Kao v. Joy Holiday ( 2017 )

Filed 6/15/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
MING-HSIANG KAO,
Plaintiff and Appellant,
A147540
v.
JOY HOLIDAY et al., (San Mateo County
Super. Ct. No. CIV 509729)
Defendants and Appellants.
Plaintiff Ming-Hsiang Kao was employed by defendant Joy Holiday, a travel tour
company. He brought an action alleging, among other things, breach of contract and
violation of federal and state statutes regulating wages and overtime pay. After a bench
trial, the court ruled against Kao on his breach of contract and statutory claims but
awarded damages for unpaid labor under the equitable doctrine of quantum meruit.
Defendants appeal the quantum meruit finding and Kao cross-appeals the denial of his
statutory claims. We conclude that Kao is entitled to compensation under the wage
statutes, making an equitable remedy unnecessary. We shall reverse the judgment and
remand for a calculation of statutory damages.
Statement of Facts
Joy Holiday is a tour company based in Millbrae, California that specializes in bus
tours across the United States and China for Chinese-speaking travelers. Defendant Joy
Express, Inc. is a related company and defendants Jessy Lin and Harry Chen are a
married couple who own and operate the companies. Kao is a Taiwanese national who
holds a bachelor‟s degree in management information systems from an English
university. Kao was living in Taiwan in late 2008 when he met Lin through mutual
friends and began assisting her as a Joy Holiday tour organizer in China.
1
In early 2009, Kao was invited to work for Joy Holiday in the United States and he
accepted. Lin testified she told Kao that his initial job duties would be information
technology with the potential to become a manager. According to Chen, Kao was
promised that he would receive $2,500 monthly. Chen testified defendants intended from
the beginning to sponsor Kao for an H-1B work visa, although no visa application was
filed until October 2009.1
Meanwhile, in March 2009, Kao arrived in California on a tourist visa, moved into
the home of Chen and Lin, and began work for Joy Holiday at its Millbrae office.2 Joy
Holiday employed about 11 individuals at the time, all but one on a salary basis. Kao
usually worked at the office weekdays from 9:00 a.m. to 6:00 p.m. and most Saturdays
from 9:00 a.m. to 2:00 p.m. Initially, Kao worked on website management but his duties
soon expanded to fielding sales calls and distributing travel brochures.
Kao received $1,700 monthly, representing a gross amount of $2,500 less an $800
rent deduction. Chen characterized the payment as an “allowance” or “stipend” while
Kao awaited his H-1B visa. When asked at trial if he was concerned that Kao had no
work permit, Chen replied that he thought of Kao as a “student” eager to learn. Chen
testified: “So I felt . . . while you are learning, we will just give you what we intend to
give you.” Chen‟s testimony differed from that of Sylvia Sun, Joy Holiday‟s chief
financial officer and accountant, who said the payments to Kao were “salary.” Kao was
not on Joy Holiday‟s company payroll at this time but the payments to Kao were
recorded in a handwritten “salary record” maintained by Sun. Payments were often made
1
An H1-B visa allows employers to temporarily employ foreign workers in specialty
occupations requiring “theoretical and practical application of a body of highly
specialized knowledge” provided the workers receive at least the prevailing wage for
their occupation. (8 U.S.C. §§ 1101, subd. (a)(15)(H)(i)(b), 1184, subd. (i)(3)(A);
Fragomen et al., H1-B Handbook (2017 ed.) §§ 1.20, 1.21, 2.28.) Joy Holiday‟s H-1B
application said it wished to employ Kao as a computer systems administrator working
“at least 20 hours per week with an hourly salary of $29.30.”
2
Kao also assisted with child care, sometimes driving the son of Chen and Lin to and
from school, cooking meals, or babysitting. The trial court did not award compensation
for these tasks and Kao does not challenge that ruling on appeal.
2
in cash but some payments were made by check. Several of those checks contain the
notation “salary” on the memo line. Kao received no itemized statement of wages or
hours worked in connection with these payments.
In February 2010, following receipt of an H-1B visa, Kao was put on the company
payroll and signed a one-paragraph “work agreement” saying he was “officially hired as
the office manager of Joy Holiday.” Kao assumed the duties of a recently departed office
manager, which included booking hotels and coordinating bus tours. The written work
agreement states: “The salary is $2,500 per month. You are obligated to work 20 hours a
week. If you stay in the office beyond 20 hours a week, it will be your personal choice.”
Kao testified that as office manager he normally worked a minimum of 10 to 12 hours
daily. The trial court found that Kao “worked roughly fifty (50) hours per week.”
Kao continued to receive $1,700 monthly but in May 2010 the rent deduction was
reduced to $600, so that the monetary portion of his monthly compensation became
$1,900. In January 2011, Kao was demoted to “non-manager status,” as Chen phrased it,
and his gross monthly salary was reduced to $2,000. It is unclear whether a rent
deduction continued to be applied to this lesser amount. Kao moved into his own
apartment sometime in 2011. Sun testified she was instructed not to deduct rent after Kao
moved but she did not recall when he moved, and there are payroll statements in the
record through April 2011 listing a $600 deduction. Kao‟s employment was terminated
on or about May 25, 2011.
Trial Court Proceedings
Kao filed suit alleging multiple causes of action, only a few of which are at issue
on appeal. Kao alleged breach of contract on the theory he was a third party beneficiary
of the H-1B visa application and entitled to the hourly rate stated in the application. Kao
also alleged violations of federal and state statutes regulating minimum wage and
overtime pay, asserting that his monthly salary of $2,000 to $2,500 was below statutory
standards for work in excess of 40 hours a week. (29 U.S.C. § 201 et seq.; Lab. Code,
§§ 1194, 1194.2.) Kao further alleged defendants failed to provide adequate wage and
3
hour statements (Lab. Code, § 226) and timely payment of wages upon his termination
(Lab. Code, § 203).
Defendants maintained that defendant was not an employee while awaiting his H-
1B visa and, thereafter, an administrative employee receiving a sufficient salary to be
exempt from minimum wage and overtime compensation requirements. At trial,
defendants presented a forensic accountant who valued Kao‟s “total compensation
package” at $34,304 annually or $2,858.67 monthly. This compensation package
included $2,500 gross salary (monetary payment and rent value) and the calculated value
of a company car, cell phone and employer-provided meals.
In its statement of decision, the trial court rejected all of Kao‟s statutory wage
claims. It concluded Kao was a non-employee “guest” entitled to no compensation for the
11 months he worked at Joy Holiday before receiving his H-1B visa. It further found, in
reliance on the testimony of defendants‟ accountant, that the value of plaintiff‟s total
compensation package after receiving the H1-B visa “placed plaintiff over the minimum
salary for an exempt employee.” The court found no failure to provide adequate wage
and hour statements given Kao‟s status as a non-employee then as an exempt employee
and ruled permissible Joy Holiday‟s delay in paying final compensation.
On the breach of contract cause of action, the court found the visa application to
be a petition submitted by the employer to the government that “cannot be relied upon as
an employment contract by the employee” or to provide third party beneficiary rights of
enforcement. The court found, however, that the complaint‟s concluding prayer for “any
other relief that is just and proper” supported an award for unpaid labor under the theory
of quantum meruit. The court found that Kao worked 50 hours a week, not 20 as stated in
the work agreement, and “defendants directly benefitted from plaintiff‟s additional
work.” The court awarded $58,284 in damages based on a valuation of that work.3 The
3
The court explained its calculations as follows: “Plaintiff‟s monthly pay of $2,500
comes to $31.25 per hour when divided by eighty (80) hours worked per month. Plaintiff
worked for fifteen months [from February 2010 to May 2011] at Joy Holiday and was
paid $35,466. At a work schedule of fifty (50) hours per week plaintiff‟s monthly pay
4
court entered judgement for Kao in that amount and, finding no prevailing party, denied
competing claims for attorney fees and costs.
Discussion
Defendants appeal, contending that the equitable quantum meruit award is
improper because it conflicts with the parties‟ express agreement establishing Kao‟s work
requirements and compensation. Kao cross-appeals from the denial of his statutory wage
claims and defends the quantum meruit award only to the extent his wage claims fail.
Kao also challenges the trial court‟s findings that he was not entitled to itemized wage
statements and that the delay in paying his final compensation was excusable.
1. Wage Claims
“A complex scheme of overlapping statutes, regulations, interpretations and
precedent governs the compensation of employees in California.” (Chin et al., Cal.
Practice Guide: Employment Litigation (The Rutter Group 2016) Compensation, ¶ 11.2,
p. 11-1.) Governing statutes include the federal Fair Labor Standards Act (29 U.S.C.
§§ 201-219, hereafter FLSA) and various California Labor Code provisions. “Although
state law standards are generally more protective of employees than federal standards,
California employers must comply with whichever standard provides greater protection
to employees.” (Chin et al., Cal. Practice Guide: Employment Litigation, supra,
Compensation, ¶ 11.2, p. 11-1; see Aguilar v. Association for Retarded Citizens (1991)
234 Cal. App. 3d 21, 34 [“federal law does not control unless it is more beneficial to
employees than the state law”].)
The trial court rejected Kao‟s statutory wage claims based on its findings that Kao
was not an employee from March 2009 to January 2010 and was an exempt salaried
administrative employee from February 2010 to May 2011. Neither finding is supported
by the record.
would instead total $6,250. This totals $93,750 over the fifteen (15) months that plaintiff
worked at Joy Holiday. Subtracting the $35,466 that plaintiff was paid, this court finds
that plaintiff is entitled to $58,284 based upon the theory of quantum meruit.” (Fn.
omitted.)
5
“Employee” is defined under the FLSA as “any individual employed by an
employer” (29 U.S.C. § 203(e)(1)) and is broadly construed to encompass virtually “all
workers not specifically excepted.” (Patel v. Quality Inn South (11th Cir. 1988) 846 F.2d
700, 702; see Powell v. U.S. Cartridge Co. (1950) 339 U.S. 497, 516-517 [noting FLSA‟s
“[b]readth of coverage” and “narrow” exceptions].) The FLSA protects undocumented
aliens, making Kao‟s initial lack of a work permit irrelevant. (Patel, supra, at pp. 702-
704.)
The trial court appears to have deemed Kao a trainee in the months before his
work visa application was approved. The court stated, “For the brief time before the
[February 2010] work agreement was in place plaintiff was only in the United States as a
guest of Harry Chen and Jessy Lin. He was at Joy Holiday to determine if this was the
type of job that he wanted to pursue. During this time, Harry Chen and Jessy Lin
provided plaintiff with money to live on while waiting for results on his visa petition.”
The “brief time” referenced by the court was 11 months, seven of which elapsed
before the visa application was submitted. The supposed gift of “money to live on” was
the substantial amount of $1,700 monthly, totaling $18,700. Only a person receiving
training but no salary, and whose work serves only his or her own interest, is a non-
employee trainee under the FLSA. (Walling v. Portland Terminal Co. (1947) 330 U.S.
148, 150.)
The substantial sum paid to Kao was not a gift but a salary. Chen, Joy Holiday‟s
general manager, conceded that he invited Kao to the United States with the promise of
$2,500 monthly and Kao received that same amount both before and after receiving a
work visa. Sun, Joy Holiday‟s chief financial officer, testified that the payments to Kao
were “salary”; the payments to Kao were recorded in a handwritten “salary record”
maintained by Sun; and several of the checks by which the payments were made contain
the notation “salary.”
There is also insufficient evidence that Kao‟s work at Joy Holiday served only his
interest. The tasks Kao performed at Joy Holiday were not “similar to that which would
be given in an educational environment” but were commercial tasks benefitting the
6
company. (Glatt v. Fox Searchlight Pictures, Inc. (2d Cir. 2015) 811 F.3d 528, 537.) Kao
worked the same hours as hired office personnel and performed a variety of tasks that
employees normally would perform, including website management, sales calls and
distribution of travel brochures. (See ibid. [stating factors distinguishing employee from
trainee]) The trial court itself observed that Joy Holiday initially “hired” Kao to be a
systems administrator and he unsuccessfully “attempted to fulfill the tasks required by his
position” until offered a management position in February 2010. Joy Holiday was “the
primary beneficiary” of Kao‟s almost year-long work. (Ibid.) Kao was not a trainee but
an employee.
California law is in agreement on this point, applying an even broader definition of
employee than does the FLSA. (Martinez v. Combs (2010) 49 Cal. 4th 35, 66-67.) An
employee is “any person employed by an employer,” an employer is one who “employs
or exercises control over the wages, hours, or working conditions of any person” and
“employ” means “to engage, suffer, or permit to work.” (Cal. Code Regs., tit. 8,
§ 11040(2)(E), (2)(F), (2)(H).) “To employ, then, . . . has three alternative definitions. It
means: (a) to exercise control over the wages, hours or working conditions, or (b) to
suffer or permit to work, or (c) to engage, thereby creating a common law employment
relationship.” (Martinez, supra, at p. 64.) The definitions are sufficiently broad to
encompass a proprietor who employs a worker by contract, permits work by
acquiescence, or suffers work to be performed by a failure to hinder. (Id. at p. 69.) “A
proprietor who knows that persons are working in his or her business without having
been formally hired, or while being paid less than the minimum wage, clearly suffers or
permits that work by failing to prevent it, while having the power to do so.” (Ibid.)
“[U]nder California law, once a plaintiff comes forward with evidence that he
provided services for an employer, the employee has established a prima facie case that
the relationship was one of employer/employee. [Citation.] As the Supreme Court of
California has held, „[t]he rule . . . is that the fact that one is performing work and labor
for another is prima facie evidence of employment and such person is presumed to be a
servant in the absence of evidence to the contrary.‟ [Citations.] Once the employee
7
establishes a prima facie case, the burden shifts to the employer, which may prove, if it
can, that the presumed employee was an independent contractor” (Narayan v. EGL, Inc.
(9th Cir. 2010) 616 F.3d 895, 900) or, in this case, a non-employee trainee. No such proof
exists here; all evidence points to an employer-employee relationship.
The record also fails to support the trial court‟s finding that Kao was an exempt
employee from February 2010 to May 2011. Most employees must be paid a specified
minimum wage (26 U.S.C. § 206 (a)(1); Lab. Code, § 1182.12, subd. (a)) and overtime of
one and one-half times the regular pay rate if they work beyond a set number of hours
(generally more than 40 hours per week or over eight hours per day under California
law). (29 U.S.C. § 207(a)(1); Lab. Code, § 510, subd. (a).) Several exemptions exist
under both federal and state law that relieve an employer from having to meet minimum
wage and maximum hour requirements. One of these exemption is for salaried
administrative employees. (29 U.S.C. § 213(a)(1); Lab. Code, § 515, subd. (a); 8 Cal.
Code Regs., tit. 8, § 11040, subd. (1)(A)(2).) Such employees are exempt if they perform
certain types of work, are paid on a salary basis, and receive a minimum salary rate.
(Ibid.) “Such exemptions are narrowly construed. [Citation.] „[T]he assertion of an
exemption from the overtime laws is considered to be an affirmative defense, and
therefore the employer bears the burden of proving the employee‟s exemption.‟ ” (Negri
v. Koning & Associates (2013) 216 Cal. App. 4th 392, 396-397.)
The exemption is clearly inapplicable to Kao‟s employment from January to May
2011 following his demotion to “non-manager status.” Under the FLSA, exempt
administrative employees include only those employees “[w]hose primary duty is the
performance of office or non-manual work directly related to the management or general
business operations of the employer or the employer‟s customers” and “[w]hose primary
duty includes the exercise of discretion and independent judgment with respect to matters
of significance.” (29 C.F.R. § 541.200(a)(2), (a)(3) (2017).) California law similarly
limits exempt status to management level administrative employees. (Lab. Code, § 515,
subd. (a); 8 Cal. Code Regs., tit. 8, § 11040, subd. (1)(A)(2); Eicher v. Advanced
Business Integrators, Inc. (2007) 151 Cal. App. 4th 1363, 1371-1372.)
8
The exemption is also inapplicable to Kao‟s employment as office manager from
February to December 2010 because he did not receive the minimum salary required for
exempt status. The parties are agreed that, at the time relevant here, to come within the
exemption the FLSA required compensation “on a salary basis at a rate of not less than
$455 per week.” (29 C.F.R. § 541.200(a) (2017).) The comparable monthly rate is
$1,971.66. (29 C.F.R. § 541.600(b).) California law requires “a monthly salary equivalent
to no less than two times the state minimum wage for full-time employment” of 40 hours
per week. (Lab. Code, § 515, subds. (a), (c).) The state minimum wage during the time of
Kao‟s employ was $8.00 an hour. (Cal. Dept. of Industrial Relations, History of
California Minimum Wage
[as of June 15, 2017].) Thus, the state minimum monthly salary for an exempt
administrative employee was $2,773.33: $8 (minimum hourly wage) x 2 x 40 (hours per
week) x 52 (weeks per year) ÷ 12 (months).
The highest monetary amount Kao received as an office manager was $1,900
monthly, which is below both federal and state standards. The trial court erroneously
disregarded the monetary amount in favor of an accountant‟s calculation of the total
value of Kao‟s “compensation package,” including rent, use of a vehicle, a cell phone and
meals. The accountant testified that the monthly value of this compensation package was
not less than $2,858.67.
The trial court erred by including these nonmonetary benefits in its calculation of
Kao‟s salary. Under the FLSA, an exempt employee‟s salary rate is determined
“exclusive of board, lodging or other facilities.” (29 C.F.R. § 541.200(a)(1) (2017).)
Defendants argue to the contrary, in mistaken reliance on cases concerning the distinct
issue of compliance with minimum wage standards. The provision of board, lodging or
other facilities may sometimes be considered in determining whether an employer has
met minimum wage requirements for non-exempt employees. (Chin et al., Cal. Practice
Guide: Employment Litigation, supra, ¶ 11.650, p. 11-113.) As defendants note, “wage”
is defined to include the reasonable cost to the employer of furnishing an employee with
“board, lodging, or other facilities,” subject to various conditions. (29 U.S.C. § 203(m).)
9
But an exempt employee must receive a minimum monetary salary rate “exclusive of
board, lodging or other facilities.” (29 U.S.C. § 213(a)(1); 29 C.F.R. § 541.200 (2017))
“The phrase „exclusive of board, lodging or other facilities‟ means „free and clear‟ or
independent of any claimed credit for non-cash items of value that an employer may
provide to an employee. Thus, the costs incurred by an employer to provide an employee
with board, lodging or other facilities may not count towards the minimum salary amount
required for exemption . . . . Such separate transactions are not prohibited between
employers and their exempt employees, but the costs to employers associated with such
transactions may not be considered when determining if an employee has received the
full required minimum salary payment.” (29 C.F.R. § 541.606(a) (2017).)
Although no California case has expressly held that nonmonetary benefits are not
to be included in determining exempt status, the law in this state is in accord with the
federal authority. For exempt status under state law, an employee must receive “a
monthly salary equivalent to no less than two times the state minimum wage for full-time
employment” of 40 hours per week. (Lab. Code, § 515, subds. (a), (c).) “Salary” is not
defined but “is generally understood to be a fixed rate of pay” and distinct from “a more
generic term, such as „compensation‟ or „pay.‟ ” (Negri v. Koning & Associates, supra,
216 Cal.App.4th at p. 397.) California‟s salary requirement, like the federal statute, is
stated as a monetary amount, which supports the conclusion that monetary payments
alone determine whether the mandated minimum salary rate has been met under state
law.
Moreover, “because California law was patterned to some extent on federal law,
the general approach in interpreting California law has been to use the federal salary basis
test unless some other provision of California law calls for a more protective standard.”
(Rhea v. General Atomics (2014) 227 Cal. App. 4th 1560, 1567-1568.) The agency
charged with enforcing California‟s labor laws, the Division of Labor Standards
Enforcement (DLSE), has consistently adopted this approach. (E.g., Dept. Industrial
10
Relations, DLSE Opn. Letter No. 2009.08.19 (Aug. 19, 2009) p. 2.)4 “While there are
several differences between the federal and state salary requirements (e.g. minimum
dollar amounts), DLSE follows the general federal interpretations under the . . . [FLSA]
salary basis test . . . to the extent there is no inconsistency with specific provisions” of
California law. (Ibid.) Specifically, the DLSE follows the federal “free and clear” rule in
determining whether the salary rate for exempt employees is satisfied: “The value of any
payments in kind, or other forms of remuneration (such as employer provided meals or
lodging) cannot be used as a credit against [the] required minimum salary.” (Chief
Counsel Memo., “Understanding AB 60: An In Depth Look at the Provisions of the
„Eight hour Day Restoration and Workplace Flexibility Act of 1999‟ ” (DLSE, Dec. 23,
1999), p. 8.) The trial court erred in including nonmonetary benefits in determining
whether Kao‟s salary met federal and state standards for exempt status. The proper
benchmark is Kao‟s monetary salary, which was below both federal and state salary
requirements for exempt status.
Kao is entitled to wages and overtime pay for employment from March 2009 to
May 2011. (29 U.S.C. § 207; Lab. Code, §§ 510, subd. (a), 1194, subd. (a).) This
determination negates the basis for the court‟s award of quantum meruit, and that award
therefore must be vacated. Kao‟s regular hourly rate of pay was $28.85, as memorialized
in the February 2010 work agreement setting a monthly salary of $2,500 for 80 hours
work.5 The same hourly wage applies to Kao‟s employment prior to February 2010,
4
We grant Kao‟s request for judicial notice of DLSE opinion letters and related
materials. (Evid. Code, § 452, subd. (c).) “The DLSE‟s opinion letters, „ “ „ “while not
controlling upon the courts, by reason of their authority do constitute a body of
experience and informed judgment to which courts and litigants may properly resort for
guidance.” ‟ ” ‟ ” (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal. 4th 1004,
1029, fn. 11.)
5
The trial court calculated Kao‟s hourly wage as $31.25 by dividing the $2,500 monthly
salary by 80 hours worked per month. The correct formula converts the monthly amount
to its workweek equivalent and then divides that sum by the number of hours the salary is
intended to cover. (29 C.F.R. § 778.113; see Huntington Memorial Hospital v. Superior
Court (2005) 131 Cal. App. 4th 893, 902-903 [California adheres to federal standards for
11
given that he received the same monthly salary amount during that period. The court
found that Kao worked 50 hours per week from February 2010 through May 2011, thus
entitling Kao to both regular and overtime pay. The court made no express finding as to
Kao‟s work hours between March 2009 and January 2010 so that on remand the court
will be required to determine the number of hours worked during that period, for which
Kao is entitled to compensation at the regular or overtime hourly rate, as appropriate. We
leave these calculations to the trial court on remand, as part of the calculation of wage
and overtime payments due Kao for the entirety of his employment.
2. Itemized wage statements
Kao alleges defendants failed to furnish any wage and hour statements from the
start of his employment in March 2009 through February 2010, when he was granted a
work visa and, thereafter, furnished inadequate statements that failed to accurately
itemize his gross wages earned and total hours worked. As indicated above, the trial court
found that Kao was not entitled to wage statements before receiving his work visa
because he was a non-employee “guest” who received no wages, only a “living
allowance.” The court further found that Kao was as an exempt employee following
receipt of a work visa and, as such, provided sufficiently itemized statements. These
findings are undermined by our determination that Kao was, in fact, a non-exempt
employee throughout his time at Joy Holiday.
Employers must provide itemized wage statements to employees containing
specified information, including wages earned and hours worked. (Lab. Code, § 226,
subd. (a).)6 “The requirement is mandatory. [Citation.] An employer‟s failure to comply
calculating the regular rate of pay to the extent those standards are consistent with state
law].) The calculation here is: $2,500 (monthly salary) x 12 (months) = $30,000 (annual
salary) ÷ 52 (weeks) = $576.92 (weekly salary) ÷ 20 (paid work hours) = $28.85.
6
Labor Code section 226, subdivision (a) provides, in relevant part: “An employer,
semimonthly or at the time of each payment of wages, shall furnish to his or her
employee, either as a detachable part of the check, draft, or voucher paying the
employee‟s wages, or separately if wages are paid by personal check or cash, an accurate
itemized statement in writing showing (1) gross wages earned, (2) total hours worked by
12
constitutes a statutory violation.” (Heritage Residential Care, Inc. v. Division of Labor
Standards Enforcement (2011) 192 Cal. App. 4th 75, 80.) “An employee suffering injury
as a result of a knowing and intentional failure by an employer to comply” with wage
statement requirements is entitled to specified damages, an award of costs and reasonable
attorney fees. (Lab. Code, § 226, subd. (e).)
“An employee is deemed to suffer injury” when the employer fails to provide a
wage statement or provides an incomplete wage statement from which “the employee
cannot promptly and easily determine” the required information. (Lab. Code, § 226, subd.
(e)(2); Lubin v. Wackenhut Corp. (2016) 5 Cal.App.5th 926, 958-959.) Kao suffered
injury from Joy Holiday‟s failure to provide any wage statement from March 2009
through January 2010. Payments made during this time period were not an “allowance”
to a “guest,” as the trial court found, but wages paid to an employee and, as such, were
required to be accompanied by an itemized wage statement. Kao also suffered injury
from Joy Holiday‟s failure to provide complete statements listing hourly pay rates and the
number of hours worked from February 2010 to Kao‟s termination in May 2011. This
information cannot be ascertained from the wage statements and was required because
Kao was not an exempt employee.
The record also establishes that Joy Holiday‟s failure to comply with wage
statement requirements was “knowing and intentional.” (Lab. Code, § 226, subd. (e).) A
violation exists if the employer “knew that facts existed that brought its actions or
omissions within the provisions of [the statute]” (Willner v. Manpower, Inc. (N.D. Cal.
2014) 35 F. Supp. 3d 1116, 1131) or, in other words, “was aware of the factual predicate
the employee, except [for exempt employees], (3) . . . (4) all deductions, provided that all
deductions made on written orders of the employee may be aggregated and shown as one
item, (5) net wages earned, (6) the inclusive dates of the period for which the employee is
paid, (7) the name of the employee and only the last four digits of his or her social
security number or an employee identification number other than a social security
number, (8) the name and address of the legal entity that is the employer . . . , and (9) all
applicable hourly rates in effect during the pay period and the corresponding number of
hours worked at each hourly rate by the employee.”
13
underlying the violation” (Novoa v. Charter Communications, LLC (E.D. Cal. 2015) 100
F. Supp. 3d 1013, 1028). Thus, an employer‟s knowledge that its wage statements did not
contain the pay period‟s inclusive dates was held to be a knowing and intentional failure
to comply with the statute. (Willner, supra, at p. 1131.) Joy Holiday knew it initially
provided no wage statements to Kao and later provided statements that did not contain
the hours worked and rate of pay. Its failure to comply with wage statement requirements
was, therefore, knowing and intentional. Joy Holiday‟s acts were not accidental
omissions, such as “an isolated and unintentional payroll error due to a clerical or
inadvertent mistake.” (Lab. Code, § 226, subd. (e)(3).) Liability is established even if Joy
Holiday‟s operators believed, in good faith, that Kao was a non-employee trainee outside
wage statement requirements or an exempt employee with lesser wage statement
requirements. Such a belief amounts to a mistake of law that is not excused under the
statute mandating itemized wage statements. (Novoa, supra, at pp. 1028-1029.)
Kao “is entitled to recover the greater of all actual damages or fifty dollars ($50)
for the initial pay period in which a violation occurs and one hundred dollars ($100) . . .
for each violation in a subsequent pay period, not to exceed an aggregate penalty of four
thousand dollars ($4,000), and is entitled to an award of costs and reasonable attorney‟s
fees.” (Lab. Code, § 226, subd. (e)(1).) The trial court shall assess damages on remand.
3. Payment of wages upon termination
Kao alleges he is owed waiting time penalties for defendants‟ willful failure to pay
all wages due upon discharge. (Lab. Code, § 203). Kao did not receive his final paycheck
upon his termination but five days later, when it was issued along with other employees‟
paychecks “on the regular pay schedule.” The trial court found the delay for “this short
time period” permissible. The trial court erred.
“If an employer discharges an employee, the wages earned and unpaid at the time
of discharge are due and payable immediately.” (Lab. Code, § 201, subd. (a).) “If an
employer willfully fails to pay . . . any wages of an employee who is discharged . . . , the
wages of the employee shall continue as a penalty from the due date thereof at the same
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rate until paid or until an action therefor is commenced; but the wages shall not continue
for more than 30 days.” (Lab. Code, § 203, subd. (a).) “The plain purpose of [Labor
Code] sections 201 and 203 is to compel the immediate payment of earned wages upon a
discharge.” (Smith v. Superior Court (2006) 39 Cal. 4th 77, 92.) The prompt payment of
an employee‟s earned wages is a fundamental public policy of this state. (Id. at p. 82.)
Contrary to the trial court‟s ruling, an employer may not delay payment for several
days until the next regular pay period. Unpaid wages are due immediately upon
discharge. (Lab. Code, § 201, subd. (a).) This requirement is strictly applied and may not
be “undercut” by company payroll practices or “any industry habit or custom to the
contrary.” (Zaremba v. Miller (1980) 113 Cal. App. Supp. 3d 1, 6.)
Joy Holiday willfully failed to pay Kao wages due on the day of his termination.
“[T]he employer‟s refusal to pay need not be based on a deliberate evil purpose to
defraud workmen of wages which the employer knows to be due.” (Barnhill v. Robert
Saunders & Co. (1981) 125 Cal. App. 3d 1, 7.) “ „[W]illful‟ merely means that the
employer intentionally failed or refused to perform an act which was required to be
done.” (Ibid.; accord Cal. Code Regs., tit. 8, § 13520.) “[A] good faith dispute that any
wages are due will preclude imposition of waiting time penalties under [Labor Code]
Section 203.” (Cal. Code Regs., tit. 8, § 13520.) There was no dispute here; the employer
simply delayed payment until its regular payday. Kao is entitled to waiting time penalties.
“[A]n employee‟s rate of pay must be calculated as a daily figure, which can then be
multiplied by the number of days of nonpayment.” (Mamika v. Barca (1998) 68
Cal. App. 4th 487, 494.) Here, Kao‟s daily rate of pay is his hourly rate of $28.85
multiplied by eight hours of work for a sum of $230.80. That figure multiplied by five
days of nonpayment totals $1,154.
Kao suggests that additional waiting time penalties should be assessed because Joy
Holiday mischaracterized him as an exempt employee and, in doing so, failed to pay
earned overtime wages. However, a good faith dispute as to those wages precludes an
award of waiting time penalties. “A „good faith dispute‟ that any wages are due occurs
when an employer presents a defense, based in law or fact which, if successful, would
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preclude any recovery on the part of the employee. The fact that a defense is ultimately
unsuccessful will not preclude a finding that a good faith dispute did exist.” (Cal. Code
Regs., tit. 8, § 13520, subd. (a).) Waiting time penalties are properly limited to the
uncontested wages due at the time of Kao‟s termination.
Disposition
The judgment is reversed. The matter is remanded to the trial court for entry of
judgment in favor of Kao on his statutory wage claims, consistent with the views
expressed in this opinion. On remand, the court shall assess unpaid wages and overtime
pay, damages for failing to provide itemized wage statements, waiting time penalties,
prejudgment interest, costs of suit and reasonable attorney fees. (Lab. Code, §§ 203,
subd. (a), 226, subd. (e), 1194, subd. (a).) Appellant Kao shall recover costs incurred on
appeal upon timely application in the trial court. (Cal. Rules of Court, rule 8.278.)
Pollak, J.
We concur:
McGuiness, P.J.
Jenkins, J.
A147540
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Trial court: San Mateo County Superior Court
Trial judge: Honorable Gerald J. Buchwald
Counsel for plaintiff and appellant: LOHR RIPAMONTI & SEGARICH LLP
Roberto Ripamonti
Alec Segarich
Counsel for defendants and appellants: LAW OFFICE OF BRIAN E. SORIANO
Brian E. Soriano
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