Seviour-Iloff v. LaPaille

• Citation: 80 Cal.App.5th 427,295 Cal.Rptr.3d 762
• Decision Date: 28 June 2022
• Docket Number: A163503, A163504
• Parties: Elsie SEVIOUR-ILOFF, Plaintiff and Appellant, v. Cynthia LAPAILLE et al., Defendants and Respondents. Laurance Iloff, Plaintiff and Appellant, v. Cynthia LaPaille et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

80 Cal.App.5th 427

295 Cal.Rptr.3d 762

Elsie SEVIOUR-ILOFF, Plaintiff and Appellant,

v.Cynthia LAPAILLE et al., Defendants and Respondents.

Laurance Iloff, Plaintiff and Appellant,

v.Cynthia LaPaille et al., Defendants and Respondents.

A163503, A163504

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

Filed June 28, 2022

As Modified on Denial of Rehearing July 21, 2022

Department of Labor Relations, Division of Labor Standards Enforcement and David M. Balter, San Francisco, for Plaintiffs and Appellants.

Janssen Malloy and Amelia F. Burroughs, Eureka, for Defendants and Respondents.

Margulies, J. Plaintiffs Elsie Seviour-Iloff and Laurance Iloff¹ (jointly, plaintiffs) filed wage claims with the Division of Labor Standards Enforcement (DLSE) against defendants Cynthia LaPaille and Bridgeville Properties, Inc. (BPI) for unpaid wages in violation of the Labor Code. Plaintiffs received a favorable order from the Labor Commissioner, and BPI appealed to the superior court. Following a de novo trial on the wage claims, the superior court found plaintiffs were entitled to unpaid wages and certain penalties but rejected plaintiffs’ unfair competition law (UCL; Bus. & Prof. Code, § 17200 et seq. ) claims, declined to award other penalties, and did not impose personal liability on Cynthia LaPaille, the chief executive officer of BPI.

On appeal, plaintiffs contend the trial court (1) miscalculated the statute of limitations when awarding unpaid wages, (2) erred in declining to impose personal liability on LaPaille, (3) erred in declining to award liquidated damages under Labor Code ² section 1194.2 or administrative penalties under section 248.5, (4) abused its discretion in denying their UCL claims, and (5) miscalculated the waiting time penalties. We conclude the trial court miscalculated the statute of limitations, and erred in declining to impose personal liability on LaPaille. We further conclude the trial court failed to properly calculate the waiting time penalties owed to plaintiffs, and remand to the trial court to recalculate those penalties in accordance with this opinion. In all other respects, we affirm the judgment.³

I.

BACKGROUND

A. Statement of Facts

BPI owned property in unincorporated Humboldt County, California, which included eight rental units, a post office, and its own water system. LaPaille served as chief executive officer and chief financial officer of BPI during the relevant time period. Laurance requested free rent if he kept the water system running, maintained the weeds, and provided general handyman services. Between 2009 and 2016, Laurance and Elsie performed various tasks for BPI, such as managing the water system and serving rent notices. BPI terminated plaintiffs’ work when it suspected Laurance was not performing his maintenance jobs, was stealing equipment and supplies from BPI, and was using BPI's water rights for a private venture. BPI acknowledged plaintiffs were not paid for any work they performed for BPI apart from receiving free rent.

B. Procedural Background

On January 31, 2017, plaintiffs each filed DLSE form 1, entitled "Initial Report or Claim," with the Labor Commissioner (Initial Report or Claim). The form identified the employer, set forth wage information, and identified hours worked. Both plaintiffs alleged being owed $132,880.

On May 17, 2017, plaintiffs each executed a form entitled "Complaint," which set forth the claimed regular and overtime wages contained in the Initial Report or Claim forms, but also included a request for liquidated damages and waiting time penalties.

The Labor Commissioner conducted a hearing on plaintiffs’ claims. He concluded LaPaille and plaintiffs entered into oral employment agreements that Laurance would manage the water system and Elsie would serve as town manager in lieu of paying their monthly $650 rent. The Labor Commissioner concluded Laurance worked an average of four hours per day and Elsie worked an average of 10 hours per day pursuant to those agreements. The Labor Commissioner further concluded plaintiffs were entitled to recover regular wages, overtime wages, liquidated damages, interest, and waiting time penalties, and LaPaille was personally liable for those amounts.

LaPaille and BPI appealed from the Labor Commissioner's order to the superior court. LaPaille and BPI contested plaintiffs’ claims, asserting the number of hours plaintiffs claimed to have worked were "unbelievable," Laurance did not provide handyman services, and other individuals and entities completed work for which plaintiffs sought payment.

Following a five-day trial, the superior court concluded plaintiffs were employees of BPI. Upon reviewing the evidence, the court concluded Elsie was entitled to unpaid minimum wages for 20 hours per week and Laurance was entitled to unpaid minimum wages for five hours per week, along with interest on those amounts. It also awarded plaintiffs statutory damages for BPI's failure to provide a wage statement, waiting time damages, and travel expense reimbursements. However, the court concluded BPI's failure to pay plaintiffs was in good faith, and it had reasonable grounds to believe it was not violating the Labor Code. Accordingly, the court declined to award liquidated damages pursuant to section 1194.2. It also declined to award penalties for violations of sick leave notice requirements and concluded LaPaille was not personally liable for BPI's failure to pay wages.

Plaintiffs objected to the court's statement of decision. Plaintiffs argued the court failed to explain why it rejected January 31, 2017 as the filing date of their claims and did not address the paid sick leave claim under section 248.5, subdivision (b)(1)(3) or whether the court found LaPaille to be "an employer or other person acting on behalf of an employer, who violates, or causes to be violated, any provision regulating minimum wages ...." Laurance also took issue with alleged ambiguities regarding the manner in which certain wages, interest, and penalties were calculated. The court overruled these objections apart from modifying the statement of decision to award Laurance interest on unreimbursed expenses. The court subsequently entered judgment for plaintiffs. The court awarded Laurance $16,341 plus additional prejudgment interest at $2.01 per day from March 3, 2021 to the date of judgment, and it awarded Elsie $38,738 plus additional prejudgment interest at $5.96 per day from March 3, 2021 to the date of judgment. Plaintiffs timely appealed.

II.

DISCUSSION

On appeal, plaintiffs raise six arguments: (1) the court utilized the wrong date when calculating the statute of limitations for their unpaid wage claims; (2) the court abused its discretion in denying plaintiffs’ UCL claims; (3) the court lacked discretion to excuse LaPaille from personal liability; (4) the court erred in concluding LaPaille established a good faith defense to plaintiffs’ liquidated damages claims; (5) the court erred in declining to award administrative damages under section 248.5 ; and (6) the court failed to incorporate the rental value of plaintiffs’ house when calculating waiting time penalties. We address each argument in turn.

A. Statute of Limitations

Plaintiffs contend the trial court erred by calculating the statute of limitations from the date they filed complaints with the Labor Commissioner rather than the date they filed their Initial Report or Claim forms with the Labor Commissioner. They argue, pursuant to Cuadra v. Millan (1998) 17 Cal.4th 855, 72 Cal.Rptr.2d 687, 952 P.2d 704 ( Cuadra ), the filing of the "Initial Report or Claim" form initiates the Berman⁴ hearing procedure. We agree.

1. Relevant Statutory Background

Section 98, subdivision (a), authorizes the Labor Commissioner to "investigate employee complaints." Subdivision (a) further states:

"Within 30 days of the filing of the complaint, the Labor Commissioner shall notify the parties as to whether a hearing will be held, whether action will be taken in accordance with Section 98.3, or whether no further action will be taken on the complaint. If the determination is made by the Labor Commissioner to hold a hearing, the hearing shall be held within 90 days of the date of that determination."

The California Code of Regulations expands upon this provision: "An employee complaint or claim for wages, penalties or other demand for compensation properly before the [DLSE] or the Labor Commissioner ... under Labor Code Section 98 [, subdivision ](a) shall be initiated by the filing of a complaint on the form prescribed herein in any District Office of the [DLSE]." ( Cal. Code Regs., tit. 8, § 13501.) The California Code of Regulations further provides a sample "complaint," and states "[t]he complaint contemplated by Labor Code Section 98 and filed with the [DLSE] shall be in writing and substantially in" that form. ( Cal. Code Regs., tit. 8, § 13501.5.) The sample complaint requires the claimant to identify the scope of services, time of service, promised rate of compensation, and the amount of wages, penalties, and other compensation sought from the employer. (Ibid. )

2. Analysis

Plaintiffs assert the statute of limitations should run from the filing of the Initial Report or Claim form filed with the DLSE. In response, defendants assert only the "complaint" initiates the Berman hearing process.

Nothing in the California Code of Regulations, which expands upon the form of complaint required by section 98, excludes plaintiffs’ initial filing with the DLSE from the definition of "complaint." Rather, Code of Regulations, title 8, section 13501.5 only requires that the complaint be "substantially" in the form provided. Here, plaintiffs used a form provided to them by the DLSE to initiate a wage claim. That form contains substantially the same information as in the form set forth in the Code of Regulations, including employee and employer information, wage compensation, hours worked, and scope of wages, compensation, and...