Naranjo v. Spectrum Security Services, Inc., No. B206618.

• Court: California Court of Appeals
• Writing for the Court: Manella
• Citation: 91 Cal. Rptr. 3d 393,172 Cal.App.4th 654
• Parties: GUSTAVO NARANJO, Plaintiff and Appellant, v. SPECTRUM SECURITY SERVICES, INC., Defendant and Respondent.
• Docket Number: No. B206618.
• Decision Date: 24 March 2009

172 Cal.App.4th 654 91 Cal. Rptr. 3d 393 GUSTAVO NARANJO, Plaintiff and Appellant,
v.
SPECTRUM SECURITY SERVICES, INC., Defendant and Respondent. No. B206618. Court of Appeals of California, Second District, Division Four. March 24, 2009.

[172 Cal.App.4th 659]

Posner & Rosen, Howard Z. Rosen and Jason C. Marsili for Plaintiff and Appellant.

Anderson & Anderson and Steven A. Micheli for Defendant and Respondent.

[172 Cal.App.4th 660]

OPINION

MANELLA, J.—

In appellant Gustavo Naranjo's action against respondent Spectrum Security Services, Inc. (Spectrum), for violations of the Labor Code, the trial court granted summary judgment in Spectrum's favor. We affirm in part and reverse in part.

RELEVANT FACTUAL AND PROCEDURAL BACKGROUND

Naranjo worked as a detention officer for Spectrum, which provides security services in holding facilities and detention centers throughout Los Angeles County under a contract with Immigration and Customs Enforcement (ICE), a federal agency. The terms of Spectrum's contract with ICE rely on wage and fringe benefit determinations by the Secretary of the United States Department of Labor (Secretary) pursuant to the Service Contract Act of 1965 (SCA) (41 U.S.C. § 351 et seq.).

On June 4, 2007, Naranjo filed a class action against Spectrum on behalf of himself and other employees who had resigned or been discharged from their employment. The complaint asserted claims under the California Labor Code (§§ 203, 226, subd. (e), 226.7), as well as claims for unfair business practices (Bus. & Prof. Code, § 17200), conversion, and injunctive relief. Spectrum sought summary judgment, or in the alternative, summary adjudication, contending that the SCA provided Naranjo with his exclusive remedies for these claims. On February 11, 2008, the trial court granted summary judgment, concluding that it lacked jurisdiction over Naranjo's claims.

DISCUSSION

A. Standard of Review

We review the ruling on Spectrum's motion for summary judgment de novo. (Lunardi v. Great-West Life Assurance Co. (1995) 37 Cal.App.4th 807, 819 [44 Cal.Rptr.2d 56].) "A defendant is entitled to summary judgment if the record establishes as a matter of law that none of the plaintiff's asserted causes of action can prevail. [Citation.]" (Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1107 [252 Cal.Rptr. 122, 762 P.2d 46].)

As Naranjo's briefs on appeal focus exclusively on the propriety of summary judgment on his claims under the Labor Code, we limit our inquiry to these claims. (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1177 [80 Cal.Rptr.3d 6].) Naranjo's first and second causes of action alleged that Spectrum regularly denied its employees meal and rest

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periods, and failed to compensate them in accordance with Labor Code section 226.7, which obliges an employer to pay an employee "one additional hour of pay at the employee's regular rate of compensation for each work day that the meal or rest period is not provided." His third and fourth causes of action sought penalties for Spectrum's failure to pay the additional compensation upon the resignation or discharge of plaintiffs (Lab. Code, § 203), and failure to provide plaintiffs with itemized records of their wages and deductions (Lab. Code, § 226).

In seeking summary judgment, Spectrum neither disputed nor conceded Naranjo's factual allegations, but contended that the court lacked jurisdiction over his claims. Specifically, Spectrum alleged that Naranjo's wage claims were preempted by federal law, and that any claim for unpaid wages must be pursued through the administrative process afforded by the SCA. The trial court concluded that it lacked jurisdiction over Naranjo's claims. The court determined that Naranjo had no right to file a private action to recover unpaid wages, and that his sole remedy lay in the administrative process of the SCA. Accordingly, the key questions here are legal, and concern whether the SCA preempts the remedies available to Naranjo in state court regarding the denial of meal and rest breaks and denial of itemized records.

B. SCA

(1) The SCA requires government contractors to pay service employees "minimum wages and benefits determined by the Secretary of Labor." (U.S. ex rel. Sutton v. Double Day Office Services (9th Cir. 1997) 121 F.3d 531, 533.) "Its purpose is to protect employees of government contractors. Before the [SCA], the federal government had been `subsidizing' substandard levels of compensation by awarding contracts to those who were able to bid low by paying less. [Citation.]" (Saavedra v. Donovan (9th Cir. 1983) 700 F.2d 496, 497.)

The SCA requires each federal service contract in excess of $2,500 to contain clauses specifying the minimum wage and fringe benefits to be paid the employees under the contract. (41 U.S.C. § 351(a)(1), (2).) The wages and benefits are determined by the Secretary in accordance with "prevailing rates for such employees in the locality," or when the employees are covered by a collective bargaining agreement, "in accordance with the rates for such employees provided for in [the] agreement." (Ibid.) The SCA specifies that no service contract may pay less than the minimum wage described in the Fair Labor Standards Act of 1938 (FLSA) (29 U.S.C. § 201 et seq.). Here, there is no dispute that Spectrum's contract with ICE incorporates a complex form clause specified in federal regulations (48 C.F.R. § 52.222-41 (2008)) that sets forth in detail Spectrum's obligations regarding the SCA.

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(2) Under the SCA and its accompanying regulations, wages encompass basic rates of pay (29 C.F.R. § 4.51(b)) (2008)) and "supplemental pay, such as shift differential" (29 C.F.R. § 4.52(a) (2008)). Fringe benefits include "vacation and holiday benefits," as well as "other benefits, such as insurance, pension[s], etc., which are not required as a matter of law (i.e., excluding Social Security, unemployment insurance, and workers' compensation payments and similar statutory benefits)." (29 C.F.R. § 4.52(a).) The SCA does not provide for overtime pay, but imposes a limit on the extent to which fringe benefits may be included in an employee's regular rate of pay for purposes of determining overtime compensation mandated under other federal laws. (29 C.F.R. § 4.180 (2008).)

Pursuant to the SCA and its regulations, the Secretary issues determinations —usually denominated simply "wage determinations"—for localities that encompass wages and fringe benefits for different categories of service employees. (29 C.F.R. § 4.52(a) (2008).) Here, the wage determination applicable to Spectrum's contract was attached to the contract. The parties do not dispute that the Secretary made the wage determination by reference to Los Angeles and Orange Counties.

(3) Regarding such determinations, the regulations implementing the SCA state: "Information considered. The minimum monetary wages and fringe benefits set forth in determinations . . . are based on all available pertinent information as to wage rates and fringe benefits being paid at the time the determination is made. Such information is most frequently derived from area surveys made by the Bureau of Labor Statistics, U.S. Department of Labor, or other Labor Department personnel. Information may also be obtained from Government contracting officers and from other available sources, including employees and their representatives and employers and their associations. The determinations may be based on the wage rates and fringe benefits contained in collective bargaining agreements where they have been determined to prevail in a locality for specified occupational class(es) of employees." (29 C.F.R. § 4.51(a) (2008).) In addition, the Secretary may give "due consideration" to "wage rates and fringe benefits which would be paid under Federal pay systems." (29 C.F.R. § 4.51(d).)

(4) The SCA and its regulations establish a system of administrative procedures for enforcing the SCA. The Secretary is authorized to "hold hearings and make decisions based upon findings of fact as are deemed to be necessary to enforce the provisions of the [SCA]." (29 C.F.R. § 4.189 (2008).) Employees who contend their employer has underpaid them in contravention of the SCA or its regulations may complain to the Secretary, who is authorized (following an administrative adjudication) to ensure that the employees are compensated in accordance with the contract. (29 C.F.R.

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§§ 4.187(a), 4.189 (2008).) Employees who contend that the wage and benefit determinations governing the contract are inadequate may also challenge them through administrative proceedings. (29 C.F.R. §§ 4.55, 4.56, 4.187-4.191 (2008).) If the challenge is successful, the contract may be amended to reflect the new determinations. (29 C.F.R. §§ 4.5, 4.55, 4.56, 4.163 (2008).)

C. Preemption

The key issue is whether the SCA preempts Naranjo's right to pursue additional compensation under the California Labor Code in state court. Spectrum contends that the SCA preempts Naranjo's entitlement to seek redress for any breaches of the pertinent Labor Code provisions in state court. He argues that Naranjo's remedies are found within the SCA administrative process, which constitutes the exclusive forum for his claims. We disagree. As explained below, although the SCA administrative process provides the sole remedies for claims arising under the SCA, the SCA does not preempt Naranjo's suit to recover the additional compensation he seeks under the California Labor Code.

(5) Several federal courts have held that no private right of action exists to enforce the SCA. In Misc. Service Workers, etc. v. Philco-Ford Corp. (9th Cir. 1981) 661 F.2d 776, 779-782 (MSW), the Ninth Circuit held that an employee's remedies for claims under the SCA lie exclusively within its administrative process. The view that employees have no private right of action against their...