Conley v. Pacific Gas and Elec. Co.

• Decision Date: 21 July 2005
• Docket Number: No. A105832.,A105832.
• Citation: Conley v. Pacific Gas and Elec. Co., 31 Cal.Rptr.3d 719, 131 Cal.App.4th 260 (Cal. App. 2005)
• Court: California Court of Appeals
• Parties: John CONLEY et al., Plaintiffs and Appellants, v. PACIFIC GAS AND ELECTRIC COMPANY, Defendant and Respondent.

31 Cal.Rptr.3d 719

131 Cal.App.4th 260

John CONLEY et al., Plaintiffs and Appellants, v. PACIFIC GAS AND ELECTRIC COMPANY, Defendant and Respondent.

No. A105832.

Court of Appeal, First District, Division 2.

July 21, 2005.

Certified for Partial Publication.^*

Siegel & LeWitter, Jonathan H. Siegel, Los Jody I. LeWitter, Daria Dimitroff, Oakland, Jonathan D. Yank, for Appellants.

Thelen, Reid & Priest, Thomas E. Hill, Los Angeles, Thomas M. McInerney, Seth L. Neulight, San Francisco, for Respondent.

RUVOLO, J.

Respondent Pacific Gas and Electric Company (PG & E) classifies some of its employees as exempt from the federal and California laws requiring overtime pay. Appellants are PG & E employees who dispute PG & E's classification of them as exempt. Appellants seek to pursue claims for unpaid overtime on behalf of several classes of PG & E employees whom they assert have been improperly treated as exempt: a salary basis class, consisting of all PG & E employees who have been classified as exempt, and various job duties classes, each consisting of employees who hold jobs in specific categories. The trial court denied appellants' motion for class certification in its entirety, and this appeal ensued.

As to the proposed salary basis class, appellants allege that PG & E's policy of charging its exempt employees' vacation leave banks for partial-day absences from work renders all of those employees non-exempt as a matter of California law. Because the trial court rejected this argument, it concluded that the class members did not share a plausible cause of action, and accordingly ruled that certification of the proposed class would be inappropriate.

Class certification normally should not be denied on the basis of a perceived lack of merit in the claims asserted on behalf of the proposed class. In this case, however, appellants have invited us to address the merits of their claim. Moreover, in the present posture of this case, the exemption issue presents a pure question of law, which is one of first impression under California law. We therefore deem it appropriate to resolve it on this appeal. Accordingly, in the published portion of this opinion, we conclude that nothing in California law precludes an employer from following the established federal policy permitting employers to deduct from exempt employees' vacation leave, when available, on account of partial-day absences from work. We therefore affirm the order denying certification of the salary basis subclass.

As to the job duties classes, appellants allege that the nature of the duties performed by employees in these classes does not qualify them as exempt. The trial court denied certification of these classes on two grounds: first, that due to individual differences in the actual tasks performed by each specific member of the proposed classes, common issues did not predominate; and second, that due to the availability of alternative relief through administrative proceedings, a class action would not be a superior method of adjudicating the claims of the proposed class members. Appellants argue that developments in the case law since the trial court issued its ruling, particularly Sav-On Drugstores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 17 Cal.Rptr.3d 906, 96 P.3d 194 (Sav-On Drugs), have called into question the key premises of the trial court's legal analysis. For the reasons explained in the unpublished portion of this opinion, we agree, and accordingly remand in order to give the trial court an opportunity to reconsider its ruling as to the job duties classes in light of more recent case law.

I. FACTS AND PROCEDURAL BACKGROUND

PG & E is a utility company that supplies energy, in the form of electricity and natural gas, to customers in many areas of northern California. Appellants are PG & E employees who have been classified by PG & E as exempt from the requirements of the federal and California statutes requiring overtime pay. Two of them are Senior New Business Representatives (SNBRs), one is an Electric Distribution Engineer (EDE), and one is a Gas Distribution Engineer (GDE).

Appellants filed this action on March 23, 2000, alleging that they and the other members of the proposed classes do not meet the legal requirements for exempt status, and are therefore entitled to overtime pay. On August 8, 2003, appellants moved for certification of a salary basis class, consisting of all exempt PG & E employees, and two job duties classes, one (the SNBR/IPE class) consisting of about 97 SNBRs and 41 Industrial Power Engineers (IPEs¹), and another (the EGE/GDE class) consisting of about 66 EDEs and 15 GDEs.

The parties conducted discovery on the class certification issues and on the issues presented by a motion for summary adjudication filed by PG & E, and submitted extensive evidence and briefing. On January 5, 2004, the trial court filed a 21-page written order denying both appellants' class certification motion, in its entirety, and PG & E's summary adjudication motion. Appellants then timely filed this appeal from the denial of their class certification motion.²

II. DISCUSSION

A. Standard of Review

The law governing a trial court's decision on a motion for class certification, and the standards applicable to our review of such a decision, were recently summarized by our Supreme Court as follows: "Code of Civil Procedure section 382 authorizes class actions `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 has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members. [Citations.] 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; and (3) class representatives who can adequately represent the class. [Citation.] [¶] The certification question is `essentially a procedural one that does not ask whether an action is legally or factually meritorious.' [Citation.] A trial court ruling on a certification motion determines `whether . . . the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.' [Citations.] . . .

"We review the trial court's ruling [on a motion for class certification] for abuse of discretion. `Because trial courts are ideally situated to evaluate the efficiencies and practicalities of permitting group action, they are afforded great discretion in granting or denying certification. . . . [Accordingly,] a trial court ruling supported by substantial evidence generally will not be disturbed "unless (1) improper criteria were used [citation]; or (2) erroneous legal assumptions were made [citation]" [citation]. . . . "Any valid pertinent reason stated will be sufficient to uphold the order."' [Citations.]" [¶] . . . [¶]

"As the focus in a certification dispute is on what type of questions—common or individual—are likely to arise in the action, rather than on the merits of the case [citations], in determining whether there is substantial evidence to support a trial court's certification order, we consider whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment. [Citations.] `Reviewing courts consistently look to the allegations of the complaint and the declarations of attorneys representing the plaintiff class to resolve this question.' [Citations.]" (Sav-On Drugs, supra, 34 Cal.4th at pp. 326-327, 17 Cal.Rptr.3d 906, 96 P.3d 194.)

B. Salary Basis Class

As PG & E acknowledges, its employees are entitled to overtime pay under the federal Fair Labor Standards Act of 1938 (FLSA) (29 U.S.C. §§ 201-219) and under the California overtime statutes (Lab.Code, §§ 510, 515) unless PG & E affirmatively establishes that the employees in question qualify for an exemption to that requirement under both federal and state law. (See generally Sav-On Drugs, supra, 34 Cal.4th at pp. 324-325, 17 Cal.Rptr.3d 906, 96 P.3d 194; Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, 794-795, 85 Cal.Rptr.2d 844, 978 P.2d 2 (Ramirez).) In the present case, the parties agree that in order to justify its treatment of the members of the proposed plaintiff classes as exempt, PG & E would be required to demonstrate that those employees meet both a salary basis test and a job duties test.³ (See generally Barner v. City of Novato (9th Cir.1994) 17 F.3d 1256, 1259-1260.)

Under the federal regulations implementing the FLSA⁴, "[a]n employee will be considered to be paid on a `salary basis' . . . if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee's compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed." (29 C.F.R. § 541.602(a).)⁵ The regulations also provide that "[d]eductions from pay may be made when an exempt employee is absent from work for one or more full days for personal reasons, other than sickness or disability." (29 C.F.R. § 541.602(b)(1).)

It is undisputed that the combined effect of these provisions of federal law is to preclude employers from docking the pay of an employee for an absence of less than a day (a partial-day absence⁶). If they do, then the involved employees do not meet the salary basis test, and are non-exempt for purposes of overtime pay. When this litigation was first filed, and in their opposition to PG & E's motion for summary adjudication, appellants contended that PG & E had a practice of doing just that. Appellants were unable to...