Rodriguez v. Parivar, Inc., A158939, A160694

83 Cal.App.5th 739

299 Cal.Rptr.3d 719

Patricia RODRIGUEZ, Plaintiff and Respondent,

v.PARIVAR, INC., et al., Defendants and Appellants.

A158939, A160694

Court of Appeal, First District, Division 4, California.

Filed September 26, 2022

Rogers Joseph O'Donnell, Dennis C. Huie, Sharon Ongerth Rossi and Si Eun Amber Lee, San Francisco, for Defendants and Appellants.

Leonard Carder, Amy Endo, San Francisco, and Jennifer Keating, Oakland, for Plaintiff and Respondent.

STREETER, J.

By a split vote of 9 to 3, Patricia Rodriguez won a jury verdict against Parivar, Inc. and Yadav Enterprises, Inc. (collectively Parivar) for failure to pay her overtime wages during the 23-month period she was employed as a salaried manager at a Jack in the Box restaurant in San Leandro. This appeal is from the ensuing judgment and a postjudgment order against Parivar for, respectively, $38,356.75 in unpaid overtime plus prejudgment interest, and $932,842.63 in attorney fees and costs.

The primary focus of the appeal is a special verdict question that was designed to elicit a finding of ultimate fact on Parivar's affirmative defense of executive exemption. When asked whether "Ms. Rodriguez performed exempt duties more than half of the time," the jury answered "No." According to Parivar, the narrow framing of this question effectively barred it from proving its executive exemption defense by allowing the jury to find liability without addressing the issue of Parivar's realistic expectations for how Rodriguez should have allocated her time.

We agree that the challenged special verdict question was erroneous and that the error was prejudicial. Accordingly, we reverse the judgment and vacate the award of fees and costs, without reaching any of Parivar's other arguments attacking the judgment or the merits of its attack on the award of fees and costs.

I. BACKGROUND

In February 2017, Rodriguez filed a complaint against Parivar¹ alleging, among other things, causes of action for Parivar's failure to pay her overtime and provide her with meal periods and rest periods required under California's labor laws.

Rodriguez alleged that Parivar misclassified her as an exempt employee, contending that she "spent the majority of her time performing the exact same duties as non-exempt employees" at her restaurant. By way of affirmative defense, Parivar argued that under the Industrial Welfare Commission (IWC) wage order No. 5-2001’s "executive exemption" Rodriguez was exempt from overtime, meal period and rest period requirements.

The case proceeded to a jury trial over a two-week period in May 2019. The jury rejected Parivar's executive exemption affirmative defense. By a 9 to 3 vote, the jury found Parivar failed to prove that, as the special verdict question put it, "Rodriguez performed exempt duties more than half of the time."

The jury further found that Rodriguez proved Parivar knew or should have known that she worked more than eight hours a day, that Rodriguez worked an average of 9.73 overtime hours a week and that she was owed $26,786.54 in overtime pay. The jury also found that Rodriguez did not prove that Parivar failed to provide her with proper meal periods and rest periods.

The trial court entered judgment in Rodriguez's favor, ordering Parivar to pay her $26,786.54 in overtime pay and $11,570.21 in prejudgment interest, for a total of $38,356.75. It further ruled that Rodriguez was entitled to costs and attorney fees under Code of Civil Procedure sections 1032 and 1033.5 and California Rules of Court, rules 3.1700 and 3.1702.

Subsequently, the trial court rejected Parivar's motions for a new trial and for a judgment notwithstanding the verdict. It later ordered Parivar to pay Rodriguez $932,842.63 in attorney fees and litigation costs.

Parivar, Inc. and Yadav Enterprises, Inc. separately filed timely notices of appeal from the judgment, unspecified orders after the judgment and the denial of their motion for judgment notwithstanding the verdict. Parivar, Inc. and Yadav Enterprises, Inc. also separately filed timely notices of appeal from the court's attorney fees award order.

II. DISCUSSION

A. Parivar's Executive Exemption Affirmative Defense

Although the Labor Code "mandates overtime pay for employees who work more than 40 hours in a given work week[,] ... the Legislature authorized the [IWC² ] to establish exemptions for various categories of employees, including ‘executive ... employees.’ " ( Lab. Code, §§ 510, subd. (a), 515, subd. (a) ; Batze v. Safeway, Inc. (2017) 10 Cal.App.5th 440, 471, 216 Cal.Rptr.3d 390.)

Our Supreme Court has instructed, "When construing the Labor Code and wage orders, we adopt the construction that best gives effect to the purpose of the Legislature and the IWC. [Citations.] Time and again, we have characterized that purpose as the protection of employees—particularly given the extent of legislative concern about working conditions, wages, and hours when the Legislature enacted key portions of the Labor Code. [Citations.] In furtherance of that purpose, we liberally construe the Labor Code and wage orders to favor the protection of employees." ( Augustus v. ABM Security Services, Inc. (2016) 2 Cal.5th 257, 262, 211 Cal.Rptr.3d 634, 385 P.3d 823.)

IWC wage order No. 5-2001 (wage order), which governs employees in the "public housekeeping industry"³ and is codified in the California Code of Regulations, exempts "executive" employees from overtime pay, meal period and rest period requirements. ( Cal. Code Regs., tit. 8, § 11050, subds. 1(B)(1), 3, 11, 12.) This exemption is an affirmative defense, for which the employer bears the burden of proof. (See Safeway Wage & Hour Cases (2019) 43 Cal.App.5th 665, 671, 676, 256 Cal.Rptr.3d 882 ( Safeway ) [regarding a similar executive exemption for the mercantile industry found at Cal. Code Regs., tit. 8, § 11070, subd. 1(A)(1) ].)

At trial, Parivar asserted the executive exemption affirmative defense against Rodriguez's claims. In the public housekeeping industry, "[a] person employed in an executive capacity" means any employee whose work meets the six prongs of the exemption, including that the employee is "primarily engaged in duties which meet the test of the exemption." ( Cal. Code Regs., tit. 8, § 11050, subd. 1(B)(1)(e).)⁴ In this appeal, the parties, aside from their attorney fees award dispute, focus entirely on the trial court's special verdict form and jury instructions regarding this particular prong of Parivar's affirmative defense. The sole focus of dispute here is prong (e) of the six-factor test governing the executive exemption.

The wage order provides that "[t]he activities constituting exempt work and non-exempt work shall be construed in the same manner as such items are construed" in corresponding federal regulations. ( Cal. Code Regs., tit. 8, § 11050, subd. 1(B)(1)(e) [citing 29 C.F.R. §§ 541.102, 541.104–111 and 541.115–116 as they were effective on the date of the order].) Under the relevant federal regulations, managerial and supervisory tasks within the scope of the exemption are generally " ‘easily recognized’ " and include such tasks as: " ‘[i]nterviewing, selecting, and training of employees; setting and adjusting their rates of pay and hours of work; directing their work; maintaining their production or sales records for use in supervision or control; appraising their productivity and efficiency for the purpose of recommending promotions or other changes in their status; handling their complaints and grievances and disciplining them when necessary; planning the work; determining the techniques to be used; [and] apportioning the work among the workers ....’ " ( Safeway, supra , 43 Cal.App.5th at pp. 676–677, 256 Cal.Rptr.3d 882, quoting 29 C.F.R. §§ 541.102(a) & (b) (2001).)

Tasks that are inherently managerial or supervisory are not the only ones the federal regulations recognize as exempt. Also exempted are tasks " ‘directly and closely related’ " to those functions. ( Safeway, supra , 43 Cal.App.5th at p. 677, 256 Cal.Rptr.3d 882, quoting 29 C.F.R. § 541.108 (2001).) Consistent with these regulations, the wage order recognizes that "[e]xempt work shall include, for example, all work that is directly and closely related to exempt work and work which is properly viewed as a means for carrying out exempt functions." ( Cal. Code Regs., tit. 8, § 11050, subd. 1(B)(1)(e).) "By contrast, nonexempt work includes all work that is neither management or supervision nor directly and closely related to those functions. ( Safeway, supra , 43 Cal.App.5th at p. 678, 256 Cal.Rptr.3d 882.) ‘ "[I]n the usual case, it consists of work of the same nature as that performed by the nonexempt subordinates of the ‘executive.’ " ’ ( Ibid. , quoting 29 C.F.R. § 541.111(b) (2001).)" ( Wesson, supra , 68 Cal.App.5th at p. 761, 283 Cal.Rptr.3d 846.)

To illuminate the phrase "primarily engaged in duties which meet the test of the [executive] exemption," the wage order defines "primarily" as "more than one-half the employee's work time." ( Cal. Code Regs., tit. 8, § 11050, subds. 1(B)(1)(e), 2(O).) It also instructs that in determining whether an employee is primarily engaged in such duties, "[t]he work actually performed by the employee during the course of the workweek must, first and foremost, be examined and the amount of time the employee spends on such work, together with the employer's realistic expectations and the realistic requirements of the job, shall be considered in determining whether the employee satisfies this requirement." ( Cal. Code Regs., tit. 8, § 11050, subd. 1(B)(1)(e).)

In Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, 85 Cal.Rptr.2d 844, 978 P.2d 2 ( Ramirez ) , which involved an "outside salesperson" exemption structured quite similarly to IWC wage order No. 5-2001, our Supreme Court explained why a simple quantitative approach to determining an employee's "primary function"—i.e., totaling up hours for types of tasks that employee actually...