Reynolds v. Bement

• Citation: 116 P.3d 1162,32 Cal.Rptr.3d 483,36 Cal.4th 1075
• Decision Date: 11 August 2005
• Docket Number: No. S115823.,S115823.
• Parties: Steven REYNOLDS, Plaintiff and Appellant, v. Christian BEMENT et al., Defendants and Respondents.
• Court: United States State Supreme Court (California)

32 Cal.Rptr.3d 483

36 Cal.4th 1075

116 P.3d 1162

Steven REYNOLDS, Plaintiff and Appellant, v. Christian BEMENT et al., Defendants and Respondents.

No. S115823.

Supreme Court of California.

August 11, 2005.

The Impact Fund, Brad Seligman, Berkeley; The Legal Solutions Group, Robert S. Boulter, San Francisco; Law Office of Jonathan Weiss and Jonathan Weiss, Los Angeles, for Plaintiff and Appellant.

Van Bourg, Weinberg, Roger & Rosenfeld, Weinberg, Roger & Rosenfeld, Ellyn Moscowitz, Oakland, Joanna Mittman and M. Suzanne Murphy, Oakland, for The Building and Construction Trades Council of Alameda County, The Building and Construction Trades Council of Contra Costa County, The Building and Construction Trades Council of Los Angeles and Orange Counties, The Building and Construction Trades Council of San Bernardino and Riverside Counties, The District Council of Iron Workers for the State of California and Vicinity, The Northern California Carpenters Regional Council, The International Brotherhood of Electrical Workers Local 11, The Painters District Council Local 36, The Roofers Union Locals 81, 36 and 220 and The Sprinkler Fitters United Association, Local 483 as Amici Curiae on behalf of Plaintiff and Appellant.

Saperstein, Goldstein, Demchak & Baller, David Borgen, Oakland, Darci Burrell and Joshua Konecky, San Francisco, for The Impact Fund, Asian Law Caucus, Inc., Asian Pacific American Legal Center, California Employment Lawyers Association, The Legal Aid Society-Employment Law Center, La Raza Centro Legal, Inc., and Women's Employment Rights Clinic at Golden Gate University School of Law as Amici Curiae on behalf of Plaintiff and Appellant.

Bet Tzedek Legal Services, Gus T. May, Los Angeles, and Cassandara Stubbs for Asian Law Caucus, Inc., Asian Pacific American Legal Center of Southern California, Bet Tzedek Legal Services, Garment Worker Center, Korean Immigrant Workers Advocates and Sweatshop Watch as Amici Curiae on behalf of Plaintiff and Appellant.

Law Offices of Jeffery K. Winikow, Jeffrey K. Winikow, Los Angeles; Law Offices of Peter Rufkin and Peter Rufkin for California Employment Lawyers Association as Amicus Curiae on behalf of Plaintiff and Appellant.

Altshuler, Berzon, Nussbaum, Rubin & Demain, Stephen P. Berzon, San Francisco, Jonathan Wissglass and Barbara J. Chisholm, San Francisco, for Service Employees International Union, AFL-CIO, International Brotherhood of Teamsters, AFL-CIO, United Food and Commercial Workers International Union, AFL-CIO, Unite, AFL-CIO, State Building and Construction Trades Council of California, AFL-CIO and United Farm Workers of

America, AFL-CIO as Amici Curiae on behalf of Plaintiff and Appellant.

William G. Hoerger, San Francisco; Talamantes/Villegas/Carrera and Mark Talamantes, San Francisco, for Miguel Martinez, Antonio Perez Cortes, Asuncion Cruz, Hermilio Mendoza, Jesus H. Mendoza and Catarino Cortez as Amici Curiae on behalf of Plaintiff and Appellant.

Munger, Tolles & Olson, Alan V. Friedman, Kathleen M. McDowell, Linda S. Goldman, Paul J. Watford, Lynn H. Scaduto and Katherine M. Forster, Los Angeles, for Defendants and Respondents.

Paul, Hastings, Janofsky & Walker and Paul Grossman, Los Angeles, for California Employment Law Council as Amicus Curiae on behalf of Defendants and Respondents.

Orrick, Herrington & Sutcliffe, Timothy J. Long, Julie A. Totten, Sacramento, and Galen T. Shimoda for Employers Group as Amicus Curiae on behalf of Defendants and Respondents.

Palmer Kazanjian Holden and Marcos A. Kropf for the California Independent Grocers Association and the Personal Insurance Federation of California as Amici Curiae on behalf of Defendants and Respondents.

Jonathan L. Block, Camarillo, and Joseph J. Craciun for Association of Corporate Counsel America-Southern California Chapter as Amicus Curiae on behalf of Defendants and Respondents.

Knox, Lemmon & Anapolsky and Thomas S. Knox, Sacramento, for the California Retailers Association as Amicus Curiae on behalf of Defendants and Respondents.

William E. Dombrowski as Amicus Curiae on behalf of Defendants and Respondents.

Anne Stevason for the Division of Labor Standards Enforcement as Amicus Curiae.

WERDEGAR, J.

In this action for recovery of unpaid overtime compensation, the question presented is whether plaintiff has stated a cause of action against any of eight individuals who were officers or directors and shareholders of the Delaware corporation, or its California subsidiary, that owns the automobile painting business for which he formerly worked. The Court of Appeal upheld the trial court's sustaining of a demurrer. We affirm the judgment of the Court of Appeal.

Background

Plaintiff Steven Reynolds, on behalf of himself and those similarly situated,¹ alleges he was employed by defendants Earl Scheib, Inc., and Earl Scheib of California, Inc. (hereafter jointly Scheib, or the corporate defendants), and by defendants Bement, Buchalter, Colburn, Helm, Kyman, Seigel, Sunkin, and Smith (hereafter collectively the individual defendants), as a "shop manager" and an "assistant shop manager" at several locations of defendants' automobile painting business. Defendants own and operate approximately 50 automobile painting shops in California.

The individual defendants are shareholders of the corporate defendants and have at material times been agents (officers or directors) of the corporate defendants. Plaintiff alleges the individual defendants each "directly or indirectly, or through an agent or any other person, employed or exercised control over wages, hours, or working conditions of Class members." Each individual defendant "authorized, directed, sanctioned, consented, cooperated, approved, aided, instigated, assisted, participated in, and voted for tortious and unlawful acts of commission or omission which have operated to the prejudice and injury of the Class, including but not limited to causing the corporate defendants to violate the overtime regulations found in the applicable wage order and commit other statutory violations." Notwithstanding each individual defendant "knew or reasonably should have known that his conduct and/or conduct under his control was injuring the Class," each "failed to take or order appropriate action to avoid the harm."

According to plaintiff, defendants had "a policy and practice to require their Shop Managers in their Earl Scheib automobile paint shops to work long overtime hours without overtime compensation." Defendants allegedly misclassified class members as exempt employees and deprived them of statutory overtime compensation in order to maximize defendants' profits and income. As a consequence of defendants' actions, plaintiff and those similarly situated have not received statutorily guaranteed overtime compensation that is owed to them.

Plaintiff initially filed a complaint only against Scheib, seeking damages as well as equitable relief on behalf of himself, the general public, and similarly situated employees who worked at Scheib's automobile painting shops in California from March 13, 1996, to the present. Plaintiff subsequently added as a defendant Scheib's president, Bement, who cross-complained and removed the case to federal court. After the case was remanded to state court, plaintiff named the seven remaining individual defendants, who thereafter demurred. The trial court sustained the demurrers with leave to amend.

In the operative first amended complaint, plaintiff alleged numerous causes of action, including claims denominated as "failure to pay overtime compensation in violation of Labor Code sections 1194, 510 and applicable wage orders," unlawful deduction of wages, and various tortious violations of the Labor Code.

The individual defendants demurred.² The trial court sustained the demurrer with leave to amend as to some causes of action and without leave to amend as to the others. Plaintiff did not amend, judgment was entered for defendants, and the entire action was dismissed with prejudice. The Court of Appeal affirmed. We granted plaintiff's petition for review.

Discussion

Our task in reviewing a judgment sustaining a demurrer is to determine whether the complaint states facts sufficient to constitute a cause of action. (Hill v. Miller (1966) 64 Cal.2d 757, 759, 51 Cal.Rptr. 689, 415 P.2d 33.) We assume the truth of the properly pleaded material facts and the reasonable inferences that may be drawn therefrom. (Coleman v. Gulf Ins. Group (1986) 41 Cal.3d 782, 789, fn. 3, 226 Cal.Rptr. 90, 718 P.2d 77.) We give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. (Speegle v. Board of Fire Underwriters (1946) 29 Cal.2d 34, 42, 172 P.2d 867.) We also consider matters that may be judicially noticed. (Serrano v Priest (1971) 5 Cal.3d 584, 591, 96 Cal. Rptr. 601, 487 P.2d 1241.)³

A. Overview: State Remedies for Unpaid Overtime

An employee's wage rights may be provided for in an employment contract and also are closely regulated by statute. "The Labor Code⁴ prescribes such matters as the time and manner of paying wages, minimum wage requirements, and mandatory overtime pay. . . ." (Cuadra v. Millan (1998) 17 Cal.4th 855, 858, 72 Cal. Rptr.2d 687, 952 P.2d 704; see § 510, subd. (a).)⁵ In addition, the Industrial Welfare Commission (IWC) is "empowered to formulate regulations (known as wage orders) governing employment in the State of California." (Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 561, 59 Cal.Rptr.2d 186, 927 P.2d 296 (Tidewater).) The IWC has promulgated 18 orders that remain in force today, 16 relating to specific industries and occupations, one general minimum wage order that applies to all California employers and employees (excluding public employees and outside salespersons), and one order implementing the Eight-Hour-Day Restoration and Workplace Flexibility Act (Stats.1999, ch. 134). (See Cal.Code Regs., tit. 8, § 11000 et. seq.; es...