Levanoff v. Dragas

280 Cal.Rptr.3d 610

65 Cal.App.5th 1079

Christopher LEVANOFF et al., Plaintiffs and Appellants,

v.Matthew DRAGAS et al., Defendants and Respondents.

G058480, G058709

Court of Appeal, Fourth District, Division 3, California.

Filed June 25, 2021

Mahoney Law Group, Kevin Mahoney, Long Beach, Katherine J. Odenbreit, Los Angeles; Ferguson Case Orr Paterson, Wendy C. Lascherand John A. Hribar, Ventura, for Plaintiffs and Appellants.

CDF Labor Law, Timothy M. Freudenberger, Amy S. Williams, Nancy N. Lubrano, Irvine; Duckor, Spradling, Metzger & Wynne, William Patrick Keith and Scott L. Metzger, San Diego, for Defendants and Respondents.

OPINION

FYBEL, J.

INTRODUCTION

The issue presented by this appeal is whether defendant employers violated California law in their method of calculating the regular rate of pay for purposes of compensating overtime hours of employees who worked at different rates of pay within a single pay period (dual rate employees). Defendants used the rate-in-effect method, by which dual rate employees are paid for overtime hours based on the rate in effect when the overtime hours began. Plaintiffs contend that California law required defendants to use the weighted average method, by which dual rate employees are paid for overtime based on an hourly rate calculated by adding all hours worked in one pay period and dividing that number into the employee's total compensation for the pay period.

Plaintiffs are employees of Buffalo Wild Wings Restaurants owned and/or operated by defendants. In their lawsuit against defendants, plaintiffs asserted individual and class claims under various provisions of the Labor Code and the California Unfair Competition Law, and claims for violations of the Labor Code Private Attorneys General Act of 2004, Labor Code section 2698 et seq. (PAGA). The trial court certified eight classes and two subclasses, but later decertified all classes except for a subclass of dual rate employees who allegedly were underpaid by defendants for overtime hours worked. We refer to this subclass as the dual rate overtime subclass.

By agreement of the parties, a bench trial was conducted on the issue of liability under PAGA for underpayment of overtime hours worked by dual rate employees. In a thorough statement of decision, the trial court found, among other things, that defendants did not violate California employment law by using the rate-in-effect method for calculating the overtime rate of pay.

Based on the ruling in the bench trial, the trial court decertified the dual rate overtime subclass and dismissed the PAGA claims. Plaintiffs appeal from the order decertifying the dual rate overtime subclass and the order dismissing the PAGA claims.

We affirm. We agree with the trial court and hold defendants did not violate California law by using the rate-in-effect method for calculating the regular rate of pay for purposes of establishing the overtime rate of pay for dual rate employees. The method employers must always use is an issue we need not decide: The only issue before us is whether under the facts of this case defendants' use of the rate-in-effect method was lawful. California law does not mandate the use of the weighted average method, and defendants' dual rate employees, including plaintiffs, overall received net greater overtime pay under the rate-in-effect method than they would have received under the weighted average method. Because defendants did not violate California law by using the rate-in-effect method, the trial court did not err by decertifying the dual rate overtime subclass and dismissing the dual rate overtime PAGA claim.

ALLEGATIONS AND PROCEDURAL HISTORY

I.The Parties and Allegations of the Complaints

Plaintiffs are Christopher Levanoff, Alison Diaz, Andrew Gaxiola, and Jenna Steed (collectively Plaintiffs). They were employees of several Buffalo Wild Wings Restaurants owned and/or operated by defendants Matthew Dragas, SoCal Wings LLC, SC Wings Buena Park, SC Wings Aliso Viejo, LLC, SC Wings Mission Viejo, LLC, SC Wings Block, LLC, and Dragas Homes, Inc. (collectively Defendants). Plaintiffs were employed in various capacities, including server, bartender, certified trainer, manager-in-training, and shift lead.

In 2011, Plaintiffs initiated this lawsuit on behalf of themselves and a plaintiff class. The Second Amended Complaint alleged eight causes of action: (1) failure to pay overtime wages, (2) failure to provide meal periods, (3) failure to provide rest periods, (4) failure to pay wages upon ending employment, (5) failure to keep accurate payroll records, (6) violation of the California Unfair Competition Law, Business and Professions Code section 17200 et seq., (7) violation of Labor Code section 558, and (8) violation of PAGA. The Second Amended Complaint alleged nine classes and two subclasses. Relevant here is subclass I within class 1, the dual rate overtime subclass, alleged to consist of "[a]ll current and former California hourly non-exempt employees who work or worked for Defendants during the Class Period who worked over eight (8) hours in a day or forty (40) hours in a week without receiving proper overtime payments because the overtime payments were calculated using the lower regular rate of pay." The class period was "September 28, 2007 to the present."

In 2014, the trial court partially granted Plaintiffs' motion for class certification and certified all classes and subclasses, with one exception not relevant to this appeal.

Plaintiffs filed the Third Amended Complaint in January 2015. It is the operative pleading and has the same causes of action and the same classes and subclasses as alleged in the Second Amended Complaint.

II.The Dual Rate Overtime PAGA Claim and Subclass

None of the complaints alleged that Defendants violated California employment law by using the rate-in-effect method instead of the weighted average method to calculate regular rate of pay for determining overtime pay of dual rate employees. Instead, the dual rate overtime subclass claim in the Second Amended Complaint and the Third Amended Complaint was based on allegations that Defendants paid certain employees different rates of pay for performing the same type of work during the same pay period and, as a result, underpaid certain employees for overtime hours.

In the motion for class certification, Plaintiffs asserted that Defendants violated California law by failing to use the weighted average method for calculating regular rates of pay used for calculating the rate of overtime pay. At a pretrial hearing on motions in limine, the trial court, over Defendants' objection, allowed Plaintiffs "to keep" the dual rate overtime claim based on failure to use a weighted average and found "it is both a PAGA issue and a class action issue."

Later, a proposed statement of joint stipulated facts defined the dual rate overtime subclass to include "any non-exempt employee[s] of Defendants who were paid at two or more different rates of pay for different work in a workweek in which they worked overtime from the beginning of the statutory period as determined by the Court through September 8, 2015."

III.Class Decertification with Exception of Dual Rate Overtime Subclass

In June 2017, the trial court decertified the class with the exception of the dual rate overtime subclass. As of that date, therefore, Plaintiffs' claims consisted of the dual rate overtime subclass claim and the PAGA claim, which was limited to a dual rate overtime PAGA claim.¹

Two months later, Plaintiffs submitted a "Post Decertification Proposed Trial Plan" (the Trial Plan) in which Plaintiffs proposed that the dual rate overtime PAGA claim be tried to the court and "[f]ollowing the bench trial, if there are any class or legal claims left to be decided that were not determined in the bench trial they will be presented to a jury as they relate to the Dual Rate [Overtime] Subclass." According to the Trial Plan, "[t]he dual rate violations will be determined during the PAGA trial, so with respect to liability, there should be no issue for the jury to determine." In addition, the Trial Plan provided that the trial court's written findings establishing liability, if any, would be binding on the jury, and the jury's sole task with respect to the dual rate overtime subclass would be to award damages.

In January 2018, the trial court denied a motion in limine by Defendants to exclude all evidence and argument on the dual rate overtime issue. The court ruled that the dual rate overtime issue involved questions of fact and could not be decided based on the pleadings and undisputed facts.

IV.Bench Trial on Dual Rate Overtime PAGA Claim

A bench trial on the liability portion of Plaintiffs' dual rate overtime PAGA claim commenced on January 31, 2018, and continued off and on until late June. Ten witnesses, including two experts, offered live testimony.

At trial, both Plaintiffs' expert and Defendants' expert testified that Levanoff and Diaz (the only dual rate overtime subclass plaintiffs) received greater overtime pay under the rate-in-effect method than they would have received under the weighted average method. Defendants' expert also concluded the dual rate overtime PAGA group members received net greater overtime time pay because Defendants had used the rate-in-effect method. Plaintiffs' expert agreed. Plaintiffs' expert testified that the dual rate overtime PAGA group members overall received $2,065.74 net greater overtime pay because Defendants had used the rate-in-effect method.

The trial court ruled in favor of Defendants and, in February 2019, issued a lengthy and thorough statement of decision. The statement of decision provided the following summary: "First, Plaintiffs failed to exhaust the administrative prerequisites necessary to pursue their PAGA claim based on Defendants' use of the rate-in-effect method of overtime calculation (‘the dual rate’ claim). Second, Plaintiffs' dual rate PAGA claim is barred by the statute of limitations....