Armenta v. Osmose, Inc.

• Citation: 37 Cal.Rptr.3d 460,135 Cal.App.4th 314
• Decision Date: 29 December 2005
• Docket Number: No. B174806.,No. B177501.,B174806.,B177501.
• Court: California Court of Appeals
• Parties: Frank Armenta et al., Plaintiffs and Respondents, v. OSMOSE, INC., Defendant and Appellant.

37 Cal.Rptr.3d 460

135 Cal.App.4th 314

Frank Armenta et al., Plaintiffs and Respondents, v. OSMOSE, INC., Defendant and Appellant.

No. B174806.

No. B177501.

Court of Appeal, Second District, Division 6.

December 29, 2005.

Sedgwick, Detert, Moran & Arnold LLP, Christina J. Imre, Leonora M. Schloss, Douglas J. Collodel, Karen F. White, Los Angeles, for Defendant and Appellant.

Carol D. Janssen; James H. Cordes, Santa Barbara, for Plaintiffs and Respondents Frank Armenta, Colleen Ulrich, Olivia Smith, Brett Kimball, Jon Norvell, Harold Showers, Ronald Showers, Eric Johnston, and Ken Ulrich.

COFFEE, J.

Here we decide the proper method for determining whether California's minimum wage law has been violated under Labor Code section 1194 and how to calculate the waiting time penalties under section 203.¹

Appellant Osmose, Inc. appeals from the judgment awarding its former employees, respondents, a total of $90,398.22 in unpaid minimum wages, liquidated damages under section 1194.2, waiting time penalties under section 203, and attorney's fees and costs in the amount of $301,625.40 and $7,110.97, respectively.

Appellant contends the judgment must be reversed because the trial court (1) failed to use an "averaging method" in determining whether it violated California's minimum wage law (§ 1194); (2) erred in finding that it had "willfully" withheld wages under section 203 and in calculating the waiting time penalties; and (3) erred by awarding attorney's fees to respondents.

We conclude the court erred in calculating the amount of the waiting time penalties. We reverse and remand for recalculation of those penalties but affirm the judgment in all other respects.

Factual and Procedural Background

Appellant's business includes maintaining standing wood utility poles for major utility companies. At various times between November of 1996 and November of 2000, respondents were employed as union employees of appellant and members of the Local Union 1245 of the International Brotherhood of Electrical Workers, AFL-CIO. Under the terms of the parties' collective bargaining agreement, respondents were paid hourly wages ranging between $9.08 to $20, depending on whether they were crew members or foremen.

Respondents' work in the field included maintaining utility poles in rural or extremely remote locations with difficult terrain. Appellant provided its crews with a utility truck which carried the tools, chemicals, and equipment needed to perform the work in the field. Typically, appellant required the foremen to designate places to meet in the morning and the crew was required to travel from there in appellant's vehicle to the job sites. On other occasions, respondents would meet at appellant's maintenance facility to pick up necessary supplies and, in the foremen's case, to turn in paperwork (or download information). The foremen were responsible for keeping daily records of the work performed in the field, including pole information, production statistics, and hourly timesheets for all crew members.

Employee hours were classified as productive or nonproductive, depending on whether the hours were directly related to maintaining the utility poles in the field. Appellant's employees, including the supervisors, foremen, and crewmen, were eligible for a bonus if they exceeded production norms. The production norm was a standard determined by appellant's regional office and varied depending on the size of the crew, the type of work, and the territory covered. The production norm required 90 percent efficiency (90 percent productive time).

At trial, respondents testified that they were not compensated for a myriad of tasks that primarily fell into the following categories: (1) travel time in company vehicles; (2) time spent loading equipment and supplies into the company vehicle; (3) time spent doing daily and weekly paperwork (foremen only); and (4) time spent in maintaining the company vehicles (foremen only). Respondents testified that time spent performing these tasks was considered nonproductive time.

In November of 2000, respondents filed the instant action in state court, electing not to pursue recovery for uncompensated time at their contractual hourly wages under their collective bargaining agreement, but instead alleging that appellant failed to pay minimum wages under section 1194. The complaint was styled as a "class action" and sought unpaid minimum wages under section 1194, liquidated damages under section 1194.2, waiting time penalties under section 203, and damages for an unfair business practice under Business and Professions Code section 17200. Included in the minimum wage claim were allegations that appellant did not pay overtime wages.

Appellant subsequently removed the action to federal court, asserting that the action arose under section 301(a) of the Labor Management Relations Act and was preempted. (29 U.S.C. § 185(a).) To avoid removal, respondents stipulated to amend their complaint to strike all references to unpaid overtime wages and to instead seek only unpaid minimum wages under section 1194. The case was then remanded back to state court. Respondents filed an amended complaint and unsuccessfully attempted class certification. Following an unsuccessful mediation, the case proceeded to a 10-day bench trial on respondents' claims for violation of the state minimum wage law, liquidated damages, waiting time penalties under section 203, and an unfair business practice.

At trial, respondents presented lengthy testimony concerning the hours they worked for which they were not compensated. They testified they were not paid for maintaining the company truck, taking the truck to be serviced and waiting for it, washing it, cleaning it out at the end of the day, discarding trash at the end of the day, repairing tools needed for field work, or for their time driving to and from the job site. They testified that it was not practical to drive their own vehicles to some of the job sites because of the terrain or location of some of the poles (on roads, highways, or private property). Additionally, they presented passages from appellant's foreman's manual which required the crew to travel together and conduct work during the drive. Among the work performed while riding in the company vehicle were safety meetings, planning the day's work, training, and reviewing maps. Notwithstanding written employment policies stating that foremen would be paid for driving the company vehicle to and from job sites, the foremen testified they were not paid for their driving time. Despite written employment policies stating that employees would not be expected to do any work prior to arriving at a job site or after leaving the job site, respondents testified that they were required to load the trucks with steel and other supplies without compensation both before and after work. Generally, appellant's pay records showed only hours worked by respondents at the actual sites of the utility poles.

Respondents testified that the issue of being compensated for driving time was raised at a company meeting, but district managers declined to pay for it, stating that respondents' time started when they reached the first pole in the morning. One of the respondents was demoted after being particularly vocal about his desire to be paid for this nonproductive time. Others reported the time on their time sheets but were never paid for it. Respondents maintained that supervisors instructed them not to report nonproductive time. They testified that reporting nonproductive time would make it difficult to meet production norms and obtain bonuses. Supervisors instructed them to do whatever it took to reach production norms.

In response, appellant produced several witnesses to rebut respondents' claims, including similarly situated foremen, a supervisor, an area manager, and a district manager. These individuals were in conflict as to whether employees would be compensated for driving time. Area Manager John Brown testified to a "one way commute policy," in which he deemed compensation was appropriate one way for drive time. Supervisor James Bushta testified the crew would not be paid and that compensable time excluded drive time and stopped upon completion of work at the last pole each day. Manager Kip Hughes testified that employees would be compensated for drive time only if they picked up supplies first. Other testimony established that crewmen and foremen were expected to record the same 40 hours per week, despite written employment policies allowing foremen to be paid for driving time.

In written arguments presented to the court, appellant contended that it had not violated California's minimum wage law (§ 1194) because respondents were compensated weekly at an amount exceeding the total hours worked multiplied by the applicable minimum wage. In other words, because respondents were paid an hourly wage far in excess of the minimum wage, appellant contended that respondents' weekly pay check exceeded the product of the total hours worked (paid and unpaid) and the minimum wage. Appellant argued that their average hourly rate in any given pay period was higher than California's minimum wage and, therefore, it had not violated section 1194. Appellant noted that this "averaging" method was consistent with the approach utilized by the federal courts.

Respondents contended that they were entitled to minimum wage for each uncompensated hour, plus statutory penalties and interest. Respondents relied on an opinion letter of the Department of Labor Standards Enforcement (DLSE) dated January 29, 2002. Appellant contended the DLSE opinion letter was not persuasive authority.

After taking the matter under submission, the trial court issued a 23-page decision finding in favor of respondents, ruling that appellant had violated California's minimum wage law by not compensating respondents for travel time and for time spent on daily paperwork....