourly rate that exceeds the minimum wage." (Id. at p. 14, italics in orig.) Thus, the court found no merit to plaintiffs' argument that the second technician was not being paid for non-productive time, or that employer had to "make a separate additional payment to the technician to comply with the minimum wage and rest period requirements." (Ibid.) Moreover, because the employer paid the technicians at an hourly rate above minimum wage for every hour worked, the court confirmed it was not case of averaging akin to Bluford and Gonzalez. (Ibid.)
As in Certified Tire, Tanimura paid its harvesters an hourly rate that was above minimum wage for all hours worked, regardless of the type of work involved, such that "all time on the clock [was] directly and expressly compensated . . . ." (Certified Tire, supra, 28 Cal.App.5th at p. 14.) This is reflected in Murcia's paystubs, and the declarations of other employees who confirmed they received hourly pay for every hour on the clock. Employees earning a GPI could work fewer hours and earn more income. However, as in Certified Tire, that does not negate the fact each employee was paid for every hour worked.
Murcia correctly points out there are distinctions between Tanimura's compensation system and that in Certified Tire. Certified Tire's incentive pay came in the form of increased hourly wages, rather than a separate bonus payment; the amount of hourly pay could vary based on how many dollars of labor were charged to a customer. By comparison, Tanimura's harvesters received the same amount of hourly pay regardless of the whether they earned the GPI or not. This is a distinction without difference—Tanimura paid each employee an hourly wage above minimum wage for every hour worked. The court in Certified Tire focused on the fact each employee received the required hourly pay, rather than the form of the incentive pay, in upholding the pay system. Nothing in the record before us, or the legal authority cited by Murcia, requires us to do differently.
Murcia also believes the fact Certified Tire did not involve payment based on "any kind of fixed rate for units of production," requires us to disregard its application to this case. None of the discussion in Certified Tire precludes us from applying its basic holding—that a compensation system under which each employee is paid at least the minimum wage per hour satisfies the state's minimum wage requirement—to a compensation system wherein the units of production is one factor in calculating an incentive bonus.
Nor does the plain language of Order 14 or the DLSE Manual preclude such a determination. The DLSE Manual confirms a bonus is money paid in addition to compensation otherwise usually due to an employee, paid for "extraordinary work," as " '[a]n inducement to employees to procure efficient and faithful service.' [Citation.]" (DLSE Manual, supra, at p. 2-3, § 2.5.5.) Tanimura did not promise its harvesters that they would receive the GPI; it was made clear in the written materials provided to the workers that the GPI was discretionary. Per the DLSE Manual, "Bonuses may be in the form of a gratuity where there is no promise for their payment...." (DLSE Manual, at p. 2-3, § 2.5.5.) The GPI is distinguishable from a standard piece-rate system, wherein the piece-rate is guaranteed, as it is often the only compensation a worker receives. Here, as in Certified Tire, the GPI was an additional payment made by Tanimura to incentivize employees to work more efficiently. (Certified Tire, supra, 28 Cal.App.5th at p. 5.)
Murcia contends Tanimura's calculation of the GPI in addition to the BHW is a superficial attempt to mask the "mathematical truth" that Tanimura's is a piece-rate system. He provides various hypothetical examples in an attempt to show a harvester's total wages on days where he or she earns the GPI is always based on the number of units, rather than the hourly wage. (Ibid.) However, the undisputed evidence in the record before us does not compel us to find the system to be a piece-rate system. Murcia's paystubs reflect hourly payment at the BHW for every hour he worked, whether he earned the GPI or not. Moreover, the GPI is not calculated solely based on the number of pieces picked; the time it takes to pick the amount is a component of the calculation as well, such that the bonus rests on the crew's efficiency, not just the units of production.
Based on the undisputed evidence in the record, we find Tanimura's GPI compensation system to be an hourly system with the opportunity for bonus pay, rather than a piece-rate system, such that Tanimura was not required to separately compensate harvesters for rest periods and other non-productive times. We thus uphold the trial court's judgment in Tanimura's favor, as well as its order denying Tanimura's motion for summary adjudication. As Tanimura did not pay Murcia and other class members piece-rate wages, we need not consider whether Tanimura complied with the safe harbor provisions of Labor Code section 226.2.
III. DISPOSITION
The October 17, 2017 judgment is affirmed.
/s/_________
Greenwood, P.J. WE CONCUR: /s/_________
Premo, J. /s/_________
Elia, J.