Ruelas v. Costco Wholesale Corporation

Filing 34

ORDER GRANTING MOTION FOR JUDGMENT ON THE PLEADINGS by Magistrate Judge Paul Singh Grewal granting 28 . (psglc1S, COURT STAFF) (Filed on 3/25/2015)

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UNITED STATES DISTRICT COURT

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United States District Court
For the Northern District of California

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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NOE RUELAS,

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Plaintiff,
v.

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COSTCO WHOLESALE CORPORATION, et
al.,

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Defendants.

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Case No. 5:14-cv-02474-PSG
ORDER GRANTING MOTION FOR
JUDGMENT ON THE PLEADINGS
(Re: Docket No. 28)

California’s Private Attorneys General Act of 2004 (“PAGA”) permits private enforcement

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of Labor Code violations when the Labor Code does not otherwise specifically provide a civil

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penalty.1 Labor Code Section 226.7(b) prohibits any requirement that employees work during a

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See Cal. Lab. Code. § 2699(f) (“For all provisions of this code except those for which a civil
penalty is specifically provided, there is established a civil penalty for a violation of these
provisions, as follows: (1) If, at the time of the alleged violation, the person does not employ one or
more employees, the civil penalty is five hundred dollars ($500). (2) If, at the time of the alleged
violation, the person employs one or more employees, the civil penalty is one hundred dollars
($100) for each aggrieved employee per pay period for the initial violation and two hundred dollars
($200) for each aggrieved employee per pay period for each subsequent violation. (3) If the
alleged violation is a failure to act by the Labor and Workplace Development Agency, or any of its
departments, divisions, commissions, boards, agencies, or employees, there shall be no civil
penalty.”).

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Case No. 5:14-cv-02474-PSG
ORDER GRANTING MOTION FOR JUDGMENT ON THE PLEADINGS

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meal or rest or recovery period.2 Section 512 prohibits any requirement that employees work for

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extensive periods of time without a meal period.3 Section 558, which provides penalties for

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Section 512 violations, does not, however, include penalties for meal-period violations.4 But

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Section 226.7(c)—enacted along with Section 226.7(b), after Sections 512 and 558 were enacted—

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provides penalties “if an employer fails to provide an employee a meal or rest or recovery period in
accordance with a state law, including, but not limited to, an applicable statute or applicable

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regulation, standard, or order of the Industrial Welfare Commission, the Occupational Safety and
Health Standards Board, or the Division of Occupational Safety and Health.”5
Plaintiff Noe Ruelas argues that Section 226.7(c) penalties do not apply to Section 512

United States District Court
For the Northern District of California

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meal-period violations, so that he may pursue a claim under PAGA.6 Defendant Costco Wholesale

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Corporation disagrees, arguing that because Section 226.7(c) penalties do cover Section 512 meal-

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See Cal. Lab. Code. § 226.7(b) (“An 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 Occupational Safety and Health.”).
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See Cal. Lab. Code. § 512(a) (“An employer may not employ an employee for a work period of
more than five hours per day without providing the employee with a meal period of not less than 30
minutes, except that if the total work period per day of the employee is no more than six hours, the
meal period may be waived by mutual consent of both the employer and employee. An employer
may not employ an employee for a work period of more than 10 hours per day without providing
the employee with a second meal period of not less than 30 minutes, except that if the total hours
worked is no more than 12 hours, the second meal period may be waived by mutual consent of the
employer and the employee only if the first meal period was not waived.”).

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See Cal. Lab. Code. § 558 (providing civil penalties for hour and wage violations).

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See Cal. Lab. Code § 226.7(c) (“If an employer fails to provide an employee a meal or rest or
recovery period in accordance with a state law, including, but not limited 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 Occupational Safety and Health, the
employer shall pay the employee one additional hour of pay at the employee’s regular rate of
compensation for each workday that the mal or rest or recovery period is not provided”).

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See Docket No. 29.

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Case No. 5:14-cv-02474-PSG
ORDER GRANTING MOTION FOR JUDGMENT ON THE PLEADINGS

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period violations, PAGA does not apply. Based on the applicable legislative history, the court
agrees with Costco and GRANTS Costco’s motion for judgment on the pleadings.
I.

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Under Fed. R. of Civ. P. 12(c), after the pleadings are closed but early enough not to delay
trial, a defendant may move for judgment on the pleadings. The standard for dismissing claims
under Rule 12(c) is “functionally identical” to the Rule 12(b)(6) standard, set forth in Ashcroft v.
Iqbal.7 A Rule 12(c) motion should be granted when the face of the pleadings demonstrates there
is no material issue of fact and that judgment can be entered as a matter of law.8

United States District Court
For the Northern District of California

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Ruelas worked with Costco for nearly seven years until he was fired. Costco frequently

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failed to provide employees like Ruelas meal periods, although for each meal-period violation,

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Costco paid the employees an extra hour of pay as required under Section 226.7(c). Not satisfied,

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Ruelas filed this suit requesting, among other things, additional penalties under PAGA for Section

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512 meal-period violations. This court dismissed with leave to amend everything but the present
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claim, which Costco did not include in its motion to dismiss.9 Ruelas did not file an amended
complaint.
II.

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This court has jurisdiction under 28 U.S.C. § 1331. The parties have consented to
magistrate judge jurisdiction under 28 U.S.C. § 636(c) and Fed. R. Civ. P. 72(a).10

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See Ashcroft v. Iqbal, 556 U.S. 662 (2009); Cafasso, U.S. ex rel. v. General Dynamics C4
Systems, Inc., 637 F.3d 1047, 1055, n.4 (9th Cir. 2011) (“Although Iqbal establishes the standard
for deciding a Rule 12(b)(6) motion, we have said that Rule 12(c) is ‘functionally identical’ to Rule
12(b)(6) and that ‘the same standard of review’ applies to motions brought under either rule.”).

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See Hal Roach Studios, Inc. v. Richard Feiner and Co., Inc., 896 F.2d 1542, 1550 (9th Cir. 1990).

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See Docket No. 20.

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See Docket Nos. 7, 10.

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Case No. 5:14-cv-02474-PSG
ORDER GRANTING MOTION FOR JUDGMENT ON THE PLEADINGS

III.

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The Enrolled Bill Report for AB 2509, the statute establishing Section 226.7(c) penalties,

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explains that Section 226.7(c) payments for meal-period violations were created because “[n]either

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Labor Code § 512 [or § 558] nor the IWC orders contain penalties for violation of [meal-period]

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provisions.”11 The timing of the passage of Section 226.7(c) and the Report’s reference to Section

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512 clarifies that Section 226.7(c) was intended to cover Section 512 violations. Further, the

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United States District Court
For the Northern District of California

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payment under 226.7(c) was intended to be a penalty to encourage employer compliance with the
meal-period laws.12 Section 226.7(c) therefore precludes the creation of a civil penalty for Section
512 meal-period violations under Section 2699(f).

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Ruelas presents four arguments to the contrary, none of which is persuasive.

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First, Ruelas asserts that because the California Supreme Court has held that the payment

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of an additional hour of pay does not excuse a meal period statute violation,13 Section 226.7(c) is

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Form DF-43, Department of Finance Enrolled Bill Report Deferred to Department of Industrial
Relations, Bill No. AB 2509, at 9 (“Adding a penalty component to the Labor Code will support
the underlying purpose of meal periods by encouraging employers to comply with the meal period
provisions. Without the proposed provisions there is no effective enforcement of current law.”).

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See Initial Statement of Reasons for Cal. Code. Regs. Tit. § 13700 (Proposed Draft 2004). See
also Home Depot U.S.A., Inc. v. Superior Court, 191 Ca. App. 4th 210, 223-24 (2010) (explaining
PAGA’s purpose: “Labor Code violations rarely result in criminal investigations and prosecutions
[and] employers may violate the law with impunity…. [P]rivate actions to enforce the Labor Code
are needed because LWDA simply does not have the resources to pursue all of the labor
violations…. The bill would authorize civil penalties for any Labor Code violation currently
lacking a specific penalty provision and authorizes aggrieved employees to bring private civil
actions against employers.”) (quoting Assem. Com. on Appropriations, Bill Analysis, Sen. Bill No.
796 (2003-04 Regular Session), as amended July 16, 2003, at 2).
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See Kirby v. Imoos Fire Protection, Inc., 53 Cal. 4th 1244, 1256-1258 (2012) (“The ‘additional
hour of pay’ provided for [in Section 226.7(c)] is the legal remedy for a violation of [Section
226.7(b)], but whether or not it has been paid is irrelevant to whether section 226.7 was violated.
In other words, section 226.7 does not give employers a lawful choice between providing either
meal and rest breaks or an additional hour of pay. An employer’s failure to provide an additional
hour of pay does not form party of a section 226.7 violation, and an employer’s provision of an
additional hour of pay does not excuse a section 226.7 violation.”).

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Case No. 5:14-cv-02474-PSG
ORDER GRANTING MOTION FOR JUDGMENT ON THE PLEADINGS

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not the applicable penalty statute, thus triggering the creation of penalties under Section 2699(f).14

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But Kirby does not preclude 226.7(c) penalties for Section 512 violations—instead, Kirby clarifies

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that 226.7(c) penalties do not wipe clean meal-period violations. For example, an employee could

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still sue for wrongful termination if his employer fired him for complaining about denied meal

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periods, even if the employer had paid the employee an hour of pay for each missed meal period.15

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An employer also could face criminal penalties for denying meal periods, even if the employer had
paid an hour of pay for each missed meal period.16
Second, Ruelas argues PAGA penalties are paid to the state, so Section 226.7(c) penalties

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United States District Court
For the Northern District of California

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paid to the employee do not preclude recovery under PAGA.17 Section 2699(f), however, provides

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no basis to distinguish between penalties that employees recover and those that the Labor

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Commissioner recovers. Section 226.7(c) penalties, also recoverable by the Labor Commissioner,

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specifically provide for meal-period violations. Section 226.79(c) penalties thus preclude the
creation of penalties, paid to an employee or to the Labor Commissioner, under Section 2699(f).18

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Third, Ruelas contends the state is harmed when an employer violates meal-period

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provisions, because even though an employee might receive extra pay, public health and safety still

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See Docket No. 29 at 3.

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See, e.g., Phillips v. Gemini Moving Specialists, 63 Cal. App. 4th 563, 574 (1998) (plaintiff
asserted a valid claim for wrongful termination by alleging he was fired for asserting his right to
receive earnings free from a setoff forbidden by the Labor Code).
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See, e.g., Lab. Code § 553 (“Any person who violates this chapter [which includes Section 512]
is guilty of a misdemeanor.”); cf. Singletary v. Teavana Corp., Case No. 5:13-cv—01163-PSG,
2014 WL 1760884, at *4 (N.D. Cal. Apr. 2, 2014) (explaining that when “the wrong at issue in
Section 226.7 is the non-provision of [meal or] rest breaks,” the case falls under Kirby’s
“characterization of Section 226.7’s payment as penalties”).
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See Docket No. 29 at 4.

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See Singletary, 2014 WL 1760884, at *4.

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Case No. 5:14-cv-02474-PSG
ORDER GRANTING MOTION FOR JUDGMENT ON THE PLEADINGS

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are jeopardized.19 Even if this argument were relevant to statutory interpretation, Ruelas still does
not establish that Section 226.7(c) penalties do not promote public health and safety.20
Fourth, Ruelas argues that PAGA must be construed liberally.21 But imposing a penalty

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under Section 226.7(c) and PAGA might inspire employers not to comply with Section 226.7(c) at

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all.22 According to legislative history, the purpose of Section 226.7(c) was to enforce meal-period

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violations under Sections 226.7(b) and 512.23 For the issue at hand, the purpose of Section 2699(f)

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United States District Court
For the Northern District of California

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is to provide relief for those provisions where no penalties were already provided in the statute.
The penalties required in Section 226.7(c) satisfy the purposes of the statute as to meal-period
violations. Section 2699(f) simply does not come into play.

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IV.

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Costco’s motion for judgment on the pleadings is GRANTED. Ruelas may amend his

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complaint as to the issue of recovery for violation of Section 512 alone no later than April 8,
2015.24

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See Docket No. 29 at 4.

Murphy v. Kenneth Cole Productions, Inc., 40 Cal. 4th 1094, 1106 (1997) (“Concerned with the
health and welfare of employees, the IWC issued wage orders mandating the provision of meal and
rest periods in 1916 and 1932, respectively. . . . In 2000, due to a lack of employer compliance, the
IWC added a pay remedy to the wage orders, providing that employers who fail to provide a meal
or rest period ‘shall pay the employee one (1) hour of pay at the employee’s regular rate of
compensation for each work day’ that the period is not provided.”); id. at 1109-10 (“IWC
Commissioner Barry Broad described the remedy as a ‘penalty,’ explaining that it was needed to
help force employers to provide meal and rest periods.”); id. at 1110 (finding Section 226.7(c)
penalties act “as an incentive for employers to comply with labor standards.”); id. at 1114 (holding
Section 226.7(c) has a “behavior-shaping function.”).

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See Docket No. 29 at 4.

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See Docket No. 32 at 7.

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Form DF-43, Department of Finance Enrolled Bill Report Deferred to Department of Industrial
Relations, Bill No. AB 2509, at 9.

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See Harris v. County of Orange, 682 F.3d 1126, 1134 (9th Cir. 2012) (reversing the district court
for granting defendant’s Rule 12(c) motion for judgment on the pleadings and not granting
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Case No. 5:14-cv-02474-PSG
ORDER GRANTING MOTION FOR JUDGMENT ON THE PLEADINGS

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SO ORDERED.
Dated: March 25, 2015
________________________________
PAUL S. GREWAL
United States Magistrate Judge

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United States District Court
For the Northern District of California

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plaintiffs’ leave to amend); see also Moran v. Peralta Community College Dist., 825 F. Supp. 891,
893 (N.D. Cal. 1993) (“Courts have discretion to grant leave to amend in conjunction with 12(c)
motions, and may dismiss causes of action rather than grant judgment.”) (citing Amersbach v. City
of Cleveland, 598 F.2d 1033, 1038 (6th Cir. 1979); Carmen v. San Francisco Unified School Dist.,
982 F.Supp. 1396, 1401 (N.D. Cal. 1997) (same).

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Case No. 5:14-cv-02474-PSG
ORDER GRANTING MOTION FOR JUDGMENT ON THE PLEADINGS