Cervantes v. Lucky B, Inc. CA2/4 ( 2020 )

Filed 11/19/20 Cervantes v. Lucky B, Inc. CA2/4
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF
CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
CUSTODIO CERVANTES, B302380
(Los Angeles County
Plaintiff and Respondent, Super. Ct. No. BC680517)
v.
LUCKY B, INC., et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Teresa Beaudet, Judge. Affirmed.
Law Offices of Gregory W. Patterson and Gregory W.
Patterson for Defendants and Appellants.
Gould & Associates, Michael A. Gould, and Aarin A.
Zeif for Plaintiff and Respondent.
INTRODUCTION
Respondent Custodio Cervantes sued his former
employer, appellant Lucky B, Inc., and a related entity,
appellant Lucky BZ, Inc., for failure to pay overtime.
Appellants contended respondent was an exempt executive
and was thus not entitled to overtime pay. Following a
bench trial, the trial court found that respondent was not
exempt because he spent most of his time engaged in
nonexempt work, including five to seven hours per day doing
paperwork in his office. On appeal, appellants challenge the
court’s classification of respondent’s paperwork as
nonexempt. Finding no error, we affirm.
BACKGROUND
A. The Parties and This Action
From September 2016 to July 2017, respondent worked
as a salaried warehouse manager for Lucky B, which sells
packaging supplies to other companies. After his
employment with the company ended, respondent sued
appellants for various pay-related Labor Code violations,
including, as relevant here, failure to pay overtime
compensation. He asserted the company misclassified him
as an executive who was exempt from overtime pay
requirements. The matter proceeded to a bench trial.
B. The Trial
The evidence at trial focused on appellants’ affirmative
defense that respondent was an exempt executive who spent
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most of his time doing managerial work and was thus not
entitled to overtime wages. Multiple witnesses testified
about respondent’s job duties: supervising and dispatching
delivery drivers, reviewing and signing orders, organizing
the warehouse (either by instructing subordinates or by
using a forklift or a pallet jack to move inventory himself),
preparing orders by “pulling” and wrapping inventory (either
himself or by instructing subordinates),1 and doing
paperwork, which included logging all orders, invoice
numbers, and deliveries in the computer, and ensuring all
documents were properly signed by drivers and customers.
There was conflicting testimony as to how much time
respondent spent on various tasks.
As to respondent’s paperwork, Saghar Sarah Zarabian,
Lucky B’s owner, testified: “[Respondent] had to record
every invoice number going out, every pickup that was done.
. . . make sure all documents were signed. Drivers have to
sign. Pullers need to sign. Warehouse manager needs to
sign that the order is correct. Once the drivers come back in,
he was required to make sure signature of the customer was
on there, if there was a pickup check, it was done. If
purchase order for an item was made, it was picked up
correctly, delivered, signed for, no back orders. [H]e had to
record all this on a daily log that had to be submitted with
1 Regarding the pulling of orders, respondent testified he
would receive order sheets, locate the necessary items in the
warehouse, and retrieve them for the drivers.
3
these documents.” Zarabian also testified that if a certain
item was out of stock or running low, respondent was
supposed to let management know. Respondent testified,
however, that he was not responsible for ordering or
“controlling stock in the warehouse.” Khristina Quilban,
Lucky B’s HR and payroll administrator, testified that in
doing his office work, respondent was “doing the parts for
the whole,” and noted, for example, that he would log
drivers’ arrival into the computer “so all of us can see the
live report from the system.”
C. The Trial Court’s Statement of Decision and
Judgment
Following trial, the trial court issued a 24-page
statement of decision, finding respondent was not an exempt
executive because he spent most of his time doing
nonexempt work. The court found that respondent typically
worked 10 to 10.5 hours per day. According to the court’s
finding, respondent spent one and a half to two and a half
hours per day doing “nonexempt pulling and other similar
nonexempt work.” While the court found that respondent
spent “some amount of time” on exempt management
activities, such as dispatching drivers and organizing
activities in the warehouse, it found he spent much of his
time -- five to seven hours per day -- doing paperwork. The
court concluded the tasks involved in respondent’s
paperwork were nonexempt, explaining: “Accepting
Zarabian’s testimony as to the nature of the computer or
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paper work as accurate, recording invoice numbers, ensuring
there is a signature on a document, and creating a daily log
of orders in and out, is not management activity. There is no
discretion or judgment involved in deciding which orders to
log in and any clerical employee could input the information
described by Zarabian.”
Accordingly, the trial court concluded respondent was
entitled to overtime compensation and awarded him about
$15,000 in overtime pay. Appellants timely appealed,
challenging only the court’s classification of respondent’s
paperwork.
DISCUSSION
A. Governing Legal Principles
1. The Labor Code and the IWC’s Wage Orders
“California’s Labor Code mandates overtime pay for
employees who work more than 40 hours in a given work
week. (Lab. Code, § 510, subd. (a).) However, the
Legislature authorized the Industrial Welfare Commission
(IWC) to establish exemptions for various categories of
employees, including ‘executive . . . employees,’ where the
employee is ‘primarily engaged in the duties that meet the
test of the exemption,’ the employee ‘customarily and
regularly exercises discretion and independent judgment in
performing those duties,’ and the employee ‘earns a monthly
salary equivalent to no less than two times the state
minimum wage for full-time employment.’ (Lab. Code, § 515,
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subd. (a).)” (Batze v. Safeway, Inc. (2017) 10 Cal. App. 5th
440, 471, fn. omitted.)
Pursuant to its statutory authority, the IWC
promulgated several Wage Orders, codified in the California
Code of Regulations, providing criteria for determining
whether an employee may be classified as an exempt
executive.2 (See Cal. Code Regs., tit. 8, § 11010 et seq.)
Wage Order No. 7-2001 governs employees of the
“mercantile industry.”3 (Cal. Code Regs., tit. 8, § 11070
(Wage Order).) To be an exempt executive under this Wage
Order, an employee must be “primarily engaged in duties
which meet the test of the exemption.” (Id., § 11070, subd.
(1)(A)(1)(e).) For purposes of the Wage Order, “[p]rimarily”
means “more than one-half the employee’s work time.” (Cal.
Code Regs., tit. 8, § 11070, subd. 2(K).) As to the nature of
the duties that meet the test of the exemption, the Wage
Order instructs that “exempt work” and “non-exempt work”
“shall be construed in the same manner as such items are
construed in the following regulations under the Fair Labor
Standards Act effective as of the date of this order [2001]: 29
2 The IWC was defunded in 2004, but its wage orders remain
in effect. (Batze v. Safeway, Inc., supra, 10 Cal.App.5th at 471,
fn. 34.)
3 It is undisputed that appellants are in the mercantile
industry.
6
C.F.R. Sections 541.102, 541.104-111, and 541.115-116.”4
(Cal. Code Regs., tit. 8, § 11070, subd. 1(A)(1)(e).)
2. The Federal Regulations
a. Exempt Managerial Work
“According to the 2001 version of the federal
regulations, determining whether a particular kind of work
is exempt or nonexempt should usually be an easy task. ‘In
the vast majority of cases[,] the bona fide executive employee
performs managerial and supervisory functions which are
easily recognized as within the scope of the exemption.’
(§ 541.102(a) (2001).) Such functions include:
‘[i]nterviewing, selecting, and training of employees; setting
and adjusting their rates of pay and hours of work; directing
their work; maintaining their production or sales records for
use in supervision or control; appraising their productivity
and efficiency for the purpose of recommending promotions
or other changes in their status; handling their complaints
and grievances and disciplining them when necessary;
planning the work; determining the techniques to be used;
apportioning the work among the workers; determining the
type of materials, supplies, machinery or tools to be used or
merchandise to be bought, stocked and sold; controlling the
flow and distribution of materials or merchandise and
4 Undesignated section references are to the 2001 version of
title 29 of the Code of Federal Regulations.
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supplies; providing for the safety of the men and the
property.’ (§ 541.102(b) (2001).)” (Safeway Wage & Hour
Cases (2019) 43 Cal. App. 5th 665, 676-677.)
b. Work “Directly and Closely Related” to
Managerial Functions
“[T]he federal regulations also recognize a category of
exempt tasks that may not be so easily identifiable as
exempt -- work ‘directly and closely related’ to the
management of a department and the supervision of
employees.” (Safeway Wage & Hour Cases, supra, 43
Cal.App.5th at 677, quoting § 541.108.) This category brings
within the scope of exempt work “not only the actual
management of the department and the supervision of the
employees therein, but also activities which are closely
associated with the performance of the duties involved in
such managerial and supervisory functions or
responsibilities.” (§ 541.108(a).) Section 541.108(a)
explains: “The supervision of employees and the
management of a department include a great many directly
and closely related tasks which are different from the work
performed by subordinates and are commonly performed by
supervisors because they are helpful in supervising the
employees or contribute to the smooth functioning of the
department for which they are responsible. Frequently such
exempt work is of a kind which in establishments that are
organized differently or which are larger and have greater
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specialization of function, may be performed by a nonexempt
employee hired especially for that purpose.”5
This category of exempt work is “narrow.” (Safeway
Wage & Hour Cases, supra, 43 Cal.App.5th at 682.) It is not
intended “to expand the exemption, but simply to recognize
that there are limited instances when production-type
activities must be utilized to carry out the duties of the
otherwise exempt employee.” (Division of Labor Standards
Enforcement, Policies and Interpretations Manual (2002
5 The regulations provide examples of tasks that may be
“directly and closely related” to managerial or supervisory
functions:
“(b) Keeping basic records of working time . . . is frequently
performed by a timekeeper employed for that purpose. In such
cases the work is clearly not exempt in nature. In other
establishments which are not large enough to employ a
timekeeper, or in which the timekeeping function has been
decentralized, the supervisor of each department keeps the basic
time records of his own subordinates. In these instances, . . . the
timekeeping is directly related to the function of managing the
particular department and supervising its employees. . . .
“(c) Another example of work which may be directly and
closely related to the performance of management duties is the
distribution of materials or merchandise and supplies. . . . In
[some] establishments it is not uncommon to leave the actual
distribution of materials and supplies in the hands of the
supervisor. In such cases it is exempt work since it is directly
and closely related to the managerial responsibility of
maintaining the flow of materials. . . .” (§ 541.108.)
9
update) (DLSE Manual), § 51.4.2.)6 “[I]f work of this kind
takes up a large part of the employee’s time it would be
evidence that . . . such work is a production operation rather
than a function directly and closely related to the
[employee’s] supervisory or managerial duties . . . .”
(§ 541.108(g).)
The regulations recognize that it may be hard to
distinguish work “directly and closely related” to managerial
functions from “production operation[s].” (§ 541.108(g).)
Thus, in Heyen v. Safeway, Inc. (2013) 216 Cal. App. 4th 795,
822 (Heyen), we stated that “[u]nderstanding the manager’s
purpose in engaging in such tasks . . . is critical to the task’s
proper categorization.” We explained that a task may be
exempt when a supervisor undertakes it “because it is
‘helpful in supervising the employees or contribute[s] to the
smooth functioning of the department,’” but will be
nonexempt if “performed for a different, nonmanagerial
reason . . . .” (Ibid.)
6 “The DLSE is the state agency charged with enforcing
California’s labor laws, including the IWC wage orders. . . .
[W]ith 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.” (Alvarado v.
Dart Container Corp. of California (2018) 4 Cal. 5th 542, 554-555,
citations omitted.) While the DLSE Manual is not binding on the
courts, we may consider it for its persuasive value. (Troester v.
Starbucks Corp. (2018) 5 Cal. 5th 829, 841.)
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Notably, however, in Safeway Wage & Hour Cases,
supra, 43 Cal.App.5th at 682, we clarified that a task will
not be exempt merely because it “‘contributes to the smooth
functioning’” of the relevant department. (Ibid. [noting that
manager of supermarket store “arguably intends to facilitate
the smooth functioning of the store in performing any task
otherwise done by hourly employees, be it mopping floors or
returning shopping carts” (italics omitted)].) Rather, the
purpose inquiry in the context of work “‘directly and closely
related’” to management must be anchored in the limiting
principles set forth in the regulations. (Ibid.) As relevant
here, to be considered exempt under this category, the work
must be “closely associated with the performance of the
duties involved in [the employee’s] managerial and
supervisory functions or responsibilities.” (§ 541.108(a).)
“And if work that is not inherently managerial ‘takes up a
large part of the employee’s time,’ it is evidence that this
work ‘is a production operation rather than a function
directly and closely related to the [employee’s] supervisory or
managerial duties . . . .’” (Safeway Wage & Hour Cases,
supra, at 683, quoting § 541.108(g).)
c. Nonexempt Work
The regulations define nonexempt work to include all
work that is neither management or supervision, nor
directly and closely related to those functions.
(§ 541.111(a).) Section 541.111 explains: “Nonexempt work
is easily identifiable where, as in the usual case, it consists
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of work of the same nature as that performed by the
nonexempt subordinates of the ‘executive.’ It is more
difficult to identify in cases where supervisory employees
spend a significant amount of time in activities not
performed by any of their subordinates and not consisting of
actual supervision and management. In such cases[,] careful
analysis of the employee’s duties with reference to the
phrase ‘directly and closely related . . .’ will usually be
necessary in arriving at a determination.” (§ 541.111(b).)
Of particular relevance here, the regulations in section
541.115 discuss the specific case of a “working foreman,”
“who regularly performs ‘production’ work or other work
which is unrelated or only remotely related to his
supervisory activities.” (§ 541.115(a).) Under the
regulations, the working foreman cannot be classified as an
exempt executive. (Ibid.) One type of working foreman “is
one who spends a substantial amount of time in work which,
although not performed by his own subordinates, consists of
ordinary production work or other routine, recurrent,
repetitive tasks which are a regular part of his duties.”
(§ 541.115(c).) “Such an employee is in effect holding a dual
job. . . . His nonsupervisory duties in such instances are
unrelated to anything he must do to supervise the employees
under him or to manage the department. They are in many
instances mere ‘fill-in’ tasks performed because the job does
not involve sufficient executive duties to occupy an
employee’s full time.” (Ibid.) Typical employees fitting this
description include “[f]oremen or supervisors who perform
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clerical work other than the maintenance of the time and
production records of their subordinates; for example, the
foreman of the shipping room who makes out the bills of
lading and other shipping records, the warehouse foreman
who also acts as inventory clerk, the head shipper who also
has charge of a finished goods stock room, assisting in
placing goods on shelves and keeping perpetual inventory
records, or the office manager, head bookkeeper, or chief
clerk who performs routine bookkeeping.” (§ 541.115(c)(3).)
B. Analysis
Appellants challenge the trial court’s classification of
respondent’s paperwork as nonexempt. The classification of
tasks as exempt or nonexempt is a mixed question of law
and fact. (Ramirez v. Yosemite Water Co. (1999) 20 Cal. 4th
785, 794.) “We review the trial court’s factual findings for
substantial evidence and independently determine issues of
law . . . .” (Walker v. Physical Therapy Bd. of California
(2017) 16 Cal. App. 5th 1219, 1227.) Substantial evidence is
evidence of ponderable legal significance that is reasonable,
credible, and of solid value. (Kuhn v. Department of General
Services (1994) 22 Cal. App. 4th 1627, 1633.) Because
appellants had the burden to prove that the executive
exemption applied to respondent, the question on appeal is
whether the trial court was compelled to find the exemption
applicable. (See Safeway Wage & Hour Cases, supra, 43
Cal.App.5th at 671 [executive exemption is an affirmative
defense that employer must prove]; Ajaxo, Inc. v. E*Trade
13
Financial Corp. (2020) 48 Cal. App. 5th 129, 163 [“‘where the
issue on appeal turns on a failure of proof at trial, the
question for a reviewing court becomes whether the evidence
compels a finding in favor of the appellant as a matter of
law’”].)
As an initial matter, appellants contend the court
misapplied the legal standard because it based its
classification of respondent’s paperwork on its finding that
“any clerical employee” could have done it. They argue the
court failed to consider the purpose for which respondent
performed the work.
The trial court did not misapply the legal standard.
We read the court’s statement that any clerical employee
could have done respondent’s paperwork to mean that this
work served no managerial purpose. To the extent
appellants contend the court’s statement was ambiguous or
suggest the court should have made additional findings, they
have forfeited any such contention by failing to object to the
statement of decision below. (See In re Marriage of
Arceneaux (1990) 51 Cal. 3d 1130, 1134 [party claiming
deficiencies in statement of decision must bring them to trial
court’s attention].) The remaining question, therefore, is
whether the record supported the trial court’s conclusions.
We conclude it did.
Respondent’s paperwork was by no means inherently
managerial. Contrary to appellants’ argument, this work --
recording invoice numbers, logging orders, and ensuring
14
documents were signed -- did not “itself control[] the
distribution or flow of merchandise.”7
Nor was the trial court compelled to find respondent’s
paperwork directly and closely related to his managerial
functions. According to the court’s uncontested findings,
respondent’s clerical office work took up the bulk of his time,
five to seven hours per day or about 50%-70% of his average
workday. This fact alone sufficed for the court to find these
tasks were not directly and closely related to respondent’s
managerial functions and were thus nonexempt. (See
Safeway Wage & Hour Cases, supra, 43 Cal.App.5th at 683,
quoting § 541.108(g).) But respondent also spent an
additional one and a half to two and a half hours per day,
about 15%-25% of his average workday, on undisputedly
nonexempt physical tasks, such as using a forklift to move
inventory. Given that respondent spent the bulk of his time
on tasks that were not inherently managerial, his
managerial functions, such as dispatching drivers and
organizing activities in the warehouse, were relatively
7 In their reply brief, appellants assert respondent’s work
was inherently managerial because it furthered his exercise of
quality control over his subordinates’ work. Initially, appellants
have forfeited this contention by failing to raise it in their
opening brief. (See Browne v. County of Tehama (2013) 213
Cal. App. 4th 704, 726 [failure to raise argument in opening brief
constitutes forfeiture].) Moreover, contrary to appellants’
suggestion, a task is not inherently managerial merely because it
furthers a managerial function.
15
minimal, further supporting the court’s finding that his
clerical work was not undertaken to aid him in performing
his managerial duties.
Appellants claim the amount of time respondent spent
doing paperwork is immaterial because his subordinates did
not perform similar work. They are mistaken. Whether
subordinates perform similar tasks has no bearing on the
regulations’ unfavorable treatment of work that consumes a
large part of the employee’s time. (See § 541.108(g).)
The trial court was also entitled to find respondent’s
paperwork nonexempt based on its nature and its lack of
connection to his managerial functions. Appellants present
argument of varying levels of plausibility regarding the
purported connection between the relevant tasks -- data
entry and verification of signatures on documents -- and
respondent’s managerial duties. They contend this work
was “helpful” to respondent’s functions of “‘controlling the
flow and distribution of materials or merchandise and
supplies’ into and out of the warehouse,” “‘maintaining
production or sales records for use in supervision or control,’”
“‘apportioning work among workers,’” and “optimizing and
organizing the warehouse . . . .” Yet a task is not exempt
merely because it could conceivably be done in aid of
managerial responsibilities; rather, the relevant employee
must undertake it because it furthers his or her managerial
duties. (Heyen, supra, 216 Cal.App.4th at 822.) Appellants
point to no evidence showing whether and to what extent
respondent actually used his paperwork in furtherance of his
16
managerial functions.8 In fact, there was evidence
suggesting that the purpose of at least some of respondent’s
clerical work was to aid other managers’ work. Quilban
testified that in his office work, respondent would do “the
parts for the whole,” including by logging drivers’ arrival
into the computer, “so all of us can see the live report from
the system.”
The record therefore supported a conclusion that
respondent was a nonexempt “working foreman” who
regularly performed work that was “unrelated or only
remotely related to his supervisory activities.”
(§ 541.115(a).) In particular, respondent appears to have fit
the description of a nonexempt foreman or supervisor who
performed clerical work other than the maintenance of the
8 Appellants claim respondent testified “he would use ‘stacks
of orders’ to ‘locate where the item was in the warehouse’ to
facilitate pulling and shipping by his employees.” That is
inaccurate. Respondent testified only that he would receive order
sheets and would then locate the requested items and pull them
for the drivers. Nothing in his testimony tied his logging of the
orders to his ability to locate and pull the items.
Appellants also emphasize Zarabian’s testimony that
respondent would let upper management know if an item was out
of stock or running low, so that it could be back ordered. Yet
nothing in the record suggests respondent himself was
responsible for deciding what or how much to order. Indeed,
respondent testified he was not responsible for ordering or
controlling stock in the warehouse. Thus the mechanical task of
informing others that product was out or running low did not
further his own managerial duties.
17
time and production records of his subordinates, such as “the
foreman of the shipping room who makes out the bills of
lading and other shipping records” or “the warehouse
foreman who also acts as inventory clerk.” (§ 541.115(c)(3).)
In short, the trial court did not err in finding respondent’s
paperwork activities were nonexempt, and thus it did not err
in finding respondent was not an exempt executive.
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DISPOSITION
The judgment is affirmed. Respondent is awarded his
costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL
REPORTS
MANELLA, P. J.
We concur:
WILLHITE, J.
COLLINS, J.
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