Morales v. 22nd Dist. Agric. Ass'n

• Decision Date: 13 July 2016
• Docket Number: D067247
• Citation: 206 Cal.Rptr.3d 1,1 Cal.App.5th 504
• Court: California Court of Appeals Court of Appeals
• Parties: Jose Luis MORALES et al., Plaintiffs and Appellants, v. 22ND DISTRICT AGRICULTURAL ASSOCIATION, Defendant and Respondent.

1 Cal.App.5th 504

206 Cal.Rptr.3d 1

Jose Luis MORALES et al., Plaintiffs and Appellants

v.22ND DISTRICT AGRICULTURAL ASSOCIATION, Defendant and Respondent.

D067247

Court of Appeal, Fourth District, Division 1, California.

Filed July 13, 2016

As Modified on Denial of Rehearing August 5, 2016

Law Offices of David J. Gallo and David J. Gallo, Del Mar, for Plaintiffs and Appellants.

Gordon & Rees, James J. McMullen, Matthew G. Kleiner, Autumn Moody and Justin Michitsch, San Diego, for Defendant and Respondent.

AARON

, J.

This appeal addresses a collective action alleging nonpayment of overtime, as required by state law under Labor Code ¹

section 510 and federal law under the Fair Labor Standards Act of 1938 (FLSA, 29 U.S.C. § 201, et seq. ). We conclude that the trial court properly entered judgment for the defendant on the FLSA claim. Defendant proved the amusement or recreational exemption (29 U.S.C. § 213(a)(3), the amusement exemption) as an affirmative defense and plaintiffs failed to show error in the denial of their nonsuit motion, in the jury instructions, in the verdict form or in the court's exclusion of witnesses from the courtroom. We also conclude that the trial court properly sustained defendant's demurrer to the section 510 claim, but further conclude that the court erred in denying leave to amend.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff Jose Luis Morales and 177 other similarly situated plaintiffs (collectively appellants) sued their employer, the 22nd District Agricultural Association of the State of California (the DAA), alleging nonpayment of overtime, as required by state law under section 510

and federal law under the FLSA. The DAA is a California agency that owns and manages the Del Mar Fairgrounds (Fairgrounds) and the Del Mar Horsepark (Horsepark). The DAA leases out part of the Fairgrounds property to the Surf & Turf Recreation Golf Center (Recreation Center). Also on the Fairgrounds property is a satellite wagering facility, which is leased to another entity. The Horsepark is located on another parcel of land, located about three miles from the Fairgrounds.

Appellants are seasonal employees of the DAA who assist with amusement and seasonal operations. Appellants are limited to working 119 days in a calendar year and are internally referred to as “119–day employees.” Appellants are not limited as to the number of hours that they may work in those 119 days. Appellants filed a putative class action against the DAA to recover penalties and damages for alleged violations of state and federal overtime laws. The trial court sustained, without leave to amend, the DAA's demurrer to appellants' section 510

cause of action. After the trial court conditionally certified the case as a collective action, the DAA answered the complaint, asserting the amusement exemption as an affirmative defense to the remaining federal claim. Under this exemption, an employee of an amusement or recreational establishment is not entitled to overtime compensation if certain criteria are met. (29 U.S.C. § 213(a)(3).)

In response to a court-approved notice, 177 individuals joined the action as additional plaintiffs. The trial court bifurcated the action; the parties stipulated that the first phase of trial would be for the exclusive purpose of adjudicating the DAA's affirmative defense regarding the applicability of the amusement exemption.

Any remaining issues would subsequently be tried before a new jury.

After conclusion of the DAA's evidence, the trial court denied appellants' oral motion for nonsuit. The jury rendered a special verdict in favor of the DAA and the court later entered judgment. Thereafter, the parties submitted a stipulation regarding the form of judgment and attached a proposed judgment. The trial court endorsed the parties' stipulation, but did not separately enter the agreed form of judgment. Appellants contend, and the DAA does not contest, that the initial judgment, as modified by the order approving the parties' stipulation, constitutes a final, appealable judgment. Appellants timely appealed from the order sustaining the demurrer and from the judgment.

DISCUSSION

Appellants contend that reversal of the judgment in favor of the DAA on their FLSA claim is required because the trial court: (1) improperly denied their nonsuit motion; (2) erred in instructing the jury; (3) provided an erroneous special verdict form; and (4) improperly excluded party witnesses from the courtroom. We address these contentions in part I of this opinion, concluding that appellants have not met their burden to demonstrate reversible error. In part II of the opinion, we conclude that the trial court properly sustained the DAA's demurrer to appellants' section 510

claim, but further conclude that the court erred in denying leave to amend.

I. FLSA Claim

A. Legal and Factual Background

The FLSA requires that an employer pay overtime wages to employees unless those employees are classified as exempt employees under applicable law. (29 U.S.C. §§ 207

, 213.) The FLSA requires overtime pay only if an employee works more than 40 hours per week, regardless of the number of hours worked during any one day. (29 U.S.C. § 207(a)(1).) However, the FLSA provides for a number of exemptions to this general rule. (29 U.S.C. § 213.) One of these exemptions is the amusement exemption that applies to any employee of an establishment whose business is to provide amusement or recreation. (29 U.S.C. § 213(a)(3).)

The amusement exemption states, in relevant part, that it applies to “any employee employed by an establishment which is an amusement or recreational establishment, organized camp, or religious or non-profit educational conference center, if (A) it does not operate for more than seven months in any calendar year, or (B) during the preceding calendar year, its average receipts for any six months of such year were not more than 33 ? per centum of its average receipts for the other six months of such year....” (29 U.S.C. § 213(a)(3)

.)²

The amusement exemption thus has two main elements: first, the business must qualify as an “amusement or recreational” establishment and second, the establishment must satisfy either the duration test or the receipts test. (29 U.S.C. § 213(a)(3)

; 29 C.F.R. § 779.385 (2015).) The first element has two subparts: (1) identifying the “establishment” and (2) determining the “amusement or recreational” nature of that establishment. “The logical purpose of the [amusement exemption] is to exempt ... amusement and recreational enterprises ... which by their nature, have very sharp peak and slack seasons.... Their particular character may require longer hours in a shorter season, their economic status may make higher wages impractical, or they may offer non-monetary rewards.” (Brock v. Louvers and Dampers, Inc. (6th Cir. 1987) 817 F.2d 1255, 1259

.)

Appellants contend that they are entitled to overtime wages under the FLSA. As an affirmative defense, the DAA asserted that it is exempt from the FLSA under the amusement exemption. The matter proceeded to trial, at which the DAA presented evidence that it is exempt from the FLSA under the amusement exemption. After the conclusion of the DAA's evidence, appellants orally moved for nonsuit, asserting that, as a matter of law, the amusement exemption did not apply because the DAA failed to show: (1) that it existed to promote youth summer employment, and (2) that the majority of its income was derived from amusement or recreation. The trial court denied the motion, concluding that the evidence could support a finding that the DAA operated as a single establishment, that the nature of that single establishment was amusement or recreational, and that it satisfied the receipts test.

B. Eligibility for Amusement Exemption

As a preliminary matter before we examine the nonsuit motion, the parties dispute whether eligibility for the amusement exemption turns on (1) the nature of the employer's revenue producing activities, or (2) the work performed by the employee. As appellants note, this question is of great importance to this appeal because it impacts the order denying nonsuit and some of the challenged jury instructions. The parties have not cited, and we have not found, any California case law addressing this issue. The parties rely on federal case law. While we are not bound to follow federal court precedent, “ 'numerous and consistent' ” federal decisions may be particularly persuasive when they interpret federal law. (Etcheverry v. Tri–Ag Service, Inc. (2000) 22 Cal.4th 316, 320–321, 93 Cal.Rptr.2d 36, 993 P.2d 366

.)

Relying on Brennan v. Six Flags Over Georgia, Ltd. (5th Cir. 1973) 474 F.2d 18

(Six Flags ), appellants contend that it is the “nature [or character] of the work” and “not the source of the remuneration, that controls” and “gives rise to the need for [the amusement] exemption.” (Id. at p. 19.) About a year later, however, the Fifth Circuit came to the opposite conclusion, holding that an employer's “principal activity should be determinative of [its] eligibility for an exemption.” (Brennan v. Texas City Dike & Marina, Inc. (5th Cir. 1974) 492 F.2d 1115, 1119 (Texas City ).) The Fifth Circuit provided no reason in Texas City regarding its change in position. (Ibid. ) The Sixth, First and Tenth Circuits later adopted the Fifth Circuit's new position that it is the employer's principal activity that controls. (Marshall v. New Hampshire Jockey Club, Inc. (1st Cir. 1977) 562 F.2d 1323, 1331, fn. 4 (Marshall ); Brennan v. Southern Productions, Inc. (6th Cir. 1975) 513 F.2d 740, 746–747 ; Hamilton v. Tulsa County Public Facilities Authority (10th Cir. 1996) 85 F.3d 494, 497 ; Chessin v. Keystone Resort Management, Inc. (10th Cir. 1999) 184 F.3d 1188, 1193–1194 (Chessin ).)³ We find these “numerous and consistent” federal circuit court decisions to be persuasive on the issue. (Conrad v. Bank of America (1996) 45 Cal.App.4th 133, 150, 53 Cal.Rptr.2d 336.)

Moreover, appellants...