Lujan v. Southern California Gas Co.

• Decision Date: 13 March 2002
• Docket Number: No. B148811.,B148811.
• Citation: 96 Cal.App.4th 1200,117 Cal.Rptr.2d 828
• Court: California Court of Appeals Court of Appeals
• Parties: Arthur LUJAN, as Labor Commissioner of the State of California Department of Industrial Relations, Plaintiff and Respondent, v. SOUTHERN CALIFORNIA GAS COMPANY, Defendant and Appellant.

117 Cal.Rptr.2d 828

96 Cal.App.4th 1200

Arthur LUJAN, as Labor Commissioner of the State of California Department of Industrial Relations, Plaintiff and Respondent, v. SOUTHERN CALIFORNIA GAS COMPANY, Defendant and Appellant.

No. B148811.

Court of Appeal, Second District, Division 4.

March 13, 2002.

Rehearing Denied April 4, 2002.

Review Denied June 12, 2002.

Randall R. Morrow and David B. Reeves, Los Angeles, for Defendant and Appellant.

William A. Reich, Ventura, for Plaintiff and Respondent.

HASTINGS, J.

Summary judgment was granted in favor of respondent, Labor Commissioner of the State of California Department of Industrial Relations, Division of Labor Standards Enforcement, in an action against Southern California Gas Company (hereinafter referred to as Employer).¹ The trial court found that application of a collective bargaining agreement between Employer and its meter readers resulted in certain of the meter readers being paid less than required for overtime pay pursuant to a California labor regulation, Wage Order 4-89. Judgment was entered against Employer in an amount stipulated by the parties.

Three determinations were essential to the trial court's resolution of the case: (1) that federal law did not preempt application of state law; (2) that it should defer to respondent's method of calculating the equivalent hourly "regular pay" to determine whether the collective bargaining agreement was at odds with Wage Order 4-89, subdivision 3(A); and (3) that the collective bargaining exemption within Wage Order 4-89, subdivision 3(G), was not applicable.

We conclude that the trial court did not err on the issue of preemption or in deferring to respondent's method of calculating the equivalent hourly regular pay referenced in Wage Order 4-89, subdivision (A). But the court did err in its determination that the collective bargaining exemption did not apply to the collective bargaining agreement at issue. Depending on the number of overtime hours worked, application of the formula provided within the collective bargaining agreement may or may not violate the terms of Wage Order 4-89. The matter must therefore be remanded for further proceedings to determine whether in any specific instance the wage order was violated.

BACKGROUND

During the period from April 1995 through April 1998, Employer's gas meter readers were covered under a collective bargaining agreement. Through the collective bargaining process, Employer implemented a new compensation plan for its meter readers in April 1995, known as the "Pay Per Route" (PPR) program. The system in place prior to 1995 compensated the meter readers at a fixed hourly rate. Briefly stated, the PPR provided that meter readers would be paid a flat daily rate for working routes designed with the expectation they would be finished within an eight hour period. Meter readers who took more than eight hours to finish the routes received overtime compensation for the additional hours according to a formula that divided the flat daily rate by the number of hours actually worked that day. As a result, there was no fixed overtime rate paid for hours worked in excess of eight per day.

The Industrial Welfare Commission (IWC) is the state agency empowered to formulate regulations governing employment in California. Those regulations are known as "wage orders." (Lab.Code, §§ 1173, 1178.5, 1182.) The Division of Labor Standards Enforcement, headed by respondent Labor Commissioner, is the state agency empowered to enforce California's labor laws, including IWC wage orders. (Lab.Code, §§ 21, 61, 95, 98-98.7, 1193.5.)

The wage order at issue here is 4-89 (Cal.Code Regs., tit. 8, § 11040),² which provides in section 3(A): "[E]mployees shall not be employed more than eight (8) hours in any workday or more than forty (40) hours in any workweek unless the employee receives one and one-half times such employee's regular rate of pay for all hours worked over forty (40) hours in the workweek. Employment beyond eight (8) hours in any workday ... is permissible provided the employee is compensated for such overtime at not less than: [¶] (1) One and one-half (1 ½) times the employee's regular rate of pay for all hours worked in excess of eight (8) hours...."

Subdivision 3(G) provides an exemption to the terms of subdivision 3(A) where an employee is "covered by a collective bargaining agreement if said agreement provides premium wage rates for overtime work and a cash wage rate for such employee of not less than one dollar ($1.00) per hour more than the minimum wage."

In April 1998, respondent, the State Labor Commissioner, brought an action against Employer, alleging that the formula in the PPR for calculating overtime wages constituted a violation of the state's overtime law, and seeking to recover unpaid overtime wages on behalf of the meter readers, as well as waiting time penalties for those wages as provided for by the Labor Code.

Employer asserted two affirmative defenses: (1) that respondent's complaint was preempted by federal labor laws; and (2) the PPR compensation program fell under a special exemption to the state's overtime pay laws because it was covered by a collective bargaining agreement.³

On February 9, 1999, Employer brought a motion for summary judgment against respondent based on its two affirmative defenses. The following day, respondent filed a motion for summary adjudication against Employer, requesting an order adjudicating that there was no merit to either of the affirmative defenses and that Employer owed a duty to pay its meter readers in compliance with state law.

Respondent asserted that the formula contained within the collective bargaining agreement is at odds with the method respondent was required to use to calculate the hourly equivalent of the "regular rate of pay" referenced in Wage Order 4-89. Respondent divides the fixed daily rate by eight, the maximum number of hours that may be worked per day before overtime pay is required pursuant to Wage Order 4-89. In other words, if the fixed daily rate is $132.48, then the hourly regular rate would equate to $16.56 ($132.48 divided by 8). Using this hourly regular rate, if a meter reader worked 10 hours in one day and completed only the regularly assigned number of routes, he or she should be compensated for those two additional hours of overtime at the rate of $24.84 ($16.56 × 1.5).

On the other hand, Employer contends that the method of determining the equivalent hourly regular rate contained within the collective bargaining agreement is sanctioned by federal law, to which respondent and the courts should defer. Federal regulations provide that the "regular rate" is determined by dividing total earnings per day by total hours worked that same day. (29 C.F.R. § 778.111 and 778.112; accord Bay Ridge Co. v. Aaron (1948) 334 U.S. 446, 464, 68 S.Ct. 1186, 92 L.Ed. 1502.) Utilizing the federal method of calculation in the example above, the hourly regular rate would equate to $13.25 ($132.48 divided by 10). The meter reader would be compensated for the two additional hours of overtime at the rate of $19.87 per hour ($13.25 × 1.5). Under Employer's method, therefore, the regular rate is not fixed; an individual's regular rate can vary daily, and the more overtime hours a meter reader works, the lower his or her regular rate and overtime rate become.

On March 9, 1999, the trial court heard both motions. After taking the matter under submission, it denied Employer's motion for summary judgment and granted respondent's motion for summary adjudication. It concluded that federal preemption did not exist; that the agency's determination of its own regulation deserved great weight; and that Skyline Homes, Inc. v. Department of Industrial Relations (1985) 165 Cal.App.3d 239, 211 Cal.Rptr. 792 "still governs as to calculating overtime wages."

Employer amended its answer to assert a third affirmative defense, that it had made additional overtime payments which should be credited against any liability. The matter proceeded to trial in October 2000. At trial, Employer withdrew its third affirmative defense, respondent withdrew its second cause of action for waiting time penalties, and the parties stipulated that the amount of overtime wages due, based on respondent's interpretation as adopted by the trial court, was $286,683.87. Judgment was entered accordingly on December 8, 2000. Employer's motion for new trial was denied and it appealed.

DISCUSSION

I. Preemption

Pursuant to section 301 of the Labor Management Relations Act (29 U.S.C. § 185(a)) (section 301), federal law exclusively governs suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce. (Caterpillar Inc. v. Williams (1987) 482 U.S. 386, 393, 107 S.Ct. 2425, 96 L.Ed.2d 318.) Section 301 has been construed to cover most state law actions that require interpretation of labor agreements to ensure uniformity. (Lingle v. Norge Division of Magic Chef, Inc. (1988) 486 U.S. 399, 403, 108 S.Ct. 1877, 100 L.Ed.2d 410.) "[W]hen resolution of a state-law claim is substantially dependent upon analysis of the terms of an agreement made between the parties in a labor contract, that claim must either be treated as a section 301 claim or dismissed as preempted by federal labor-contract law." (Allis Chalmers Corp. v. Lueck (1985) 471 U.S. 202, 220, 105 S.Ct. 1904, 85 L.Ed.2d 206, internal citations omitted.) Preemption has also been applied when the "heart" of a state law complaint is a clause in the collective bargaining agreement (sometimes referred to as a CBA) (Caterpillar, supra, 482 U.S. at p. 394, 107 S.Ct. 2425), or if resolution of the state law claim depends on the meaning of or requires the interpretation of a collective bargaining agreement. (Lingle, supra, at pp. 405-410, 108 S.Ct. 1877.) However "not every dispute concerning employment, or tangentially involving a...