Maldonado v. Epsilon Plastics, Inc., B278022

• Court: California Court of Appeals
• Writing for the Court: RUBIN, J.
• Citation: 232 Cal.Rptr.3d 461,22 Cal.App.5th 1308
• Parties: Olvin MALDONADO et al., Plaintiffs and Respondents, v. EPSILON PLASTICS, INC., Defendant and Appellant.
• Docket Number: B281129,B278022
• Decision Date: 18 April 2018

22 Cal.App.5th 1308
232 Cal.Rptr.3d 461

Olvin MALDONADO et al., Plaintiffs and Respondents,
v.
EPSILON PLASTICS, INC., Defendant and Appellant.

B278022
B281129

Court of Appeal, Second District, Division 8, California.

Filed April 18, 2018

Stuart Kane, Robert J. Kane, Peter L. Wucetich, Newport Beach, and Shane P. Criqui, for Defendant and Appellant.

Abrolat Law, Nancy L. Abrolat and Shahane A. Martirosyan, Redondo Beach, for Plaintiffs and Respondents.

RUBIN, J.

22 Cal.App.5th 1312

Plaintiff employees were successful in a wage and hour class action against defendant and appellant Epsilon Plastics. Specifically, at four different times, Epsilon employees worked on a 12-hour/day schedule, under which they were paid for 10 hours at the regular rate of pay and 2 hours of overtime. This Alternative Workweek Schedule (AWS) would have been permissible if it had been adopted in accordance with the rules set forth in the applicable wage order. However, the trial court concluded, after a bench trial, that the AWS had not been properly adopted. The court further concluded that Epsilon's failure to pay overtime for the ninth and tenth hours of work, in reliance on the improperly adopted AWS, was not in good faith. As a result of the improperly adopted AWS, plaintiffs obtained judgment for unpaid overtime, interest, waiting time penalties ( Lab. Code, § 203 ), inaccurate wage statement penalties ( Lab. Code, § 226 ), and attorney's fees.¹

Epsilon appeals, arguing: (1) the evidence does not support the trial court's conclusion that the AWS was improperly adopted in one of the four periods; (2) the evidence does not support the full award of damages for unpaid overtime; (3) the evidence does not support the trial court's conclusion of lack of good faith for two of the four periods, undermining the award of waiting time penalties; (4) the evidence does not support the award of waiting time penalties for certain former employees; (5) the wage statement penalties must be reversed because plaintiffs suffered no injury; (6) the attorney's fee award was untimely sought; and (7) the attorney's fee award incorporated a multiplier that was not supported by the evidence. We agree with Epsilon only in two respects: the evidence does not support the full award of damages for unpaid overtime; and the wage statement penalties must be reversed. We therefore affirm in part, reverse in part, and remand for recalculation of damages, and reconsideration of the attorney's fee award.

FACTUAL AND PROCEDURAL BACKGROUND

Because of the complexity of the issues and the variety of mathematical calculations for different time periods, we spend considerable time reciting the facts and procedural history through and including the court's final statement of decision.

1. The Plant and the Plaintiffs

Epsilon manufactures plastic bags. The manufacture requires the operation of one or more lines of machines which are designed to operate 24 hours per

22 Cal.App.5th 1313

day. Whenever the machines are shut down, it takes up to six hours to restart them. This process creates a lot of wasted plastic, and excessive wear and tear on the machines. For this reason, Epsilon strongly preferred

232 Cal.Rptr.3d 464

to run its plant 24 hours a day, seven days a week.

Plaintiffs are production employees who operate the machines. Plaintiffs are largely Spanish-speaking, and many are uneducated.

2. The Two Schedules Used by Epsilon

As a general rule, overtime pay is required for each hour in excess of 8 hours in one day, or 40 hours in one week. (§ 510, subd. (a).) Epsilon could have run the plant full time with four shifts of employees working 8-hour shifts, with minimal overtime.² But Epsilon did not run the plant in that fashion.

A. The 10/2 AWS

Instead, Epsilon's employees each worked 12-hour shifts—four shifts in one week and three in the next.³ If no AWS had been adopted, Epsilon could operate its plant in this manner, but would be required to pay its employees overtime for each hour in excess of 8 hours each day. In other words, the employees would be paid regular time for the first 8 hours of each 12-hour shift, and overtime for the last 4 hours. However, Epsilon used an AWS, under which the employees were paid regular time for the first 10 hours, and overtime for the last 2 (the 10/2 AWS). In weeks that an employee worked 48 hours (4 shifts), the employee would receive 40 hours of regular pay and 8 hours of overtime; in weeks that the employee worked 36 hours (3 shifts), the employee would receive 30 hours of regular pay and 6 hours of overtime.

Under the 10/2 AWS, Epsilon also agreed to give its employees a half-hour paid meal break. As a result, the employees were paid for the full 12 hours of each shift, even though they only worked 11.5 hours. A dispute regarding overtime pay for these meal breaks would ultimately become the main damages issue at trial.

B. The Ten Day/Eight-Hour Schedule

At times, Epsilon did not have enough orders to justify operating the plant 24 hours a day, 7 days a week. However, it was keenly aware of the

22 Cal.App.5th 1314

problems caused by continually starting and stopping its machines. Therefore, when it could not operate the plant full time, it adopted a schedule of 24 hours a day for 10 days straight, then closed down for 4 days, before restarting for another 10 days, and so forth. Epsilon put its employees into three 8-hour shifts, and had each shift work for 8 hours, for 10 days straight. Epsilon paid no overtime, because it structured its workweek such that employees were working the last five days of one week and the first five days of the next, thereby never exceeding 40 hours in one week.

It can come as no surprise that Epsilon's employees vastly preferred the 10/2 AWS to the Ten Day/Eight-Hour schedule. On the 10/2 AWS, they worked fewer days and received greater pay (both for additional hours worked and for overtime). In contrast, the Ten Day/Eight-Hour schedule required them to commute to work more often, and work ten days in a row, for less money. However, although Epsilon's employees testified that they preferred the 10/2 AWS to the Ten Day/Eight-Hour schedule, several of them also testified that, had they been offered the option of a 12-hour schedule with 4 hours

232 Cal.Rptr.3d 465

of overtime, they would have preferred that. It does not appear that were ever given this option, nor were they given the option of running the plant full time with 8-hour schedules and minimal overtime.

3. The Governing Authority for Adoption of an AWS

Before we address the circumstances in which Epsilon adopted the AWS each of the four times it did so, we provide an overview of the legal requirements for an AWS.

Overtime compensation is required to be paid for any work in excess of eight hours in one workday unless an exception applies. One such exception is an "alternative workweek schedule adopted pursuant to Section 511." (§ 510, subd. (a)(1).) Section 511 in turn, provides that an employee may adopt an AWS only if it receives approval in a secret ballot election by at least two-thirds of the affected employees. Specific requirements for the adoption of an AWS are then set forth in the applicable wage orders. For the manufacturing industry, we are concerned with Industrial Welfare Commission wage order 1-2001. ( Cal. Code Regs., tit. 8, § 11010.) This wage order permits an AWS which has up to 10 hours of work per day at regular pay with up to 2 additional hours to be paid at the overtime rate. ( Cal. Code Regs., tit. 8, § 11010, subd. 3(B)(1) ; see Mitchell v. Yoplait (2004) 122 Cal.App.4th Supp. 8, 12, 19 Cal.Rptr.3d 267.)

The wage order provides detailed requirements for the adoption of such an AWS:

- it shall begin with a proposal "in the form of a written agreement proposed by the employer" ( Cal. Code Regs., tit. 8, § 11010, subd. 3(C)(1) );

22 Cal.App.5th 1315

- in "order to be valid, the proposed alternative workweek schedule must be adopted in a secret ballot election, before the performance of work, by at least a two-thirds (2/3) vote of the affected employees in the work unit. The election shall be held during regular working hours at the employees' work site" (id . at subd. 3(C)(2) );

- prior to the vote, the employer "shall have made a disclosure in writing to the affected employees, including the effects of the proposed arrangement on the employees' wages, hours, and benefits. Such a disclosure shall include meeting(s), duly noticed, held at least 14 days prior to voting, for the specific purpose of discussing the effects of the alternative workweek schedule" (id . at subd. 3(C)(3) );

- the results of the election shall be reported by the employer to the Division of Labor Statistics and Research within 30 days (id . at subd. 3(C)(6) );

- employees affected by the AWS "may not be required to work those new hours for at least 30 days after the announcement of the final results of the election" (id . at subd. 3(C)(7) ); and

- the employer

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