Amador, et al. v. City of Ceres

Filing 16

ORDER GRANTING IN PART AND DENYING IN PART 9 Defendant's Motion to Dismiss signed by District Judge Dale A. Drozd on 7/13/2017. (Jessen, A)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 JULIO AMADOR et al., 12 13 14 15 No. 1:17-cv-00552-DAD-MJS Plaintiffs, v. ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS CITY OF CERES, Defendant. (Doc. No. 9) 16 17 This matter comes before the court on defendant’s motion to strike portions of plaintiffs’ 18 complaint, or in the alternative, motion to dismiss or motion for judgment on the pleadings. A 19 hearing on this motion was held on June 20, 2017. Attorney Gary Goyette appeared on behalf of 20 plaintiffs, and attorney Jesse Maddox appeared on behalf of defendant. Having considered the 21 parties’ briefs and oral arguments, and for the reasons stated below, the court will grant in part 22 and deny in part defendant’s motion. 23 BACKGROUND 24 Thirty-four plaintiffs bring this action against defendant City of Ceres (“City”). 25 According to the complaint, each of the plaintiffs (1) is or was employed by the City within the 26 last three years; and (2) has received certain compensation from the City, including cash in lieu of 27 City-sponsored medical benefits and lump sum payment for unused holidays. (Doc. No. 1 ¶ 2.) 28 Plaintiffs allege that for the three years prior to commencement of this action, the City failed to 1 1 properly calculate payment of overtime compensation, in violation of the Fair Labor Standards 2 Act, 29 U.S.C. § 201 et seq. (“FLSA”). Specifically, plaintiffs advance three independent bases 3 for liability under a single FLSA claim for failure to properly compensate employees for overtime 4 work: (1) the City’s alleged failure to include cash-in-lieu payments for medical benefits in its 5 calculation of the regular rate of pay for purposes of overtime compensation, in contravention of 6 the Ninth Circuit’s decision in Flores v. City of San Gabriel, 824 F.3d 890, 895 (9th Cir. 2016) 7 (holding that cash payments in lieu of health benefits “must be included in the regular rate of pay 8 and thus in the calculation of the overtime rate” under the FLSA); (2) the City’s alleged failure to 9 include payments for certain holiday benefits in its calculation of the regular rate of pay, as 10 purportedly required by a district court decision in Hart v. City of Alameda, No. C-07-5845MMC, 11 2009 WL 1705612 (N.D. Cal. June 17, 2009); and (3) the City’s calculation of a regular rate of 12 pay based on a practice of dividing total pay by the number of hours actually worked, rather than 13 the scheduled number of hours worked. (See id. ¶¶ 22–27.) 14 On May 11, 2017, defendant filed the instant motion to strike certain portions of 15 plaintiffs’ complaint, or in the alternative, motion to dismiss or motion for judgment on the 16 pleadings. (Doc. No. 9.) Specifically, defendant seeks to strike or dismiss all allegations relating 17 to latter two of plaintiffs’ aforementioned claimed bases for liability. (See Doc. No. 9-2 at 2–3.) 18 On June 6, 2017, plaintiffs filed their opposition. (Doc. No. 11.) On June 13, 2017, defendant 19 filed its reply. (Doc. No. 12.) 20 APPLICABLE LEGAL STANDARD 21 Defendant City principally styles its request as a motion to strike under Rule 12(f) of the 22 Federal Rules of Civil Procedure. In the alternative, defendant requests that its motion be 23 considered as a motion to dismiss under Rule 12(b)(6) or a motion for judgment on the pleadings 24 under Rule 12(c). (Doc. No. 9-2 at 4.) 25 A. 26 Applicability of Rule 12(f) Under Rule 12(f), a court may strike from a complaint “any redundant, immaterial, 27 impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). “[T]he function of a 12(f) motion to 28 strike is to avoid the expenditure of time and money that must arise from litigating spurious 2 1 issues.” Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983). Here, 2 defendant’s motion cannot properly be construed as attacking plaintiffs’ complaint for raising 3 spurious issues. Rather, the City challenges whether such allegations, even if true, support legally 4 cognizable theories of liability under the FLSA. Such a challenge is properly brought under Rule 5 12(b)(6) for failure to state a claim upon which relief may be granted. See Balistreri v. Pacifica 6 Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990) (“Dismissal can be based on the lack of a 7 cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal 8 theory.”); N. Star Int’l v. Ariz. Corp. Comm’n, 720 F.2d 578, 581 (9th Cir. 1983). 9 B. 10 Standard for Motions to Dismiss Pursuant to Rule 12(b)(6) In determining whether a complaint states a claim on which relief may be granted, the 11 court accepts as true the allegations in the complaint and construes them in the light most 12 favorable to the plaintiff. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Love v. United 13 States, 915 F.2d 1242, 1245 (9th Cir. 1989). A plaintiff is required to allege “enough facts to 14 state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 15 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the 16 court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” 17 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Moreover, it is inappropriate to assume that the 18 plaintiff “can prove facts which it has not alleged or that the defendants have violated the . . . laws 19 in ways that have not been alleged.” Associated Gen. Contractors of California, Inc. v. 20 California State Council of Carpenters, 459 U.S. 519, 526 (1983). In ruling on a motion to 21 dismiss brought pursuant to Rule 12(b)(6), the court is permitted to consider material which is 22 properly submitted as part of the complaint, documents that are not physically attached to the 23 complaint if their authenticity is not contested and the plaintiffs’ complaint necessarily relies on 24 them, and matters of public record. Lee v. City of Los Angeles, 250 F.3d 668, 688–89 (9th Cir. 25 2001). 26 ///// 27 ///// 28 ///// 3 1 2 DISCUSSION A. 3 Fair Labor Standards Act Overview Pursuant to the FLSA, an employer must pay its employees overtime compensation at the 4 rate of one and one-half times the employee’s regular rate of pay for hours worked in excess of 5 forty in a seven-day workweek. Flores, 824 F.3d at 895 (citing Cleveland v. City of Los Angeles, 6 420 F.3d 981, 984–85 (9th Cir. 2005)); 29 U.S.C. § 207(a). The FLSA provides “a limited 7 exemption” to this overtime rule to public agencies employing firefighters or law enforcement 8 personnel. Adair v. City of Kirkland, 185 F.3d 1055, 1059 (9th Cir. 1999); accord Flores, 824 9 F.3d at 895; see also 29 U.S.C. § 207(k). 10 An employee’s “regular rate” of pay is defined to include “all remuneration for 11 employment paid to, or on behalf of, the employee,” with certain enumerated exceptions. 29 12 U.S.C. § 207(e). One such exception, relevant to this case, excludes from the regular rate of pay 13 “payments made for occasional periods when no work is performed due to vacation, holiday, 14 illness . . . and other similar payments to an employee which are not made as compensation for 15 his hours of employment” § 207(e)(2). The employer ultimately bears the burden of proving that 16 specific types of compensation fall within one of the FLSA’s enumerated exceptions. See, e.g., 17 O’Brien v. Town of Agawam, 350 F.3d 279, 294 (1st Cir. 2003) (citing Idaho Sheet Metal Works, 18 Inc. v. Wirtz, 383 U.S. 190, 209 (1966)); Dietrick v. Securitas Sec. Servs. USA, Inc., 50 F. Supp. 19 3d 1265, 1270 (N.D. Cal. 2014); Alonzo v. Maximus, Inc., 832 F. Supp. 2d 1122, 1130 (C.D. Cal. 20 2011); see also Cleveland v. City of Los Angeles, 420 F.3d 981, 988 (9th Cir. 2005) (“The FLSA 21 is construed liberally in favor of employees; exemptions are to be narrowly construed against the 22 employers seeking to assert them.” (citations and internal quotations omitted)). 23 B. Use of Lump Sum Holiday Payments in Calculating Overtime Compensation 24 Plaintiffs allege that as part of their employment with the City, they received certain 25 premium compensation items, including lump sum pay for holidays, as part of their overall 26 compensation. (Doc. No. 1 ¶ 16.) Plaintiffs allege that for purposes of overtime compensation, 27 the City failed to include these lump sum holiday payments in its calculation of plaintiffs’ regular 28 rate of pay. (Id. ¶ 24.) Plaintiff’s FLSA claim in this regard is premised solely on a district court 4 1 opinion from the Northern District of California, in Hart v. City of Alameda, No. C-07- 2 5845MMC, 2009 WL 1705612 (N.D. Cal. June 17, 2009). In that case, the City of Alameda 3 compensated its police officers for a certain number of holidays during the year by evenly 4 spreading out the monetary value of those holidays over every pay period, regardless of whether 5 or not the officers actually worked on those holidays. Id. at *1. Because the city’s calculation 6 had the effect of regularly compensating officers for holidays irrespective of whether officers 7 actually worked the holidays, or whether a particular holiday fell within the pay period in which 8 the officer was compensated, the district court in Hart concluded that payments under such a 9 compensation scheme were not made “due to” a holiday, as prescribed by § 207(e)(2). Id. at 10 11 *2–3. Here, the allegations of plaintiffs’ complaint, taken to be true, support a reasonable 12 inference that defendant City’s payments for holidays—particularly in light of their lump-sum 13 nature—were not made “due to” a vacation, holiday, illness, or other time spent away from work, 14 are not exempted from an employee’s regular rate of pay under 29 U.S.C. § 207(e). In support of 15 its motion to dismiss, defendant submits a memorandum of understanding between the police 16 union and the City (the “MOU”), which appears to cover a part of the time period relevant to this 17 case. (See Doc. No. 9-1, Ex. A.) Under the terms of the MOU, employees annually receive 120 18 hours of holiday leave, effective the first pay period of each calendar year. Employees may then 19 optionally use this time throughout the remainder of the year. Any remaining holiday time not 20 used by December 31 will be paid to an employee during the second pay period of the following 21 year. (Id. at 15.) If these terms exclusively governed plaintiffs’ holiday compensation and 22 applied to the entire relevant time period in this case, defendant City’s alleged compensation 23 scheme might be exempted from any determination of plaintiffs’ regular rate of pay. See, e.g., 24 Balestrieri v. Menlo Park Fire Prot. Dist., 800 F.3d 1094, 1103–04 (9th Cir. 2015) (holding that 25 where a municipality buys back unused annual leave hours, which cover both vacation and sick 26 leave, such compensation should be excluded from the employee’s regular rate of pay). 27 28 However, at the hearing on the pending motion, plaintiffs’ counsel represented that even under the POA MOU, employees’ use of holiday leave was further restricted in practice. 5 1 Specifically, counsel suggested that employees could only take holiday leave on City-designated 2 holidays, and that in some cases, an employee might not be able to take leave on a certain holiday 3 because she was not scheduled to work that day to begin with. Because at this stage of the 4 litigation, the court cannot conclude that plaintiffs’ complaint relies exclusively on the terms of 5 the MOU, and in light of defendant’s ultimate burden to establish that its holiday compensation 6 policy must be exempted from plaintiffs’ regular rate of pay, the court declines to dismiss 7 plaintiffs’ FLSA claim with respect to this theory of liability at this early stage of the litigation. 8 C. Calculating Overtime Rate Based on Total Number of Hours Worked 9 Plaintiffs separately allege that defendant City improperly calculated the regular rate of 10 pay for overtime compensation purposes by dividing an employee’s total pay by the number of 11 hours actually worked, rather than the scheduled number of hours worked. Plaintiffs explain that 12 when employees work more hours than they are scheduled to work, the City effectively 13 undercompensates them for overtime purposes. (See Doc. No. 11 at 5.) 14 The implementing regulations promulgated pursuant to the FLSA, however, explicitly 15 endorse the former approach: “The regular hourly rate of pay of an employee is determined by 16 dividing his total remuneration for employment (except statutory exclusions) in any workweek by 17 the total number of hours actually worked by him in that workweek for which such compensation 18 was paid.” 29 C.F.R. § 778.109 (emphasis added).1 The “total number of hours actually worked” 19 should include overtime hours. See, e.g., Frank v. McQuigg, 950 F.2d 590, 592 (9th Cir. 1991). 20 Plaintiffs contend that the law surrounding this question is unsettled and cites to several cases that 21 purportedly support calculation of a regular rate of pay based on the scheduled number of hours 22 worked. (See Doc. No. 11 at 7–8.) Having reviewed those decisions, the court finds no basis of 23 support for plaintiffs’ position. Moreover, plaintiffs’ complaint alleges no facts that could 24 1 25 26 27 28 This method of computing the regular rate is to be employed when employees are not compensated on an hourly rate basis. Id. While plaintiffs do not specify the precise manner in which they are compensated, e.g., whether by salary or on another basis, the plaintiffs’ complaint their opposition brief appear to assume that such a computation is necessary. Somewhat perplexing to the court, at the hearing on the pending motions, plaintiffs’ counsel represented that plaintiffs are hourly rate workers. If that were the case, then a plaintiff’s hourly rate would be her regular rate of pay, and the inquiry would likely end there. See 29 C.F.R. § 778.110. 6 1 2 support a legal basis for deviating from the regulatory language cited above. Additionally, plaintiffs note that there is no clear case law regarding the computation of 3 their regular rate of pay as public safety employees covered by 29 U.S.C. § 207(k). (Id.) 4 However, this court finds no basis—and plaintiffs have offered none—on which to treat public 5 safety employees described in § 207(k) any differently from other employees when computing 6 their regular rates of pay. See 29 U.S.C. § 207(k) (providing that public safety employees must 7 also be provided overtime compensation “at a rate not less than one and one-half times the regular 8 rate at which he is employed”). 9 In the absence of any persuasive legal authority requiring the calculation of the regular 10 rate of pay based on the scheduled number of hours worked, plaintiffs’ FLSA claim must be 11 dismissed with respect to this theory of liability. 12 CONCLUSION 13 For the reasons stated above, 14 1. Defendant City’s motion (Doc. No. 9) is construed as a motion to dismiss pursuant to 15 16 Rule 12(b)(6) of the Federal Rules of Civil Procedure; 2. Defendant’s motion to dismiss is granted in part and denied in part as indicated above; 17 18 and 3. Plaintiff’s FLSA claim is dismissed only with respect to the theory of liability 19 concerning the City’s alleged failure to calculate pay based on the scheduled number 20 of hours worked, rather than the number of hours actually worked. 21 22 IT IS SO ORDERED. Dated: July 13, 2017 UNITED STATES DISTRICT JUDGE 23 24 25 26 27 28 7

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