Oman v. Delta Air Lines, Inc.

IN THE SUPREME COURT OF
CALIFORNIA
DEV ANAND OMAN et al.,
Plaintiffs and Appellants,
v.
DELTA AIR LINES, INC.,
Defendant and Respondent.
S248726
Ninth Circuit
17-15124
Northern District of California
3:15-cv-00131-WHO
June 29, 2020
This opinion follows companion case S248702,
also filed on June 29, 2020.
Justice Kruger authored the opinion of the Court, in which
Chief Justice Cantil-Sakauye and Justices Chin, Corrigan, Liu,
Cuéllar, and Groban concurred.
Justice Liu filed a concurring opinion, in which Justice Cuéllar
concurred.
OMAN v. DELTA AIR LINES, INC.
S248726
Opinion of the Court by Kruger, J.
In this case, as in the companion cases Ward v. United
Airlines, Inc., and Vidrio v. United Airlines, Inc. (June 29, 2020,
S248702) ___ Cal.5th ___ (Ward), we confront a question about
the application of various California wage and hour laws to
flight attendants who work primarily outside California’s
territorial jurisdiction. Consistent with our holding in those
cases, we conclude that California’s wage statement laws apply
only to flight attendants who have their base of work operations
in California, and that the same is true of California laws
governing the timing of wage payments. Finally, we hold that,
whether or not California’s minimum wage laws apply to work
performed on the ground during the flight attendants’ brief and
episodic stops in California, the pay scheme challenged here
complies with the state requirement that employers pay their
employees at least the minimum wage for all hours worked.
I.
Defendant Delta Air Lines, Inc., is a national and
international air carrier incorporated in Delaware and based in
Georgia. Delta offers service in and out of roughly one dozen
California airports, connecting cities as small as Palm Springs
and as large as Los Angeles to the rest of the country and the
world.
Plaintiffs Dev Anand Oman, Todd Eichmann, Michael
Lehr, and Albert Flores are or were flight attendants for Delta.
OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
Oman lived in New York and had a New York airport as a home
base. Lehr lives in Nevada but has a California airport as his
home base. Eichmann and Flores both live in California and
have California airports as their home bases. All four employees
have served on flights in and out of California airports, as well
as airports outside the state.
In 2015, the named plaintiffs (collectively Oman) filed a
putative class action in federal court, alleging that Delta
violates California labor law by failing to pay its flight
attendants at least the minimum wage for all hours worked.
According to the operative complaint, Delta’s published work
rules (hereafter Work Rules) pay flight attendants pursuant to
formulas that compensate them on an hourly basis for certain
hours worked but fail to provide any compensation at all for
other working hours, in contravention of an obligation under
California statutory and regulatory law to pay no less than the
minimum wage for every hour worked. (See Lab. Code,
§§ 1182.12, 1194, 1194.2; Industrial Welfare Commission (IWC)
wage order No. 9–2001, § 4 (Wage Order No. 9).) Oman also
alleged Delta fails to pay all wages in accordance with the
semimonthly timeframe prescribed by Labor Code section 204
(section 204) and to provide comprehensive wage statements
reporting hours worked and applicable hourly pay rates, as
required by California’s wage statement statute, Labor Code
section 226 (section 226). Oman sought relief under these
statutes, as well as civil penalties under the Labor Code Private
Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) and
restitution and injunctive relief under the unfair competition
law (Bus. & Prof. Code, § 17200 et seq.).
On cross-motions for summary judgment, the district
court concluded Delta’s pay scheme does not violate California’s
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OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
minimum wage requirements. (Oman v. Delta Air Lines, Inc.
(N.D.Cal. 2015) 153 F. Supp. 3d 1094, 1095.) Oman argued that
Delta fails to pay any compensation at all for certain hours
worked in California and, under Gonzalez v. Downtown LA
Motors, LP (2013) 215 Cal. App. 4th 36 (Gonzalez) and Armenta
v. Osmose, Inc. (2005) 135 Cal. App. 4th 314 (Armenta), Delta is
prohibited from borrowing compensation due for other hours
worked to make up for any shortfall. The district court
examined the pay formulas set out by Delta’s Work Rules and
concluded they adequately compensate flight attendants for all
hours worked, without any impermissible borrowing or
reduction in agreed-to contractual rates. (Oman, supra, 153
F.Supp.3d at pp. 1102–1107.)
The parties then filed cross-motions for summary
judgment on Oman’s remaining wage statement and timing
claims. The district court granted judgment in favor of Delta,
concluding that the relevant California statutes, sections 204
and 226, do not apply to Oman. The court held that the
jurisdictional reach of the statutes should be determined
according to a multifactor analysis that examines “the
particular Labor Code provision invoked, the nature of the work
being performed, the amount of work being performed in
California, and the residence of the plaintiff and the employer.”
(Oman v. Delta Air Lines, Inc. (N.D.Cal. 2017) 230 F. Supp. 3d
986, 992–993.) Here, “[f]ocusing on the purpose of Section 226
(to give employees clarity as to how their wages are calculated,
so they can verify that their wages are calculated appropriately
under California law), because the undisputed facts show that
the named plaintiffs only worked a de minimis amount of time
in California (ranging from 2.6% to a high of 14%), and in light
of the nature of their work (necessarily working in federal
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OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
airspace as well as in multiple other jurisdictions but during
each pay period and day at issue),” the court concluded that
section 226 does not apply to Oman’s claims. (Oman, supra, 230
F.Supp.3d at p. 993, fn. omitted.) Seeing no argument for a
different result under section 204, and because plaintiffs’
counsel had conceded the statute should have a similar scope,
the district court likewise rejected Oman’s section 204 claims.
(Oman, at p. 994.)
On appeal, the Ninth Circuit asked that we resolve three
unsettled questions of California law underlying Oman’s claims.
(Oman v. Delta Air Lines, Inc. (9th Cir. 2018) 889 F.3d 1075,
1076–1077.) We accepted the request and agreed to resolve the
following issues:1
(1) Do sections 204 and 226 apply to wage payments and
wage statements provided by an out-of-state employer to an
employee who, in the relevant pay period, works in California
only episodically and for less than a day at a time?
(2) Does California minimum wage law apply to all
work performed in California for an out-of-state employer by an
employee who works in California only episodically and for less
than a day at a time? (See Lab. Code, §§ 1182.12, 1194; Cal.
Code Regs., tit. 8, § 11090, subd. (4).)
(3) Does the Armenta/Gonzalez bar on averaging wages
(see Armenta, supra, 135 Cal. App. 4th 314; Gonzalez, supra, 215
Cal. App. 4th 36) apply to a pay formula that generally awards
credit for all hours on duty, but which, in certain situations
1
We have reframed these inquiries slightly. (Cal. Rules of
Court, rule 8.548(f)(5).)
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OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
resulting in higher pay, does not award credit for all hours on
duty?
II.
A.
Our precedent makes clear that the application of
California wage and hour protections to multistate workers like
Oman may vary on a statute-by-statute basis. (See Sullivan v.
Oracle Corp. (2011) 51 Cal. 4th 1191, 1201 (Sullivan).) We thus
consider separately each of the wage and hour statutes on which
Oman relies, beginning with section 226. That provision
requires an employer to supply each employee “semimonthly or
at the time of each payment” a written wage statement
disclosing the pay period and itemizing the hours worked,
applicable hourly rates, gross and net wages earned, any
deductions taken, and other relevant information. (§ 226, subd.
(a).)
As we explained in Ward, supra, ___ Cal.5th ___, section
226 does not, in so many words, define its geographic reach.
(Ward, at p. ___ [p. 21].) But we ordinarily presume the
Legislature drafts laws with domestic conditions in mind (id. at
p. ___ [p. 16]), and thus requires some degree of connection
between the subject matter of the statutory claim and the State
of California. In Ward, we addressed the nature of the
connection required to trigger the wage statement requirements
set forth in section 226 and held that section 226 applies when
an employee’s principal place of work is in California.
Ordinarily, this test is met if an employee works primarily (i.e.,
the majority of the time) in California. In the case of interstate
transportation workers and others who do not spend a majority
of their working time in any one state, this test is satisfied when
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OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
California serves as their base of work operations. (Ward, at
pp. ___–___ [pp. 26–28].) Under this rule, because plaintiffs
here never worked more than half the time in California (or in
any other state), whether they are entitled to California-
compliant wage statements hinges on whether they were based
for work purposes in California.
The Ninth Circuit’s question in this case appears to ask
whether it is also relevant that Delta is a nonresident
corporation. Delta now concedes that its foreign domicile does
not foreclose the application of state law. We accept the
concession. Section 226 contains no exemption based on the
employer’s location. This is in contrast to, for example, the
worker’s compensation scheme, which expressly exempts some
out-of-state employers. (See Lab. Code, § 3600.5, subd. (b);
Sullivan, supra, 51 Cal.4th at pp. 1197–1198.) The state’s
power to protect employees within its borders is not limited by
whether the worker might be a nonresident or might be
employed by a nonresident entity. (North Alaska Salmon Co. v.
Pillsbury (1916) 174 Cal. 1, 5; see Kearney v. Salomon Smith
Barney, Inc. (2006) 39 Cal. 4th 95, 105 [“individual states may
adopt distinct policies to protect their own residents and
generally may apply those policies to businesses that choose to
conduct business within that state”].) Instead, the onus
ordinarily is on “a company that conducts business in numerous
states . . . to make itself aware of and comply with the law of a
state in which it chooses to do business.” (Kearney, at p. 105.)
To hold otherwise would, as Delta suggests, create an incentive
for businesses employing individuals who work in California to
avoid application of California law by locating their business
operations outside the state. If employees are based for work
purposes in California, that is sufficient to trigger the
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OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
requirements of section 226, regardless of where their employer
resides.
The proposed class in this case includes individuals who,
like New York-based Dev Oman, neither perform their work
predominantly in California nor are based for work purposes in
the state. Oman urges us to apply a different rule than the one
we have articulated in Ward. Although the operative complaint
does not so specify, Oman clarifies in his briefing that unlike the
Ward plaintiffs he does not seek comprehensive wage
statements documenting all wages earned during a pay period.
He argues instead that section 226 ought to be interpreted to
require California-compliant documentation for those hours,
however few they might be during any given pay period, when
he worked on the ground in California. He contends this
requirement should apply to any airline employee who ever
works in California, even those who are based out of state.
This argument fails under the terms of section 226.
Section 226 provides for the documentation of wages and other
information over an entire pay period, not fractions thereof. A
wage statement must specify not only “total hours worked” and
“all applicable hourly rates,” but also “gross wages,” “net wages,”
and “all deductions” for the full period. (§ 226, subd. (a).) The
statute contains no indication that the employer of an out-of-
state worker must report fractions of wages earned during brief
trips to the state, as well as attempt to calculate the fraction of
wage deductions attributable to these sojourns. The statute
requires “an accurate itemized statement” reflecting “the
inclusive dates of the period for which the employee is paid” and
all relevant information concerning the employee’s pay during
that period—that is, a single comprehensive statement of pay.
(Ibid.)
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Opinion of the Court by Kruger, J.
Oman argues that our recent decision in Troester v.
Starbucks Corp. (2018) 5 Cal. 5th 829 supports his proposed
fractional approach, but Troester has nothing to do with the
question before us. There, stressing that the IWC’s wage orders
ensure compensation for “ ‘all hours worked’ ” (Troester, at
p. 840, quoting IWC wage order No. 5–2001, §§ 3(A), 4(A)), we
rejected the contention that state wage law would not concern
itself with unpaid work on the order of a few minutes a day.
Instead, we held that an “employer that requires its employees
to work minutes off the clock on a regular basis or as a regular
feature of the job may not evade the obligation to compensate
the employee for that time by invoking the de minimis doctrine.”
(Troester, at p. 847.) That holding has no relevance here. The
issue before us is not whether brief periods of work must be
compensated—no one disputes the point—but whether a few
minutes or hours of work in California necessarily trigger the
detailed pay-period documentation requirements of California
law. The answer to that question is no: Employees are entitled
to California-compliant wage statements only if California is the
principal place of their work.
Oman also argues that an approach based on the principal
place of work will prove unworkable because coverage can only
be determined in retrospect. But there is nothing unworkable
about it. Wage statements are, of necessity, prepared in
retrospect; their function is to record hours already worked and
wages already earned. And if the location of an employee’s job
duties shifts radically during the course of employment—if, for
example, a flight attendant takes on a new job as a gate agent
at Los Angeles International Airport—the employer will have
ample opportunity to adjust. Likewise, if the employee’s base of
operations changes because the employee is assigned to a
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OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
different home airport, it will be a small matter to determine
whether section 226 now applies.
It is, in the end, Oman’s approach that poses greater
practical concerns. By insisting on California-compliant wage
statements, but only for the fraction of hours worked on the
ground in California, Oman would effectively require that
employers either (1) accompany each California-specific wage
statement with multiple similar separate statements under the
laws of each and every additional state in which an employee
worked during a pay period, or (2) issue a single wage statement,
but allow California law effectively to dictate the form and
contents for documenting work predominantly performed in
foreign jurisdictions. The first option would undermine the very
purpose of section 226, which is “to ensure an employer
‘document[s] the basis of the employee compensation payments’
to assist the employee in determining whether he or she has
been compensated properly.” (Soto v. Motel 6 Operating, L.P.
(2016) 4 Cal. App. 5th 385, 390, quoting Gattuso v. Harte-Hanks
Shoppers, Inc. (2007) 42 Cal. 4th 554, 574.) This informational
purpose would be ill-served by a rule that led to employees
receiving a blizzard of wage statements every pay period, each
documenting only a state-specific sliver of their work, and from
this paper snowdrift trying to discern what they had actually
been paid. As to the second option, allowing any work in
California, no matter how fleeting, to effectively impose
California law on documentation of all work in a pay period
would raise the very sorts of conflict-of-laws problems we
generally presume the Legislature seeks to avoid. (Ward, supra,
___ Cal.5th at pp. ___–___ [pp. 16–17].) It is presumably for this
reason that Oman has avoided arguing that California law
requires this result. We decline to construe section 226 as
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OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
putting employers to the choice of either issuing a single
California-compliant wage statement for every interstate
worker who works for any amount of time, however brief, within
the state, or issuing a multiplicity of statements, when the
statute envisions that employees will receive just one.
The principal place of work rule we have articulated in
Ward means that some short periods of work in California will
not be covered by section 226’s documentation requirements.
Conversely, some periods of work outside California will be
covered, if they occur as part of an overall period in which most
work occurs inside this state or are performed by an employee
who primarily works in no state but is based here. Such
consequences are inevitable and unavoidable in a nation of 50
states where some forms of employment stretch across the land.
But an understanding of section 226 that focuses on the
principal place of an employee’s work both serves the
informational purposes the Legislature sought to achieve and
minimizes the inevitable complications that would result from a
rule that any work in one state, no matter how fleeting, is
sufficient to trigger application of that state’s wage reporting
laws.
We thus conclude section 226 does not apply to work
performed in California during pay periods in which the
employee, based outside California, works primarily outside
California. A non-California-based employee who works in
California “only episodically and for less than a day at a time”
(Oman v. Delta Air Lines, Inc., supra, 889 F.3d at p. 1077) is not
entitled to a wage statement prepared according to the
requirements of California law.
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Opinion of the Court by Kruger, J.
B.
We turn now to Oman’s section 204 claim. That statute
guarantees employees full payment on a semimonthly basis,
providing: “All wages,” with certain exceptions not relevant
here, “earned by any person in any employment are due and
payable twice during each calendar month, on days designated
in advance by the employer as the regular paydays.” (§ 204,
subd. (a).) Section 204 goes on to establish specific deadlines by
which wage payments must be made. (Id., subd. (a).)2 As is true
of section 226, nothing in the statute explicitly specifies its
intended geographic scope.
As Oman conceded in the federal district court (see Oman
v. Delta Air Lines, Inc., supra, 230 F.Supp.3d at p. 994), there is
no reason to interpret section 204’s geographic coverage
differently from that of section 226. That is because section 204
works hand in hand with section 226. Section 226 regulates the
information an employer must provide in connection with wage
payments, while section 204 regulates when an employer must
pay an employee for hours worked. The Legislature has
recognized that when an employee must be paid (the subject of
§ 204), and what information must accompany each such
required payment (the subject of § 226) are necessarily linked.
(See § 204, subd. (b)(2) [coordinating the application of these
provisions].)
2
With certain exceptions not relevant here, “[l]abor
performed between the 1st and 15th days, inclusive, of any
calendar month shall be paid for between the 16th and the 26th
day of the month during which the labor was performed, and
labor performed between the 16th and the last day, inclusive, of
any calendar month, shall be paid for between the 1st and 10th
day of the following month.” (§ 204, subd. (a).)
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Opinion of the Court by Kruger, J.
As with section 226, Oman seeks to apply section 204 only
to those hours he worked within California. And as with section
226, reading the statute as Oman argues would pose difficulties
that prove fatal to the argument. Again, there are two options:
Either the employer must calculate and split out some portion
of the wages due as attributable to work performed in California
and pay only those on section 204’s schedule, while paying other
wages due in accord with whatever timing statutes might apply
under other states’ laws, or the employer must pay all wages due
according to the schedule required under California law by
section 204. These interpretations present the same issues as
the corresponding options for complying with section 226.
The first interpretation, aside from the administrative
headaches it would generate, runs headlong into the text of
section 204, which applies to “[a]ll wages . . . earned,” with
exceptions not significant here. (§ 204, subd. (a), italics added.)
As with section 226, nothing in the text suggests the Legislature
contemplated fragmenting wages earned according to the state
in which labor was performed and requiring whatever sliver of
wages might be attributable to California to be paid on section
204’s timeline, with other slivers for work elsewhere paid
according to whatever other state law might apply. Nor is it
clear how such a reading would advance the policy underlying
section 204. Section 204 serves the “public policy in favor of full
and prompt payment of an employee’s earned wages,” which “is
fundamental and well established: ‘ “Delay of payment or loss
of wages results in deprivation of the necessities of life, suffering
inability to meet just obligations to others, and, in many cases
may make the wage-earner a charge upon the public.” ’ ” (Smith
v. Superior Court (2006) 39 Cal. 4th 77, 82, quoting Kerr’s
Catering Service v. Department of Industrial Relations (1962) 57
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Cal.2d 319, 326; see Voris v. Lampert (2019) 7 Cal. 5th 1141,
1148 [“prompt and complete wage payments are of critical
importance to the well-being of workers, their families, and the
public at large”].) Section 204, insofar as it applies to the
entirety of an employee’s wages, directly serves this policy. It is
less apparent how the policy is meaningfully advanced by
requiring payment of California-earned wages on a California-
specified timeline when those wages represent just a small
fraction of the earnings an employee relies on for support.
The second interpretation accords section 204 a broad
reach, allowing California law to dictate the timing of payment
for wages earned predominantly outside California for work
performed outside California. Granting section 204 such an
expansive scope would generate significant complications.
Given the nature of the flight attendants’ work, treating any
work performed on the ground in any given state as sufficient to
trigger application of payment timing requirements could
subject the payment for work in a given pay period to the often-
conflicting laws of a dozen or more states. Reading section 204
in concert with section 226 as applying to pay periods in which
an employee works predominantly in California avoids these
problems.
In sum, we conclude section 204 is subject to the same
limits as section 226 and applies only to pay periods during
which an employee predominantly works inside California.
III.
We turn, finally, to the minimum wage claims. The Ninth
Circuit asks two questions related to these claims: First,
whether California minimum wage law applies to the hours (or
fractions thereof) that Oman worked on the ground in
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California, and second, whether Delta’s method of computing
Oman’s wages complies with the state law. As discussed, the
application of labor protections must be analyzed on a provision
by provision basis in light of the nature of the protection
afforded, and so the rules we articulate for sections 204 and 226
do not resolve whether the state’s minimum wage laws might
apply. (See Ward, supra, ___ Cal.5th at pp. ___, ___ & fn. 10
[pp. 21, 28 & fn. 10]; Sullivan, supra, 51 Cal.4th at p. 1201; ante,
at p. ___ [p. 5].) But we need not settle the reach of the state’s
minimum wage laws if we can determine that, even were those
laws to apply, Delta’s pay scheme would not violate them.
Because the record establishes Delta complies with state
minimum wage law, we address only that question.
Like other industry wage orders, Wage Order No. 9
requires that “[e]very 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.” (Id., § 4(B).) Here, pursuant to the
Work Rules, the remuneration provided to Delta flight
attendants is measured by the “rotation,” a given sequence of
flights over a day or a period of days that the attendant will
serve on. Compensation for each rotation is calculated
according to four different formulas; flight attendants are paid
according to whichever formula yields the largest amount for the
complete rotation. (See post, at pp. 22–23.) It is undisputed that
under this compensation scheme, flight attendants are always
paid, on an hourly average, above the minimum wage. Oman
contends that the scheme nonetheless violates California’s
minimum wage law, principally because one of Delta’s four
formulas—the formula that most often determines how much
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Opinion of the Court by Kruger, J.
flight attendants will be paid, because it generally yields the
greatest compensation—is based solely on flight time and does
not factor in the hours flight attendants spend working on the
ground before and after flights.
The dispute between the parties does not concern the
substance of California’s minimum wage guarantee. It is
common ground that the law guarantees at least minimum wage
for “all hours worked in the payroll period.” (Wage Order No. 9,
§ 4(B).) The parties’ disagreement instead concerns how
compliance is to be measured when the employer does not
compensate its employees according to a fixed hourly rate
applicable to all hours.
A.
To understand the nature of the dispute, some background
is required. Beginning several decades ago, federal courts
confronting questions about minimum wage compliance
commonly interpreted federal law to require only that
employers pay in each week an average wage at or above the
federal minimum. (See 29 U.S.C. § 206(a); U.S. v. Klinghoffer
Bros. Realty Corp. (2d Cir. 1960) 285 F.2d 487, 490; see also, e.g.,
Dove v. Coupe (D.C. Cir. 1985) 759 F.2d 167, 171–172 (opn. of
Ginsburg, J.).) At least without further refinement, the
workweek-average approach means that if an employer agrees
to pay a particular amount for say, 20 hours of work in a week,
but then demands the employee work an additional 10 hours for
free, the minimum wage law is satisfied so long as the total
wages, divided by 30, equal or exceed the applicable minimum
wage. Under this approach, Delta’s compensation scheme could
create no possible problems, since, as noted, it is undisputed
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that the scheme yields an average hourly wage that well exceeds
the minimum set by California law.
The Division of Labor Standards Enforcement (DLSE) and
the unanimous Courts of Appeal, however, have embraced a
more stringent understanding of state law that forbids taking
compensation contractually due for one set of hours and
spreading it over other, otherwise un- or undercompensated,
hours to satisfy the minimum wage—a practice that has often,
perhaps misleadingly, been referred to as “wage averaging.” As
we will explain, the practice these authorities prohibit might be
more accurately characterized as “wage borrowing,” and we
employ that phraseology here.
The DLSE was first to consider the issue. (See Dept. of
Industrial Relations, DLSE Opn. Letter No. 2002.01.29 (Jan. 29,
2002) (hereafter DLSE Opinion Letter No. 2002.01.29).) In
response to a question by parties to a collective bargaining
agreement, the DLSE determined that particular employee
travel time for which no compensation was being paid, because
the employer apparently viewed it as off-duty and
noncompensable, was in fact on-duty hours worked and
compensable. (Id. at pp. 1–7.) The DLSE then considered
whether payments for other compensable hours, contractually
promised under the collective bargaining agreement, could be
borrowed to satisfy the employer’s minimum wage obligations,
as would have been true under the rule generally articulated in
the federal courts.
The DLSE viewed the language of the wage order as
ambiguous, so it turned to the statutory backdrop for answers.
California law, the DLSE observed, differs from federal law in
that it not only guarantees a minimum wage but also expressly
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Opinion of the Court by Kruger, J.
protects employees’ right to receive the wages promised in a
contract or collective bargaining agreement. Specifically, Labor
Code section 221 prohibits an employer from paying wages and
then recouping some portion of the wages as a kickback or secret
deduction;3 Labor Code section 222 prohibits underpayment of
wages established by a collective bargaining agreement;4 and
Labor Code section 223 prohibits underpayment of wages
otherwise established by contract.5 Wage borrowing would
violate these statutes by reducing compensation, for the hours
from which wages were borrowed, below the contractually
agreed-upon level. (DLSE Opn. Letter No. 2002.01.29, supra, at
p. 11 [“These statutes prevent [an] employer that might be
covered by a [collective bargaining agreement (CBA)] or other
contract that expressly pays employees less than the minimum
wage for certain activities that constitute ‘hours worked’ within
the meaning of state law, from using any part of the wage
payments that are required under that CBA or other contract
for activities that are compensated in an amount that equals or
exceeds the minimum wage, as a credit for satisfying minimum
3
“It shall be unlawful for any employer to collect or receive
from an employee any part of wages theretofore paid by said
employer to said employee.” (Lab. Code, § 221; see Kerr’s
Catering Service v. Department of Industrial Relations, supra,
57 Cal.2d at p. 328.)
4
“It shall be unlawful, in case of any wage agreement
arrived at through collective bargaining, either wilfully or
unlawfully or with intent to defraud an employee, a competitor,
or any other person, to withhold from said employee any part of
the wage agreed upon.” (Lab. Code, § 222.)
5
“Where any statute or contract requires an employer to
maintain the designated wage scale, it shall be unlawful to
secretly pay a lower wage while purporting to pay the wage
designated by statute or by contract.” (Lab. Code, § 223.)
17
OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
wage obligations for those activities that are compensated at
less than the minimum wage under the CBA or contract” (fn.
omitted)].) In practical terms, this means that an employer who
contracts to pay $18 per hour for two hours of work, but who
then demands a third hour of unpaid work, cannot argue that it
has complied with a $12 hourly minimum wage (see, e.g., Lab.
Code, § 1182.12, subd. (b)(1)(C), (2)(C)) because it has paid $36
over three hours, or $12 per hour. Under the DLSE’s
interpretation of the Labor Code, the employer must pay the full
$18 required by contract for the first two hours. Then, for the
third uncontracted-for hour for which no compensation was
promised, it must pay no less than the applicable minimum
wage.
The Court of Appeal in Armenta, supra, 135 Cal. App. 4th
314, endorsed the DLSE’s reasoning in a similar context. The
employer in Armenta, which maintained utility poles, had
promised in a collective bargaining agreement to pay set hourly
rates for hours spent engaged in “productive” tasks directly
related to pole maintenance. But employees were required to
engage in other, “nonproductive” activities, such as travel time
and paperwork, for which they received no compensation. (Id.
at p. 317.) The court held this unlawful, notwithstanding the
fact that the average of the paid and unpaid hours exceeded the
minimum wage. The court reasoned that an employer who
promises to compensate particular hours worked at a particular
rate cannot borrow some of that compensation and apply it to
other compensable hours for which no compensation is provided.
To do so would effectively compel an employee to sacrifice
contractually promised compensation and breach the employer’s
contractual commitments, in violation of either Labor Code
section 222 (governing collective bargaining agreements) or
18
OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
Labor Code section 223 (governing ordinary contracts). (See
Armenta, at p. 323 [averaging pay across any uncompensated
hours “contravenes these code sections and effectively reduces
[the employee’s] contractual hourly rate”].)
Since Armenta, other Courts of Appeal have uniformly
followed its lead. These decisions have extended the no-
borrowing rule to employees under a collective bargaining
agreement (Bluford v. Safeway Inc. (2013) 216 Cal. App. 4th 864,
872–873 (Bluford)) and an ordinary contract (Gonzalez, supra,
215 Cal.App.4th at pp. 50–51), and without regard to whether
the basis for compensation is hourly (Sheppard v. North Orange
County Regional Occupational Program (2010) 191 Cal. App. 4th
289, 297–298, fn. 5), by piece rate (Bluford, at p. 872; Gonzalez,
at pp. 51–52), or by commission (Vaquero v. Stoneledge
Furniture, LLC (2017) 9 Cal. App. 5th 98, 108–114 (Vaquero)).
Although we have not previously had occasion to address the
issue, we agree with this consensus: State law prohibits
borrowing compensation contractually owed for one set of hours
or tasks to rectify compensation below the minimum wage for a
second set of hours or tasks, regardless of whether the average
of paid and unpaid (or underpaid) time exceeds the minimum
wage. Even if that practice nominally might be thought to
satisfy the requirement to pay at least minimum wage for each
hour worked, it does so only at the expense of reneging on the
employer’s contractual commitments, in violation of the contract
protection provisions of the Labor Code.
Synthesizing the authorities, we summarize the principles
this way. The compensation owed employees is a matter
determined primarily by contract. Compensation may be
calculated on a variety of bases: Although nonexempt employee
pay is often by the hour, state law expressly authorizes
19
OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
employers to calculate compensation by the task or piece, by the
sale, or by any other convenient standard. (See Lab. Code,
§ 200, subd. (a) [compensation may be “fixed or ascertained by
the standard of time, task, piece, commission basis, or other
method of calculation”]; Wage Order No. 9, § 4(B) [compensation
may be “measured by time, piece, commission, or otherwise”].)
In many employment agreements, such as the one at issue in
Armenta, the unit of time or activity by which an employer
promises to pay an employee is easily ascertainable. (See
Armenta, supra, 135 Cal.App.4th at p. 317 [“Under the terms of
the parties’ collective bargaining agreement, respondents were
paid hourly wages . . . .”].) In other cases, the employer may
compensate employees based on a combination of methods.
(See, e.g., Vaquero, supra, 9 Cal.App.5th at p. 103
[compensation determined by the greater of sales commission or
hourly minimum pay]; Gonzalez, supra, 215 Cal.App.4th at p. 41
[compensation determined by greater of repair tasks completed
or minimum hourly pay].) Consistent with general contract
interpretation principles, the unit for which pay is promised
should be determined based on the “mutual intention of the
parties as it existed at the time of contracting.” (Civ. Code,
§ 1636.)
Whatever the task or period promised as a basis for
compensation, however, an employer must pay no less than the
minimum wage for all hours worked. (See Wage Order No. 9,
§§ 2(H), 4.) The employer must satisfy this obligation while still
keeping any promises it has made to provide particular amounts
of compensation for particular tasks or periods of work. (Lab.
Code, §§ 221–223.) For all hours worked, employees are entitled
to the greater of the (1) amount guaranteed by contract for the
specified task or period, or (2) the amount guaranteed by the
20
OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
minimum wage. Whether a particular compensation scheme
complies with these obligations may be thought of as involving
two separate inquiries. First, for each task or period covered by
the contract, is the employee paid at or above the minimum
wage? Second, are there other tasks or periods not covered by
the contract, but within the definition of hours worked, for
which at least the minimum wage should have been paid?
For purposes of evaluating whether an employee has
received at least the hourly minimum wage for tasks or periods
compensated under the contract, it is generally permissible to
translate the contractual compensation—whether it be done by
task, work period, or other reasonable basis—into an hourly rate
by averaging pay across those tasks or periods. An employer
can, for example, pay by the day, with daily pay averaged across
all hours worked to determine whether the resulting hourly
wage exceeds the minimum. But an employer who instead
promises to pay by the hour may not compensate any given hour
at less than minimum wage. Nor may the employer make up for
the shortfall by pointing to other hours for which contractual
compensation exceeds the minimum wage. As the DLSE
explained in its letter, if a contract or bargaining agreement
expressly guarantees compensation for one set of tasks or one
specific period, that compensation may not be reduced to
supplement pay for other tasks or periods within the purview of
the contract or bargaining agreement, but otherwise
undercompensated by them. (DLSE Opn. Letter
No. 2002.01.29, supra, at p. 11; Lab. Code, §§ 221–223.)
The same “no borrowing” principle applies when an
employer requires work not covered by the contract at all, but
which falls within the definition of hours worked under the
minimum wage law. So, for example, in Armenta, supra, 135
21
OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
Cal.App.4th 314, the collective bargaining agreement ensured
pay at or above the minimum wage for hours engaged in
specified productive tasks, and under the agreement and Labor
Code section 222, the employees were entitled to their promised
wages without diminution. But for other periods not
compensated under the contract, but during which employees
were on duty and thus owed compensation under the wage
order, the minimum wage was also due.
B.
So far, we have described common ground: Delta does not
challenge the no-borrowing principle as it has been elaborated
in the Armenta line of cases. The parties’ disagreement concerns
whether Delta’s flight attendant compensation scheme violates
this no-borrowing principle. Because the relevant provisions of
the Labor Code prohibit borrowing only when it results in
failure to maintain the wage scale designated by contract, the
resolution necessarily turns on the nature of Delta’s contractual
commitments. (See Lab. Code, § 223 [prohibiting an employer
from “secretly pay[ing] a lower wage while purporting to pay the
wage designated . . . by contract”].)
Delta’s Work Rules, which are disclosed to all its flight
attendants, promise to compensate attendants by the rotation
rather than by particular hours worked. This is evident both
from the structure of the compensation scheme outlined in the
Work Rules and the procedures Delta employees follow to obtain
work assignments.
Each rotation contains one or more duty periods,
interspersed with layovers between duty periods. A duty period
begins when a flight attendant reports to an airport before a
flight. Thereafter, the flight attendant may have preboarding
22
OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
obligations, in-flight obligations, posttouchdown obligations,
transit or sit time—the period in another airport before the next
flight is ready for boarding—and a similar set of obligations
during the next or each subsequent flight until the end of the
duty period. As Delta acknowledges, flight attendants are on
duty continuously during a duty period, from first reporting
until release after the last flight of the period. For his part,
Oman does not contend flight attendants are on duty or entitled
to compensation for layovers between duty periods.
Under the Work Rules, compensation is first determined
for each duty period within a rotation by comparing three
calculations and choosing the highest pay from among these:
“Each duty period of a rotation pays the greatest of: [¶] 1) flight
time (includes deadhead flight time, minutes under, and flight
pay for ground time), or [¶] 2) 4:45 minimum duty period credit
(MDC), or [¶] 3) 1 for 2 duty period credit (DPC).” Second, the
maximum pay for all duty periods within a rotation is summed
and compared against a fourth formula based on the length of
the rotation, and flight attendants are paid whichever of these
two amounts is greater.6 Thus, although hours worked, or
credited, are elements in these successive computations and
comparisons to determine an employee’s pay, Delta does not
promise to pay by the hour, nor does it promise to pay for certain
hours and not others.
6
Under this alternative rotation formula, “[t]he sum of the
duty period credits listed above is then compared to 1 for 3.5 trip
credit (TRP), which guarantees at least 1 hour pay for every 3.5
hours away from base. You will be paid the greater of the two
values.”
23
OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
The promise to pay by rotation is also reflected in the
procedures Delta uses for distributing work assignments. The
nature of these procedures is undisputed: Each month, Delta
circulates a bid packet to its flight attendants listing rotations
each employee can request. The bid packet presents the number
of duty periods and length of each duty period within each
rotation; report times and total scheduled flight times for the
flights within each rotation; and the amount of time the flight
attendant can expect to be away from base. The bid packet also
shows which formula will apply and the minimum amount flight
attendants would be paid for the rotation at their particular
contractually established “flight pay” rate. (See Oman v. Delta
Air Lines, Inc., supra, 153 F.Supp.3d at pp. 1096–1098.) Flight
attendants then submit their rotation preferences, with the
understanding that their pay for each rotation will be no less
than the amount derivable from the bid packet. That Delta pays
flight attendants by the rotation, and what it will pay for any
particular rotation, are fully disclosed. Delta then gives flight
attendants access to electronic databases that track credits and
pay earned for each assigned rotation.
Delta’s four-formula method for calculating compensation
guarantees that flight attendants are always paid above the
minimum wage for the hours worked during each rotation
without borrowing from compensation promised for other
rotations. Under one of the four formulas—the one-for-two duty
period credit formula—pay is calculated by multiplying the
attendant’s established flight pay rate by the total hours in the
duty period, divided by two. To borrow the simple example
contained in Delta’s 2014 Work Rules, a flight attendant
working a duty period that lasts 12.5 hours would receive 6.25
hours of credit at the flight pay rate—a rate that in 2014 ranged
24
OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
from $23.28 to $53.52 depending on the employee’s years of
service. So long as the flight pay rate equals or exceeds twice
the applicable minimum wage, this formula ensures a flight
attendant is paid for all hours worked in every duty period at no
less than the minimum wage. And because pay for a rotation is
never less than the sum of the pay for each duty period, rotation
pay also will always meet or exceed the hourly minimum wage.
Oman does not contend that any flight attendant’s flight
pay rate was ever less than twice the applicable minimum wage.
But he nevertheless contends that the duty period credit
formula fails to compensate flight attendants for all hours
worked and instead compensates them for only half the hours
worked—leaving the other half entirely uncompensated,
contrary to state minimum wage law. Specifically, as Oman
reads the Work Rules, the flight attendant working a 12.5-hour
duty period is being paid for only half of that time, 6.25 hours,
with the remaining 6.25 hours unpaid.
Oman’s reading is unsound. The Work Rules do not, as he
suggests, purport to compensate flight attendants only for every
other hour—which is to say, they do not require a flight
attendant to work an hour for free in order to earn full flight pay
credit for working a second hour. Instead, flight pay credit
accumulates continuously as the duration of the duty period
lengthens: Every additional minute on duty earns an employee
an additional 30 seconds of flight pay credit. As an example, a
flight attendant subject to a $40 flight pay rate who works an
eight-hour duty period would receive $160; for an 8.5-hour duty
25
OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
period, $170; for a nine-hour duty period, $180; and so on.7 Each
and every increment of on-duty time is compensated under the
formula, and at a rate equal to or greater than the hourly
minimum wage. There is no impermissible borrowing from
hours for which full flight pay was promised to cover hours for
which no compensation is provided, both because every hour is
compensated at the same rate (half flight pay) and because
Delta never promised full flight pay for any particular hour
under this formula.
The duty period credit formula is, however, only one of
four formulas that may determine flight attendant
compensation; if any one of the other formulas yields a greater
amount of compensation, it will instead control. Oman argues
that when pay is based on one of these other formulas, Delta
violates the state minimum wage law.
Oman focuses in particular on a second formula, the flight
time formula, which supplies the measure of pay for most duty
periods. (Oman v. Delta Air Lines, Inc., supra, 153 F.Supp.3d at
pp. 1100–1101.) Under this formula, an attendant is paid at the
contractually established flight pay rate for each period between
flight “block out” and “block in”—the period between when each
flight departs the block, or gate, and arrives at the destination
gate. The established flight pay rate is multiplied by the longer
of the scheduled flight time or the actual flight time. Time
7
The same is true no matter what causes the duty period to
extend. If the same flight attendant with a $40 flight pay rate
works a duty period consisting of flights in and out of San
Francisco, and the second flight is delayed by fog, requiring
additional sit time in San Francisco, the amount owed under the
duty period credit formula will still rise, at the rate of $20 per
hour, for every extra minute of delay.
26
OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
between reporting for duty and the first flight block out, during
any between-flights sit time, and after the last flight block in
until release, is not directly factored into the calculation. For
duty periods where the flight time comprises less than 50
percent of the total on-duty time, a flight attendant can still be
compensated according to the duty period credit formula
described above; the flight time formula operates only to supply
additional compensation, above and beyond the compensation
that would be owed under the duty period credit formula, for
periods where flight time exceeds this 50 percent threshold.
As Oman observes, there are on-duty periods to which the
flight time formula does not directly attribute compensation,
such as preflight briefings. Oman contends that Delta’s failure
to specify a particular pay rate specific to these periods of time
violates the obligation to pay at least minimum wage for all
hours worked. And, according to Oman, any attempt to satisfy
the minimum wage law by averaging the flight attendant’s pay
over the entire span of the duty period would violate the no-
borrowing rule of Armenta and its progeny.
Oman’s argument depends on a particular view of the role
of the flight time formula under the parties’ contract: That, by
offering flight attendants a fixed amount of compensation for a
particular rotation, but also disclosing the formula on which it
has arrived at that amount, Delta has in effect promised to
compensate flight attendants at their full flight pay rate for
hours in flight, and not to compensate them at all for their other
hours worked. But even if this were a plausible view of the flight
time formula in isolation, it is not a plausible view of the formula
as it operates in the broader context of the Work Rules. Under
those rules, the flight time formula is just one of four
components of a single compensation scheme that constitutes
27
OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
Delta’s contractual promise to its flight attendants. Flight
attendants are presented with information about the entire
scheme and bid on their work assignments according to the
entire scheme. And the scheme, taken as a whole, does not
promise any particular compensation for any particular hour of
work; instead, as discussed above, it offers a guaranteed level of
compensation for each duty period and each rotation. Because
there are no on-duty hours for which Delta contractually
guarantees certain pay—but from which compensation must be
borrowed to cover other un- or undercompensated on-duty
hours—the concerns presented by the compensation scheme in
Armenta, supra, 135 Cal. App. 4th 314 and like cases are absent
here.
The same logic applies when either of Delta’s remaining
two formulas is used to calculate flight attendant compensation.
In all cases, flight attendants are guaranteed at least the
amount of compensation owed under the duty period credit
formula, which, as already discussed, always exceeds the
minimum wage. To forbid Delta from offering greater pay than
the amount owed under that formula based on the flight time
formula or one of the other two formulas would do nothing to
ensure workers are paid fair or adequate wages for all hours
worked. (See Barrentine v. Arkansas-Best Freight System (1981)
450 U.S. 728, 739 [minimum wage laws serve to ensure “ ‘ “[a]
fair day’s pay for a fair day’s work” ’ ”]; Brooklyn Bank v. O’Neil
(1945) 324 U.S. 697, 706 [minimum wage protections serve “to
protect certain groups of the population from sub-standard
wages . . . due to . . . unequal bargaining power”].) There is no
evident inadequacy or unfairness in permitting Delta to
compensate flight crew members on a per-rotation basis, at a
level no less than contractually promised and in excess of the
28
OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
hourly minimum wage—nor is there any unfairness in
permitting Delta to increase that compensation when, for
example, duty periods include a greater percentage of flight time
or rotations include more drawn-out off-duty layovers between
duty periods.
Resisting this commonsense conclusion, Oman leans
heavily on Gonzalez, supra, 215 Cal. App. 4th 36, but Gonzalez
will not support the weight. There, the employer auto
dealership and service center compensated auto technicians on
a piece-rate basis. Each repair task was assigned a set number
of “flag hours” roughly corresponding to the length of time it
ought to take to complete. The service center promised its
technicians a flat rate tied to their experience level multiplied
by the number of flag hours completed. Technicians also had
significant wait time, during which no repair orders were
pending and so no flag hours could be accrued, but during which
the employer required them to remain on premises in case new
customers arrived. The employer also calculated a “ ‘minimum
wage floor,’ ” which equaled the total hours a technician
remained on the premises multiplied by the applicable
minimum wage. (Id. at p. 41.) If a technician’s “flag hour”
compensation fell below the minimum wage floor, the employer
supplemented the technician’s pay to make up for the difference.
(Id. at pp. 41–42.) Employees sued for minimum wage
violations based on the failure to pay for wait time.
The Court of Appeal concluded that the employer’s
compensation scheme violated California minimum wage law.
It explained that the Armenta no-borrowing rule “applies
whenever an employer and employee have agreed that certain
work will be compensated at a rate that exceeds the minimum
wage and other worktime will be compensated at a lower rate.”
29
OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
(Gonzalez, supra, 215 Cal.App.4th at p. 51.) In such
circumstances, pay at an agreed higher rate cannot be borrowed
to make up for sub-minimum wage pay during other worktime.
As the Gonzalez court read the parties’ contract, the case before
it involved such a situation: The employer’s contractual
commitment to its workers was a guaranteed piece-rate for
completing various repair tasks. Having promised a particular
amount of compensation for each flag hour, the employer could
not borrow from that promised compensation to supply at least
a minimum hourly wage for unpaid wait time hours without
violating Labor Code section 223 and the Armenta no-borrowing
rule. The court illustrated with the hypothetical case of a
worker promised $20 per flag hour who completed repair tasks
assigned four flag hours but was then obligated to spend an
additional four hours on site, during which no new orders came
in. In the Gonzalez court’s view, paying the employee only $80
for this shift would either (1) violate the minimum wage,
because the four hours of wait time were uncompensated, or
(2) require the employee to forfeit half of his or her promised $20
per flag hour to cover the unpaid wait time, in violation of
section 223. (Gonzalez, at p. 50.) In other words, the additional
wait time constituted periods not covered by the employer’s
commitment to piece-rate pay, but within the definition of hours
worked, for which at least the minimum wage should have been
paid.
This case is different from Gonzalez in critical respects. In
Gonzalez, the court understood the contract at issue to promise
pay at a certain rate for certain tasks completed. The minimum
wage floor, which “supplement[ed]” employee pay only when
“necessary,” did not alter the nature of that promise. (Gonzalez,
supra, 215 Cal.App.4th at p. 40.) We do not address here, and
30
OMAN v. DELTA AIR LINES, INC.
Opinion of the Court by Kruger, J.
express no opinion concerning, a scenario in which a minimum
wage floor was written into a contract that otherwise promised
pay by the piece.8 Because the employer in Gonzalez required
technicians to remain at work while waiting for customers—
time not accounted for by the piece-rate system—the Court of
Appeal concluded the employer violated the no-borrowing rule
by attempting to use piece-rate pay as a credit against its
obligations to pay for wait time. By contrast, as we have
explained, Delta’s Work Rules reflect a promise to pay by the
rotation, and for each rotation, the compensation Delta promises
will, no matter which of the four formulas applies, always exceed
the state minimum wage per hour worked. Thus, Delta satisfies
state minimum wage law without ever needing to compromise
its contractual commitments.
The minimum wage laws exist to ensure that workers
receive adequate and fair pay, not to dictate to employers and
employees what pay formulas they may, or may not, agree to
adopt as a means to that end. (See Madison Ave. Corp. v. Asselta
8
Since Gonzalez, this particular scenario has been
addressed by the Legislature, which endorsed Gonzalez’s
overarching principles and codified for piece-rate workers a
statutory right to separate pay, at no less than the minimum
wage, for otherwise uncompensated nonproductive and rest
time. (Lab. Code, § 226.2, subd. (a), added by Stats. 2015,
ch. 754, § 4; see Sen. Rules Com., Off. of Sen. Floor Analyses, 3d
reading analysis of Assem. Bill No. 1513 (2015–2016 Reg. Sess.)
as amended Sept. 9, 2015, pp. 2 [bill “[c]odifies the Gonzalez and
Bluford decisions that nonproductive time, rest breaks, and
recovery breaks are separately compensated”], 3 [bill “[c]odifies
that, for nonproductive time, the rate of compensation is not less
than the minimum wage”].)
31
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Opinion of the Court by Kruger, J.
(1947) 331 U.S. 199, 203–204.) Delta’s arrangement may be
relatively unusual, but it is not unlawful.
IV.
We answer the Ninth Circuit’s questions as follows:
(1) Labor Code sections 204 and 226 do not apply to pay
periods in which an employee works only episodically and for
less than a day at a time in California unless the employee
works primarily in this state during the pay period, or does not
work primarily in any state but has his or her base of operations
in California.
(2) State law limits on wage borrowing permit
compensation schemes that promise to compensate all hours
worked at a level at or above the minimum wage, even if
particular components of those schemes fail to attribute to each
and every compensable hour a specific amount equal to or
greater than the minimum wage.
(3) In light of the answer to the question about the
substantive application of the state’s minimum wage laws, we
do not address the separate question concerning the geographic
scope of that law’s application.
KRUGER, J.
We Concur:
CANTIL-SAKAUYE, C. J.
CHIN, J.
CORRIGAN, J.
LIU, J.
CUÉLLAR, J.
GROBAN, J.
32
OMAN v. DELTA AIR LINES, INC.
S248726
Concurring Opinion by Justice Liu
Today’s opinion endorses the rule against wage borrowing
established in Armenta v. Osmose, Inc. (2005) 135 Cal. App. 4th
314 (Armenta) and reaffirmed in subsequent decisions. (Maj.
opn., ante, at p. 19.) The court holds that an employer may not
satisfy its obligation to pay at least the minimum wage for all
hours worked by “borrowing compensation contractually owed
for one set of hours or tasks to rectify compensation below the
minimum wage for a second set of hours or tasks.” (Ibid.) Delta
Air Lines, Inc.’s (Delta) flight attendant compensation scheme
does not violate this “no-borrowing” rule. (Id. at pp. 22–31.)
While agreeing with today’s opinion, I write to highlight
the first step in applying the no-borrowing rule: identifying the
nature of the employer’s contractual commitment to its
employees. Because the rule requires employers to keep their
contractual commitments in the course of fulfilling their
minimum wage obligations, whether the rule is violated turns
on what an employer’s contractual commitments are. Courts
should be careful not to allow employers to characterize their
contractual commitments in ways that would effectively
circumvent the no-borrowing rule.
Although Armenta established the no-borrowing rule in
the context of a “minimum wage” claim, it is important to clarify
that the rule’s purpose is not to ensure that employees are paid,
on average, hourly wages at or above a minimum threshold. In
OMAN v. DELTA AIR LINES, INC.
Liu, J., concurring
no-borrowing cases, there is no dispute that the employees are
paid at least the minimum wage when total compensation is
averaged over all hours worked. The question is whether the
employer is using contractually promised pay for certain tasks
or hours worked to make up for failing to pay the minimum wage
for other tasks or hours worked. As today’s opinion explains, the
purpose of the no-borrowing rule is to prevent employers from
using clever accounting to effectively “reneg[e] on the employer’s
contractual commitments, in violation of the contract protection
provisions of the Labor Code.” (Maj. opn., ante, at p. 19.)
Plaintiff flight attendants do not claim that their average pay
ever fell below the minimum wage. Rather, they claim that the
pay structure Delta promised did not compensate them for all
the hours they worked.
Whether Delta or any other employer violates the no-
borrowing rule thus turns on the nature of the pay structure the
employer has promised. “The compensation owed employees is
a matter determined primarily by contract.” (Maj. opn., ante, at
p. 19.) Employers may legally compensate their employees on
any number of bases, including “by the standard of time, task,
piece, commission basis, or other method of calculation.” (Lab.
Code, § 200, subd. (a); see Industrial Welfare Commission, wage
order No. 9-2001, § 4(B) [compensation may be “measured by
time, piece, commission, or otherwise”].) The unit of pay is often
straightforward. In Armenta, the plaintiff employees “were paid
hourly wages ranging between $9.08 to $20, depending on
whether they were crew members or foremen.” (Armenta, supra,
135 Cal.App.4th at p. 317.) In other cases, the compensation
scheme may be more complex. Employers may use a
combination of methods (e.g., Bluford v. Safeway Inc. (2013) 216
Cal. App. 4th 864, 867 [truck drivers’ compensation based on a
2
OMAN v. DELTA AIR LINES, INC.
Liu, J., concurring
combination of miles driven and hours worked]) or alternative
pay formulas that are triggered when certain conditions are met
(e.g., Vaquero v. Stoneledge Furniture, LLC (2017) 9 Cal. App. 5th
98, 103 (Vaquero) [compensation determined by the greater of
sales commission or hourly minimum pay]; Gonzalez v.
Downtown LA Motors, LP (2013) 215 Cal. App. 4th 36, 41
(Gonzalez) [compensation determined by the greater of repair
tasks completed or hourly minimum pay]).
Consistent with general contract interpretation
principles, the employer’s contractual commitment, including
the unit of promised pay, is based on the objectively reasonable
expectations of the parties at the time of contract. (See Civ.
Code, § 1636 [“A contract must be so interpreted as to give effect
to the mutual intention of the parties as it existed at the time of
contracting, so far as the same is ascertainable and lawful.”].)
Such principles include interpreting the employment agreement
as a whole (id., § 1641) and, if the contract language is
ambiguous, looking to the context surrounding its formation
(id., § 1647) as well as the subsequent conduct of the parties (1
Witkin, Summary of Cal. Law (11th ed. 2017) Contracts, § 772).
Correctly identifying an employer’s contractual
commitment is critical to ensuring that employers do not
circumvent the no-borrowing rule simply by inserting into
employment agreements a minimum wage floor — i.e., an
agreement to make up the difference if an employee’s promised
pay, averaged over all hours worked, falls below the applicable
minimum wage. A minimum wage floor, by incorporating the
concept of borrowing into the contract, would seem to be an easy
way for an employer to inoculate itself against a no-borrowing
claim.
3
OMAN v. DELTA AIR LINES, INC.
Liu, J., concurring
Courts applying Armenta have rejected such
compensation schemes. In Vaquero, a furniture store paid its
salespeople on a commission basis and did not separately
compensate them for legally mandated rest breaks. (Vaquero,
supra, 9 Cal.App.5th at p. 103.) The employer also calculated
employee pay based on the total number of hours an employee
worked, including rest breaks. If a salesperson failed to earn
more than an average of $12.01 per hour on commission, the
employer made up the difference and subtracted that amount
from the salesperson’s earnings in the next pay period. (Ibid.)
Construing the compensation scheme to promise payment by
commission, the Court of Appeal concluded that the scheme
failed to separately pay employees for rest breaks and therefore
failed to pay for all hours worked. (Ibid.) The no-borrowing rule
barred the employer from using pay promised for an employee’s
commission to fulfill its obligation to pay for rest breaks. (Id. at
pp. 114–117.) The fact that the employer supplemented an
employee’s commission if it fell below a specified hourly floor did
not cure the violation. (Ibid.)
Likewise, in Gonzalez, an automobile servicing company
paid its mechanics for each repair they completed but did not
compensate them for wait time between repairs. (Gonzalez,
supra, 215 Cal.App.4th at p. 41.) The employer also calculated
what it called a “ ‘minimum wage floor’ ” (ibid.): If a mechanic’s
compensation for repairs fell below what the mechanic would
have made if paid the minimum wage for all hours worked,
including wait time, the employer made up the difference. (Id.
at pp. 41–42.) Despite such a minimum wage floor, the Court of
Appeal affirmed the trial court’s finding that the employer failed
to pay for all hours worked. (Id. at p. 55.) The court found that
the compensation system was a “piece-rate system” because the
4
OMAN v. DELTA AIR LINES, INC.
Liu, J., concurring
“technicians [were] paid primarily on the basis of repair tasks
completed.” (Id. at p. 41.) It concluded that the no-borrowing
rule developed in Armenta also applied to piece-rate
compensation schemes. (Id. at p. 49.) Because the employer’s
piece-rate scheme did not separately compensate mechanics for
wait time between repairs, the employer did not pay employees
for all hours worked. Under the no-borrowing rule, the employer
could not use pay promised for repair tasks to cover its
obligations to pay for wait time. (Id. at p. 50; see also
Balasanyan v. Nordstrom, Inc. (S.D.Cal. 2012) 913 F. Supp. 2d
1001 [finding a violation of California wage law under Armenta
where a department store paid salespeople on a commission
basis and supplemented commissions if it fell below an average
hourly minimum].)
Although Vaquero and Gonzalez did not extensively
discuss the nature of each employer’s respective contractual
commitments, the reasoning of those decisions recognizes that
employers cannot circumvent their obligation to pay employees
for all hours worked or to pay the full amount of commissions,
piece rates, or other compensation promised to employees
simply by inserting a minimum wage floor into an employment
agreement. A contrary conclusion would make it all too easy to
evade the rule; a minimum wage floor would become a standard
term in many employment contracts, and the rule would be
emptied of real substance. The rule developed in Armenta is
grounded in the protections of the Labor Code that prohibit an
employer from diluting an employee’s contractually promised
wages. (Armenta, supra, 135 Cal.App.4th at p. 323 [discussing
Lab. Code, §§ 221, 222, 223].) Vaquero and Gonzalez held that
the employers in those cases made contractual commitments to
commission and piece-rate pay, respectively, and the addition of
5
OMAN v. DELTA AIR LINES, INC.
Liu, J., concurring
a minimum wage floor did not change those commitments. (Cf.
Cardenas v. McLane FoodServices, Inc. (C.D.Cal. 2011) 796
F. Supp. 2d 1246, 1252 [finding a violation of California wage law
under Armenta even though the employer did not violate an
“explicit agreement”].) Today’s opinion leaves those decisions,
and the protective force of the no-borrowing rule, intact.
LIU, J.
I Concur:
CUÉLLAR, J.
6
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Oman v. Delta Airlines, Inc.
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding XXX on request pursuant to rule 8.548, Cal. Rules of Court
Review Granted
Rehearing Granted
__________________________________________________________________________________
Opinion No. S248726
Date Filed: June 29, 2020
__________________________________________________________________________________
Court:
County:
Judge:
__________________________________________________________________________________
Counsel:
Nichols Kaster, Matthew C. Helland, Daniel S. Brome; Altshuler Berzon, Michael Rubin and Barbara J.
Chisholm for Plaintiffs and Appellants.
Carol Vigne, Katherine Fiester; Cynthia L. Rice; Olivier Schrieiber & Chao, Monique Olivier; Anna
Kirsch; and Nayantara Mehta for California Employment Lawyers Association, California Rural Legal
Assistance Foundation, Legal Aid at Work, National Employment Law Project and Women’s Employment
Rights Clinic as Amici Curiae on behalf of Plaintiffs and Appellants.
Mastagni Holstedt, David E. Mastagni and Isaac S. Stevens for Dan Goldthorpe, James Donovan, Chris
Bennett, James Isherwood and David Vincent as Amici Curiae on behalf of Plaintiffs and Appellants.
Duckworth Peters Lebowitz Olivier, Monique Olivier and J. Erik Heath for California Employment
Lawyers Association as Amicus Curiae on behalf of Plaintiffs and Appellants.
Morgan, Lewis & Bockius, Thomas M. Peterson, Robert Jon Hendricks and Andrew P. Frederick for
Defendant and Respondent.
Ogletree, Deakins, Nash, Smoak & Stewart, Robert R. Roginson and Christopher W. Decker for Employers
Group and California Employment Law Council as Amici Curiae on behalf of Defendant and Respondent.
Mayer Brown, Donald M. Falk, John P. Zaimes and Ruth Zadikany for Cathay Pacific Airways Limited as
Amicus Curiae on behalf of Defendant and Respondent.
Greines, Martin, Stein & Richland, Robert A. Olson and Cynthia E. Tobisman for California New Car
Dealers Association as Amicus Curiae on behalf of Defendant and Respondent.
Jones Day, Douglas W. Hall, Shay Dvoretzky and Vivek Suri for Airlines for America as Amicus Curiae
on behalf of Defendant and Respondent.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Matthew C. Helland
Nichols Kaster, LLP
235 Montgomery St., Suite 810
San Francisco, CA 94104
(415) 277-7235
Robert Jon Hendricks
Morgan, Lewis & Bockius LLP
One Market Street, Spear Tower
San Francisco, CA 94105
(415) 442-1000