Employer’s Inconsistent Application of Written Rest Break Policies Will Not Create Predominance of Individual Inquiries in Class Actions

On June 17, 2022, the California Court of Appeal, Second Appellate District, Division Three (Los Angeles), issued an opinion in Meza v. Pacific Bell Telephone Company (B317119, June 17, 2022) __ Cal.App.5th ___. In this employment class action, the appellate court addressed a number of issues, including appealability of the orders under the death knell doctrine and application of res judicata as to the Labor Code Private Attorneys General Act of 2004 (PAGA) claim. Importantly, the appellate court reversed the trial court’s order denying certification as to the meal and rest period claims where the employee’s theory of liability was based upon written guidelines (not verbal) despite the employer’s evidence that the written guidelines were inconsistently applied in practice.

In Meza, the plaintiff filed a class action lawsuit against his former employer, a telecommunications corporation. The plaintiff, a premises technician, alleged that his employer violated California law by failing to provide lawful meal and rest periods, failing to document hours worked, failing to pay overtime and failing to provide lawful wage statements. The plaintiff included causes of action under Business and Professions Code section 17200 and PAGA.

The plaintiff moved to certify six statewide classes of premises technicians, five of which pertained to the meal and rest period claims and one of which pertained to the wage statement claim. In support of certification of the meal and rest break claims, the plaintiff relied on the written Premises Technician Guidelines the employer adopted in 2011 and modified in 2013 and 2015. The guidelines provided that technicians, during meal or rest periods: were not to abandon their vehicles, were required to protect company property, were not allowed to travel “out of route,” were not allowed to sleep in their vehicles, were not permitted to congregate with other company vehicles and were required at all times to project a positive image of the company. The plaintiff asserted that these guidelines substantially limited the activities of premises technicians during their meal and rest periods in violation of law, and that common issues predominated because the guidelines uniformly apply to all premise technicians.

The employer opposed certification of the meal and rest period classes arguing that its meal and rest period policies were facially compliant. According to the employer, the 2011 guidelines on which the plaintiff relied were not in effect during his employment and the guidelines in effect during the plaintiff’s employment did not specifically limit how premise technicians spend their meal and rest periods. The employer further argued that individualized issues predominated based on testimony from premise technicians and their managers indicating that technicians’ understanding and managers’ enforcement of the guidelines differed. The employer also argued that the putative class plaintiff was an inadequate class representative because he “repeatedly lied in his deposition” and because of the circumstances of his discharge.

The trial court denied the class certification motion for the meal and rest period classes, stating, “While the policies are undisputed,” “it appears that the actual management practices of [the employer]’s supervisors result in a diverse application of the company’s Premises Technician Guidelines” that renders the claims “unsuitable for class action treatment.” Because it did not certify these proposed classes, the trial court did not address the argument that the plaintiff was an inadequate class representative. The trial court certified a class to pursue the plaintiff’s wage statement claim.

Thereafter, the trial court granted the employer’s summary adjudication motion on the sole class claim that the trial court certified—the wage statement claim—ruling that the wage statements complied with the law. With this ruling, no further class claims remained.

The trial court also granted the employer’s motion for summary adjudication as to the PAGA claims where it was barred under res judicata and a settlement and release in a previous employment action. The trial court also granted the employer’s motion to strike portions of the plaintiff’s third amended complaint for failure to state a claim regarding the accuracy of the employer’s wage statements.

The plaintiff appealed four trial court orders: (1) an order denying class certification to five meal and rest period classes (the class certification order); (2) an order granting summary adjudication of the wage statement claim (the wage statement order); (3) an order striking the claim under section 226, subdivision (a)(6) (the order to strike); and (4) an order granting summary adjudication of the PAGA claim (the PAGA order).

The Court of Appeal first addressed the appealability of each order. The court concluded that the plaintiff’s appeal from the order to strike must be dismissed because the plaintiff failed to include it in his notice of appeal. The remaining orders were appealable under the death knell doctrine, which allows immediate appeals of certain interlocutory orders that resolve all representative claims but leave individual claims intact.

On the merits, the appellate court determined that the trial court abused its discretion in refusing to certify the meal and rest period classes based on its conclusion that common issues do not predominate. The issues involved analyzing whether individualized inquiries predominate because the employer’s witnesses testified that they apply the various written guidelines regarding meal and rest periods in diverse ways in practice. Relying on Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, and its progeny, the appellate court concluded that the trial court did not apply the proper legal framework when it denied class certification. The plaintiff’s theory of liability was that the written guidelines for premises technicians were for the employer’s benefit and exerted substantial control over the premises technicians during their meal and rest periods in violation of the law. Although the trial court acknowledged that “the policies are undisputed,” it concluded that the disparate manner in which employees experienced the policy through different managers rendered the claims unsuitable for class treatment. However, “the employer’s liability arises by adopting a uniform policy that violates the wage and hour laws.” (Slip Opn., p. 20, quoting Faulkinbury v. Boyd & Associates, Inc. (2013) 216 Cal.App.4th 220, 235.) The “fact that individual inquiry might be necessary to determine whether individual employees were able to take breaks despite the defendant’s allegedly unlawful policy . . . is not a proper basis for denying certification.” (Slip Opn., p. 20, quoting Benton v. Telecom Network Specialist, Inc. (2013) 220 Cal.App.4th 701, 726.)

The Court of Appeal distinguished Koval v. Pacific Bell Telephone Co. (2014) 235 Cal.App.4th 1050, by concluding that the record in Koval was different in a central way. “Koval relied heavily on evidence that although the policies were written, they were conveyed to the employees orally, leading as a practical matter to a multiplicity of different policies.” (Slip Opn., p. 21.) In other words, the policies were far from uniform because of the manner in which they were transmitted. According to the Court of Appeal, this case was more like Jones v. Farmers Ins. Exchange (2013) 221 Cal.App.4th 986, which reversed the trial court’s refusal to certify a class as to written policies distributed to the employees, even if they were inconsistently applied in practice. As such, the Court of Appeal reversed the class certification, but also instructed the trial court to address whether the plaintiff is an adequate class representative.

The Court of Appeal also affirmed the trial court’s order granting summary adjudication of the PAGA claim because it was barred by claim preclusion in light of the settlement and dismissal of a previous PAGA lawsuit. Claim preclusion applies where a second action involves the same cause of action, between the same parties after a final judgment on the merits in the first lawsuit. Two proceedings are on the same cause of action where the matter was within the scope of the action, related to the subject matter and relevant to the issues so that it could have been raised. Here, both the previous action and the current action alleged a failure to pay wages in connection with the employer’s purported failure to provide compliant meal and rest periods, as well as a failure to provide accurate wage statements and to pay wages owed at termination. The only claim asserted by the plaintiff that was not asserted in the previous lawsuit was under Labor Code section 2802 for failure to pay for upkeep of uniforms. However, this is also a claim for the payment of wages and could have been brought in the previous lawsuit.

The Court of Appeal further determined that the settlement and release in the previous lawsuit did not waive the employer’s claim preclusion defense. To the contrary, the settlement broadly released, without limitation, “any and all known and unknown wage and hour related claims that arise of the facts asserted in the operative complaint in the Action.” The release expressly preserved the right of the plaintiff in the current action to bring his claims regarding the legality of the wage statements, but not the PAGA claims.

Finally, in the unpublished portion of the opinion, the court affirmed the wage statement order. The trial court correctly granted summary adjudication of the plaintiff’s wage statement claim because the employer’s wage statements did not violate Labor Code section 226. The statute requires an employer to list on the wage statement “hourly rates in effect during the pay period” and the “corresponding number of hours” worked at such rates. (Lab. Code, § 226, subd. (a)(9).) As such, the employer was not required to list hours and rates next to its calculation of an overtime-true up for previous pay periods.

This case illuminates an interesting distinction in determining whether individualized inquiries predominate when applying written policies versus verbal policies. The focus is on the manner in which the policies are transmitted. Where policies are transmitted in writing, even if the employer applies them inconsistently, the courts tend to find that no individualized issues predominate. However, where policies are disseminated orally and in an inconsistent manner, individualized inquiries tend to predominate. Indeed, it is important to note this trending distinction when opposing a class certification motion. Further, this case emphasizes the importance of ensuring your notice of appeal includes reference to all appealable orders at the risk of forfeiting your right to challenge certain issues.

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June 23, 2022