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Court of Appeal clarifies on Split Shift and Reporting Time Pay Issues

Aleman v. AirTouch Cellular, 2012 WL 4130520

Background: Plaintiffs Daniel Krofta (Krofta) and Mary Katz (Katz) brought putative class action AirTouch Cellular (doing business as Verizon Wireless) (AirTouch) alleging violation of two separate provisions of the Industrial Welfare Commission’s (IWC) Wage Order No. 4–2001 (Cal.Code Regs., tit. 8, § 11040). First, Plaintiffs claimed that AirTouch improperly failed to pay “reporting time pay” for days when employees were required to report to work just to attend work-related meetings. Second, Airtouch owed “split shift” compensation for days on which they attended a meeting in the morning and worked another shift later the same day.

Court History: Airtouch moved for summary judgment against Daniel Krofta, one of the 17 named plaintiffs and putative class action representatives. Airtouch argued that because Krofta’s salary was not at or near minimum wage, he was not entitled to additional compensation for working a split shift; and, because all meetings Krofta attended were scheduled and Krofta was paid for working the scheduled time, he was not owed reporting time pay.

AirTouch also moved for summary judgment against Mary Katz arguing that an agreement signed by Katz while the lawsuit was pending released all of her claims.

Both the summary judgments were granted in favor of Airtouch. Subsequently, Airtouch moved to recover attorney fees from Krofta and Katz, trial court rejecting the Plaintiffs argument that actions were covered not by section 218.5, but instead by section 1194 awarded AirTouch $146,000 in fees against Krofta and $140,000 in fees against Katz.

After AirTouch moved for summary judgment but prior to the court’s rulings, all plaintiffs unsuccessfully moved for class certification. Trial Court denied the motion without prejudice on the basis that the court was not “satisfied that any of the named representatives have made an adequate showing that he or she is an adequate class representative.”

All plaintiffs filed appealed from the order denying the motion for class certification. Separately, Krofta and Katz appealed from the judgments entered against them. Court of Appeal in its initial decision, reversed the trial court’s fees award and found both appellants’ claims subject to Labor Code section 1194, a “plaintiffs only” fees shifting statute. Subsequently, the Supreme Court granted review and held it pending its decision in Kirby v. Immoos Fire Protection, Inc. (2012) 53 Cal.4th 1244, 140 Cal.Rptr.3d 173 (Kirby) (discussed here).

Pertinent Issues addressed: On remand post Kirby, the Court of Appeal explained, under California law

“Now, reconsidering the matter, we determine that the split shift claim is subject to Labor Code section 1194, because the claim seeks to recover unpaid minimum wage compensation. However, a reporting time claim is brought to recover unpaid wages, and is therefore subject to Labor Code section 218.5, which allows a prevailing defendant to recover attorney fees. We conclude that the trial court must allocate the reasonable fees incurred by AirTouch in defending the reporting time claim and award those fees.

Finally, we decline to consider the putative class members’ appeal of the trial court’s denial of a motion for class certification, since the motion was denied without prejudice and the matter has not been finally decided.”

The Court of Appeal made the following relevant findings, among others:

a.  Krofta was not owed additional compensation for reporting time pay. The Court of Appeal simplified the issue by framing the following question: “If an employee’s only scheduled work for the day is a mandatory meeting of one and a half hours, and the employee works a total of one hour because the meeting ends a half hour early, is the employer required to pay reporting time pay pursuant to subdivision 5(A) of Wage Order 4 in addition to the one hour of wages?” The Court of Appeal answered in “No” explaining that, “because the employee was furnished work for more than half the scheduled time. The employee would be entitled to receive one hour of wages for the actual time worked, but would not be entitled to receive additional compensation as reporting time pay.”

b.  Krofta was not owed additional compensation for working split shifts. The facts were undisputed as to Krofta worked “split shifts”. Subdivision 4(C) of Wage Order 4 states: “When an employee works a split shift, one (1) hour’s pay at the minimum wage shall be paid in addition to the minimum wage for that workday, except when the employee resides at the place of employment.” Court of Appeal found that, “The provision provides that one hour at the “minimum wage shall be paid in addition to the minimum wage for that workday”—not the regular wage for that workday.” Since Krofta was paid more than the sum of minimum wage for all hours worked plus an additional hour at minimum wage, he was not entitled to additional compensation for working split shifts.

c.  Katz released her claims. Court of Appeal stated as follows: “Katz simply contended that AirTouch failed to pay split shift and reporting time pay, which, according to Katz, was undisputedly owed. She argued that pursuant to section 206.5, any release of these claims was unenforceable. This argument clearly failed. There was no question that AirTouch disputed her right to split shift and reporting time pay. These types of pay were not undisputedly owed, and Katz received consideration for releasing her disputed claims. The trial court, therefore, did not err by finding the release effective and granting summary judgment against Katz.”

d.  Split shift compensations are subject to section 1194. Court of Appeal noted that, “unlike a claim for rest or meal period violations, a split shift claim is one brought to recover unpaid minimum wage compensation – one hour’s pay “at the minimum wage … in addition to the minimum wage for that workday.” Accordingly, an action for recovery of split shift compensation is governed by section 1194 and is not subject to section 218.5. Hence, a prevailing defendant cannot recover fees in an action under section 1194.

e.  Reporting time claims are unpaid wages, hence subject to section 218.5 and not section 1194. In the light of the Supreme Court decision in Kirby, the Court of Appeal reversed its earlier findings that that reporting time claims were also subject to section 1194. The Court of Appeal explained as follows:

“In light of Kirby, however, it cannot be held that a claim is subject to section 1194 because it seeks to enforce minimum pay requirements. Instead, it must seek unpaid minimum wage or overtime compensation. A reporting time claim is not designed to seek minimum or overtime wages; rather, reporting time compensation is “at the employee’s regular rate of pay.” Therefore, section 1194 does not authorize an award of attorney fees to an employee who prevails on a reporting time claim.” (Emphasis added) The Court of Appeal further observed that because an action for reporting time pay is one brought on account of nonpayment of wages, section 218.5 would be applicable. Court of Appeal held as follows: “Unlike a failure to provide a meal or rest break, it is not a legal violation to decline to put an employee to work or to furnish less than half the usual or scheduled day’s work. It simply requires that the employer pay the employee for reporting time. An employee who brings suit to collect reporting time seeks to obtain unpaid wages. The claim is thus subject to section 218.5, which allows the prevailing party to recover attorney fees.”

Pointers:

  • Employers should note that, meetings should be scheduled and employees must be promptly informed about the duration of the meeting, also the meeting should be for at least one-half of the scheduled time to avoid minimum payment of two hours.