Chris Azpeitia et al v. Tesoro Refining & Marketing Company LLC et al

Filing 43

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS by Judge Jon S. Tigar granting in part and denying in part 25 Motion to Dismiss. (wsn, COURT STAFF) (Filed on 7/21/2017)

1
2
3
4

UNITED STATES DISTRICT COURT

5

NORTHERN DISTRICT OF CALIFORNIA

6
CHRIS AZPEITIA, et al.,

7

Plaintiffs,

8
v.

9
10

TESORO REFINING & MARKETING
COMPANY LLC, et al.,

11
United States District Court
Northern District of California

Case No. 17-cv-00123-JST
ORDER GRANTING IN PART AND
DENYING IN PART MOTION TO
DISMISS

Defendants.

12
13
14

Before the Court is Defendants' Motion to Dismiss. ECF No. 25. Plaintiffs oppose the
motion. ECF No. 34. The Court will grant the motion in part and deny the motion in part.
I.

15

18
19

22
23
24

Facts and Procedural History1

Plaintiffs Chris Azpeitia, Eileen Foster, Antonio Garcia, and Samantha West bring a
putative class action asserting several claims under California wage laws and related statutes
against Defendants Tesoro Refining & Marketing Company LLC, and Tesoro Logistics GP, LLC
(collectively, “Defendants”).

20
21

BACKGROUND
A.

16
17

Re: ECF No. 25

Named Plaintiffs are or were employed as operators at Defendants' Golden Eagle facility
located in Martinez, California, and Defendants' Los Angeles Refinery, located in Carson and
Wilmington, California. ECF No. 33 ¶ 9. Because the oil refining and distribution process
requires constant monitoring, operators work a continuous 12-hour shift and are required to
remain on duty during the entire shift. ECF No. 33 ¶ 18; 19.

25

The gravamen of Plaintiffs' complaint is that Defendants do not authorize or permit

26
27
28

1

For purposes of this motion, all facts alleged in the complaint will be taken as true and the Court
will "construe the pleadings in the light most favorable to the nonmoving party." Knievel v.
ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005).

1

Plaintiffs to take off-duty rest breaks for every four-hour work period or major fraction thereof, as

2

mandated by law. ECF No. 33 ¶ 21. Because Defendants require operators to monitor the

3

refining process, respond to upsets and critical events, and maintain the safe and stable operation

4

of their units, they are required to remain attentive, carry radios, and be reachable throughout their

5

shifts. ECF No. 33 ¶ 20. As a result, Plaintiffs are responsible for their units at all times and do

6

not receive “designated rest breaks or relief.” ECF No. 33 ¶ 21.
Plaintiffs assert the following four causes of action under California law: (1) violations of

7

California Labor Code section 226.7 and California's Industrial Welfare Commission (“IWC”)

9

Wage Order 1-2001 for failure to provide rest periods; (2) violation of Labor Code section 226 for

10

failure to provide accurate written wage statements; (3) violation of California's Private Attorney

11
United States District Court
Northern District of California

8

General Act (“PAGA”) (Cal. Lab. Code § 2698 et seq); and (4) violation of California's Unfair

12

Competition Law (“UCL”) (Bus. & Prof. Code § 17200 et seq). ECF No. 33 ¶ 40-66.

13

On April 14, 2017, Defendants moved to dismiss Plaintiffs' First Amended Complaint

14

(“FAC”), asserting that Plaintiffs' state law claims are preempted by section 301 of the Labor

15

Management Relations Act (“LMRA”) and that several of Plaintiffs derivative claims are

16

deficiently pled. ECF Nos. 21, 25. On April 26, 2017, the parties filed a stipulation requesting to

17

direct Defendants’ Motion to Dismiss to the Plaintiffs’ soon-to-be-filed Second Amended

18

Complaint (“SAC”), which the Court granted. ECF Nos. 31, 32. Plaintiffs filed their SAC on

19

May 3, 2017 to add allegations that they had administratively exhausted their PAGA claims. ECF

20

No. 33 ¶ 55.

21

II.

JURISDICTION
The Court has jurisdiction pursuant to 28 U.S.C. § 1332(a) because the amount in

22
23

controversy exceeds $75,000 and the opposing parties are of diverse citizenship.

24

III.

25
26
27

REQUESTS FOR JUDICIAL NOTICE
Before turning to the merits of the motion to dismiss, the Court resolves the Defendants’

requests for judicial notice.
“As a general rule, we may not consider any material beyond the pleadings in ruling on a

28
2

1

Rule 12(b)(6) motion.” United States v. Corinthian Colleges, 655 F.3d 984, 998-99 (9th Cir.

2

2011) (internal quotation marks and citations omitted). Pursuant to Federal Rule of Evidence

3

201(b), however, “[t]he court may judicially notice a fact that is not subject to reasonable dispute

4

because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be

5

accurately and readily determined from sources whose accuracy cannot reasonably be questioned.”

6

The Court may properly take judicial notice of materials attached to the complaint and of matters

7

of public record. Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). A court

8

“must take judicial notice if a party requests it and the court is supplied with the necessary

9

information.” Fed. R. Evid. 201(c)(2). However, the Court takes judicial notice only of the
existence of the document, not of the veracity of allegations or legal conclusions asserted in it.

11
United States District Court
Northern District of California

10

See Lee, 250 F.3d at 689-90.

12

Defendants request that the Court take judicial notice of the following documents: (1) the

13

“Joint Stipulation of Class Action Settlement; Settlement Agreement and Release” in Benjamin

14

Burgess v. Tesoro Refining & Marketing Company, United States District Court, Central District

15

of California Case No. 2:10-cv-05870-DMG-PLA, ECF No. 199-1. ECF No. 25-1, Exh. A; (2)

16

“The Order and Final Judgment (a) Confirming Final Certification of Settlement Class; (b)

17

Granting Final Approval of Class Action Settlement; and (c) Granting Plaintiffs' motion for award

18

of Attorneys' Fees” in Burgess, ECF No. 228. ECF No. 25-1, Exh. B; (3) the Collective

19

Bargaining Agreements (“CBAs”) and Memoranda of Agreement attached to the concurrently

20

filed Declaration of Karen Kawano. ECF No. 25-2 through ECF No. 25-14; and (4) Form DF-43,

21

Department of Finance Bill Report Deferred to Department of Industrial Relations, Bill No. AB

22

2509, ECF No. 35-1, Exh. A, and California Legislative Counsel's digest of Senate Bill 1255, ECF

23

No. 35-1, Exh. B. Defendants’ request is not opposed.

24

Because a court “may take judicial notice of proceedings in other courts . . . if those

25

proceedings have a direct relation to matters at issue,” Bias v. Moynihan, 508 F.3d 1212, 1225

26

(9th Cir. 2007), the Court grants requests (1) and (2) for judicial notice. Because a court may

27

“take judicial notice of a CBA in evaluating a motion to dismiss” the Court grants request (3) for

28
3

1

judicial notice of the attached CBAs. Jones v. AT&T, 2008 WL 902292, at *2 (N.D. Cal. Mar. 31,

2

2008). See also Busey v. P.W. Supermarkets, Inc., 368 F. Supp. 2d 1045, 1049 (N.D. Cal. 2005)

3

(granting judicial notice of a CBA). Because courts may take judicial notice of records and

4

reports of administrative bodies and the legislative history of state statutes, the Court grants

5

request (4) for judicial notice. See Anderson v. Holder, 673 F.3d 1089, 1094 n.1 (9th Cir. 2012)

6

(explaining that a court may take judicial notice of legislative history and records and reports of

7

administrative bodies).

8

IV.

9
10

LEGAL STANDARDS
A.

Motion to Dismiss

A complaint must contain “a short and plain statement of the claim showing that the

United States District Court
Northern District of California

11

pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). While detailed factual allegations are not

12

required, a complaint must have sufficient factual allegations to “state a claim to relief that is

13

plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotations and

14

citations omitted). A party may move to dismiss based on the failure to state a claim upon which

15

relief may be granted. See Fed. R. Civ. P. 12(b)(6). “Dismissal under Rule 12(b)(6) is appropriate

16

only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable

17

legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). To

18

survive a motion to dismiss, a pleading must allege “enough facts to raise a reasonable expectation

19

that discovery will reveal evidence” to support the allegations. Bell Atl. Corp. v. Twombly, 550

20

U.S. 544, 556 (2007). For purposes of a motion to dismiss, “all allegations of material fact are

21

taken as true and construed in the light most favorable to the nonmoving party.” Cahill v. Liberty

22

Mut. Ins. Co., 80 F.3d 336, 337–38 (9th Cir. 1996).

23

B.

24

LMRA section 301 provides federal jurisdiction over “[s]uits for violation of contracts

25

between an employer and a labor organization." 29 U.S.C § 185(a). Section 301 embodies “a

26

congressional mandate to the federal courts to fashion a body of federal common law to be used to

27

address disputes arising out of labor contracts.” Allis-Chalmers Corp. v. Lueck, 471 U.S. 202,

Section 301 Preemption

28
4

1

209 (1985) (footnote omitted). “This federal common law, in turn, preempts the use of state

2

contract law in CBA interpretation and enforcement.” Matson v. United Parcel Serv., Inc., 840

3

F.3d 1126, 1132 (9th Cir. 2016) (citation and quotation omitted). “To give ‘the policies that

4

animate § 301 . . . their proper range,’ the Supreme Court has expanded “the pre-emptive effect of

5

§ 301 . . . beyond suits alleging contract violations’ to state law claims grounded in the provisions

6

of a CBA or requiring interpretation of a CBA.” Kobold v. Good Samaritan Reg'l Med. Ctr., 832

7

F.3d 1024, 1032 (9th Cir. 2016) (quoting Lueck, 471 U.S. at 210–11). However, “not every

8

dispute concerning employment, or tangentially involving a provision of a collective-bargaining

9

agreement, is preempted by section 301.” Lueck, 471 U.S. at 211. “[T]he Supreme Court has
repeatedly admonished that section 301 preemption is not designed to trump substantive and

11
United States District Court
Northern District of California

10

mandatory state law regulation of the employee-employer relationship; section 301 has not

12

become a 'mighty oak' that might supply cover to employers from all substantive aspects of state

13

law.” Humble v. Boeing Co., 305 F.3d 1004, 1007 (9th Cir. 2002) (citing Lingle v. Norge Div. of

14

Magic Chef Inc., 486 U.S. 399, 408-09 (1988); Livadas v. Bradshaw, 512 U.S. 107, 122 (1994)).

15

“In extending the pre-emptive effect of § 301 beyond suits for breach of contract, it would be

16

inconsistent with congressional intent under that section to preempt state rules that proscribe

17

conduct, or establish rights and obligations, independent of a labor contract.” Allis-Chalmers

18

Corp., 471 U.S. at 212.

19

In Burnside v. Kiewit Pacific Corp., the Ninth Circuit articulated a two prong inquiry to

20

analyze whether section 301 preemption applies. 491 F.3d 1053, 1059-60 (9th Cir. 2007). A

21

court must first determine “whether the asserted cause of action involves a right conferred upon an

22

employee by virtue of state law, not by a CBA. If the right exists solely as a result of the CBA,

23

then the claim is preempted and our analysis ends there.” Id. at 1059. However, if the court

24

determines the right underlying the state law claim(s) “exists independently of the CBA” the court

25

proceeds to the second prong, which inquires whether the right is “substantially dependent on

26

analysis of a collective bargaining agreement.” Id.

27

In determining whether the first prong is met (whether a right is independent of a CBA) a

28
5

1

court must evaluate whether the “legal character of a claim” is “independent of rights under the

2

collective-bargaining agreement.” Livadas, 512 U.S. at 123. Section 301 preempts the claim if

3

the claim is “founded directly on rights created by a collective bargaining agreement.” Caterpillar

4

v. Williams, 482 U.S. 386, 394 (1987).
In determining whether the second prong is met (whether the claim is “substantially

5
6

dependent” on a CBA) the Court must evaluate whether the claim can be resolved by “‘look[ing]

7

to’ versus interpreting the CBA. If it is the latter, the claim is preempted, if it is the former, it is

8

not.” Burnside, 491 F.3d at 1060 (internal quotation marks and citations omitted). “When the

9

meaning of a contract term is not the subject of dispute, the bare fact that a CBA will be consulted
in the course of the state-law litigation plainly does not require the claim to be extinguished.”

11
United States District Court
Northern District of California

10

Livadas, 512 U.S. at 124.
“[W]hen the resolution of a state-law claim is substantially dependent upon analysis of the

12
13

terms of an agreement made between the parties in a labor contract, that claim must either be

14

treated as a section 301 claim, or dismissed as preempted by federal labor-contract law.” Lueck,

15

471 U.S. at 220. It is usually difficult for an employee to succeed in a suit under section 301

16

“unless the contractual grievance-arbitration procedure is invoked on her behalf or on behalf of a

17

group of employees of which she is part. If the dispute is not ultimately resolved by arbitration,

18

the employee must establish that the union violated its duty of fair representation by failing to

19

pursue the grievance to arbitration or pursuing it arbitrarily.” Kobold v. Good Samaritan Regional

20

Medical Center, 832 F.3d 1024, 1034 (9th Cir. 2016).

21

V.

DISCUSSION

22

Defendants advance two primary arguments in support of their motion: (1) Plaintiffs'

23

claims are preempted by section 301 of the LMRA because they require interpretation of the

24

CBAs and (2) Plaintiffs' derivative claims fail to state a viable claim for relief.

25
26
27
28
6

A.

1

Section 301 Preemption
1.

2

Application of the Burnside Test

In addressing the first prong of the Burnside test,2 the Court asks whether Plaintiffs' claims

3
involve rights conferred upon an employee by state law or solely by a CBA. Burnside, 491 F.3d at
4
1059. Here, the Court concludes that Plaintiffs' claims are independently rooted in state law.
5
Plaintiffs assert that Defendants failed to provide them with off-duty rest breaks, as mandated by
6

Labor Code section 226.73 and Wage Order 1-2001, since they were required to attend to their job

7
duties during the entirety of their shifts, carry radios, and respond to emergencies that could arise
8
at any time. ECF No. 33 ¶ 20, 21. And while Defendants place numerous CBAs before the Court,
9
10

United States District Court
Northern District of California

11
12

none of them forms the basis of Plaintiffs’ claims. In other words, Plaintiffs’ claims involve rights
“conferred upon an employee by virtue of state law, not by a CBA.” Burnside, 491 F.3d at 1059.
“If the claim is plainly based on state law, § 301 pre-emption is not mandated simply because the
defendant refers to the CBA in mounting a defense.” Valles v. Ivy Hill Corp., 410 F.3d 1071,

13
1081 (9th Cir. 2005) (quoting Cramer v. Consol. Freightways, Inc., 255 F.3d 683, 691 (9th Cir.
14
2001)).
15
Because the right exists independently of the CBA, the Court addresses the second prong
16

and asks whether the right is “nevertheless substantially dependent on the analysis of a CBA.”

17
Burnside, 491 F.3d at 1059. Defendants assert that Plaintiffs' claims challenge collectively
18
bargained rest break policies and require interpretation of the CBAs. ECF No. 25 at 20-23.
19

Defendants cite Raphael v. Tesoro Ref. & Mktg. Co. LLC for the proposition that “the need to

20
interpret the substantive impact of the CBAs becomes more complex because there are a number
21
of CBAs” that apply to the putative class. No. 2:15-cv-02862-ODW, 2015 WL 3970293 (C.D.
22
Cal. June 30, 2015); ECF No. 25 at 21.
23
24
25
26
27
28

2

Defendants essentially concede the first prong of the Burnside test by not addressing it.

3

Labor Code 226.7(b) states that “[a]n employer shall not require an employee to work during a
meal or rest or recovery period mandated pursuant to an applicable statute, or applicable
regulation, standard, or order of the Industrial Welfare Commission, the Occupational Safety and
Health Standards Board, or the Division of Occupations Safety and Health.” West’s Ann. Cal.
Labor Code § 226.7.
7

1

Raphael does not help Defendants. In that case, the Court was faced with the question of

2

whether the plaintiff, a commercial truck driver, was subject to a statutory exemption under the

3

Labor Code which excludes commercial truck drivers from protection of the Labor Code if they

4

are covered by a CBA. Unlike here, however, the defendant in that case “presented the Court with

5

a plethora of provisions in need of interpretation throughout the eight separate CBAs covering

6

Raphael and the aggrieved employees he seeks to represent.” 2015 WL 3970293, at *6. More

7

importantly, there was no way for the Raphael court to determine whether the statutory exemption

8

at issue applied ‒ and by extension, whether the case belonged in a federal court ‒ without

9

construing terms of the CBAs. Id. (noting that impact of plaintiff’s argument that statutory
exemption did not apply “is that it introduces a clear dispute between the parties as to the

11
United States District Court
Northern District of California

10

interpretation and application of the CBAs' arbitration provisions”).

12

Here, by contrast, Defendants’ motion fails to identify any particular CBA provision that

13

must be interpreted. Although Defendants cite to the CBAs attached to the Declaration of Karen

14

Kawano at Exhs. E, D, F, and G, and state that several of them “specifically define the terms and

15

conditions for the provision of authorized rest breaks,” ECF No. 25 at 21, Defendants’ listing of

16

provisions of the CBA that might be relevant to a determination of its employees’ rights does not

17

meet the “substantially dependent” test. See Densmore v. Mission Linen Supply, 164 F. Supp. 3d

18

1180, 1194 (E.D. Cal. 2016) (“[Defendant] has failed to point out any specific provisions in the

19

CBAs that are subject to dispute. Rather, as stated above, [Defendant] merely lists the provisions

20

in the CBA that could be relevant to the determination of whether the statutory exemption . . .

21

could apply in this case.”).

22

It is not until their reply that Defendants identify the specific CBA provisions on which

23

adjudication of this case purportedly depends. The Court usually does not consider new facts or

24

argument made for the first time in a reply brief. “It is inappropriate to consider arguments raised

25

for the first time in a reply brief.” Ass'n of Irritated Residents v. C & R Vanderham Dairy, 435

26

F.Supp.2d 1078, 1089 (E.D. Cal. 2006). But even considering the provisions Defendants list in

27

their reply, the Court is not persuaded. Defendants argue that the CBA provision that requires

28
8

1

interpretation is whether “‘employees who are forced to forego a Rest Period’ includes rest periods

2

not merely entirely missed, but those interrupted by a purported requirement to monitor a radio.”

3

ECF No. 35 at 11 (quoting ECF No. 25-9 at 22). On the one hand, Defendants do not explain how

4

the Court must interpret a CBA provision to answer this question. On the other hand, the

5

California Supreme Court recently held in Augustus v. ABM Security Services, Inc., 2 Cal. 5th

6

257, 270 (2016), that on-call rest breaks are “impermissible.” The Augustus court explains that

7

“on-call rest periods do not satisfy an employer's obligation to relieve employees of all work-

8

related duties and employer control.” Id. The court noted that “[s]everal options exist for an

9

employer who finds it especially burdensome to relieve employees of all duties during rest
periods,” including paying the premium set forward in Labor Code section 226.7. Id. at 272.

11
United States District Court
Northern District of California

10

Otherwise, “state law prohibits on-duty and on-call rest periods. During required rest periods,

12

employers must relieve their employees of all duties and relinquish any control over how

13

employees spend their break time.” Id. at 260. Thus, under Augustus, Plaintiffs’ rights are clear

14

and do not substantially depend on any interpretation of a CBA. Cf. Firestone v. Southern

15

California Gas Co., 219 F.3d 1063 (9th Cir. 2000) (Plaintiffs’ claim was preempted because

16

whether the requirements of the state wage law were met substantially depended on interpretation

17

of the CBA’s wage calculations). Because the right to rest breaks is independently rooted in state

18

law, and the right to an uninterrupted rest break is clear, it is not substantially dependent on the

19

analysis of a CBA, section 301preemption does not apply.

20
21

2.

Plaintiffs’ Claims Are Not Preempted Because the Right to Rest Breaks
Is Non-Negotiable

In addition to failing the Burnside test, Defendants’ section 301 preemption argument fails

22
for an additional reason: the right to rest breaks is a nonnegotiable right and thus exempt from
23
section 301 preemption. ECF No. 34 at 9. In Valles, the Ninth Circuit held that nonnegotiable
24
rights are not subject to section 301 preemption, even if employees are covered by a valid CBA.
25
26

410 F.3d at 1081 (“[W]e have held that § 301 does not permit parties to waive, in a collective
bargaining agreement, nonnegotiable state rights conferred on individual employees.”) (internal

27
citation and quotation marks omitted); see also Vasserman v. Henry Mayo Newhall Mem'l Hosp.,
28
9

1
2

65 F. Supp. 3d 932, 960 (C.D. Cal. 2014).
Although Valles concerned the state law provisions governing meal periods, 410 F.3d at

3

1081, a California appellate court has held that rest breaks are a non-waivable state-mandated

4

“minimum labor standard.” Zavala v. Scott Bros. Dairy, 143 Cal. App. 4th 585, 594 (2006). And

5

rest breaks, like meal periods, are similarly regulated by Labor Code section 226.7 and “address

6

some of the most basic demands of an employee's health and welfare.” Valles, 410 F.3d at 1081.

7

Thus, this Court holds that the right to rest breaks is non-negotiable and not subject to section 301

8

preemption.

9
10

3.

Plaintiffs' Claims Do Not Violate the Collectively-Bargained Class
Settlement

Defendants also argue that “Plaintiffs’ claims violate the terms of the collectively-

11
United States District Court
Northern District of California

bargained Class Settlement of the Burgess, Delagarza, and USW actions, which directly addressed
12
the issue of certain plant radio usage and provided a collectively-bargained solution to comport
13
14
15

wage and hour practices with the various communication requirements of Tesoro’s California
refineries.” ECF No. 25 at 23. The Court concludes that the settlement agreement does not have
any terms that must be interpreted in order to resolve Plaintiffs’ state law claims.

16
On March 15, 2013, Defendants and the United Steel Workers union ("USW") (the union
17
which Plaintiffs are members) entered into a "Joint Stipulation of Class Action Settlement" ("Class
18
Settlement") to resolve three class and putative class actions (Delagarza v. Tesoro Refining &
19
Marketing Co., N.D. Cal., Case No. 09-05803 EMC, Burgess v. Tesoro Refining & Marketing
20
Co., C.D. Cal., Case No 10-5870-DMG (PLAx), and United Steel, Paper & Forestry, Rubber,
21
Mfg., Energy, Allied Indus. & Serv. Workers Int'l Union, ALF-CIO, CLC, and Richard Floyd and
22
Eduardo Carbajal, on behalf of all similarly situated current and former employees v. Shell Oil
23
Co., C.D. Cal., Case No. 08-3693 RGK ["USW"]). ECF No. 25 at 17.
24
Defendants are correct that in some instances a class settlement may have a preemptive
25
effect under section 301 of the LMRA. See, e.g., Retail Clerks Intern. Ass'n Local Unions Nos.
26
128 and 633 v. Lion Dry Goods, Inc., 369 U.S. 17, 28 (1962) (holding a strike settlement
27

agreement “plainly . . . falls within § 301(a)”). The settlement at issue here, however, does not

28
10

1

have such an effect. See Dall v. Albertson’s, Inc., 234 Fed.Appx. 446, 449 (9th Cir. 2007)

2

(holding that where a settlement agreement is only relevant to the defendant’s defenses of waiver,

3

release, and duty to arbitrate, there is no preemption).

4

First, Defendants do not identify anything in the Class Settlement that purports to

5

expressly govern radio usage during rest breaks. Defendants point to the fact that the Class

6

Settlement acknowledged “'the requirement that [covered employees] generally carry radios or

7

otherwise remain in contact or available to be contacted during meal periods' and fashioned the

8

collectively-bargained solution of providing an on-duty meal period agreement between Tesoro

9

and the USW.” ECF No. 25 at 23 (quoting ECF No. 25-1 at 52) (emphasis added). But Plaintiffs’
claims regarding rest breaks do not require interpretation of an agreement concerning whether

11
United States District Court
Northern District of California

10

they are required to carry radios during meal periods.

12

Moreover, the Augustus decision suggests rest breaks cannot be waived with an on-duty

13

agreement. In Augustus, the California Supreme Court differentiated between an employer's

14

ability to authorize on-duty rest breaks versus on-duty meal breaks. See Augustus, 2 Cal. 5th at

15

266 ("The [Industrial Welfare Commission] could have allowed on-duty rest breaks—and did so

16

in subdivision 11(A) [meal breaks]. Its failure to do so in subdivision 12(A) is a telling indication

17

it did not contemplate on-duty rest periods more generally."). Moreover, Defendants essentially

18

argue that the Class Settlement shows that they are not requiring employees to be on their radios

19

during rest breaks, stating that the “agreement reflects the mutual understanding that carrying

20

radios is only required during meal periods – not during rest periods.” ECF No. 25 at 23

21

(emphasis in original)(citing ECF No. 25-1 at 52). In fact, the agreement says nothing about

22

whether Tesoro expects its employees to carry their radios during rest breaks; the agreement only

23

discusses meal periods. Moreover, the Court must take Plaintiffs' alleged facts as true for

24

purposes of the motion to dismiss, see Knievel, 393 F.3d at 1072, and Plaintiffs claim that they are

25

required to be on their radios during such breaks. Reading the Class Settlement agreement does

26

not assist the Court in addressing those allegations.

27

The Class Settlement released putative class members' claims regarding rest breaks

28
11

1

through July 19, 2013 (the “Effective Date”). ECF No. 33 ¶ 26; ECF No. 25-1 at 71. There is

2

nothing in the on-duty meal agreement that waives employees’ right to duty-free rest breaks after

3

that date. Thus, it appears Plaintiffs are free to assert these rest break and wage statement

4

violation claims provided they have occurred since July 13, 2013 and are rooted in state law.

5

4.

Plaintiffs’ Need Not Exhaust Arbitration Procedures

6

Finally, Defendants argue that Plaintiffs must exhaust arbitration procedures before filing

7

suit. ECF No. 25 at 25-26. “The existence of an arbitration clause in a CBA does not necessarily

8

implicate § 301 preemption.” Meyer v. Irwin Industries, Inc., 723 F. Supp. 2d 1237, 1246 (C.D.

9

Cal. 2010) (citing Livadas, 512 U.S. at 128); see also Lingle, 486 U.S. at 411 (“[The Supreme
Court] has, on numerous occasions, declined to hold that individual employees are, because of the

11
United States District Court
Northern District of California

10

availability of arbitration, barred from bringing claims under federal statutes.”) (internal quotation

12

marks and citations omitted). Because Plaintiffs' claims are founded on rights guaranteed by

13

California law and do not require interpretation of the CBAs, Plaintiffs' are not required to exhaust

14

the grievance and arbitration procedures set forward in the CBAs.

15

B.

16

Defendants also argue that Plaintiffs' derivative claims fail to state a viable claim for relief.

Plaintiffs' Derivative Claims

17

Specifically, Defendants assert: (1) under Labor Code section 226, wage statements need not

18

include unearned wages; (2) UCL claims cannot be predicated on rest break penalties or wage

19

statement violations; (3) Plaintiffs cannot seek disgorgement of profits under the UCL; and

20

(4) Plaintiffs' PAGA claims fail to state a claim for relief. The Court addresses each argument in

21

turn.

22
23
24

1.

Section 226 Claims

Defendants contend that Plaintiffs' Labor Code section 226 claim should be dismissed
because wage statements need not include unearned wages. ECF No. 25 at 26-28.

25

Labor Code section 226 requires employers to keep accurate itemized pay statements

26

setting forth gross wages, the actual number of hours and minutes worked, and all applicable

27

hourly rates of pay. Cal. Lab. Code §226(a). To recover damages under section 226, an employee

28
12

1

must allege that he or she “suffer[ed] injury as a result of a knowing and intentional failure by an

2

employer to comply” with section 226(a). Id. at § 226(e)(1). An “injury” occurs when, among

3

other events, “the employer fails to provide accurate and complete information as required by any

4

one or more of” the items contained in section 226(a)(1)-(9) and “the employee cannot promptly

5

and easily determine from the wage statement alone one or more of” the items of information

6

provided in the statute. Id. at § 226(e)(2)(B). Wage statements must accurately itemize gross

7

wages earned, (§ 226(a)(1)), total hours worked, (§ 226(a)(2)), and net wages earned (§ 226(a)(5)).

8

If a wage statement fails to accurately itemize any of those items, and an employee “cannot

9

promptly and easily determine from the wage statement alone” total hours worked, or all the
applicable hourly rates for each hour worked by the employee, the wage statement violates section

11
United States District Court
Northern District of California

10

226.

12

This Court has previously held that payments awarded under Labor Code section 226.7 in

13

respect of missed meal periods are properly classified as wages. Parson v. Golden State, LLC,

14

2016 WL 1734010, at *4 (N.D. Cal. May 2, 2016). In summarizing the relevant California

15

Supreme Court precedent, Parson clarified that “although an employee who successfully brings a

16

section 226.7 claim is challenging a failure to provide rest breaks, the remedy for that failure is

17

additional wages . . . . Nothing in Murphy or Kirby suggests that wages awarded under section

18

226.7 be treated any differently than other wages earned by the employee.” Id. (citing Murphy v.

19

Kenneth Cole, 40 Cal. 4th 1094 (2007); Kirby v. Immoos Fire Prot., Inc., 53 Cal. 4th 1244

20

(2012)).

21

Defendants attempt to distinguish Parson on the ground that Plaintiffs’ claim there arose

22

under Labor Code § 204, which concerns the timing of wage payments, rather than under Labor

23

Code § 226, which concerns the content of wage statements. ECF No. 35 at 14-15. But

24

Defendants do not explain how this distinction matters, or why such payments should be

25

considered “wages” in one context but not the other. Defendants also challenge the basis for the

26

Court’s decision in Parson by pointing to the legislative history of section 226, but the materials

27

submitted by Defendants are actually consistent with the conclusion that wages for missed rest

28
13

1

periods should be included on an employee’s wage statements. See ECF No. 35 at 15 (noting that

2

legislative purpose was to provide for a penalty where “the employee cannot promptly and easily

3

determine from the wage statement alone the amount of the gross or net wages paid to the

4

employee during the pay period”) (emphasis in original); ECF No. 35-1 at 20.

5

Accordingly, the Court declines Defendants’ invitation to reconsider its prior ruling in

6

Parson and instead concludes that the payments required by section 226.7 should be considered

7

wages, and that the Plaintiffs may therefore bring a derivative claim under section 226.

8

Defendants' motion to dismiss Plaintiffs' section 226 claim is denied.

9
10

2.

UCL Claims

Plaintiffs' fourth cause of action is brought under the California Unfair Competition Law

United States District Court
Northern District of California

11

(“UCL”), Business and Professions Code § 17200 et seq. and seeks restitution of all lost wages

12

and work benefits, plus interest, disgorgement of profits, and preliminary and permanent

13

injunctive relief. ECF No. 33 ¶ 66. Defendants contend these claims must be dismissed because

14

(1) UCL claims cannot be predicated on Labor Code section 226.7 and 226 violations and (2)

15

disgorgement of profits is not an available remedy under the UCL. ECF No. 25 at 28-29. The

16

Court agrees with Defendants.

17
18

a.

UCL Claims Predicated on 226.7 Violations

Defendants contend that UCL claims cannot be predicated upon missed rest break

19

violations. “While the scope of conduct covered by the UCL is broad, its remedies are limited,

20

and ‘[p]revailing plaintiffs are generally limited to injunctive relief and restitution.’” Korea

21

Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1144 (2003) (quoting Cel-Tech

22

Communications, Inc v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 127 (1999)).

23

This Court has previously held that wages awarded under section 226.7 violations do not

24

constitute restitution for the purpose of the UCL. Parson, 2016 WL 1734010, at *6. In Parson,

25

this Court held that “wages awarded for failure to provide rest breaks under section 226.7 would

26

not be earned by the ‘employee who has given his or her labor to the employer in exchange for

27

that property.’” Id. at *7 (quoting Cortez v. Purolator Air Filtration Prods. Co., 23 Cal. 4th 163,

28
14

1

173 (2000)).

2

Plaintiffs respond that this portion of the Court’s prior holding in Parson was in error,

3

because (1) it failed to consider the clear import of the California Supreme Court’s holding in

4

Murphy; (2) numerous district courts have concluded that section 226.7 payments for meal breaks

5

are compensatory payments that support a UCL restitution claim; (3) missed rest period payments

6

should be treated the same way; and (4) the California Supreme Court’s opinion in Kirby did not

7

overrule the relevant portion of its holding in Murphy. The Court concludes that Plaintiffs are

8

correct.

9

First, there can be no dispute, as set forth above, that Murphy holds that payments under
section 226.7 are “wages.” 40 Cal.4th at 1099. Second, it has long been the law that “unlawfully

11
United States District Court
Northern District of California

10

withheld wages are property of the employee within the contemplation of the UCL.” Cortez v.

12

Purolator Air Filtration Prod. Co., 23 Cal. 4th 163, 178 (2000). Accordingly, numerous district

13

courts have held that “the recovery of section 226.7 missed meal premiums represent restitution

14

that a plaintiff may recover under the UCL.” Cleveland v. Groceryworks.com, LLC, 200 F. Supp.

15

3d 924, 963 (N.D. Cal. 2016); see also Tomlinson v. Indymac Bank, F.S.B., 359 F. Supp. 2d 891,

16

896 (C.D. Cal. 2005); Brandon v. Nat'l R.R. Passenger Corp. Amtrak, No. CV 12–5796 PSG

17

(VBKx), 2013 WL 800265, at *4 (C.D. Cal. Mar. 1, 2013); Doe v. D.M. Camp & Sons, No. CIV-

18

F-05-1417 AWI SMS, 2009 WL 921442, at *13 (E.D. Cal. Mar. 31, 2009). As stated earlier, there

19

is no meaningful difference between meal breaks and rest periods for purposes of this analysis.

20

Finally, this Court’s reliance on Kirby to reach its conclusion in Parson was misplaced. The

21

California Supreme Court in Kirby concluded that an action to recover section 226.7 payments

22

was not an action to recover “wages” within the meaning of California Labor Code section 1194.

23

Kirby, 53 Cal. 4th at 1254. Kirby left intact, however, Murphy’s definition of wages,

24

distinguishing the two cases as follows:

25
26
27
28

Our reading of section 218.5 is not at odds with our decision in Murphy. There, we
held that the three-year statute of limitations period in Code of Civil Procedure
section 338, subdivision (a) governs section 226.7 claims because such claims are
“action[s] upon a liability created by statute, other than a penalty or forfeiture”
(Code Civ. Pro. § 338, subd. (a)). (See Murphy, supra, 40 Cal.4th at p. 1099, 56
Cal.Rptr.3d 880, 155 P.3d 284.) We said that the “additional hour of pay” remedy
15

in section 226.7 is a “‘liability created by statute’” and that the liability is properly
characterized as a wage, not a penalty. (Murphy, at pp. 1102, 1114, 56 Cal.Rptr.3d
880, 155 P.3d 284.) To say that a section 226.7 remedy is a wage, however, is not
to say that the legal violation triggering the remedy is nonpayment of wages. As
explained above, the legal violation is nonprovision of meal or rest breaks, and the
object that follows the phrase “action brought for” in section 218.5 is the alleged
legal violation, not the desired remedy.

1
2
3
4

Kirby v. Immoos Fire Prot., Inc., 53 Cal. 4th 1244, 1257 (2012); see also Brewer v. Gen.
5
Nutrition Corp., No. 11-CV-3587 YGR, 2015 WL 5072039, at *18 (N.D. Cal. Aug. 27, 2015)
6
7
8

(noting that “Kirby did not abrogate Murphy”). Because Kirby leaves intact the essential
characterization of section 226.7 payments as “wages,” it also continues to acknowledge the
Plaintiffs’ ownership interest in those wages.4 Thus, Plaintiffs are entitled to seek restitution

9
under the UCL. Thompson v. Target Corp., No. CV12-10-MWF (MRWX), 2012 WL 12883954,
10

at *4 (C.D. Cal. Aug. 2, 2012) (holding that claim for section 226.7 payments “is restitutionary

11
United States District Court
Northern District of California

and [plaintiff] may allege this claim under the UCL”).
12
Thus, Defendants motion to dismiss Plaintiffs' UCL claim predicated on Labor Code
13

section 226.7 violations is denied.5

14
b.

15

UCL Claims Predicated on 226 Violations

Defendants assert that Defendants cannot predicate their UCL claims on Labor Code
16
section 226 violations. ECF No. 25 at 29. Defendants base their argument regarding section 226
17
18

claims on the same reasoning as their argument about section 226.7 ‒ an argument the Court
rejected. However, Plaintiffs do not respond to this part of Defendants’ motion, and it is unclear

19
to the Court what UCL relief the Plaintiffs could seek for a 226 violation. See In Re Wal-Mart
20
Stores, Inc. Wage and Hour Litigation, 505 F. Supp. 2d 609, 619 (N.D. Cal. May 29, 2007)
21
22
23
24
25
26
27
28

4

At least one panel of the California Court of Appeal has already held explicitly that Kirby does
not preclude UCL restitution claims based on alleged meal and rest break violations. McCleery v.
Allstate Ins. Co., No. B256374, 2016 WL 463275, at *18 (Cal. Ct. App. Feb. 5, 2016). Although
McCleery is an unpublished decision, this Court may consider its reasoning. See Smith v.
Harrington, No. C 12-03533 LB, 2015 WL 1407292, at *18 (N.D. Cal. Mar. 27, 2015), aff'd sub
nom. Smith v. Liddell, No. 15-15826, 2017 WL 1031360 (9th Cir. Mar. 17, 2017). And at least
one published opinion allows restitution claims based on section 226.7 premiums in the class
action context, although it is unclear whether the issue was litigated. Safeway, Inc. v. Superior
Court of Los Angeles Cty., 238 Cal. App. 4th 1138, 1159 (2015).
5

Plaintiffs also seek injunctive relief. Tesoro does not meaningfully address that claim, and it
survives.
16

1

(“claims pursuant to Labor Code §§ 203 and 226 cannot support a § 17200 claim”). The Court

2

will accordingly take Plaintiffs’ silence as a concession, and grant Defendants’ motion on this

3

ground. See Linder v. Golden Gate Bridge, Highway & Transportation Dist., No. 4:14-CV-

4

03861-SC, 2015 WL 4623710, at *3 (N.D. Cal. Aug. 3, 2015) (citing Stichting Pensioenfonds

5

ABP v. Countrywide Fin. Corp., 802 F. Supp. 2d 1125, 1132 (C.D. Cal. 2011) (“[I]n most

6

circumstances, failure to respond in an opposition brief to an argument . . . constitutes waiver or

7

abandonment in regard to the uncontested issue.”)).

8

c.

Disgorgement of Profits Under the UCL

Plaintiffs’ UCL claim seeks “an order [of] disgorgement of all profits gained by operation

10

of the unfair business practices.” ECF No. 33 ¶ 65, 66; Prayer for Relief ¶ 10. Defendants argue

11
United States District Court
Northern District of California

9

that such a request is improper and not permitted by the UCL. ECF No. 25 at 29. Plaintiffs do not

12

oppose Defendants' argument on this claim. The Court agrees with Defendants. See Cortez, 23

13

Cal. 4th at 172 ("the trial court may not make an order for disgorgement of all benefits defendant

14

may have received from failing to pay overtime wages”). Thus, Defendants' motion to dismiss

15

Plaintiffs request for disgorgement of profits under the UCL is granted.

16
17

3.

PAGA Claims

Defendants raise two issues with respect to Plaintiffs' PAGA claims. First, Defendants

18

assert that because Plaintiffs failed to fulfill PAGA's mandatory exhaustion requirements prior to

19

filing suit, the claims must be dismissed. ECF No. 25 at 30. Second, Defendants contend that

20

because Plaintiffs' Labor Code section 226 and 226.7 claims already provide for penalties,

21

Plaintiffs may not recover additional penalties under PAGA. ECF No. 25 at 30-33. The Court

22

disagrees.

23
24

a. Exhaustion Requirements
In 2003, the California legislature adopted PAGA into the state's labor code to allow

25

individual plaintiffs “to bring a civil action to collect civil penalties for Labor Code violations

26

previously only available in enforcement actions initiated by the State's labor law enforcement

27

agencies.” Caliber Bodyworks, Inc. v. Superior Court, 134 Cal. App. 4th 365, 374 (2005); See

28
17

1

Cal. Lab. Code § 2699(a); Urbino v. Orkin Serv. of Cal., Inc., 726 F.3d 1118, 1121 (9th Cir.

2

2013). In order to bring a PAGA claim, a plaintiff must exhaust the administrative procedures set

3

out in section 2699.3, which require giving written notice to the California Labor and Workforce

4

Development Agency (“LWDA”) and the defendants via certified mail. Cal. Lab. Code

5

§ 2699.3(a)(1)(A). After the LWDA responds that it will not prosecute the action, or after 65 days

6

without notice from the LWDA, the plaintiff may file suit. Id. at § 2699.3(a)(2)(A). A civil action

7

“shall commence only after” the exhaustion requirements are satisfied. Id. at § 2699.3(a).

8

However, a Plaintiff may amend his complaint to plead that the 65 day deadline passed without

9

any notice from the LWDA. “California courts have not held that the failure to exhaust
administrative remedies before initiating PAGA actions must le[a]d to dismissal of the PAGA

11
United States District Court
Northern District of California

10

claim.” Donnelly v. Sky Chefs, Inc., Case No. 16-cv-03404-JD, 2016 WL 9083158, at *2 (N.D.

12

Cal. Oct. 25, 2016); see also Stagner v. Luottica Retail N. Am., Inc., 2011 WL 3667502, at *7

13

(N.D. Cal. Aug. 22, 2011) (“In any amended complaint, to satisfy the PAGA requirements,

14

Plaintiff must plead that the [] deadline passed without any notice from the LWDA”).

15

Here, Defendants assert that Plaintiffs' PAGA claims fail because Plaintiffs failed to

16

exhaust the administrative procedures established in section 2699.3 prior to filing suit. ECF No.

17

25 at 30. Plaintiffs gave notice of their claims to the LWDA on January 10, 2017, the same day

18

Plaintiffs filed this suit. ECF No. 33 ¶ 55, ECF No. 1. Plaintiffs filed a SAC on May 3, 2017, 113

19

days after giving notice to the LWDA, alleging that they had met the exhaustion requirements.

20

ECF No. 33 ¶ 55. Because Plaintiffs amended their complaint to allege exhaustion, failing to

21

exhaust prior to filing suit is not fatal to their claim.

22

b.

Section 226.7 and Section 226 Penalties

23

Defendants argue that because Plaintiffs' Labor Code section 226 and 226.7 claims already

24

provide for penalties, Plaintiffs may not recover additional penalties under PAGA. ECF No. 25 at

25

30-33. Defendants' argument fails to differentiate between civil and statutory penalties and calls

26

for a discussion distinguishing the two. A statutory penalty is directly recoverable by an employee

27

and does not require PAGA compliance, whereas a civil penalty was previously enforceable only

28
18

1

by the state's labor enforcement agencies and now requires PAGA compliance. See Caliber, 134

2

Cal. App. 4th at 377 (distinguishing statutory penalties as “recoverable directly by employees well

3

before [PAGA]” and civil penalties as “previously enforceable only by the state's labor law

4

enforcement agencies”); see also Noe v. Superior Court, 237 Cal. App .4th 316, 339 (2015).

5

Defendants contend that because 226.7(c) already provides for penalties for violations of
section 226.7, Plaintiffs may not recover additional penalties under PAGA. ECF No. 25 at 32.

7

The Court disagrees. Section 226.7(c) states “[i]f an employer fails to provide an employee a meal

8

or rest or recovery period . . . the employer shall pay the employee one additional hour of pay . . .”

9

Cal. Lab. Code § 226.7(c). Nothing in the statute suggests this is a civil penalty to be collected by

10

California's labor enforcement agencies; rather, the plain language suggests it is instead a statutory

11
United States District Court
Northern District of California

6

penalty directly recoverable by an employee. See Diaz v. A&R Logistics, Inc., 2015 WL

12

11237469, at *6 (S.D. Cal. Sept. 16, 2015) (explaining the penalty set forward in section 226.7(c)

13

is not a "civil penalty"); see also Culley v. Lincare Inc., 2017 WL 698273, at *7-8 (E.D. Cal. Feb.

14

21, 2017) (allowing a plaintiff to seek both the statutory remedy provided in section 226.7 as an

15

individual and civil penalties under PAGA). Thus, because Labor Code section 226.7 does not

16

provide for civil penalties, Plaintiffs state a viable claim for recovery of civil penalties for 226.7

17

violations under PAGA.

18

Defendants similarly contend that because section 226.3 already provides for civil

19

penalties for section 226 violations, Plaintiffs may not recover additional penalties under PAGA.

20

Section 226.3 provides that “[a]ny employer who violates subdivision (a) of section 226 shall be

21

subject to a civil penalty in the amount of two hundred fifty dollars ($250) per employee . . . ” Cal.

22

Lab. Code § 226.3 (emphasis added). Although the statute explicitly references a “civil penalty,”

23

when the Labor Code provides for a civil penalty but “contains no language suggesting the penalty

24

is recoverable directly by employees” then “no right of action is available other than through a

25

PAGA claim.” Noe, 237 Cal. App. 4th at 339. The Court is further persuaded by the fact that

26

Labor Code section 2699.5 explicitly states that “Section 2699.3 appl[ies] to any alleged violation

27

of the following provisions,” and includes section 226 (as well as section 226.7) within that list,

28
19

1

suggesting recovery under PAGA for these claims is permitted. Therefore, Defendants' motion to

2

dismiss Plaintiffs' PAGA claims is denied.

3

CONCLUSION

4

For the foregoing reasons, Defendants’ motion to dismiss is granted with regard to

5

Plaintiffs’ UCL claim under Labor Code section 226 and their claim for disgorgement under the

6

UCL, and denied in all other respects. Because the Court concludes that amendment would be

7

futile, dismissal is without leave to amend. Defendants’ requests for judicial notice are granted.

8
9

IT IS SO ORDERED.
Dated: July 21, 2017

10

United States District Court
Northern District of California

11
12

______________________________________
JON S. TIGAR
United States District Judge

13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
20