Safeway, Inc. v. Superior Court

Filed 7/22/15
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
SAFEWAY, INC. et al., B255216
Petitioners, (Los Angeles County
Super. Ct. No. BC487830)
v.
THE SUPERIOR COURT OF
LOS ANGELES COUNTY,
Respondent;
ENRIQUE ESPARZA et al.,
Real Parties in Interest.
ORIGINAL PROCEEDINGS in mandate. John Shepard Wiley, Judge.
Petition denied.
Payne & Fears, James L. Payne, Eric C. Sohlgren, Jeffrey K. Brown and
Andrew K. Haeffele for Petitioners.
Arias Ozzello & Gignac, Mike Arias, Makael H. Stahle and Alfredo Torrijos
for Real Parties In Interest.
In the underlying action, real parties in interest asserted putative class
claims against petitioners Safeway Inc. (Safeway) and The Vons Companies
(Vons) for violations of the Labor Code and the unfair competition law (UCL)
(Bus. & Prof. Code, § 17200 et seq.). The trial court certified a class for purposes
of the UCL claim based on the theory that petitioners had a practice of never
paying premium wages for missed meal breaks when required (Lab. Code,
§ 226.7). Petitioners seek a writ directing the trial court to vacate the grant of
certification and to enter a new order denying certification. We deny the petition
for writ of mandate.
RELEVANT FACTUAL AND PROCEDURAL BACKGROUND
In 2007, the initial class action complaint was filed in the underlying action.
In February 2009, real parties Enrique Esparza, Cathy Burns, Sylvia Vezaldenos,
and Levon Thaxton II filed their second amended complaint, asserting claims for
failure to provide meal and rest breaks (Lab. Code, §§ 226.7, 512), failure to
provide itemized pay statements (Lab. Code, § 226), unfair business practices
under the UCL, and penalties under the Labor Code Private Attorneys General Act
of 2004 (PAGA) (Lab. Code, § 2698 et seq.). The complaint alleged that
petitioners failed to provide meal and rest breaks, and failed to pay compensation
for those missed breaks.
In January 2013, real parties filed a motion for class certification of their
claims for failure to provide meal and rest breaks, unfair business practices, and
PAGA penalties. They proposed two classes, namely, the “[m]eal [b]reak [c]lass,”
composed of over 200,000 employees who worked for petitioners between
December 28, 2001 and June 17, 2007, and the “[r]eceiver [r]est [b]reak
[s]ubclass,” composed of all such employees who worked as receivers after
2
December 28, 2001. In connection with the meal break class, real parties sought
class certification of the UCL claim, arguing that prior to June 17, 2007,
petitioners had a policy of never paying the meal break premium wages set forth in
Labor Code section 226.7 “under any circumstances,” and that the policy
constituted an unlawful or unfair business practice under the UCL.
On February 6, 2014, the trial court granted the motion with respect to the
meal break class, and otherwise denied the motion. On March 28, 2014,
petitioners filed their petition for writ of mandate. We issued an order to show
cause on February 26, 2015.
DISCUSSION
Petitioners contend the trial court erred in granting class certification with
1
respect to the meal break class. For the reasons discussed below, we disagree.
A. Standard of Review
“Code of Civil Procedure section 382 authorizes class action suits in
California ‘when the question is one of a common or general interest, of many
persons, or when the parties are numerous, and it is impracticable to bring them all
before the court . . . .’ The party seeking certification as a class representative
must establish the existence of an ascertainable class and a well-defined
community of interest among the class members. [Citation.] The community of
interest requirement embodies three factors: (1) predominant common questions
of law or fact; (2) class representatives with claims or defenses typical of the class;
1
In certifying the meal break class, the trial court did not expressly refer to real
parties’ claims under the Labor Code, the UCL, or PAGA. Before us, petitioners
challenge the ruling only insofar as it relates to the UCL claim.
3
and (3) class representatives who can adequately represent the class. [Citation.]”
(Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470.)
When “[p]resented with a class certification motion, a trial court must
examine the plaintiff’s theory of recovery, assess the nature of the legal and
factual disputes likely to be presented, and decide whether individual or common
issues predominate. To the extent the propriety of certification depends upon
disputed threshold legal or factual questions, a court may, and indeed must,
resolve them. . . . [H]owever, a court generally should eschew resolution of such
issues unless necessary. [Citation.] Consequently, a trial court does not abuse its
discretion if it certifies (or denies certification of) a class without deciding one or
more issues affecting the nature of a given element if resolution of such issues
would affect the ultimate certification decision.” (Brinker Restaurant Corp. v.
Superior Court (2012) 53 Cal.4th 1004, 1025 (Brinker).)
“On review of a class certification order, an appellate court’s inquiry is
narrowly circumscribed. ‘The decision to certify a class rests squarely within the
discretion of the trial court, and we afford that decision great deference on appeal,
reversing only for a manifest abuse of discretion . . . . A certification order
generally will not be disturbed unless (1) it is unsupported by substantial evidence,
(2) it rests on improper criteria, or (3) it rests on erroneous legal assumptions.
[Citations.]’ [Citations.] Predominance is a factual question; accordingly, the trial
court’s finding that common issues predominate generally is reviewed for
substantial evidence. [Citation.]” (Brinker, supra, 53 Cal.4th at p. 1022, quoting
Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1089.)
Petitioners challenge the class certification on several grounds, including
the legal viability of real parties’ theory of recovery under the UCL. However,
because certification is not “conditioned upon a showing that class claims for
4
relief are likely to prevail,” an inquiry into the merits of a claim is ordinarily
appropriate only when that question is “enmeshed with class action requirements,
such as whether substantially similar questions are common to the class and
predominate over individual questions or whether the claims or defenses of the
representative plaintiffs are typical of class claims or defenses.” (Linder v. Thrifty
Oil Co. (2000) 23 Cal.4th 429, 443.) Thus, defendants are generally not entitled to
a merits determination in the context of a ruling on class certification. (Ibid.)
Nonetheless, that determination may be proper when the defendants cannot attack
the claim by demurrer or summary judgment following certification, or the parties
jointly request a merits determination. (Id. at p. 443.)
Here, petitioners did not establish those special circumstances before the
trial court, which made no merits determination. In this writ proceeding, real
parties have responded to petitioners’ challenges to their theory of recovery under
the UCL, but have not requested a merits determination. We therefore limit our
examination of the merits of real parties’ theory of recovery to those issues related
to class action requirements.
B. Governing Principles
We begin by discussing the principles applicable to real parties’ theory of
recovery under the UCL. Generally, the UCL defines “unfair competition”
broadly to include “any unlawful, unfair or fraudulent business act or practice.”
(Bus. & Prof. Code, § 17200.) “By proscribing ‘any unlawful’ business practice,
‘[the UCL] “borrows” violations of other laws and treats them as unlawful
practices’ that the unfair competition law makes independently actionable. [¶]
However, the law does more than just borrow. The statutory language referring to
“any unlawful, unfair or fraudulent” practice (italics added) makes clear that a
5
practice may be deemed unfair even if not specifically proscribed by some other
law.” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone
Co. (1999) 20 Cal.4th 163, 180 (Cel-Tech).) Under the UCL, damages cannot be
recovered, and plaintiffs are generally limited to restitution and injunctive relief.
(Clark v. Superior Court (2010) 50 Cal.4th 605, 610.)
Real parties’ theory of recovery under the UCL focuses on the additional
compensation afforded employees under the Labor Code for failure to provide
meal breaks.2 Section 512 obliges employers to provide 30-minute meal periods
within a work break at specified intervals absent special circumstances, that is,
unless the employee waives or agrees to modify that requirement, or an exception
to the requirement is set forth in an applicable wage order issued by the Industrial
Welfare Commission (IWC). (§ 512, subds. (a), (b).) Under section 512, “an
employer’s obligation is to provide a first meal period after no more than five
hours of work and a second meal period after no more than 10 hours of work.”
(Brinker, supra, 53 Cal.4th at p. 1049.) That obligation reflects the requirements
generally stated in the IWC wage orders. (Brinker, supra, at pp. 1046-1049.)
As explained in Brinker, to comply with the obligation, the employer must
afford an “off-duty” meal break, absent an employee waiver or agreement.
(Brinker, supra, 53 Cal.4th at p. 1039.) The employer properly provides an off-
duty break “if it relieves its employees of all duty, relinquishes control over their
activities and permits them a reasonable opportunity to take an uninterrupted 30-
minute break, and does not impede or discourage them from doing so.” (Id. at
p. 1040.) Thus, the employer “may not undermine a formal policy of providing
2
All further statutory citations are to the Labor Code, unless otherwise indicated.
6
meal breaks by pressuring [its] employees to perform their duties in ways that omit
breaks.” (Ibid.)
Nonetheless, an employee is not obliged to police the breaks or ensure that
no work is performed during them. (Brinker, supra, 53 Cal.4th at p. 1040.) Work
by an employee during a break does not, by itself, breach the employer’s
obligation to provide the break. (Ibid.) Nor does “[p]roof an employer had
knowledge of employees working through meal periods . . . .” (Ibid.)
When an employer fails to discharge its duty regarding meal breaks, section
226.7 requires the employer to compensate employees with “premium” pay
(Brinker, supra, 53 Cal.4th at p. 1039.) That statute provides: “(b) An employer
shall not require any employee to work during any meal or rest period mandated
pursuant to an applicable . . . order of the Industrial Welfare Commission. . . . [¶]
(c) If an employer fails to provide an employee a meal . . . period in accordance
with a[n] . . . applicable order of the [IWC] order . . . , the employer shall pay the
employee one additional hour of pay at the employee’s regular rate of
compensation for each workday that the meal . . . period is not provided.”
In Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1102-
1111 (Murphy), our Supreme Court determined that the additional compensation
established in section 226.7 is a “premium wage,” not a penalty. There, an
employee successfully asserted certain wage-related claims before the Labor
Commissioner.3 (Murphy, supra, 40 Cal.4th at pp. 1100-1101.) After the
employer sought de novo review of the ruling, the trial court permitted the
3
Employees may recover unpaid wages and penalties in administrative proceedings
before the Labor Commissioner. (Post v. Palo/Haklar & Associates (2000) 23 Cal.4th
942, 946 (Post); § 98.) The Labor Commissioner’s ruling is subject to de novo review in
superior court. (Post, supra, 23 Cal.4th at pp. 947-948; § 98.2.)
7
employee to supplement his claims with a claim under section 226.7, and issued an
award that included payment for missed meal and rest breaks. (Murphy, supra, 40
Cal.4th at p. 1101.) Before the Supreme Court, the employer contended that the
“‘additional hour of pay’” specified in section 226.7 constituted a penalty, and
thus that the employee’s claim was subject to the one-year limitations period
applicable to penalties (Code. Civ. Proc., § 340, subd. (a)), rather than the three-
year limitations period applicable to “a liability created by statute” (Code Civ.
Proc., § 338, subd. (a)). (Murphy, supra, at p. 1102.) In rejecting that contention,
the Supreme Court concluded that the additional pay set forth in section 226.7 is a
“dual-purpose” remedy intended primarily to compensate employees, and
secondarily to shape employer conduct. (Murphy, supra, at pp. 1110-1111.) The
court stated: “[A]n employee is entitled to the additional hour of pay immediately
upon being forced to miss a rest or meal period. In that way, a payment owed
pursuant to [Labor Code] section 226.7 is akin to an employee’s immediate
entitlement to payment of wages or for overtime.” (Id. at p. 1108.)
In Kirby v. Immoos Fire Protection, Inc. (2012) 53 Cal.4th 1244, 1256-1257
(Kirby), the Supreme Court held although the remedy set forth in section 226.7 is
properly characterized as a wage, an employer’s failure to pay that wage “does not
form part of a section 226.7 violation . . . .” There, two employees asserted claims
against their employers in superior court under the Labor Code and the UCL,
including a claim under section 226.7 predicated on a failure to provide rest
breaks.4 (Kirby, supra, 53 Cal.4th at pp. 1248-1249.) After the employees entered
into a settlement regarding the section 226.7 claim, one of the employers secured a
4
In addition to presenting claims based on labor law violations before the Labor
Commissioner, employees may assert such claims in civil actions. (Post, supra, 23
Cal.4th at p. 946.)
8
fee award under section 218.5, which authorizes an award to the prevailing party
“‘[i]n any action brought for the nonpayment of wages . . . .’” (Kirby, supra, at
pp. 1248-1249.)
In reversing the award, the Supreme Court concluded that notwithstanding
Murphy, a claim under section 226.7 is not an “action brought for the nonpayment
of wages,” within the meaning of section 218.5 (italics added). (Kirby, supra, 53
Cal.4th at pp. 1256-1257.) The court determined that the term “‘nonpayment of
wages,’” in the context of the phrase “‘action brought for the nonpayment of
wages,’” identifies an alleged legal violation, not a remedy, as it would be absurd
to bring an action to obtain the nonpayment of wages. (Id. at p. 1256.) The court
further determined that the sole legal violation specified in section 226.7 is the
failure to provide meal and rest breaks, stating: “Nonpayment of wages is not the
gravamen of a section 226.7 violation. Instead, subdivision (a) of section 226.7
defines a legal violation solely by reference to an employer’s obligation to provide
meal and rest breaks. [Citation.] The ‘additional hour of pay’ provided for in
subdivision (b) is the legal remedy for a violation of subdivision (a), but whether
or not it has been paid is irrelevant to whether section 226.7 was violated. . . . The
failure to provide required meal and rest breaks is what triggers a violation of
section 226.7. Accordingly, a section 226.7 claim is not an action brought for
nonpayment of wages; it is an action brought for non provision of meal or rest
breaks.” (Kirby, supra, at pp. 1256-1257, italics added.) That reading of section
218.5, the court explained, comports with Murphy: “To say that a section 226.7
remedy is a wage . . . is not to say that the legal violation triggering the remedy is
nonpayment of wages.” (Id. at p. 1257.)
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C. Underlying Proceedings
1. Motion for Class Certification
Real parties sought class certification for the meal break class, which
encompasses over 200,000 store-level hourly employees who worked for
petitioners’ Vons and NorCal divisions in California between December 28, 2001
and June 17, 2007. In support of class certification, they contended that
petitioners’ policy “of not paying meal break premiums under any circumstances”
to those employees during the specified break constituted both an “‘unlawful’”
and an “‘unfair’” business practice under the UCL. Real parties argued that the
policy was unlawful because it contravened section 226.7 and was otherwise
unfair. Real parties maintained that their theory of liability was suitable for class
treatment, that the class was ascertainable on the basis of petitioners’ employment
records, and their own claims were typical of the class members.
To support class certification, real parties submitted excerpts from the
depositions of some of petitioners’ managers, together with real parties’ own
declarations and deposition testimony, and a declaration from accounting expert
Eric R. Lietzow. According to real parties’ showing, prior to June 17, 2007,
petitioners used time-keeping systems to monitor when employees began and
ended work, as well when they took meal breaks. Terri Buller, a Vons human
resources manager, testified that prior to June 2007, there was no mechanism or
procedure by which the premium pay related to meal breaks was calculated or
determined when due. Michael Scizak, a Safeway director, and Jefferey Mason,
the NorCal division’s human resources director, testified that prior to June 2007,
employees were paid only the meal break pay required by union contracts. Buller,
Scizak, and Mason further testified that after June 2007, petitioners implemented a
time-keeping system that detected missed, shortened, or late meal breaks, and
10
began to make virtually automatic payments of premium wages for such meal
breaks, following managerial review of the system’s reports.
Real parties stated that they worked as store-level hourly employees
between December 28, 2001 and June 17, 2007, and that on many occasions, they
were directed to work through meal breaks, or otherwise were unable to take the
breaks due to heavy workloads. According to Lietzow, following a review of real
parties’ payroll records, he found no payments to real parties prior to June 2007
under the “earning codes” petitioners used to document wage payments pursuant
to section 226.7.
Lietzow also stated that he had examined “time punch data” and payroll
records for the pertinent break from a random sample of petitioners’ stores.
Lietzow reviewed the time punch data for what he called “meal break violations”
under section 226.7, that is, instances in which the data for an employee on a
particular day did not show that the employee had taken a 30-minute break within
the first five hours of work, thus reflecting a missed, shortened, or delayed break.
Extrapolating from the data for the sample, Lieztow estimated that petitioners’ full
records would reveal 27,095,927 such violations between December 28, 2001 and
June 17, 2007. Lietzow further stated that his review of the payroll records
disclosed no payments under the earning codes reflecting section 226.7 wages. He
thus opined that petitioners made no such payments to employees prior to June 17,
2007.
2. Opposition
Petitioners opposed class certification on several grounds. They contended
no liability could be imposed under real parties’ theory, which petitioners
characterized as relying on an alleged policy of “not automatically paying meal
11
break premiums.” Petitioners argued that any such practice is not itself unlawful,
noting that under Kirby, the failure to provide premium pay “does not form part of
a section 226.7 violation” (Kirby, supra, 53 Cal.4th at p. 1256). Petitioners stated:
“Where the underlying statutory claim fails, then the UCL claim likewise fails.”
Petitioners further contended the theory of liability improperly presupposed
that they had contravened the statutory duty to provide meal breaks. Relying on
Brinker, they argued: “If an employer provides lawful meal periods, it has no
obligation to pay meal break premiums. [Citation.] This is true even if an
employee chooses not to take his or her meal period.” (Underlining deleted.)
Petitioners maintained there was “overwhelming evidence that [the] putative class
members have been provided lawful meal periods.” To support that contention,
they submitted more than 2,000 declarations from putative class members and 31
declarations for store managers. Petitioners also submitted a declaration from
economist G. Michael Phillips, who stated that he had reviewed the declarations.
Phillips opined: “My analysis . . . provides statistically significant evidence that
the vast majority of employees always took their meal breaks. I saw no
statistically valid evidence supporting the hypothesis of a system-wide policy of
denying meal breaks.” (Underlining deleted.)
Petitioners further maintained that individualized issues predominated over
common issues. They offered a declaration from economist Hyowook Chiang,
who had examined the time punch data and payroll records reviewed by Lietzow.
Chiang stated: “My analys[i]s . . . shows significant variability [in time punches
reflecting apparent short, late, and missed breaks] across jobs, departments, stores,
employees, and shift start time. Moreover, it shows that the overwhelming
majority of short, late, and missed meal period punches [sic] can be traced to a
small minority of employees, and that a vast majority of employees have a zero or
12
very low rates of short, late, or missed punches. Most importantly, it shows
absolutely no evidence of a companywide policy or practice of depriving
employees of meal periods.” (Underlining deleted.)
3. Reply
Real parties contended that petitioners’ opposition “completely
sidestep[ped]” their theory of liability, namely, “that [petitioners] had a practice
before June 17, 2007 of not paying meal break premiums and that this practice
constituted an unlawful and unfair business practice . . . .” Noting that the
premium wages are intended to compensate employees and shape employer
conduct (Murphy, supra, 40 Cal.4th at pp. 1110-1111), real parties stated: “by
engaging in a classwide practice of ignoring the statutory mandate of [s]ection
226.7[, subdivision (b)], petitioners unilaterally deprived all class members . . . the
compensation guarantee and enhanced enforcement [of the meal break duty].”
According to real parties, petitioners made no attempt to dispute the
existence of that practice and instead, repeatedly mischaracterized real parties’
theory as predicated on a policy of not automatically paying meal break premium
wages. Real parties stated: “While automatically paying meal break premiums is
precisely what [petitioners] began doing in mid-June of 2007 . . . , [real parties]
have never asserted as a violation the failure to automatically pay premiums. . . .
[W]hat [real parties] allege is . . . that [petitioners] ‘automatically did not pay
meal break premiums’ before mid-June of 2007, regardless of the circumstances.”
Real parties maintained that for purposes of a UCL class action, the
existence of an unlawful or unfair business practice and the amount of restitution
were issues capable of common proof. They argued that establishing liability
required no individualized inquiries into violations of section 512 and 226.7
13
sufficient to bar class certification. They further argued that determining
appropriate restitution involved no such assessments. They contended that a result
of petitioners’ alleged practice, “the class members lost a substantial portion of the
value they were otherwise guaranteed as part of their employment. Had they taken
comparable jobs at comparable pay with other (presumably law abiding) retailers,
the class members would have received the benefits of these statutory protections
and would not have suffered this loss.” (Italics deleted.) The value of that loss,
they further contended, was measurable under a “‘market value’ approach,”
relying primary on evidence of petitioners’ own conduct.
4. Supplemental Briefing
The trial court permitted the filing of a surreply and response to the
surreply. Petitioners’ surreply contended the practice attributed to them by real
parties supported no UCL claim. They reaffirmed their view that the practice was
not unlawful under section 226.7, and argued the practice was therefore also not
unfair. Petitioners further argued that the UCL claim failed because section 226.7
permitted the alleged practice. Real parties’ response maintained that for purposes
of the UCL, the alleged practice could be determined to be unfair even if it
violated no law, and that no statute affirmatively permitted the practice.
5. Ruling
In granting class certification, the trial court stated: “[Real parties] prove[]
that[] before June 17, 2007, Safeway did not pay meal break premiums. . . .
Safeway does not contest this fact. Safeway had thousands or tens of thousands of
workers, but for years it never paid statutory meal break premiums. Why? One
explanation is human perfection: Safeway never, ever erred. This explanation is
14
possible. But human perfection is rare. Another explanation is deep, system-wide
error: that Safeway was unaware of, or for some other reason[,] violated[] its duty
to pay statutory premiums when required. [¶] This situation presents the central
and predominating common issue: did Safeway’s system-wide failure to pay
appropriate meal break premiums make it liable to the class during this period.
This dominant common issue makes certification proper . . . .”
D. Analysis
In reviewing the trial court’s ruling, our focus is on whether the court
abused its discretion in granting class certification, not on the merits of real
parties’ UCL claim, to the extent resolution of that issue is unnecessary to
adjudicate the propriety of a class action (see pt. A., ante). As explained below,
we see no error in the ruling.
The key questions concern whether common issues predominate, and
whether the litigation of individual issues “can be managed fairly and efficiently.”
(Duran v. U.S. Bank National Assn. (2014) 59 Cal.4th 1, 28-29 (Duran).) The
propriety of a UCL class action “‘hinges on “whether the theory of recovery
advanced by the proponents of certification is, as an analytical matter, likely to
prove amenable to class treatment.”’” (Id. at p. 28, quoting Sav-on Drug Stores,
Inc. v. Superior Court (2004) 34 Cal.4th 319, 327.) Ordinarily, class treatment of
a claim is appropriate if the facts necessary to establish liability are capable of
common proof, including the so-called “‘fact of damage,’” that is, the existence of
harm establishing an entitlement to damages. (B.W.I. Custom Kitchen v. Owens-
Illinois, Inc. (1987) 191 Cal.App.3d 1341, 1350-1354.) If the defendant’s liability
can be determined “‘“by facts common to all members of the class,”’” a class may
be certified even though class members must individually establish the amount of
15
their restitution. (See Duran, supra, 59 Cal.4th. at p. 28, quoting Brinker, supra,53 Cal.4th at pp. 1021-1022.) Nonetheless, “class treatment is not appropriate ‘if
every member of the alleged class would be required to litigate numerous and
substantial questions determining his individual right to recover following the
“class judgment” on common issues.’” (Duran, supra, 59 Cal.4th. at p. 28,
quoting City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 459.)
1. Liability
We begin by examining real parties’ theory of liability under the UCL, to
the extent necessary to assess the propriety of a class claim. Generally, the UCL
permits employees to obtain restitution for unpaid wages. (Cortez v. Purolator Air
Filtration Products Co. (2000) 23 Cal.4th 163, 177 (Cortez)). As the trial court
observed, the propriety of class treatment required more than the presentation of
evidence that during the pertinent period, petitioners never paid meal break
premium wages: that conduct subjected petitioners to liability suitable for class
treatment only if they had a “system-wide” practice of failing to pay meal break
premium wages “when required.” The court thus recognized that under real
parties’ theory of liability, recovery of restitution called for a showing that never
paying “appropriate” premium wages is an unlawful or unfair business practice
under the UCL, as well as a showing that petitioners actually engaged in that type
of harmful practice -- or, as the trial court put it, that there was “deep, system-wide
error.” As discussed below, our inquiry into those required showings establishes
that real parties’ theory of liability is capable of common proof.
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a. Failure to Pay Premium Wages “When Required”
Determining whether real parties’ theory is suitable for class treatment
necessitates an inquiry into the factual issues relevant to the first showing, namely,
the circumstances under which an employer’s failure to pay meal break premium
wages may constitute an unlawful or unfair business practice under the UCL. We
conclude that there is at least one such set of circumstances.
As explained in Brinker, an employer discharges its duty to provide an off-
duty break “if it relieves its employees of all duty, relinquishes control over their
activities and permits them a reasonable opportunity to take an uninterrupted 30-
minute break, and does not impede or discourage them from doing so.” (Brinker,
supra, 53 Cal.4th at p. 1040.) When the employer does so, its knowledge that an
employee is working through a meal break establishes no violation of the duty to
pay premium wages, though the employer must still compensate the employee for
the time worked. (Ibid., fn. 19.) In contrast, if the employer knows that meal
breaks are missed, shortened, or unduly delayed because the employer has
instructed the employee to work, or has otherwise impeded the taking of breaks,
that duty is contravened, absent a suitable waiver or agreement by the employee.
(See id. at pp. 1039-1040, 1049.)
In view of Murphy, under those circumstances, the employee is
“immediately” entitled to the premium wage, without any demand or claim to the
employer, in a manner “akin to an employee’s immediate entitlement to payment
of wages or for overtime.” (Murphy, supra, 40 Cal.4th at p. 1108.)5 The Labor
5
Petitioners suggest that employers are not obliged to pay premium wages
under those circumstances if employees do not request them or their supervisors
merely fail to order payment of the wages. We disagree. As explained in Murphy,
an employee’s right to the premium wages vests prior to any action taken to
(Fn. continued on next page.)
17
Code contains numerous provisions requiring the payment of wages (e.g., § 204
[requiring payment of wages every two weeks, unless specified otherwise in
employment contract]), including overtime wages (§ 510, subd. (a)), as well as
provisions intended to enforce those requirements (e.g., § 210 [imposing penalties
for failing to make timely wage payments]; § 1194 [authorizing civil actions to
recover unpaid overtime wages].) The Labor Code thus embodies a public policy
“in favor of full and prompt payment of wages due an employee.” (Kerr’s
Catering Service v. Department of Industrial Relations (1962) 57 Cal.2d 319,
326.) We therefore conclude that a UCL claim may be predicated on a practice of
not paying premium wages for missed, shortened, or delayed meal breaks
attributable to the employer’s instructions or undue pressure, and unaccompanied
by a suitable employee waiver or agreement. (See Cortez, supra, 23 Cal.4th at
p. 177 [under UCL, employer’s failure to pay earned wages was an unlawful
business practice]; Sullivan v. Oracle Corp. (2011) 51 Cal.4th 1191, 1206 [under
UCL, California employer’s failure to pay overtime wages to out-of-state
employees was an unlawful business practice]; Tomlinson v. Indymac Bank F.S.B
(2005) 359 F.Supp.2d 891, 895-897 [employer’s failure to pay meal break
premium wages was an unlawful business practice under the UCL].)
Petitioners contend no UCL claim can be predicated on a practice of not
paying premiums, absent evidence that the employer failed to “provide” lawful
meal breaks. They argue that under Kirby, there is no theory under which a failure
to pay meal break premium wages is “separately actionable” from a failure to
enforce that right. (Murphy, supra, 40 Cal.4th at p. 1108.) For that reason,
employers owe the premium wages in the absence of any request by employees or
payment authorization by their supervisors.
18
provide meal breaks. In addition, they argue that under Brinker, an employer that
provides meal breaks is not obliged to ensure that employees do not work through
them.
Although we do not disagree with petitioners’ primary contention, it does
not address real parties’ theory of liability, as elaborated above. Nothing in Kirby
or Brinker forecloses that theory, which is predicated not on a failure to pay
premium wages in the absence of section 226.7 violations, but on an alleged
practice of failing to pay them when required. As explained above, under that
theory, when an employer directs or improperly pressures employees to miss,
shorten, or delay meal breaks in the absence of a suitable waiver or agreement,
employees accrue premium wages that the employer is obliged to pay, without any
demand or action by the employee.6
Petitioners maintain that real parties have identified no unlawful or unfair
practice. They invoke two restrictions on liability under the UCL traceable to Cel-
Tech, supra, 20 Cal.4th 163, which involved UCL claims relating to the marketing
of consumer goods and services. There, our Supreme Court stated that no UCL
claim may be predicated on a practice for which there is a “‘safe harbor,’” that is,
specific legislation that “clearly permit[s]” the practice. (Cel-Tech, supra, at
pp. 182-183.) In addition, the court concluded that for purposes of the type of
UCL claim presented to it, the public policy necessary to establish an unfair
practice must be closely tied to a statute. (Cel-Tech, supra, at p. 187.) The court
stated: “When a plaintiff who claims to have suffered injury from a direct
6
In a related contention, petitioners’ reply brief suggests that real parties’ theory is
predicated on petitioners’ lack of a “formal policy” regarding the payment of meal break
payment wages. However, the theory relies on the practice described above, not the
absence of any such formal policy.
19
competitor’s ‘unfair’ act or practice invokes [the UCL], the word ‘unfair’. . .
means conduct that threatens an incipient violation of an antitrust law, or violates
the policy or spirit of one of those laws because its effects are comparable to or the
same as a violation of the law, or otherwise significantly threatens or harms
competition.” (Ibid.) Following Cel-Tech, at least one appellate court has
concluded that in any UCL action, the public policy underlying an alleged unfair
practice “must be ‘tethered’ to specific constitutional, statutory, or regulatory
provisions.” (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 854.)
Relying on Kirby, petitioners contend that the practice attributed to them
regarding the nonpayment of meal break premium wages was lawful and
permissible. However, under the “safe harbor” exception to UCL liability, “[t]here
is a difference between (1) not making an activity unlawful, and (2) making that
activity lawful.” (Cel-Tech, supra, 20 Cal.4th p. 183.) Kirby stands solely for the
proposition that an employer’s failure to pay accrued meal break premium wages
is not itself a violation of section 226.7. Nothing in Kirby suggests that section
226.7 or any other provision of the Labor Code “clearly permit[s]” an employer to
withhold accrued meal break premium wages (Cel-Tech, supra, 20 Cal.4th at
p.p. 182-183).
Petitioners also contend that because real parties have asserted no class
claim for violations of section 226.7 based on a policy or practice of denying meal
breaks, they cannot maintain a class claim under the UCL based on an alleged
practice of never paying meal break premium wages. The crux of their argument
is that under the test for unfairness in Cel-Tech, no UCL claim for an unfair
practice is tenable absent an underlying claim for a Labor Code violation. We
disagree. Nothing in Cel-Tech suggests that unfairness requires a statutory
violation; on the contrary, Cel-Tech expressly states that the UCL is independent
20
of other statutes, and prohibits unfair practices not otherwise unlawful. (Cel-Tech,
supra, 20 Cal.4th at pp. 180-181.) Furthermore, assuming --without deciding --
that the test for unfairness set forth in Cel-Tech is applicable to petitioners’ claim,
the alleged practice is unfair, in view of the Labor Code provisions discussed
above regarding timely payment of wages, as well as the public policy they
embody.
Aleksick v. 7-Eleven, Inc. (2012) 205 Cal.App.4th 1176, upon which
petitioners rely, is distinguishable. There, a franchisor of convenience stores
imposed a contractual obligation on franchisees to obtain payroll services from the
franchisor. (Id. at pp. 1180-1181.) A franchisee’s employee asserted a UCL class
action against the franchisor, alleging that its payroll system did not fully
compensate franchisee employees for their work. (Aleksick v. 7-Eleven, Inc.,
supra, 205 Cal.App.4th at pp. 1180-1181.) When the franchisor secured summary
judgment on the claim, the appellate court affirmed, concluding that because the
franchisor was not the class members’ employer, the UCL claim failed for want of
a cognizable unlawful or unfair practice under the Labor Code. (Aleksick v. 7-
Eleven, Inc., supra, at pp. 1185-1193.) Here, in contrast, petitioners employed real
parties and the putative class members during the pertinent period.
Petitioners further contend the trial court erred in certifying real parties’
UCL theory for class treatment in the absence of a suitable showing of “[p]redicate
[l]iability.” They argue that the theory presupposes liability without proof, and
that the trial court’s ruling denied them due process. However, the court
recognized that real parties’ theory required a demonstration of facts sufficient to
establish liability. As noted above, an element of the common issue identified by
the court was whether “there was deep, system-wide error.” The court thus
21
effectively determined that the facts required to show liability were suitable for
class treatment. We therefore turn to that aspect of the court’s ruling.
b. “Deep, System-Wide Error”
To demonstrate the propriety of class certification, real parties were obliged
to show that the practice described above and the so-called “fact of damage” --
that is, the existence of harm supporting a recovery of restitution -- were capable
of common proof. Generally, the fact of damage is suitable for class treatment
only when the class members “‘“have sustained the same or similar damage.”’”
(Ali v. U.S.A. Cab Ltd. (2009) 176 Cal.App.4th 1333, 1349-1350, italics deleted,
quoting Caro v. Procter & Gamble Co. (1993) 18 Cal.App.4th 644, 664.) Aside
from submitting evidence relating to the existence of the practice, real parties
proposed a theory of recovery identifying the restitution sought and their
entitlement to it. They maintained they did not seek accrued meal break premium
wages owed to individual class members, but rather the loss of the “compensation
guarantee and enhanced enforcement” implemented by section 226.7. According
to real parties, that loss was imposed on “all class members,” as “the class
members lost a substantial portion of the value they were otherwise guaranteed as
part of their employment . . . .” (Italics added.)
Real parties’ evidentiary showing relied on their own declarations and
deposition testimony, as well as deposition testimony from petitioners’ managers.
That evidence showed that prior to 2007, real parties often had been directed or
pressured by supervisors not to take meal breaks, and that petitioners had no
mechanism by which the premium pay related to meal breaks was calculated or
determined when due. In addition, real parties submitted the declaration from
accounting expert Leitzow, who offered opinions based on a sample of petitioners’
22
time punch data and payroll records. He estimated that petitioners’ full records for
the pertinent break would disclose 27,095,927 “meal break violations,” that is,
instances in which employee time punch data reflected omitted, shortened, or
delayed meal breaks. He also stated that the records he reviewed -- including real
parties’ own payroll records -- showed no premium wage payments under the
earning codes used to document section 226.7 payments.7
In our view, real parties demonstrated that the existence of the practice and
the fact of damage were matters suitable for class treatment. Real parties’
evidence supports the reasonable inference that in the context of a class action,
they could establish that petitioners engaged in the alleged practice, that is, they
never paid meal break premium wages, even though a significant number of
employees accrued them. Furthermore, in view of real parties’ theory of
restitution, those facts would also suffice to demonstrate the fact of damage.
Under that theory, the fact of damage does not require a showing that all -- or
virtually all -- class members accrued unpaid meal break premium wages, but only
that on a system-wide basis, petitioners denied the class members the benefits of
the compensation guarantee and enhanced enforcement implemented by section
226.7.
We find further support for our conclusion from the concurring opinion of
Justice Werdegar in Brinker, who also authored the majority opinion. In the
concurring opinion, for the guidance of the parties on remand, Justice Werdegar
stated the majority opinion did not accept the employer’s contention that the
7
Although the principles regulating the use of statistical methods to establish
liability in class actions are unsettled, the use of such a method may be proper when the
defendant is not prevented from impeaching it or presenting defenses. (Duran, supra, 59
Cal.4th 35, 38-40.)
23
determinations necessary to show why meal breaks were missed categorically
precluded certification of a class action for missed meal breaks. (Brinker, supra,53 Cal.4th at p. 1052 (conc. opn. of Werdegar, J.).) In explaining that a variety of
methods existed to render such actions manageable, Justice Werdegar placed
special emphasis on a presumption based on record-keeping obligations. (Id. at
pp. 1052-1054 (conc. opn. of Werdegar, J.).) Justice Werdegar stated that when
the applicable IWC wage order obliges the employer to record meal breaks, “[i]f
[those] records show no meal period for a given shift over five hours, a rebuttable
presumption arises that the employee was not relieved of duty and no meal period
was provided. . . . An employer’s assertion that it did relieve the employee of
duty, but the employee waived the opportunity to have a work-free break, is not an
element that a plaintiff must disprove as part of the plaintiff’s case-in-chief.
Rather, . . . the assertion is an affirmative defense, and thus the burden is on the
employer, as the party asserting waiver, to plead and prove it. [Citations.]”
(Brinker, supra, at p. 1053 (conc. opn. of Werdegar, J.).) In view of the
presumption and other methods of rendering a class action manageable, including
representative testimony, surveys, and statistical analysis, there is no per se bar to
class actions related to missed meal breaks, although denial of certification may be
necessary in some instances.8 (Id. at pp. 1053-1055 (conc. opn. of Werdegar, J.).)
8
The presumption discussed by Justice Werdegar is predicated on the United States
Supreme Court’s decision in Anderson v. Mt. Clemens Pottery Co. (1946) 328 U.S. 680.
(Brinker, supra, 53 Cal.4th at p. 1053, fn. 1 (conc. opn. of Werdegar, J.).) There,
employees asserted claims for unpaid overtime under the Federal Labor Standards Act
(FLSA) (29 U.S.C. § 201 et seq.), alleging that because their employer’s time-keeping
system automatically reduced their clocked breaks of work in a predetermined manner,
they were not fully compensated for work performed. (Anderson v. Mt. Clemens Pottery
Co., supra, 328 U.S. at pp. 682-684.) Noting that the FLSA obliged employers to keep
proper work records, the high court determined that once the employees had adequately
(Fn. continued on next page.)
24
Here, establishing that a significant number of employees accrued unpaid
meal break premium wages is capable of common proof, in view of petitioners’
time punch data and the presumption identified by Justice Werdegar. There is no
dispute that the applicable wage order is Wage Order 7-2001 (Cal. Code Regs., tit.
8, § 11070), which obliges employers to provide at least one 30-minute meal break
for shifts of over five hours (absent a waiver available only in limited
circumstances) (id., subd. (11)(A)), requires employers to record meal breaks (id.,
subd. (7)(A)(3)), and permits an “on duty” meal break only with the employee’s
express written agreement (id., subd. (11)(C)). The time punch data and records
identified by Leitzow are capable of raising a rebuttable presumption that a
significant portion of the missed, shortened, and delayed meal breaks reflected
meal break violations under section 226.7. Because that fact potentially can be
shown without consideration of an unwieldy number of individualized issues, the
record shows that the facts necessary to establish liability are capable of common
proof.
Petitioners’ contentions are largely directed at a theory real parties do not
assert. They maintain that real parties’ UCL claim is not suitable for class
treatment for several reasons, each of which relies on the assumption that real
parties seek unpaid meal break premium wages. Their primary contention is that
the issues regarding liability and the entitlement to restitution are incapable of
shown they performed work for which they were owed compensation and sufficient
evidence of the amount of that work, the burden shifted to the employer “to come forward
with evidence of the precise amount of work performed.” (Anderson v. Mt. Clemens
Pottery Co. supra, at pp. 687-688.) A contrary holding, the court explained, would
“penalize” employees and “place a premium on an employer’s failure to keep proper
records in conformity with his statutory duty; it would allow the employer to keep the
benefits of an employee’s labors without paying due compensation as contemplated by
the [FLSA].” (Id. at p. 687.)
25
common proof unless they had a policy or practice of denying meal breaks. In the
absence of such a policy or practice, petitioners argue, class treatment of real
parties’ claim necessitates individualized assessments of the time punch data to
establish section 226.7 violations and the accrual of premium wages. Petitioners
further maintain they had policies guaranteeing meal breaks, and there is no
evidence they systematically required employees to miss, shorten, or delay meal
breaks. They point to the evidence that prior to June 2007, they provided meal
breaks to the putative class members in compliance with sections 226.7 and 512,
Wage Order 7-2001, and the applicable collective bargaining arguments. 9
As explained above, however, real parties’ theory of liability does not
require individual issues sufficient to preclude class treatment. That theory
predicates liability on petitioners’ alleged practice of never paying meal break
premium wages when required, and seeks restitution for the class-wide loss of the
statutory benefits implemented by section 226.7, not the premium wages accrued
by class members. Accordingly, establishing real parties’ theory does not
9
We note that petitioners represent that Safeway paid meal break premiums before
2007 “as required under its collective bargaining agreements.” However, during the
hearing on the certification motion before the trial court, petitioners’ counsel
acknowledged that they had submitted no evidence that even a single meal break
premium wage was ever paid. To the extent petitioners suggest that the contractual
penalties amounted to payment of the premium wages owed under section 226.7, they
have forfeited that contention, as they did not raise it before the trial court, and offer no
argument with citation to legal authority to support it. (Evans v. Lasco Bathware, Inc.
(2009) 178 Cal.App.4th 1417, 1429, fn. 6 (Evans); Okasaki v. City of Elk Grove (2012)
203 Cal.App.4th 1043, 1045, fn. 1; OCM Principal Opportunities Fund, L.P. v. CIBC
World Markets Corp. (2007) 157 Cal.App.4th 835, 844, fn. 3; 9 Witkin, Cal. Procedure
(5th ed. 2008) Appeal, § 701, pp. 769-771.)
26
necessitate excessive individualized assessments of time punch data or similar
inquiries.10
Petitioners also contend the class definition is defective because it is
“completely disconnected” from real parties’ theory of liability, and contains
individuals owed no meal break premium wages, as well as individuals regarding
whom the existence of a meal break violation is difficult to assess. Those
contentions fail, however, as real parties’ theory of restitution places the purported
loss on all members of the class, as defined.
Petitioners challenge real parties’ theory of restitution, arguing that they
seek restitution for a loss not cognizable under the UCL. However, as petitioners
raised no objection to the theory before the trial court, and first raised their
challenges in their reply brief in this writ proceeding, they have forfeited their
contentions of error. (Evans, supra, 178 Cal.App.4th at p. 1429, fn. 6.) In so
concluding, we note that the forfeiture does not bar petitioners from attacking the
theory by means of a motion for summary judgment or other suitable manner.
(Hall v. Rite Aid Corp. (2014) 226 Cal.App.4th 278, 296-297.)
10
The decisions upon which petitioners rely are factually distinguishable. In each
case, the party seeking class certification of claims related to section 226.7 did not rely on
real parties’ theory of restitution, and the pertinent court determined the propriety of class
treatment on the basis of a different theory of recovery. (Sotelo v. Medianews Group, Inc.
(2012) 207 Cal.App.4th 639, 652-655; Ugas v. H & R Block Enterprises, LLC (C.D. Cal.
2012) 2012 U.S. Dist. LEXIS 156359, *1-*13; Uddin v. Radio Shack, Corp. (C.D. Cal.
July 2, 2012, CV 11-398 CAS (JCGx)), pp. 13-15; Gonzalez v. Millard Mall Services,
Inc. (S.D. Cal. 2012) 281 F.R.D. 455, 461-464 [2012 U.S. Dist. LEXIS 28142, **14-
**24]; Ordonez v. Radio Shack, Inc. (C.D. Cal. 2013, Jan. 17, 2013, No. CV 10-7060-
CAS (JCGx)) 2013 U.S. Dist. LEXIS 7868, *17-*24.)
27
2. Determining the Amount of Restitution
We further conclude that determining the amount of restitution under real
parties’ theory of restitution presents no issues precluding class certification.
Regarding restitution, the UCL provides that “[t]he court may make such orders or
judgments . . . as may be necessary to restore to any person in interest any money
or property, real or personal, which may have been acquired by means of such
unfair competition.” (Bus. & Prof. Code, § 17203.) As noted above (see pt. D.1.,
ante), the UCL permits employees to obtain restitution for unpaid wages. (Cortez,
supra, 23 Cal.4th at p. 177.) In suitable circumstances, “the return of the excess of
what the plaintiff gave the defendant over the value of what the plaintiff received”
is an appropriate measure of restitution. (Id. at p. 174.) Generally, “[i]in order to
recover under th[at] measure, there must be evidence of the actual value of what
the plaintiff received. When the plaintiff seeks to value the product received by
means of the market price of another, comparable product, that measure cannot be
awarded without evidence that the proposed comparator is actually a product of
comparable value to what was received. [Citation.]” (In re Vioxx Class
Cases (2009) 180 Cal.App.4th 116, 131.)
As noted, real parties do not seek the unpaid accrued meal break premium
wages, but instead maintain that valuing the loss of the “statutory protections” to
the class can be determined by a “‘market value’ approach.” Before the trial court
and in this proceeding, they have proposed a specific application of the measure of
restitution discussed above, arguing that the loss is “directly measurable” by
reference to petitioners’ own conduct, namely, their 2007 decision to begin paying
meal break premium wages “automatically” for short, late, and missed meal breaks
reflected in time punch data. They assert that petitioners effectively identified “the
least costly method to correct [their] pre-June 2007 practice.”
28
We do not examine the merits of real parties’ proposed measure of
restitution, as no such inquiry is necessary for a determination whether it precludes
class treatment of real parties’ UCL claim. For purposes of our review, it is
sufficient that the proposed measure does not require the litigation of issues
unsuitable for class certification. Furthermore, because petitioners raised no
challenge to the real parties’ proposed measure of restitution prior to their reply
brief in this proceeding, they have forfeited any contention of error regarding it.
In sum, the trial court did not err in certifying real parties’ UCL claim for class
treatment.
29
DISPOSITION
The petition for writ of mandate is denied. Real parties are awarded their
costs.
CERTIFIED FOR PUBLICATION
MANELLA, J.
We concur:
EPSTEIN, P. J.
WILLHITE, J.
30