Harris v. Vector Marketing Corporation, No. 3:2008cv05198 - Document 71 (N.D. Cal. 2009)
Court Description: ORDER Granting in Part and Denying in Part 35 Defendant's Motion for Summary Judgment. Signed by Judge Edward M. Chen on 9/4/2009. (emcsec, COURT STAFF) (Filed on 9/4/2009)
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Harris v. Vector Marketing Corporation Doc. 71 1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 8 ALICIA HARRIS, 9 For the Northern District of California United States District Court 10 No. C-08-5198 EMC Plaintiff, ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR SUMMARY JUDGMENT v. 11 VECTOR MARKETING CORPORATION, 12 Defendant. ___________________________________/ Docket No. 35 13 14 15 Plaintiff Alicia Harris has filed a class action lawsuit against Defendant Vector Marketing 16 Corporation, alleging violations of both federal and state employment law. At present, no class has 17 been certified. Currently pending before the Court is Vector’s motion for summary judgment or in 18 the alternative, summary adjudication with respect to Ms. Harris’s individual claims. Having 19 considered the parties’ briefs and accompanying submissions, as well as the oral argument of 20 counsel, the Court hereby GRANTS in part and DENIES in part Vector’s motion. 21 I. FACTUAL & PROCEDURAL BACKGROUND 22 “Vector is a direct sales company that markets a line of high quality kitchen cutlery, 23 accessories, and sporting knives manufactured by Cutco Cutlery Corporation.” Matheson Decl. ¶ 2. 24 “Vector sells and markets Cutco products . . . through the use of Sales Representatives.” Matheson 25 Decl. ¶ 4; see also Matheson Depo. at 20 (testifying that Vector also has a catalog program). A 26 significant number of its “Sales Reps” are college students. See Matheson Depo. at 176. 27 28 The parties agree that, at one point, Vector hired Ms. Harris to be a Sales Rep to sell the Cutco knives. The parties dispute, however, when Ms. Harris was hired – i.e., before participating Dockets.Justia.com 1 in a three-day training or after completing the training. The parties also dispute whether, when 2 hired, Ms. Harris was an employee (Ms. Harris’s position) or simply an independent contractor 3 (Vector’s position). For the Northern District of California United States District Court 4 Each of the claims asserted in Ms. Harris’s complaint are predicated on her being an 5 employee. Those claims are as follows: (1) failure to pay wages in violation of California Labor 6 Code §§ 201 et seq.; (2) failure to pay minimum wages in violation of California Labor Code § 7 1197; (3) failure to pay minimum wages in violation of the Fair Labor Standards Act (“FLSA”), see 8 29 U.S.C. § 206; (4) failure to keep and provide accurate pay records in violation of California 9 Labor Code § 226; (5) failure to pay wages owed in a timely fashion at the end of employment in 10 violation of California Labor Code § 201 et seq.; (6) compelling or coercing an employee to 11 patronize Vector’s business in violation of California Labor Code § 450; (7) failure to reimburse in 12 violation of California Labor Code § 2802; (8) civil penalties based on violations of the California 13 Labor Code Private Attorneys General Act, see Cal. Lab. Code § 2698 et seq.; and (9) unfair 14 competition in violation of California Business & Professions Code § 17200. 15 II. 16 EVIDENTIARY OBJECTIONS As a preliminary matter, the Court addresses the parties’ evidentiary objections. The Court 17 addresses only the main objections that are relevant to resolution of the motion for summary 18 judgment. 19 A. 20 Plaintiff’s Objections First, Ms. Harris objects that the declarations of other Sales Reps are irrelevant because the 21 motion for summary judgment concerns only her individual claims, not any class claims. The 22 objection is overruled. If, for example, all of the Sales Reps testify that they were not hired until 23 after the training while Ms. Harris testifies that she was hired before the training, then the trier of 24 fact might conclude that Ms. Harris is not credible, at least as to this point. Of course, at the 25 summary judgment stage, the Court makes no credibility determinations. See Anderson v. Liberty 26 Lobby, Inc., 477 U.S. 242, 255 (1986) (“Credibility determinations, the weighing of the evidence, 27 and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, 28 whe[n] he is ruling on a motion for summary judgment . . . . The evidence of the non-movant is to be 2 1 believed, and all justifiable inferences are to be drawn in his favor.”); Albarran v. New Form, Inc. 2 (In re Barboza), 545 F.3d 702, 707 (9th Cir. 2008) (“A court ‘generally cannot grant summary 3 judgment based on its assessment of the credibility of the evidence presented..’ ‘[A]t the summary 4 judgment stage the judge’s function is not himself to weigh the evidence and determine the truth of 5 the matter but to determine whether there is a genuine issue for trial.’”). 6 7 Leahy declarations, contain legal conclusions because they purport to interpret the Sales Rep 8 Agreement. The objection is overruled. The Sales Reps and District Managers may testify as to 9 what they understood the agreement to mean although, ultimately, the Court will be the one to 10 11 For the Northern District of California United States District Court Second, Ms. Harris objects that the declarations of other Sales Reps, as well as the Arlie and interpret the agreement. Third, Mr. Harris objects to a document attached to the Matheson declaration (“Standards for 12 Advertising”) on the ground that it was not previously produced. The objection is essentially moot. 13 Even without the document, Mr. Matheson may testify as to what Vector’s standards of advertising 14 were. That being said, regardless of what Vector’s standards were, that does not mean that the 15 standards were always complied with – i.e., it is still possible that an advertisement was composed 16 which claimed that Sales Reps would be compensated on an hourly basis (as Ms. Harris contends). 17 Fourth, Ms. Harris objects to ¶ 8 of the Matheson declaration on the basis of hearsay. In ¶ 8, 18 Mr. Matheson testifies that, based on his communications with Sales Managers, he believes that 19 candidates who interview well are offered the opportunity to participate in the three-day training and 20 that candidates are encouraged to participate in the training, but that candidates who do not 21 participate in the training have still been offered positions as Sales Reps. The objection is overruled. 22 While “an affidavit that contains facts that could only be presented at trial through evidence that 23 violates the proscriptions against hearsay and statements made without personal knowledge should 24 not be admitted at the summary judgment stage[,] . . . an affidavit [that] points to the testimony of 25 another witness or source of competent evidence” may be considered for purposes of summary 26 judgment. 11-56 Moore’s Fed. Prac. – Civ. § 56.14[1][d]. Also, it should be noted that Mr. 27 Matheson was deposed as Vector’s 30(b)(6) witness. Cf. id. § 56.14[1][c] (stating that “[t]he 28 testimony of a Rule 30(b)(6) corporate agent deponent may be presented on motion for summary 3 1 judgment, even though not based on personal knowledge, because a Rule 30(b)(6) witness need not 2 have personal knowledge of the facts to which he or she testifies.”). Finally, the objection is 3 essentially moot because District Managers have provided declarations to the same effect. See Arlie 4 Decl. ¶ 14 (“Candidates are not required to participate in the training program in order to be retained 5 as a Sales Representative by Vector. One can become a Sales Representative without going through 6 the training program. Conversely, an individual may participate in the training program but not 7 receive an offer to become a Sales Representative.”); Leahy Decl. ¶ 13 (“An individual may 8 participate in the training program but not receive an offer to become a Sales Representative.”). For the Northern District of California United States District Court 9 Finally, Ms. Harris argues that the declarations of the other Sales Reps should be stricken 10 because Vector acted improperly in seeking out the declarations without fully informing the Sales 11 Reps about the nature of the litigation (e.g., that it is a class action) and the possible consequences of 12 their actions (e.g., that their own claims against Vector might be compromised should Ms. Harris 13 prevail on the class action). The request is denied. First, the case authority that Ms. Harris cites is 14 largely inapplicable. The cases largely concern motions to limit precertification communications 15 between the defendant and the absent class members. No such motion was made by Ms. Harris in 16 the instant case. If the Court were to strike the declarations, that would likely have to be done as a 17 sanction pursuant to the Court’s inherent authority. Second, and more important, the Sales Reps 18 who were deposed indicated in their depositions that they would still have submitted the declarations 19 and/or stood by their declarations. See Carrasco Depo. at 34; Lewis Depo. at 22-23. 20 B. 21 Defendant’s Objections First, Vector objects that, in numerous places, Ms. Harris has mischaracterized deposition 22 testimony. The objection is overruled as the Court is able to view the deposition testimony and 23 evaluate the testimony on its own. 24 Second, Vector objects to Ms. Harris’s testimony that she saw a Vector advertisement 25 (whether a flyer or an advertisement on craigslist.com) listing compensation as $16 an hour. This 26 objection is, in essence, moot. The parties agree that Sales Representatives were not compensated 27 on an hourly basis per se, and the Court’s analysis below assumes they were not. 28 4 For the Northern District of California United States District Court 1 Third, Vector argues that various statements that Ms. Harris claims were made by her Sales 2 or District Managers are not admissible. According to Vector, these statements do not qualify as 3 admissions of a party-opponent because the Sales and District Managers are independent 4 contractors. In support of this contention, Vector relies primarily on Merrick v. Farmers Insurance 5 Group, 892 F.2d 1434, 1440 (9th Cir. 1990) (concluding that statements of insurance agents and 6 district manager were properly rejected as hearsay because plaintiff “did not establish that [they] 7 were ‘agents’ of [defendant] as opposed to independent contractors; nor did he show that their 8 statements about the Christmas party concerned a matter within the scope of their agency”). This 9 objection is overruled. Agent and independent contractor are not mutually exclusive categories. An 10 employee can be an agent, as can an independent contractor. See In re Coupon Clearing Service, 11 Inc., 113 F.3d 1091, 1100 (9th Cir. 1997) (in bankruptcy proceeding, noting that “[i]t is 12 well-established that one who contracts to act on another’s behalf and is subject to the other’s 13 control, except with respect to his physical control, may still be acting as an agent and also as an 14 independent contractor”); Bill A Duffy, Inc. v. Scott, No. C-08-00878 EDL, 2009 U.S. Dist. LEXIS 15 35667, at *12 (N.D. Cal. Apr. 27, 2009) (noting that, under California law, “‘[a]gency and 16 independent contractorship are not necessarily mutually exclusive legal categories as independent 17 contractor and servant or employee are[;] [i]n other words, an agent may also be an independent 18 contractor”). For purposes of the instant motion, there is sufficient evidence of agency to invoke the 19 party-opponent rule. 20 Fourth, Vector objects to Ms. Harris’s assertion that, during the three-day training, Sales 21 Reps are trained about the concept “Personal Daily Interest” (i.e., PDI). This objection is overruled. 22 Even if, as Vector contends, PDI was not specifically discussed during training, PDI is clearly 23 mentioned in the Manual, which was undisputedly given to trainees. See Harris Decl., Ex. A 24 (Manual at 30). 25 Finally, Vector objects to various statements by Ms. Harris that she was told by Vector to do 26 certain things – e.g., call if she was having a problem closing a sale or call to get authorization to 27 make a deal with a customer. According to Vector, such statements are hearsay because Ms. Harris 28 has not identified who at Vector told her to do these things. In support of this argument, Vector 5 1 relies primarily on Zaken v. Boerer, 964 F.2d 1319, 1324 (2d Cir. 1992) (concluding that, “without 2 identification of the declarant, the statement concerning the reason for [plaintiff’s] termination did 3 not have a sufficient evidentiary foundation to establish the existence of an agency relationship as 4 required under Rule 801(d)(2)(D)”). The objection is overruled. Zaken is not binding authority. 5 Even if it were, the situation here is factually different from that in Zaken. In Zaken, there was 6 understandably concern about the predicate for agency because many people could have discussed 7 the reasons for the plaintiff’s termination. Here, Ms. Harris is discussing instructions that she was 8 given in order to perform her job as a Sales Rep. It is highly unlikely that anyone but a Vector agent 9 would have given her such instructions. 11 For the Northern District of California United States District Court 10 III. A. 12 DISCUSSION Legal Standard Federal Rule of Civil Procedure 56(c) provides that summary judgment shall be rendered “if 13 the pleadings, depositions, answers to interrogatories, and admissions on file, together with the 14 affidavits, if any, show that there is no genuine issue as to any material fact and that the moving 15 party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). An issue of fact is genuine 16 only if there is sufficient evidence for a reasonable jury to find for the nonmoving party. See 17 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). “The mere existence of a scintilla of 18 evidence . . . will be insufficient; there must be evidence on which the jury could reasonably find for 19 the [nonmoving party].” Id. at 252. At the summary judgment stage, evidence must be viewed in 20 the light most favorable to the nonmoving party and all justifiable inferences are to be drawn in the 21 nonmovant’s favor. See id. at 255. 22 Where the plaintiff has the ultimate burden of proof, the defendant may prevail on a motion 23 for summary judgment simply by pointing to the plaintiff’s failure “to make a showing sufficient to 24 establish the existence of an element essential to [the plaintiff’s] case.” Celotex Corp. v. Catrett, 25 477 U.S. 317, 322 (1986). 26 B. 27 28 Independent Contractor v. Employee In her complaint, Ms. Harris asserts claims pursuant to both state and federal law. See page 2, supra. All of the claims, except one, are state law claims. As stated above, Vector’s main 6 For the Northern District of California United States District Court 1 argument is that it is entitled to summary judgment on all of Ms. Harris’ claims because no 2 reasonable jury could conclude that she was an employee instead of an independent contractor. 3 Ms. Harris does not dispute that, if she was an independent contractor rather than an employee, all of 4 her claims must be dismissed. Ms. Harris, however, contends that there is a genuine dispute of 5 material fact as to whether she was an employee instead of an independent contractor. 6 1. 7 Under state law, in particular, the California Labor Code, whether a person is an independent 8 contractor or an employee largely turns on whether the employer controls the details of the person’s 9 work. See Cal. Lab. Code § 3353 (defining independent contractor as “any person who renders State Law 10 service for a specified recompense for a specified result, under the control of his principal as to the 11 result of his work only and not as to the means by which such result is accomplished”); S.G. Borello 12 & Sons, Inc. v. Department of Indus. Relations, 48 Cal. 3d 341, 350 (1989) (in workers’ 13 compensation case, noting that “‘[the] principal test of an employment relationship is whether the 14 person to whom service is rendered has the right to control the manner and means of accomplishing 15 the result desired’”); Estrada v. FedEx Ground Package System, Inc., 154 Cal. App. 4th 1, 10 (2007) 16 (in discussing claim for failure to reimburse under the California Labor Code, noting that the 17 common law test of employment applies and that “[t]he essence of the test is the ‘control of details’ 18 – that is, whether the principal has the right to control the manner and means by which the worker 19 accomplishes the work”); Reynolds v. Bement, 36 Cal. 4th 1075, 1086-87 (2005) (in discussing 20 claim for unpaid overtime under the California Labor Code, applying the common law test of 21 employment); see also In re Brown, 743 F.2d 664, 667 (9th Cir. 1984) (stating that, under California 22 law, “the most significant factor is the right to control the means by which the work is 23 accomplished”). 24 25 26 27 28 There are, however, additional factors that are considered, including: (1) whether the worker is engaged in a distinct occupation or business, (2) whether, considering the kind of occupation and locality, the work is usually done under the principal’s direction or by a specialist without supervision, (3) the skill required, (4) whether the principal or worker supplies the instrumentalities, tools, and place of work, (5) the length of time for which the services are to be performed, (6) the method of payment, whether by time or by job, (7) whether the work 7 1 is part of the principal’s regular business, and (8) whether the parties believe they are creating an employer-employee relationship. 2 3 Estrada, 154 Cal. App. 4th at 10 (noting that “there are a number of additional factors in the modern 4 equation”). 5 6 one of fact if dependent upon the resolution of disputed evidence or inferences . . . . [But] [i]f the 7 evidence is undisputed, the question becomes one of law . . . .” See S.G. Borello, 48 Cal. 3d at 349. 8 2. 9 Under federal law, in particular, the FLSA, a court considers the following factors in 10 Federal Law determining whether a person is an independent contractor or an employee1: 11 For the Northern District of California United States District Court Under California law, “[t]he determination of employee or independent-contractor status is 1) The degree of the alleged employer’s right to control the manner in which the work is to be performed; 2) the alleged employee’s opportunity for profit or loss depending upon his managerial skill; 3) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers; 4) whether the service rendered requires a special skill; 5) the degree of permanence of the working relationship; 6) whether the service rendered is an integral part of the alleged employer’s business. 12 13 14 15 16 Donovan, 656 F.2d at 1370. The Ninth Circuit has instructed that “[n]either the presence nor the 17 absence of any individual factor is determinative. Whether an employer-employee relationship 18 exists depends ‘upon the circumstances of the whole activity,’ and ultimately, whether, as a matter 19 of economic reality, the individuals ‘are dependent upon the business to which they render service.’” 20 Id. 21 Under federal law, as under state law, “‘[t]he existence and degree of each factor [regarding 22 the status of a person as an independent contractor or employee] is a question of fact while the legal 23 conclusion to be drawn from those facts – whether workers are employees or independent 24 contractors – is a question of law.’” Berger Transfer & Storage v. Central States Pension Fund, 85 25 F.3d 1374, 1378 (8th Cir. 1996); see also Herr v. Heiman, 75 F.3d 1509, 1513 (10th Cir. 1996) 26 (“Whether an individual is an employee or an independent contractor is generally a question of fact 27 1 28 The factors are not exhaustive. See Donovan v. Sureway Cleaners, 656 F.2d 1368, 1370 (9th Cir. 1981). 8 1 for the jury to decide. Under the Fair Labor Standards Act, even though the question of whether a 2 worker is an independent contractor or an employee is a question of law, the existence and degree of 3 each factor is a question of fact.”) (internal quotation marks omitted); Brock v. Superior Care, Inc., 4 840 F.2d 1054, 1059 (2d Cir. 1988) (“The existence and degree of each factor is a question of fact 5 while the legal conclusion to be drawn from those facts -- whether workers are employees or 6 independent contractors -- is a question of law.”). 7 3. 8 Although Vector contends otherwise, the Court concludes that there is sufficient evidence to For the Northern District of California United States District Court 9 Control raise a genuine dispute of material fact as to whether Ms. Harris was an employee rather than an 10 independent contractor. Most significant is the evidence concerning the control allegedly exercised 11 by Vector over Ms. Harris. 12 In its motion, Vector argues that it did not have sufficient control over Ms. Harris to make 13 her an employee based on the following: 14 (1) Vector does not provide Sales Reps with a list of names or other contact information for 15 prospective customers. See Matheson Decl. ¶ 19; see also Arlie Decl. ¶ 22; Leahy Decl. ¶ 21 16 (both stating that Sales Reps are expected to develop their own list and leads). 17 (2) Vector does not assist Sales Reps in scheduling appointments with prospective customers. 18 See Matheson Decl. ¶ 23; see also Arlie Decl. ¶ 25; Leahy Decl. ¶ 24 (both stating that Sales 19 Reps schedule their own appointment). 20 (3) “Vector does not require any of its Sales Representatives to meet a sales quota.” Matheson 21 Decl. ¶ 23; see also Arlie Decl. ¶ 25 (stating the same and adding that there is no requirement 22 that a Sales Rep meet an appointment quota either); Leahy Decl. ¶ 24 (same). 23 (4) Vector does not provide Sales Reps with, e.g., offices, computers, telephones, fax machines, 24 or vehicles to assist them in their sales activities. See Matheson Decl. ¶ 20; Arlie Decl. ¶ 23; 25 Leahy Decl. ¶ 22. 26 (5) Under the Sales Rep Agreement, Sales Reps “reserve[] the right to approach [their] business 27 in any way that [they] see[] fit in the pursuit of sales and profits except as precluded [by the 28 Agreement].” Matheson Decl., Ex. F (Sales Rep Agreement ¶ 6). 9 1 For the Northern District of California Under the Sales Rep Agreement, Sales Reps have the right to determine which marketing 2 methods to use, with some exceptions. See Matheson Decl., Ex. F (Sales Rep Agreement ¶ 3 1) (“The Sales Rep shall personally solicit orders from time to time for the Company’s 4 consumer products through various marketing methods to be determined by the Sales Rep . . 5 . .”). Exceptions include: Sales Reps may not sell Cutco products in retail establishments 6 and may not advertise or sell Cutco products online. See Matheson Decl. ¶ 16; Matheson 7 Depo. at 87-88; Matheson Decl., Ex. F (Sales Rep Agreement ¶ 1). Advertising in, e.g., a 8 newspaper would be permitted but only if approved first by Vector. See Matheson Depo. at 9 168. 10 United States District Court (6) (7) The techniques taught by Vector during the three-day training program are simply 11 guidelines. See Arlie Decl. ¶ 12; Leahy Decl. ¶ 11; see also Bartolini Decl. ¶ 6; Carrasco 12 Decl. ¶ 6; Casanova Decl. ¶ 6; Hedrick Decl. ¶ 6; Lewis Decl. ¶ 6 (all stating that they 13 understood the techniques to be guidelines). 14 (8) Vector does not discipline and does not even have a system to discipline a Sales Rep for not 15 following or integrating the techniques offered in the training program. See Matheson Decl. 16 ¶¶ 24-25. 17 (9) Sales Reps are encouraged, but not required, to contact their Sales or District Managers. See 18 Arlie Decl. ¶ 27; Leahy Decl. ¶ 26; see also Bartolini Decl. ¶ 21; Casanova Decl. ¶ 21; 19 Hedrick Decl. ¶ 21; Carrasco Decl. ¶ 21; Lewis Decl. ¶ 21 (all stating that they did not suffer 20 any consequences for not contacting their managers). 21 Although such evidence certainly weighs in Vector’s favor, Ms. Harris has submitted 22 evidence from which a reasonable jury could find that Vector exercised sufficient control over Ms. 23 Harris to make her an employee. For example: 24 (1) Sales Reps are not allowed to post any advertisements or otherwise use the Vector or Cutco 25 names (e.g., on a business card) without getting approval from Vector. See Matheson Depo. 26 at 98-99, 168. 27 28 (2) Sales Reps are not able to set their own prices for the Cutco knives. See Matheson Depo. at 137-38, 183-84. Vector sets the price from which Sales Reps may not deviate. 10 1 For the Northern District of California Vector dictates what constitutes a qualified presentation for purposes of a Sales Rep being 2 compensated for an in-home demonstration. See Matheson Decl., Ex. F (Sales Rep 3 Agreement § 2). 4 United States District Court (3) (4) Although Vector claims that the techniques taught at the training program are only 5 guidelines, the Manual distributed to trainees states: “You are encouraged to use your own 6 words and phrases to express the ideas of the presentation. But be careful no to stray too far 7 from the basic outline or to change the sequence. Our sales program has been developed 8 through many years of sales experience with CUTCO. It works! Stay within the guidelines, 9 but be yourself.” Harris Decl., Ex. A (Manual at 28) (emphasis added). In addition, Ms. 10 Harris states in her deposition and declaration that she was instructed to follow the Manual 11 word for word. See Harris Decl. ¶¶ 15-17; Harris Depo. at 75, 85. 12 (5) Sales Reps are effectively required to use Vector’s prospectus (i.e., brochure) to do the in- 13 home demonstrations since Sales Reps are not allowed to create and use their own brochures 14 without approval from Vector. See Matheson Depo. at 188 (stating that, if a Sales Rep were 15 to use an intellectual property, then he or she would need to get approval). 16 (6) 17 18 Sales Reps are required to obtain and use a sample kit for in-home demonstrations. See Matheson Decl., Ex F (Sales Rep Agreement ¶ 6). (7) Vector provides Sales Reps with rope and leather to use for in-home demonstrations. See 19 Carrasco Depo. at 71-72 (indicating that managers set up the rope and leather for Sales Reps 20 to use); Lewis Depo. at 106 (testifying that the rope and leather were provided by Vector) 21 (8) Per Vector’s own materials, Sales Reps are effectively required to call their Sales or District 22 Managers every day under the principle of “PDI,” i.e., Personal Daily Interest. See Manual 23 at 30 (“Daily contact with the office is essential for your success. We also encourage you to 24 stop in to the office as much as possible. At a minimum, you should call in daily. . . . Be sure 25 to call in on time. If the line is busy, try again. PDI is one of the most important aspects of 26 working with Vector.”); see also Lee Decl., Ex. G (Outline, Day 3, at V0127-28) (“[PDI] is 27 to ensure your success[;] if we’re going to pay you so much we have to be able to have daily 28 influence with you. . . . Not calling in for PDI is like not showing up for work. . . . We have 11 For the Northern District of California United States District Court 1 to here [sic] from everyone every day so we know what’s going on.”). Ms. Harris also states 2 in her deposition testimony and declaration that she was in fact required to call her managers 3 each day. See Harris Decl. ¶ 22; Harris Depo. at 87, 89. She further states that, if she was 4 having a problem closing a sale, she was required to call her managers during the 5 presentation for further instructions. See Harris Decl. ¶ 24; Harris Depo. at 28, 32, 90. Other 6 Sales Reps also testified as to communications they had with managers during sales efforts. 7 See, e.g., Carrasco Depo. at 132-33 (indicating that, if she had a big order, she would call in 8 and ask if it was acceptable for her to offer a particular product for free to help close the 9 deal); Lewis Depo. at 74 (testifying that, if he was close to making a sale, he would call his 10 manager to see what else he could offer). 11 The Court notes that the critical evidence presented by Ms. Harris is that related to PDI. If it 12 was effectively a requirement that Ms. Harris engage in PDI, and if during these PDI sessions Sales 13 or District Managers effectively supervised or monitored Ms. Harris’s work, then a reasonable jury 14 could conclude that Vector exercised sufficient control over Ms. Harris to make her an employee 15 instead of an independent contractor. 16 4. 17 At the hearing, Vector contended that, even if there were a genuine dispute of material fact Remaining Factors 18 regarding control, the other factors considered under federal and state law (identified above) dictate 19 the legal conclusion that Ms. Harris must be an independent contractor and not an employee. The 20 Court cannot agree. First, particularly under state law, control is the most significant factor. See 21 Estrada, 154 Cal. App. 4th at 10 (stating that the essence of the common law test of employment is 22 whether the principal has the right to control). Thus, the fact that there is a genuine dispute of 23 material fact regarding control alone is enough to preclude summary judgment. 24 Even if that were not the case, the Court does not find the remaining factors overwhelmingly 25 weigh in its favor. Although some factors favor Vector, others favor Ms. Harris – and most factors 26 do not clearly weigh in favor of either. This last point in particular underscores that a summary 27 judgment ruling in favor of Vector would not be proper since the existence and degree of each factor 28 12 1 is a question of fact for the trier of fact to resolve. See Berger, 85 F.3d at 1378. The Court 2 addresses the factors briefly below. For the Northern District of California United States District Court 3 Whether the worker is engaged in a distinct occupation or business. If a worker is engaged 4 in a distinct occupation or business, then that would suggest that the worker is an independent 5 contractor rather than an employee. Here, there is no evidence that, while working as a Sales Rep 6 and selling knives, Ms. Harris held herself out as a separate occupation or business. See S.G. 7 Borello, 48 Cal. 3d at 357 (noting that sharefarmers and their families “engage in no distinct trade or 8 calling” and that “[t]hey do not hold themselves out in business”); Antelope Valley Press v. Poizner, 9 162 Cal. App. 4th 839, 854-55 (2008) (stating that “the evidence does not show that in making 10 deliveries for AVP, the carriers are engaged in a distinct occupation or business of their own”; 11 adding that “[t]here was no evidence that any of AVP’s carriers hold themselves out as being an 12 independent delivery service that happens to have AVP as one of its customers”); Air Couriers Intl’l 13 v. Employment Development Dep’t, 150 Cal. App. 4th 923, 938 (2007) (noting that “the drivers were 14 not engaged in a separate profession or operating an independent business”). That being said, it 15 does not appear that Vector precluded Ms. Harris from doing so. See Matheson Decl. ¶ 15 (noting 16 that Sales Rep Agreement does not prohibit Sales Reps “from selling and marketing other products 17 or preclude them from working elsewhere”); Arlie Decl. ¶ 19 (noting the same; adding that “[m]any 18 Sales Representatives maintain full time jobs at the same time they are performing services for 19 Vector”). 20 Whether, considering the kind of occupation and locality, the work is usually done under the 21 principal’s direction or by a specialist without supervision. In this case, this factor is largely 22 duplicative of the control factor. Vector argues that this factor also requires consideration of sales 23 representative positions in the direct sales industry generally and points to the Mariano declaration 24 which states that “[p]erson-to-person sellers typically specialize in sales for their company and 25 operate with minimal or no supervision by the direct selling company.” Mariano Decl. ¶ 13. 26 However, it is notable that Mr. Mariano used the word “typically.” “Typically” does not preclude 27 supervision in the instant case. Moreover, it is not necessarily unusual for sales employees to work 28 under minimal supervision. 13 1 2 special skill is required of a worker, that fact supports a conclusion that the worker is an employee 3 instead of an independent contractor. See Antelope Valley Press, 162 Cal. App. 4th at 855 (stating 4 that the fact that “[d]elivering papers requires no particular skill” indicated that carriers were 5 employees); Air Couriers, 150 Cal. App. 4th at 934 (noting the same). In the instant case, Vector 6 argues that being a Sales Rep requires special skill, as evidenced by the fact that Vector training 7 materials are used in college courses to teach sales skills and techniques. But, as Ms. Harris points 8 out, Vector’s contention that special skill is required is problematic given its admission that many of 9 its Sales Reps are college students or other first-time sales people, see Matheson Decl. ¶ 9, and its 10 11 For the Northern District of California United States District Court The skill required, i.e., whether the service rendered requires a special skill. Where no claim that training is not required to become a Sales Rep. See Matheson Decl. ¶ 8; Arlie Decl. ¶ 14. Whether the principal or worker supplies the instrumentalities, tools, and place of work; also 12 the alleged employee’s investment in equipment or materials required for his task, or his 13 employment of helpers. Vector does not provide Sales Reps with, e.g., offices, computers, 14 telephones, fax machines, or vehicles to assist them in their sales activities. See Matheson Decl. ¶ 15 20; Arlie Decl. ¶ 23; Leahy Decl. ¶ 22. In addition, there is no evidence that a Sales Rep may not 16 employ any helpers. On the other hand, Vector does supply Sales Reps with the key tool needed to 17 sell the Cutco knives – i.e., the knives themselves (upon payment of a discounted price) – as well 18 rope and leather to use for in-home demonstrations. See Carrasco Depo. at 71-72; Lewis Depo. at 19 106. Also, as noted above, Sales Reps are arguably effectively required to use Vector’s brochures to 20 sell the knives. 21 The length of time for which the services are to be performed; also the degree of permanence 22 for the working relationship. Where a worker is employed for a lengthy period of time, the 23 relationship with the employer looks more like an employer-employee relationship. See Antelope 24 Valley Press, 162 Cal. App. 4th at 855 (concluding that newspaper carriers were employees because, 25 inter alia, the length of a carrier’s service was twelve months by contract); Air Couriers, 150 Cal. 26 App. 4th at 934 (noting that, in a different case, newspaper carriers were deemed employees 27 because, inter alia, they were employed for lengthy periods of time). The same is true where a 28 worker may be discharged at will without cause. See Antelope Valley Press, 162 Cal. App. 4th at 14 1 854. Here, there seems to be little dispute that Sales Reps generally work for a short period of time, 2 which suggests an employer-independent contractor relationship. See Matheson Decl. ¶ 18. On the 3 other hand, the Sales Rep Agreement gives Vector the right to terminate the relationship “at any 4 time for good cause,” which suggests an employer-employee relationship. Matheson Decl., Ex. F 5 (Sales Rep Agreement). For the Northern District of California United States District Court 6 The method of payment, whether by time or job. Here, it is undisputed that Sales Reps were 7 not paid by the hour, which suggests that they were not employees. That being said, Vector 8 compensated Sales Reps not only a commission basis but also on a “qualified sales presentation” 9 basis, which, as Ms. Harris argues, could be analogized to payment on a piece rate basis. See 10 Antelope, 162 Cal. App. 4th at 855-56 (concluding that newspaper carriers were employees based 11 on, inter alia, the fact that they were paid based on the number of papers they delivered per day). 12 Whether the work is part of the principal’s regular business or whether the service rendered 13 in an integral part of the alleged employer’s business. On the one hand, the work of the Sales Reps 14 is clearly part of Vector’s regular business and is an integral part of that business. Vector admits 15 such. See Mot. at 12. On the other hand, as Vector notes, this is the case in any direct sales 16 business. This factor is not dispositive. 17 Whether the parties believe they are creating an employer-employee relationship. In the 18 instant case, the Sales Rep Agreement expressly provides that a “Sales Rep agrees that he/she shall 19 not, at any time, represent himself/herself to be an employee of [Vector]” and that “[t]he Sales Rep 20 agrees to conduct his/her business on an independent contractor basis.” Matheson Decl., Ex. F 21 (Sales Rep Agreement ¶ 4). Documents provided to trainees are consistent, see, e.g., Matheson 22 Decl., Ex. C (“Skills for Life” brochure) (stating that Sales Reps work as independent contractors), 23 and trainees are also told during the three-day training program that they are independent 24 contractors. See Arlie Decl. ¶ 13. Notwithstanding the above, the context of the contractual 25 relationship must be taken into account – i.e., that Vector was largely contracting with young people 26 with little to no business experience – and there is no evidence that the implications of the 27 independent contractor status were explained to trainees or Sales Reps. See Antelope Valley Press, 28 162 Cal. App. 4th at 854 n.14 (recognizing that contract language showed that “AVP intended for 15 1 the carriers to believe they have an independent contractor relationship with AVP,” but pointing out 2 that “it was not clear to the ALJ that the carriers fully understood what such a relationship would 3 mean for themselves”); Air Couriers, 150 Cal. App. 4th at 938 (taking into account terms of contract 4 but concluding that this did not preclude worker from being an employee since, inter alia, workers 5 testified that employer failed to explain the legal and practical impacts of the contract). On the other 6 hand, Vector argues that Ms. Harris never asserted rights as an employee while acting as a Sales 7 Rep. Hence, there are factual disputes. 8 For the Northern District of California United States District Court 9 The alleged employee’s opportunity for profit or loss depending upon his managerial skill. Although Vector contends that how much a Sales Rep earns is entirely dependent on his or her 10 skills, Ms. Harris legitimately points out that Sales Reps are somewhat insulated against the risk of 11 loss because they may be compensated on the “qualified sales presentation” basis instead of the 12 commission basis. In addition, Sales Reps are somewhat restricted from full opportunity for profit 13 because they are not able to set the prices for the Cutco knives. See Matheson Depo. at 137-38, 183- 14 84. 15 In short, based on the genuine dispute of material fact regarding control, the Court rejects 16 Vector’s argument that it is entitled to summary judgment on all claims (state and federal) because 17 Ms. Harris was clearly an independent contractor rather than an employee.2 18 C. Claims for Failure to Pay Minimum Wages 19 In its motion for summary judgment, Vector argues that, regardless of how the issue above is 20 decided, at the very least, the claims for failure to pay minimum wages (under federal and state law) 21 2 22 23 24 25 26 27 28 Ms. Harris has cited Mary Kay, Inc. v. Woolf, 146 S.W.3d 813 (Tex. Ct. App. 2004), in support of her position that she was an employee of Vector rather than an independent contractor. In Mary Kay, the trial court concluded that a Mary Kay sales director was an employee under California law but the appellate court held that Texas law, not California law, governed and ruled that she was not an employee under Texas law. Some of the facts in Mary Kay are similar to those in the instant case – e.g., there, as here, the worker had “broad discretion in how she operated her business,” her only limitations being that the product had to be sold to end users (not retail establishments) and that she had circumscribed use of the Mary Kay trademarks. Id. at 818. Also, the worker “did not work any particular hours; she could work as much or as little as she chose.” Id. But, as Ms. Harris points out, some of the facts in Mary Kay are distinguishable. Most notably, the worker was able “set her own prices for the cosmetics, thus controlling the profit she made from the sales aspect of her business”; “[s]he could (and did) choose to recruit more consultants” to assist her; and “[s]he consistently represented to the Internal Revenue Service that she was self-employed.” Id. 16 1 should be dismissed. Vector’s main argument is that, even assuming that Ms. Harris was an 2 employee, it should not be held liable for failure to pay minimum wages because of the outside sales 3 exemption, which is found in both federal and state law. 4 5 U.S.C. § 206 is not applicable with respect to, inter alia, any employee employed in the capacity of 6 an “outside salesman.” See 29 U.S.C. § 213(a) (stating that “[t]he provisions of sections 6 (except 7 section 6(d) in the case of paragraph (1) of this subsection) and 7 [29 U.S.C. §§ 206, 207] shall not 8 apply with respect to – (1) any employee employed . . . or in the capacity of outside salesman (as 9 such terms are defined and delimited from time to time by regulations of the Secretary . . . )”). 10 11 For the Northern District of California United States District Court Under federal law, the requirement that an employer pay a minimum wage pursuant to 29 “Outside salesperson” is defined in 29 C.F.R. § 541.500 as one: (1) 12 Whose primary duty is: (i) making sales within the meaning of section 3(k) of the Act, or (ii) obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and 13 14 15 (2) 16 Who is customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty. 17 18 29 C.F.R. § 541.500. 19 Like federal law, “state minimum wage laws specifically exclude outside salesmen from 20 coverage.” Grubb & Ellis Co. v. Spengler, 143 Cal. App. 3d 890, 897 (1983); see also Cal. Lab. 21 Code § 1171 (stating in relevant part that “[t]he provisions of this chapter shall apply to and include 22 men, women and minors employed in any occupation, trade, or industry, whether compensation is 23 measured by time, piece, or otherwise, but shall not include any individual employed as an outside 24 salesman”); Reynolds v. Bement, 36 Cal. 4th 1075, 1084 (2005) (noting that the Industrial Welfare 25 Commission (“IWC”) is empowered to formulate regulations, known as wage orders, governing 26 employment in California and that the IWC was promulgated a general minimum wage order that 27 applies to all employers and employees, excluding, inter alia, outside salespersons). The IWC has 28 defined outside salesperson as “‘any person, 18 years of age or over, who customarily and regularly 17 For the Northern District of California United States District Court 1 works more than half the working time away from the employer’s place of business selling tangible 2 or intangible items or obtaining orders or contracts for products, services or use of facilities.’” 3 Ramirez v. Yosemite Water Co., 20 Cal. 4th 785, 795 (1999) (quoting Wage Order No. 7-80, 2(I)). 4 The California Supreme Court has indicated that the state law definition of outside salesperson 5 differs from the federal law definition in that “the federal exemption focuses on defining the 6 employee’s ‘primary function,’ not on how much work time is spent selling.” Id. at 797. 7 Vector contends that, whether under federal or state law, there is no genuine dispute of 8 material fact that Ms. Harris qualified as an outside salesperson. In her opposition and supplemental 9 opposition, Ms. Harris failed to make any challenge to this claim. Furthermore, at the hearing, Ms. 10 Harris conceded that she was an outside salesperson. Notwithstanding such, Ms. Harris argued in 11 her papers and at the hearing that outside salespersons are still entitled to compensation for training,3 12 and therefore she should have been compensated for the time that she spent in the three-day training. 13 Ms. Harris points out that, under federal law, the outside sales exemption “do[es] not apply 14 to employees training for employment in an . . . outside sales . . . capacity who are not actually 15 performing the duties of an . . . outside sales . . . employee.” 29 C.F.R. § 541.705. There is no 16 evidence in the record indicating that, during the three-day training program, Ms. Harris or even any 17 other person actually set up an appointment with a customer or otherwise tried to make a sale. 18 Therefore, the Court rejects Vector’s contention that the outside sales exemption dictates dismissal 19 of the entire federal claim. The exemption does not, in and of itself, warrant denial of compensation 20 for training. 21 However, Ms. Harris is not automatically eligible for compensation for the time spent in 22 training. The Ninth Circuit has stated that “[i]t is axiomatic, under the FLSA, that employers must 23 pay employees for all ‘hours worked.’ The threshold question in [a] case is whether the activities 24 cited by the plaintiff[] . . . constitute ‘work’ under the FLSA.” See Alvarez v. IBP, Inc., 339 F.3d 25 26 27 28 3 She also argues that outside salespersons are still considered employees deserving of other protections under the California Labor Code – i.e., §§ 203, 226, 450, 2802, and 2698. See Supp. Opp’n at 5. 18 1 894 (9th Cir. 2003). “[A]ll hours are hours worked which the employee is required to give his 2 employer . . . .” 29 C.F.R. § 785.7. Federal regulations, however, specifically provide that 3 4 [a]ttendance at lectures, meetings, training programs and similar activities need not be counted as working time if the following four criteria are met: 5 (a) Attendance is outside of the employee’s regular working hours; 6 (b) Attendance is in fact voluntary; 7 (c) The course, lecture, or meeting is not directly related to the employee’s job; and (d) The employee does not perform any productive work during such attendance.[4] 8 9 11 For the Northern District of California United States District Court 10 29 C.F.R. § 785.27 (emphasis added). In the instant case, there is a genuine dispute of material fact as to at least one of the criteria 12 above – i.e., (b). For example, Ms. Harris states in her declaration and deposition testimony that she 13 was told the training was mandatory. See Harris Decl. ¶ 8; Harris Depo. at 59. Also, an inference 14 could be made that, even if Vector did not formally require participation in the training, the implicit 15 message was that the training should be done as reflected by Vector’s admission that a high 16 percentage of persons do participate in the training. See Matheson Depo. at 76 (sating that over 75% 17 participate); see also Arlie Depo. at 112-13 (initially stating that close to 99% participate, although 18 later backtracking and stating that he did not know the exact percentage). Furthermore, it appears 19 doubtful whether criteria (c) applies: The training appears to be related to the job. Indeed, the 20 training is keyed to the specifics of the Vector sales program and Cutco knives. 21 In its papers, Vector seems to challenge the applicability of the above authority and argues 22 that other authority is on point. However, the authority cited by Vector is actually inapplicable. For 23 example, the main authority cited by Vector, Atkins v. General Motors Corp., 701 F.2d 1124 (5th 24 Cir. 1983), addresses the issue of when trainees should be considered employees. See id. at 1127. 25 But the outside sales exemption is applicable only where a person is already considered an 26 27 28 4 At least one court has suggested that “‘productive work’ may be measured by comparing the duties of the employee while in training to the duties that the employee is normally expected to perform.” Seever v. Carrols Corp., 528 F. Supp. 2d 159, 168 (W.D.N.Y. 2007). 19 1 employee; thus, Atkins is not on point. See id. at 1128 n.2 (stating that the test articulated in 29 2 C.F.R. § 785.27 – the regulation cited by Ms. Harris in the instant case – “applies to trainees who are 3 already employees”; “[s]ince employment is the question we must decide, this test is inapposite”). For the Northern District of California United States District Court 4 To the extent Vector argues that, at the time of the training, Ms. Harris was not an employee 5 – thus making Atkins relevant authority – that is a genuine dispute of material fact. Ms. Harris states 6 in her declaration and deposition testimony that she was hired before the training started. See Harris 7 Decl. ¶ 8; Harris Depo. at 45, 53. Mr. Lewis indicates the same in his deposition testimony. See 8 Lewis Depo. at 52-53 (stating that, after the interview but before training, he was told something 9 along the lines of “You got the position” and that he accepted the position). Also, the Manual which 10 was distributed to the trainees states: “Welcome to the VECTOR team!” Harris Decl., Ex. A 11 (Manual at 1). 12 Furthermore, even if Atkins applied, two of the criteria used in Atkins to determine whether a 13 trainee should be considered an employee is (1) whether the training is for the benefit of the trainees 14 and (2) whether the employer derives no immediate advantage from the activities of the trainees. 15 See id. at 1127 (listing six criteria developed by Wage and Hour Administrator to determine if a 16 trainee is an employee under FLSA). Here, there is a genuine dispute of material fact as to whether 17 Vector or the trainees principally benefitted from the training. See McLaughlin v. Ensley, 877 F.2d 18 1207, 1209-10 (4th Cir. 1989) (evaluating whether employer or individual principally benefitted 19 from training; noting that workers received very little benefit – “the skills learned were either so 20 specific to the job or so general to be of practically no transferable usefulness”); see also Reich v. 21 Parker Fire Protection Dist., 992 F.2d 1023, 1027 (10th Cir. 1993) (noting that “determinations of 22 employee status under FLSA in other contexts [e.g., employee v. independent contractor] are not 23 subject to rigid tests but rather to consideration of a number of criteria in their totality” and that the 24 economic realities of the relationship must be considered). Although Vector argues that the trainees 25 largely benefitted by learning general sales skills, a reasonable jury might conclude otherwise 26 because a significant part of the training was very specific to Vector and the Cutco knives. For 27 example, during the training, trainees learn how to do demonstrations, see Lee Decl., Ex. E (Outline, 28 Day 1, at V0066, V0073); are educated about Cutco knives and the knives of competitors, see Lee 20 1 Decl., Ex. F (Outline, Day 2, at V0084-87); and learn how to take orders. See Lee Decl., Ex. G 2 (Outline, Day 3, at V0115). For the Northern District of California United States District Court 3 For the foregoing reasons, Ms. Harris’s federal claim for failure to pay minimum wages 4 should not be dismissed. There is a genuine dispute of material fact as to whether, at the time of the 5 three-day training, Ms. Harris was an employee. If so, then the outside sales exemption would not 6 be applicable because the exemption does not apply to training time and there is a genuine dispute of 7 material fact as to whether the training time constituted “hours worked,” although the above analysis 8 suggests Ms. Harris’s claim on this issue is persuasive. 9 As for Ms. Harris’s state claim, Vector does not argue that the legal standards are any 10 different. Therefore, summary judgment on the state law claim for failure to pay minimum wages is 11 also denied. 12 D. 13 Claim for Violation of California Labor Code § 450 In its summary judgment motion, Vector also challenges Ms. Harris’s claim that Vector 14 violated California Labor Code § 450. Section 450 provides that “[n]o employer, or agent or officer 15 thereof, or other person, may compel or coerce any employee, or applicant for employment, to 16 patronize his or her employer, or any other person, in the purchase of any thing of value.” Cal. Lab. 17 Code § 450. According to Ms. Harris, Vector violated this statute by compelling Sales Reps to buy 18 sample kits. 19 Vector contends that it is entitled to summary judgment on this claim because a Sales Rep 20 could obtain a refund if he or she returned a sample kit; thus, no “purchase” actually took place. See 21 Mot. at 22 (characterizing the transaction as a “deposit” instead of a “purchase”). Vector also argues 22 that, even if there was a purchase, Sales Reps were not required to purchase the sample kit but rather 23 could have sold the knives without having any samples at all. See Matheson Depo. at 82 (testifying 24 that a sample kit was helpful but not necessary and that other sales aids could be used). 25 26 27 28 21 1 2 means, in essence, to buy.5 See Black’s Law Dictionary 1248 (7th ed. 1999) (defining “purchase” as 3 “[t]he act or an instance of buying”); http://www.merriam-webster.com/dictionary/purchase 4 (defining “purchase” as “to obtain by paying money or its equivalent” or “buy”). Under this 5 definition, there is ample evidence that Sales Reps were required to “purchase” sample kits. The 6 Sales Rep Agreement specifically provides that “Sales Reps shall obtain a sample kit for 7 demonstration purposes. The company reserves the right to convert checks provided by sales 8 representatives for payment of the sample kit to ACH transactions (Electronic Funds Transfers) . . . 9 .” Matheson Decl., Ex. F (Sales Rep Agreement ¶ 6) (emphasis added). Vector has failed to provide For the Northern District of California 10 United States District Court The Court rejects both of Vector’s arguments. As to the first argument, the term “purchase” any authority suggesting that the possibility of a refund negates a purchase. 11 As to the second argument, the same provision of the Sales Rep Agreement quoted above 12 constitutes evidence that Sales Reps were required to purchase the sample kits. See id. (using the 13 term “shall”). Vector’s attempt to argue that a Sales Rep could perform a demonstration without a 14 sample kit also fails to take into account that, in order to be compensated for a qualified sales 15 presentation, a Sales Rep had to do a visual demonstration with the Cutco knives. See Matheson 16 Depo. at 92-92 (admitting that a visual demonstration involves hands-on using of the tools and the 17 cutting performance; also stating that if a Sales Rep does not have a sample kit then he or she would 18 not qualify for the minimum commission, i.e., the qualified sales presentation commission). 19 For the above-stated reasons, the Court denies Vector’s motion for summary adjudication on 20 the § 450 claim. 21 E. 22 Claim for Violation of California Labor Code § 226 In her complaint, Ms. Harris alleges that Vector violated California Labor Code § 226, which 23 requires an employer to keep and provide accurate pay records. See Cal. Lab. Code § 226(a) 24 (providing that “[e]very employer shall, semimonthly or at the time of each payment of wages, 25 furnish each of his or her employees, either as a detachable part of the check, draft, or voucher 26 27 28 5 “In engaging in statutory interpretation we are to accord words their usual, ordinary, and common sense meaning based on the language the Legislature used and the evident purpose for which the statute was adopted.” In re Rojas, 23 Cal. 3d 152, 155 (1979). 22 For the Northern District of California United States District Court 1 paying the employees wages, or separately when wages are paid by personal check or cash, an 2 accurate itemized statement in writing showing [inter alia] gross wages earned”); Cornn v. UPS, 3 Inc., No. C03-2001 TEH, 2006 U.S. Dist. LEXIS 9013, at *4 (N.D. Cal. Feb. 22, 2006) (stating that, 4 “[u]nder California Labor Code section 226, employers must provide accurate itemized statements 5 of wages to their employees”). In its summary judgment motion, Vector argues that this claim 6 should be dismissed because, “in order for Section 226 penalties to be imposed, the failure to 7 provide accurate wage statements to employees must have been knowing and intentional.” Mot. at 8 22 (emphasis in original). 9 Section 226(e) does provide that “[a]n employee suffering injury as a result of a knowing and 10 intentional failure by an employer to comply with subdivision (a) is entitled to recover” damages, as 11 well as costs and reasonable attorney’s fees. Cal. Lab. Code § 226(e) (emphasis added); see also 12 Hoffman v. Construction Protective Servs., Nos. 06-56380, 06-56381, 06-56382, 07-55135, 2008 13 U.S. App. LEXIS 19055, at *3 (9th Cir. Sept. 4, 2008) (stating that California law requires that there 14 be a knowing and intentional violation of § 226); Amaral v. Cintas Corp. No. 2, 163 Cal. App. 4th 15 1157, 1195 (2008) (noting that, “[w]hen proven, Labor Code violations give rise to civil penalties” 16 and that “[s]ome statutory penalties are imposed only if an employers’ violation was ‘willful’ or 17 ‘knowing’” – for example, “section 226, subdivision (e) penalizes an employer’s ‘knowing and 18 intentional’ failure to provide itemized wage statements under section 226, subdivision (a)”). 19 Vector is entitled to summary adjudication on the damages claim. There is no evidence that 20 Vector’s conduct was a knowing or willful violation of § 226(a). See, e.g., Reber v. AIMCO, No. SA 21 CV07-0607 DOC (RZx), 2008 U.S. Dist. LEXIS 81790, at *25 (C.D. Cal. Aug. 25, 2008) (noting 22 that § 226 does not apply if an employee falls under an administrative exception and that, in the case 23 under consideration, there was a “good faith dispute” as to whether employees were exempt; thus, 24 employer did not knowingly and intentionally fail to provide itemized wage statements and 25 employer was awarded summary judgment); Wang v. Chinese Daily News, Inc., 435 F. Supp. 2d 26 1042, 1051 (C.D. Cal. 2006) (taking note that “[d]efendants concede that they knew their wage 27 statements did not comply with California law” and so defendants’ failure to ameliorate the problem 28 23 1 “and their stance that the violations are merely technical also demonstrate that the violations were 2 knowing and intentional”). 3 However, Ms. Harris seeks not only damages for the violation of § 226 but also injunctive 4 relief. See Compl. ¶¶ 61-62. Under § 226(g), there is no requirement of knowing and intentional 5 failure to comply with the statute in order to justify injunctive relief. See id. § 226(g) (providing that 6 “[a]n employee may also bring an action for injunctive relief to ensure compliance with this section, 7 and is entitled to an award of costs and reasonable attorney’s fees”). Therefore, Ms. Harris’s § 226 8 claim should not be dismissed in its entirety. She may seek injunctive relief. 9 F. For the Northern District of California United States District Court 10 Claim for Violation of California Labor Code § 201 et seq. In her complaint, Ms. Harris claims that Vector also violated the California Labor Code by 11 failing to pay wages in a timely fashion. Section 201 of the Labor Code provides: “If an employer 12 discharges an employee, the wages earned and unpaid at the time of discharge are due and payable 13 immediately.” Cal. Lab. Code § 201(a). Section 202 provides: “If an employee not having a written 14 contract for a definite period quits his or her employment, his or her wages shall become due and 15 payable not later than 72 hours thereafter . . . .” Id. § 202(a). Finally, § 203(a) of the Labor Code 16 provides: 17 18 19 If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.3, 201.5, 202, and 205.5, any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days. 20 21 Cal. Lab. Code § 203(a). Similar to above, Vector argues that this claim should be dismissed 22 because there is no evidence that it willfully failed to pay Ms. Harris wages in a timely manner. 23 Because Ms. Harris’s claim here does appear to seek only the civil penalties provided for in § 24 203(a), the Court agrees with Vector’s position and dismisses the claim in its entirety. See Amaral, 25 163 Cal. App. 4th at 1195 (stating that, “[w]hen proven, Labor Code violations give rise to civil 26 penalties” and that “[s]ome statutory penalties are imposed only if an employers’ violation was 27 ‘willful’ or ‘knowing’” – e.g., “section 203 penalizes an employer that ‘willfully’ fails to pay wages 28 due under sections 201 or 202”). 24 1 G. For the Northern District of California United States District Court 2 Claim for Violation of California Labor Code § 2698 et seq. California Labor Code § 2698 et seq. is known as the Labor Code Private Attorneys General 3 Act. The Act provides that, “[f]or all provisions of this code except those for which a civil penalty is 4 specifically provided, there is established a civil penalty for a violation of these provisions, as 5 follows . . . .” Cal. Lab. Code § 2699(f). In the instant case, Vector moves for summary judgment 6 on the basis that “virtually all of the California Labor Code provisions sued under by plaintiff 7 already provide a civil penalty.” Mot. at 23. However, Vector does not claim that either California 8 Labor Code § 450 or § 2802 provide for a civil penalty. These are the only claims for which Ms. 9 Harris seeks a penalty under the Act. See Compl. ¶ 81 (stating that “the members of all classes seek 10 recovery of all applicable civil penalties for Defendants’ violation of Labor Code §§ 450 and 11 2802”). Accordingly, the Court denies Vector’s motion for summary adjudication on this claim. 12 H. 13 Violation of California Business & Professions Code § 17200 California Business & Professions Code § 17200 prohibits unfair competition, i.e., “any 14 unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading 15 advertising.” Cal. Bus. & Prof. Code § 17200. In its motion, Vector asserts that it is entitled to 16 summary judgment because there has been no unlawful business practice – that is, “there has been 17 no violation of any of the statutes pled in plaintiff’s complaint” and thus “the predicate wrongful act 18 necessary for a 17200 claim is absent.” Reply at 15. Because most of the claims have survived 19 summary judgment for the reasons discussed above, the Court rejects Vector’s argument and allows 20 the § 17200 claim to proceed as well. 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 25 1 2 IV. CONCLUSION For the foregoing reasons, the Court grants in part and denies in part Vector’s motion for 3 summary judgment or summary adjudication. Vector is entitled to summary adjudication on (1) the 4 § 226 damages claim (but not the § 226 injunctive relief claim) and (2) the § 201 claim. On all other 5 claims, Vector’s request for summary adjudication is denied. 6 This order disposes of Docket No. 35. 7 8 IT IS SO ORDERED. 9 Dated: September 4, 2009 11 For the Northern District of California United States District Court 10 _________________________ EDWARD M. CHEN United States Magistrate Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 26
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