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1 KEITH A. JACOBY, Bar No. 150233 FILED
kiacobv(5)littler.com
2 BRADLEY E. SCHWAN, Bar No. 246457
bschwan(g),littler.com Superior Court Of CaSlforlnia,
3 LITTLER MENDELSON, P.C.
2049 Century Park East OS/04/2020
4 5th Floor
Los Angeles, CA 90067.3107
5 Telephone: 310.553.0308 Casu Mumbur:
Fax No.: 310.553.5583
6 34=2018-0024727
NATHANIEL H. JENKINS, Bar No. 312067
7 nienkins(g),littler.com
LITTLER MENDELSON, P.C.
8 500 Capitol Mall
Suite 2000
9 Sacramento, CA 95814
Telephone: 916.830.7200
10 Fax No.: 916.561.0828
X 11
Attomeys for Defendant
12 PRIMERITUS FINANCIAL SERVICES, INC.
13
SUPERIOR COURT OF CALIFORNL\
14
COUNTY OF SACRAMENTO
15
JOHN BOUDREAU, an individual, on CaseNo. 34-2018-00247272
16 behalf of himself and all others similarly
situated. Assigned to Department 41, Hon. David De Alba
17
Plaintiff, DEFENDANT PRIMERITUS FINANCIAL
18 SERVICES, INC.'S REPLY BRIEF IN
V. SUPPORT OF MOTION FOR SUMMARY
19 ADJUDICATION
PRIMERITUS FINANCIAL SERVICES,
20 INC., A Delaware corporation; CHRIS Date: September 24, 2020
McGINNESS, an individual; and DOES 1 Time: 9:00 a.m.
21 through 10, inclusive. Dept.: 54
Judge: Christopher E. Krueger
22 Defendants. Reservation No. 2519118
23 Complaint filed: December 27, 2018
First Amended Complaint filed: April 12, 2019
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1 I. INTRODUCTION
2 At the heart of this case is whether Califomia law permits employers to pay employees for
3 productivity, or if piece rate systems that reward employees for efficiency (but still compensate at
4 least the minimum wage) are effectively banned by the implementation of Labor Code section 226.2.
5 Section 226.2 should not be interpreted to tmdermine the ability of employees and employers to
6 agree on a system to pay employees a premium for efficiency and success. Skip Tracers are highly-
7 paid employees who, on average, eam more than double the minimum wage, while several earn over
8 six figures per year. And Primeritus' Pay Plan compensates them for all hours worked in accordance
9 with Califomia law. Plaintiffs oversimplified analysis in his Opposition to Primeritus' Motion for
10 Summary Adjudication leads again and again to the incorrect legal result. Plaintiff argues the eight
11 dollar per hour payment is below the minimum wage, so the plan must be illegal. This is simplistic
12 and false. Labor Code 226.2 expressly specifies that piece rate employees must be paid certain rates
13 for rest periods (the average hourly rate) and nonproductive time (minimum wage) while otherwise
14 ensuring that employees are paid at least the minimiun wage for all time worked. Primeritus' Pay
15 Plan does that, and Plaintiff does not dispute those underlying facts - he only mischaracterizes them.
16 Section 226.2 further permits employers to pay a reasonable estimate of non-productive time, and
17 nowhere in his Opposition does Plaintiff even attempt to contend that enough nonproductive time
18 was ever worked by a class member in an 8-hour day or 40 hour week to render the eight dollar per
19 hour allocation to non-productive time insufficient to cover the minimum wage.
20 As set forth in Defendant's moving papers, and in more detail below, the Primeritus Pay Plan
21 strictly complied with the four requirements in Section 226.2. Accordingly, Primeritus' Pay Plan is
22 lawful and Plaintiffs claim for unpaid wages and derivative claim for rest period premiums fail.
23 Consequently, Plaintiffs hyper-technical attack on this Pay Plan should be rejected and the Court
24 should grant summary adjudication in favor of Primeritus.
25 II. ARGUMENT
26 A. PlaintifTs Opposition Ignores the History Of, and Requirements For, Piece-Rate
Pay Plans in California
27
The Califomia Labor Commissioner defines "Piece Rate" as "work paid for according to the
28
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1 number of units tumed out." (Division of Labor Standards Enforcement ("DLSE") Enforcement
2 Policies and Interpretations Manual § 2.5.1) The Labor Commissioner notes that "a piece rate must
3 be based upon an ascertainable figure paid for completing a particular task or making a particular
4 piece of goods" and provides the following examples demonstrating just how diverse piece-rate
5 plans can be: (1) automobile mechanics paid on a "book rate" (i.e., brake job); (2) nurses paid on the
6 basis of the nimiber of procedures performed; (3) carpet layer paid by the yard of carpet laid; (4)
7 technician paid by the number of telephones installed; (5) factory worker paid by the widget
8 completed; or (6) a carpenter paid by the linear foot on aframingjob, etc. (5ee id. at 2.5.2.) The idea
9 is that the worker is in control of her own wages, and can increase her compensation by working
10 more quickly or more efficiency. For years, employers used piece-rate pay plans in Califomia to pay
11 employees for their production, rather than merely hours worked - indeed. Labor Code section
12 200(a) explicitly includes "piece" compensation in its definition of "wages."
13 Despite confusion regarding the treatment of piece-rate plans in Califomia over the last 15
14 years, the California Supreme Court just two months ago reminded us that piece-rate pay plans are
15 still valid forms of compensation in California. {See Oman, et al, v. Delta Air Lines, Inc., (Jun. 20,
16 2020) 9 Cal.Sth 762, 466 P.3d 325, 366 ["state law expressly authorizes employers to calculate
17 compensation by the task or piece, by the sale, or by another convenient standard"]; citing Lab.
18 Code, § 200(a) [compensation may be "fixed or ascertained by the standard of time, task, piece,
19 commission basis, or other method of calculation"]; and Wage Order No. 9,§ 4(B) [same] (emphasis
20 added).)' In that case, the Supreme Court endorsed creative pay plans that reward employees for
21 hard work and efficiency so long as they otherwise comply with the law. {Id. at 341.) The Primeritus
22 Pay Plan complies with Califomia law.
23 Nine years ago, the Central District of Califomia was the first court to revisit a piece-rate
24 compensation plan after the 2005 California Appellate Decision in Armenia v. Osmose, Inc., which
25 had held that employers could not average an hourly worker's weekly wages to meet minimum wage
26 requirements. ((2005) 135 Cal.App.4th 314, 317.) In Cardenas v. McLane Food Services, Inc., the
27
' A copy of Oman is attached as Exhibit 1 to Defendant's Request for Judicial Notice ("R.TN") filed concurrently with its
28 Opposition to Plaintiffs Motion for Summary Adjudicati^ on August 14, 2020, and available at Docket No. 88.
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1 Central District held that "a piece-rate formula that does not compensate directly for all time worked
2 does not comply with the Califomia Labor Code, even if, averaged out, it would pay at least
3 minimum wage for all hours worked." {Cardenas, (CD. Cal. 2011) 796 F.Supp.2d 1246, 1252.) The
4 Califomia Court of Appeal for the Second District then followed the Central District's decision in
5 Gonzalez v. Downtown LA Motors, LP ((2013) 215 Cal.App.4tli 36), in which it held that piece-rate
6 workers are entitled to separate compensation of at least the minimum wage for "non-productive"
7 time. {See Gonzalez, 215 Cal.App.4th at 40-41.) Two months after Gonzalez, Califomia's Third
8 District Court of Appeal injected even more confusion into the law by holding that rest periods must
9 be compensated separately from any piece-rate compensation, but it did not explain how such rest
10 periods should be separately compensated. {See Bluford v. Safeway Stores, Inc. (2013) 216
11 Cal.App.4th 864.)
12 Given the resoimding confiision bestowed upon employers of piece-rate workers in
13 Califomia as a result of Armenia, Cardenas, Gonzalez, and Bluford, the Califomia Legislature took
14 it upon itself to clarify the requirements for piece-rate plans through Assembly Bill 1513, which
15 enacted Labor Code section 226.2, effective January 1, 2016. Section 226.2 has four kev provisions
16 now applicable to piece rate plans: First, diat employers compensate employees for rest breaks and
17 other nonproductive time separate from piece rate compensation. Second, that pay for rest breaks be
18 paid at no less than the employee's "average hourly rate" each workweek. (Lab. Code § 226.2
19 (a)(3)(A).) Third, that pay for other nonproductive time - defined as "time under the employer's
20 control, exclusive of rest and recovery periods, that is not directly related to the activity being
21 compensated on a piece-rate basis" - must be at least the minunum wage. (Lab. Code § 226.2
22 (a)(4).) Fourth, a provision that authorizes employers to use reasonable estimates to determine the
23 amount of non-productive time worked in a given pay period. (Lab. Code § 226.2 (a)(5).)
24 However, nowhere - in any of the court cases leading up to AB 1513, in the text of AB 1513,
25 or in thefinalizedand codified text of Section 226.2 - does either a Court or the Legislature require
26 that employers pay piece-rate workers a base hourly rate of minimum wage for every hour worked
27 for both productive and non-productive time. In other words, the law does not require that a piece-
28 rate worker be any particular time-based rate fcM" time working toward the piece rate so long as the
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I employee is paid at least the minimum wage for all time worked for piece rate work. Yet, in reading
2 Plaintiffs opposition - he is arguing just that.
3 Indeed, it seems Plaintiff contends that Primeritus utilized two different pay plans at the same
4 time; one piece-rate, and one hourly. Under his theory. Plaintiff does not have a problem with the
5 piece-rate plan, but instead his hourly pay plan. For example. Plaintiff makes the argument that if he
6 were to attend a one-hoiu- meeting, he did not receive at least the minimum wage because he only
7 received $8.00 for that hour. {See PItf s Opp. at 8:5-6.) But this is not the case. Plaintiff was not an
8 hourly employee, he was a piece-rate employee, and Primeritus compensated Plaintiff using only
9 one pay plan - a piece-rate pay plan which set aside enough base pay such that Plaintiff s
10 nonproductive time meeting would be compensated at no less than minimimi wage. As set forth in
II Defendant's moving papers, and in fiirther detail below, Primeritus' piece-rate pay plan complies
12 with the requirements set forth in Section 226.2.
13 B. Primeritus' Piece-Rate Pay Plan Complies with Section 226.2
14 1. Primeritus Separately Compensated Skip Tracers for Rest Periods and
Non-Productive Time.
15
Section 226.2 requires that, for piece-rate pay plans, an employer must separately
16
compensate employees for rest periods and "nonproductive time" (which the statute defines as time
17
"that is not directly related to the activity being compensated on a piece rate basis"). Primeritus' Pay
18
Plan does just that by separately paying employees a separate component of pay intended to cover
19
pay for rest breaks and nonproductive time. In fact. Plaintiff admits in his Opposition that he
20
received separate pay for rest periods and non-productive time. {See PItf's Opp. at 2:20-21; 6:14;
21 I
22 7:10.) However, Plaintiff attempts to sweep this under the mg by accusing Defendant of
23 "contradict[ing] with the stipulated fact" by "now asserting that Plaintiff was paid a daily rate of
24 $64.00" as opposed to $8.00 for each hour worked. {See PItf's Opp. at 6:16-20.) This argument is
25 absurd, and can be resolved with simple math. First, Defendant never agreed that Plaintiff was an
26 hourly employee; instead. Defendant maintains (and so stipulated with Plaintiff) that "[e]ach class
27 member was promised that he/she would receive $8.00 for each hoiu" worked." (Defendant's COE,
28 Exhibit 1, Jenkins Deck, Exliibit U at p. 6, ^ 9.) And second, if a class member works a typical eight-
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1 hour workday, doing the simple mathematical equation of eight times eight reveals that the class
2 member receives a daily' rate of $64.00 (in addition to their piece-rate pay). Indeed, Primeritus
3 expected all Skip Tracers to work an eight-hour workday, Monday through Friday; but, if for
4 whatever reason a Skip Tracer needed to leave early or start late, and only worked, for example, a
5 six-hour shift, the Skip Tracer received base pay for that day in the amount of $48.00. Regardless of
6 whether the Skip Tracer worked eight hours, six hoiu-s, or only two hours in one day, the Skip Tracer
7 reported to work to actively locate vehicles for repossession and eam a piece-rate pay. The $8.00 for
8 each hour worked was not an hourly pay plan, rather it was the separate component to the piece-rate
9 pay meant to compensate Skip Tracers for rest periods and any non-productive time worked.^ Again,
10 nowhere in Section 226.2 does it require that an employer pay a piece-rate worker an hourly rate of
II minimum wage for productive time in addition to piece-rate pay. Accordingly, by separately paying
12 Skip Tracers $8.00 for each hour worked to compensate Skip Tracers for rest periods and any non-
13 productive time worked, Primeritus has complied with tlie principle requirement of Section 226.2.
14 2. Primeritus Separately Compensated Skip Tracers for Rest Breaks At
Their Average Hourly Rate
15
Here too, "Plaintiff does not dispute that Primeritus separately compensated the class for rest
16
breaks." (Pltf's Opp. at 6:14.) Rather, Plaintiff contends that this separate compensation violates
17
Section 226.2 because "$8.00 per hour" is less than minimum wage. {Id. at 6:15) Once again.
18
Plaintiff argues that he was paid on an hourly basis instead of on a piece-rate basis. To support this
19
misconception. Plaintiff boldly contends that Defendant is wrong in "asserting that this [] daily rate
20
can be averaged across multiple hours to arrive at amounts above the minimum wage" to
21
compensate for rest periods. {Id. at 6:21-22.) Yet here. Plaintiff blatantly ignores the explicit
22
requirements in Section 226.2, which aptly provide that, "[ejmployees shall be compensated for rest
23
and recovery periods at a regularly hourly rate that is no less than the higher of (i) [a]n average
24
hourly rate determined by dividing the total compensation for the workweek...by the total
25
hours worked during [the workweek...[or] (ii) [t]he applicable minimum wage." (Lab. Code §
26
27 ^ Using the example of a Skip Tracer working less lhan an eight-hour shifl in one day, such as only six hours, the Skip
Tracer would have been only entitled to one rest break, rather than the two he would have been entitled to on an eight-
28 hour shift, leaving additional, separate compensation to co^'er any non-productive time worked.
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1 226.2(a)(3)(A).) Indeed, the Legislature has expressly instmcted Primeritus to "average" Plaintiffs
2 total pay and divide by the total hours worked during the workweek in order to properly compensate
3 for rest breaks. Moreover, given the high value of the piece-rate pay, the Skip Tracers' will almost
4 certainly, always be owed the "average hourly rate" instead of the minimum wage rate for rest
5 breaks, as the "average hourly rate" will be higher than the current minimum wage rate, and thus the
6 correct amount owed for rest breaks pursuant to Section 226.2. Consequently, Primeritus could not
7 even begin to calculate the appropriate pay for each rest break until the end of the workweek, when
8 Primeritus would be able to include the piece-rate pay eamed during that same week to determine
9 the "average hourly rate."
10 Even assuming, arguendo, that the Skip Tracers were paid hourly at $12.00 per hour (the
11 ciurent hourly minimiun, wage rate) on top of their piece-rate pay, applying Plaintiff s theory, this
12 would still be a violation of 226.2 because Plaintiff would be owed compensation for his rest periods
13 at his "average hourly rate," and not just ten minutes of time at a rate of $12.00 per hour. In other
14 words, it does not matter what the base pay is for each hour worked, Primeritus needs to ensure that
15 Plaintiff receives his "average hourly rate" for rest periods each workweek to satisfy Section 226.2 -
16 which is exactly what Primeritus did here. Primeritus' compliance with 226.2 is home out by the
17 Skip Tracers' actual time and pay data. Primeritus' expert. Dr. Ward, analyzed the Skip Tracers'
18 time and payroll data to confirm that the $64 per day (or equivalent, such as $48 for a six-hour shift)
19 payments were sufficient to pay Skip Tracers their Average Hourly Rate (all amounts paid divided
20 by all hours worked) for all rest breaks owed for each workday. Dr. Ward's analysis confirms that
21 the Skip Tracers' base pay during the Class Period was sufficient to pay Class Members for all rest
!
22
breaks at their Average Hoiu-ly Rate in 99.99% of workweeks - 14,159 out of 14,160. (Defendant's
23
COE, Exhibit 2, Ward Report, Table 3.) Therefore, Primeritus properly compensated Skip Tracers
24
for rest and recovery periods in accordance with Section 226.2.
25 3. Primeritus Compensated the Skip Tracers' Non-Productive Time At or
Above the Minimum Wage
26
Here again, "Plaiintiff does not dispute that Primeritus separately compensated the class for
27
non-productive time." (Pltf's Opp. at 7:10.) Rather, Plaintiff argues that he was an hourly employee,
28
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1 and that $8.00 is not $12.00 (the current hourly minimum wage requirement). But Plaintiff again
2 ignores the base payment Primeritus paid to Skip Tracers—separate from his piece rate pay—
3 specifically intended to compensate them for rest periods and nonproductive time - a fact which
4 Plaintiff has offered no evidence to contradict. Specifically, Section 226.2 requires that piece-rate
5 workers be guaranteed a rate of at least minimiun wage for any non-productive time. {See Lab. Code
6 § 226.2(a)(4).) Under the Primeritus Pay Plan, as the Ward Report demonstrates, after compensating
7 Skip Tracers at the average rate of pay for rest breaks, except in rare cases (typically during
8 workweeks with irregular hours), there is still more than sufficient compensation to cover other
9 nonproductive time at the minimum wage. (Defendant's SSUF Nos. 29, 30, 31.) Thus, the
10 Primeritus Pay Plan separately compensates Skip Tracers for non-productive time at or above the
11 minimiun wage in accordance with Section 226.2.
12 4. Section 226.2 Expressly Authorizes Primeritus to Reasonably Estimate
the Amount of Non-Productive Time and the Data Analysis Supports
13 That Estimate
14 Plaintiff attempts to distract the Court from requirements of Section 226.2 by arguing that,
15 "Plaintiff does not understand the basis for asserting this as an issue for summary adjudication of a
16 legal issue." (Phf's Opp. at 7:16-17.) On the contrary, this is precisely at issue to determine whether
17 the Primeritus Pay Plan is legal. Piece-rate pay plans are govemed by Section 226.2, which clearly
18 provides that, "the amount of nonproductive time may be determined either through actual records
19 or the employer's reasonable estimates, whether for a group of employees or for a particular
20 employee, of other nonproductive time worked during the pay period." (Lab. Code §
21 226.2(a)(5) (emphasis added).) So naturally, this section is relevant to determine whether Primeritus
22 complied with the applicable piece-rate pay plan requirements in Califomia. Here, the Legislature
23 intentionally added this particular subsection to 226.2, which means it must have understood that
24 tme piece-rate workers are meant to be actively working toward eaming a piece (i.e., productive
25 time) during the majority of their workday. However, as pointed out in cases like Gonzalez, there are
26 occasional activities, such as meetings or trainings, that take a piece-rate worker away from being
27 able to earn a piece, in which case, he or she is owed a rate of at least minimum wage for that time.
28 Just like there is no requirement to pay an hourly minimum wage rate for productive time in Section
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1 226.2, there is no requirement to pay an hourly rate for non-productive time {i.e., the worker need
2 not separately clock in and out for a nonproductive time meeting at $12.00 per hour"). Instead, the
3 Legislature permits employers to reasonably estimate the amount of non-productive time worked,
4 and then to pay for that time at a rate equivalent to the hourly minimum wage rate. That is
5 particularly appropriate here where the evidence from other Skip Tracers shows an average of 1.33
6 hours of nonproductive time per week (even Plaintiff s self-serving estimate was minimal). So long
7 as that reasonable amount of non-productive time is compensated by at least at minimum wage, the
8 employer has complied with Section 226.2.
9 Here, taking into account the very little time that Skip Tracers are not actively locating
10 collateral, such as monthly meetings lasting up to one hour, Primeritus reasonably estimated that
11 Skip Tracers could work up to two to three non-productive hours in any given workday, but never
12 more barring unusual circumstances. (Defendant's SSUF Nos. 32, 33.) As such, Primeritus believed
13 that compensating the Skip Tracers at a daily flat rate of $64 per eight hour work day (or its
14 equivalent, such as $48 for a six-hour shift) would sufficiently compensate the Skip Tracers for rest
15 breaks at or above the Average Rate of Pay while still leaving more than enough to pay for any non-
16 productive meetings or trainings they may encounter in any given day. Tellingly, the Ward Report
17 confirms that these estimates were indeed reasonable. The instances of the $8.00 for each hour
18 worked being insufficient under 226.2 were a fraction of one percent. (Defendant's SSUF Nos. 24-
19 33.) Accordingly, Primeritus has not failed to compensate Skip Tracers for rest breaks and
20 nonproductive time because the Pay Plan complies with all requirements set forth in Section 226.2.
21 C. Primeritus Compensated Plaintifl' and the Class At Least Minimum Wage For
All Time Worked - It Did Not "Borrow" or "Average" Wages to Meet Minimum
22 Wage
23 Plaintiff ignores pertinent and recent Supreme Court authority and wrongly accuses
24 Primeritus of "assert[ing] that it can average pay over the balance of other hours worked." (Ptlf's
25 Opp. at 8:7-8.) Besides Plaintiffs belief that he was an hourly worker, he also incorrectly perceives
26 that Primeritus "borrows" piece rate pay to make up for its "$8 for each hour worked base pay." Or,
27 altematively, that Primeritus adds the $8 rate and the piece rate together and averages them over all
28 hours worked to meet minimum wage obligations. Primeritus does neither of these things. Rather,
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1 Primeritus' paid Skip Tracers on a piece-rate basis, but separately paid for rest breaks and non-
2 productive time, in accordance with Califomia law. And the law instmcts Primeritus to "divide the
3 total compensation by the total hours worked for the workweek" to determine the "average hourly
4 rate" for rest breaks, and to reasonably estimate the amount of non-productive time worked and then
5 ensure that time is paid at an amount no less than minimum wage. Thus, as directed by Section
6 226.2, Primeritus is separately paying for rest breaks and nonproductive time. In many instances,
7 even after these payments are made, the pay set aside to cover rest breaks and nonproductive time
8 results in a surplus, which is sometime used about 20% of the time to ensure that the piece rate
9 payments are sufficient to compensate employees at least the minimum wage. But those amounts
10 are not borrowed from any amount intended to compensate employees for any other work. Thus,
11 they are not borrowing as defined by Armenia or Cardenas.
12 The Supreme Court's June 2020 decision in Oman discusses the critical differences between
13 "averaging" and "borrowing." {Oman, supra, 466 P.3d 325.) As Oman notes, "[i]f a contract or
14 bargaining agreement expressly guarantees compensation for one set of tasks or one specific period,
15 that compensation may iiot be reduced to supplement pay for other tasks or periods within the
16 purview of the contract or bargaining agreement, but otherwise undercompensated by them." {Oman,
17 466 P.3d at 337.) In practical terms, this means that an employer who contracts to pay $18 per hour
18 for two hours of work, but who then demands a third hour of unpaid work, carmot argue that it
19 complied with a $12 hourly minimum wage...because it has paid $36 over three hours." {Id. at 335.)
20 Under this interpretation, the employer must pay the contracted for $18 for two hours of work, and
21 then "for the third uncontracted-for hours for which no compensation was promised, it must pay no
22 less than the applicable minimum wage." {Id.) The key distinction here is that Primeritus' Pay Plan
23 is govemed by Section 226.2. Primeritus has contractually committed to its Skip Tracers to
24 guarantee a piece-rate for completing the task of locating vehicles for repossession. Primeritus does
25 not include this pay in any task that does not work toward eaming a point {e.g., meetings). This is
26 because Primeritus has not guaranteed to pay Skip Tracers anything more than the average hourly
27 rate for rest periods or the minimum wage for nonproductive time. It has merely set aside a
28 sufficient amount to cover what is required to meet Section 226.2's statutory mandate. If the balance
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1 of the base pay is used to ensiu-e that Skip Tracer's are compensated at or above the minimum wage
2 for all hours worked, this does not constitute borrowing as described by the Supreme Court because
3 that amount is not otherwise promised to Skip Tracer's for any other task. Accordingly, Primeritus
4 complies with the law with respect to its piece-rate pay plan because it provides at least the
5 minimum wage without "borrowing" any piece-rate pay to compensate for non-piece rate eaming
6 tasks, as set forth in Oman.
7 1. The Minimal Number of Instances Where Incentive Pay Fell Below
Minimum Wage Do Not Support Adjudication on a Class Wide Basis
8
Plaintiff asserts in a footnote at the conclusion of his brief, that this Motion cannot be granted
9
because of the possibility that a minutiae of wages may be owed to Skip Tracers as determined by
10
the Ward Report. On the contrary, as set forth in Oman, if a piece rate employee fails to produce
II
enough pieces to equate to the minimum wage {i.e., the contracted-for amount), the employer must
12
make up the difference to ensure that employees are paid at least the minimum wage for all time
13
worked. Generally, the Skip Tracer's incentive pay alone is sufficient to cover the minimum wage.
14
(Defendant's COE, Exhibit 2, Ward Deck, ^ 30, Appendix C, Table 3.) Where though, the incentive
15
pay alone is insufficient (in only 1.16% of all workweeks), the amount below the minimum wage
16
was a matter of pennies. {Id. at f 38, n.5.) Primeritus will provide back wages to each of those
17
employees plus interest at 10% per annum, rendering any Failure to Pay Minimum Wage claim
18
moot. Accordingly, the Primeritus Pay Plan should still be found compliant as a matter of law.
19
m. CONCLUSION
20
Primeritus respectfully requests that the Court grant its motion for summary adjudication and
21
enter judgment for the Defendant as set forth in its Notice.
22
23 Dated: September 4, 2020
24
KEITH A. JACOBY
25 BRADLEY E. SCHWAN
NATHANIEL H. JENKINS
26 LITTLER MENDELSON, P.C.
Attomeys for Defendant
27 PRIMERITUS FINANCIAL SERVICES, INC.
28 4820-2126-.W6.2 087308.1007
LITTLER MENDELSON. P C. 10.
2040 Cenlury P«ik Ei4l
O i l . FIOOI
Lot Aooftl.t. CA 00007.3107 DEFENDANT PRIMERITUS FINANCIAL SERVICES, INC.'S REPLY BRIEF FN SUPPORT OF
310.003 0301
MOTION FOR SUMMARY ADJUDICATION
Preview
1 KEITH A. JACOBY, Bar No. 150233 FILED kiacobv(5)littler.com 2 BRADLEY E. SCHWAN, Bar No. 246457 bschwan(g),littler.com Superior Court Of CaSlforlnia, 3 LITTLER MENDELSON, P.C. 2049 Century Park East OS/04/2020 4 5th Floor Los Angeles, CA 90067.3107 5 Telephone: 310.553.0308 Casu Mumbur: Fax No.: 310.553.5583 6 34=2018-0024727 NATHANIEL H. JENKINS, Bar No. 312067 7 nienkins(g),littler.com LITTLER MENDELSON, P.C. 8 500 Capitol Mall Suite 2000 9 Sacramento, CA 95814 Telephone: 916.830.7200 10 Fax No.: 916.561.0828 X 11 Attomeys for Defendant 12 PRIMERITUS FINANCIAL SERVICES, INC. 13 SUPERIOR COURT OF CALIFORNL\ 14 COUNTY OF SACRAMENTO 15 JOHN BOUDREAU, an individual, on CaseNo. 34-2018-00247272 16 behalf of himself and all others similarly situated. Assigned to Department 41, Hon. David De Alba 17 Plaintiff, DEFENDANT PRIMERITUS FINANCIAL 18 SERVICES, INC.'S REPLY BRIEF IN V. SUPPORT OF MOTION FOR SUMMARY 19 ADJUDICATION PRIMERITUS FINANCIAL SERVICES, 20 INC., A Delaware corporation; CHRIS Date: September 24, 2020 McGINNESS, an individual; and DOES 1 Time: 9:00 a.m. 21 through 10, inclusive. Dept.: 54 Judge: Christopher E. Krueger 22 Defendants. Reservation No. 2519118 23 Complaint filed: December 27, 2018 First Amended Complaint filed: April 12, 2019 24 25 26 27 28 LITTLER MENDELSON. P.C. 204e Centufy Psik E K I btl> FtMr Lo. AnselK CA 90067.310? DEFENDANT PRIMERITUS FINANCIAL SERVICES, INC.'S REPLY BRIEF IN SLIPPORT OF 310.SSJ 030B MOTKDN FOR SUMMARY ADJUDICATION 1 I. INTRODUCTION 2 At the heart of this case is whether Califomia law permits employers to pay employees for 3 productivity, or if piece rate systems that reward employees for efficiency (but still compensate at 4 least the minimum wage) are effectively banned by the implementation of Labor Code section 226.2. 5 Section 226.2 should not be interpreted to tmdermine the ability of employees and employers to 6 agree on a system to pay employees a premium for efficiency and success. Skip Tracers are highly- 7 paid employees who, on average, eam more than double the minimum wage, while several earn over 8 six figures per year. And Primeritus' Pay Plan compensates them for all hours worked in accordance 9 with Califomia law. Plaintiffs oversimplified analysis in his Opposition to Primeritus' Motion for 10 Summary Adjudication leads again and again to the incorrect legal result. Plaintiff argues the eight 11 dollar per hour payment is below the minimum wage, so the plan must be illegal. This is simplistic 12 and false. Labor Code 226.2 expressly specifies that piece rate employees must be paid certain rates 13 for rest periods (the average hourly rate) and nonproductive time (minimum wage) while otherwise 14 ensuring that employees are paid at least the minimiun wage for all time worked. Primeritus' Pay 15 Plan does that, and Plaintiff does not dispute those underlying facts - he only mischaracterizes them. 16 Section 226.2 further permits employers to pay a reasonable estimate of non-productive time, and 17 nowhere in his Opposition does Plaintiff even attempt to contend that enough nonproductive time 18 was ever worked by a class member in an 8-hour day or 40 hour week to render the eight dollar per 19 hour allocation to non-productive time insufficient to cover the minimum wage. 20 As set forth in Defendant's moving papers, and in more detail below, the Primeritus Pay Plan 21 strictly complied with the four requirements in Section 226.2. Accordingly, Primeritus' Pay Plan is 22 lawful and Plaintiffs claim for unpaid wages and derivative claim for rest period premiums fail. 23 Consequently, Plaintiffs hyper-technical attack on this Pay Plan should be rejected and the Court 24 should grant summary adjudication in favor of Primeritus. 25 II. ARGUMENT 26 A. PlaintifTs Opposition Ignores the History Of, and Requirements For, Piece-Rate Pay Plans in California 27 The Califomia Labor Commissioner defines "Piece Rate" as "work paid for according to the 28 LITTLER MENDELSON. P.C. 1. 1040 C.nlur, Paik Eait frtti Fivor LBl Alis«E.a CA 00067.3107 DEFENDANT PRIMERITUS FINANCIAL SERVICES, INC.'S REPLY BRIEF IN SUPPORT OF 310 063 030B MOTION FOR SUMMARY ADJUDICATION 1 number of units tumed out." (Division of Labor Standards Enforcement ("DLSE") Enforcement 2 Policies and Interpretations Manual § 2.5.1) The Labor Commissioner notes that "a piece rate must 3 be based upon an ascertainable figure paid for completing a particular task or making a particular 4 piece of goods" and provides the following examples demonstrating just how diverse piece-rate 5 plans can be: (1) automobile mechanics paid on a "book rate" (i.e., brake job); (2) nurses paid on the 6 basis of the nimiber of procedures performed; (3) carpet layer paid by the yard of carpet laid; (4) 7 technician paid by the number of telephones installed; (5) factory worker paid by the widget 8 completed; or (6) a carpenter paid by the linear foot on aframingjob, etc. (5ee id. at 2.5.2.) The idea 9 is that the worker is in control of her own wages, and can increase her compensation by working 10 more quickly or more efficiency. For years, employers used piece-rate pay plans in Califomia to pay 11 employees for their production, rather than merely hours worked - indeed. Labor Code section 12 200(a) explicitly includes "piece" compensation in its definition of "wages." 13 Despite confusion regarding the treatment of piece-rate plans in Califomia over the last 15 14 years, the California Supreme Court just two months ago reminded us that piece-rate pay plans are 15 still valid forms of compensation in California. {See Oman, et al, v. Delta Air Lines, Inc., (Jun. 20, 16 2020) 9 Cal.Sth 762, 466 P.3d 325, 366 ["state law expressly authorizes employers to calculate 17 compensation by the task or piece, by the sale, or by another convenient standard"]; citing Lab. 18 Code, § 200(a) [compensation may be "fixed or ascertained by the standard of time, task, piece, 19 commission basis, or other method of calculation"]; and Wage Order No. 9,§ 4(B) [same] (emphasis 20 added).)' In that case, the Supreme Court endorsed creative pay plans that reward employees for 21 hard work and efficiency so long as they otherwise comply with the law. {Id. at 341.) The Primeritus 22 Pay Plan complies with Califomia law. 23 Nine years ago, the Central District of Califomia was the first court to revisit a piece-rate 24 compensation plan after the 2005 California Appellate Decision in Armenia v. Osmose, Inc., which 25 had held that employers could not average an hourly worker's weekly wages to meet minimum wage 26 requirements. ((2005) 135 Cal.App.4th 314, 317.) In Cardenas v. McLane Food Services, Inc., the 27 ' A copy of Oman is attached as Exhibit 1 to Defendant's Request for Judicial Notice ("R.TN") filed concurrently with its 28 Opposition to Plaintiffs Motion for Summary Adjudicati^ on August 14, 2020, and available at Docket No. 88. LITTLER MENDELSON. P C. 2040 C.nlufir P«tk E B . I 6lh Floof Lo. A n s . l . * . CA 00007.3107 DEFENDANT PRIMERITUS FINANCIAL SERVICES, INC.'S REPLY BRIEF IN SUPPORT OF 310 003 0300 MOTION FOR SUMMARY ADJUDICATION 1 Central District held that "a piece-rate formula that does not compensate directly for all time worked 2 does not comply with the Califomia Labor Code, even if, averaged out, it would pay at least 3 minimum wage for all hours worked." {Cardenas, (CD. Cal. 2011) 796 F.Supp.2d 1246, 1252.) The 4 Califomia Court of Appeal for the Second District then followed the Central District's decision in 5 Gonzalez v. Downtown LA Motors, LP ((2013) 215 Cal.App.4tli 36), in which it held that piece-rate 6 workers are entitled to separate compensation of at least the minimum wage for "non-productive" 7 time. {See Gonzalez, 215 Cal.App.4th at 40-41.) Two months after Gonzalez, Califomia's Third 8 District Court of Appeal injected even more confusion into the law by holding that rest periods must 9 be compensated separately from any piece-rate compensation, but it did not explain how such rest 10 periods should be separately compensated. {See Bluford v. Safeway Stores, Inc. (2013) 216 11 Cal.App.4th 864.) 12 Given the resoimding confiision bestowed upon employers of piece-rate workers in 13 Califomia as a result of Armenia, Cardenas, Gonzalez, and Bluford, the Califomia Legislature took 14 it upon itself to clarify the requirements for piece-rate plans through Assembly Bill 1513, which 15 enacted Labor Code section 226.2, effective January 1, 2016. Section 226.2 has four kev provisions 16 now applicable to piece rate plans: First, diat employers compensate employees for rest breaks and 17 other nonproductive time separate from piece rate compensation. Second, that pay for rest breaks be 18 paid at no less than the employee's "average hourly rate" each workweek. (Lab. Code § 226.2 19 (a)(3)(A).) Third, that pay for other nonproductive time - defined as "time under the employer's 20 control, exclusive of rest and recovery periods, that is not directly related to the activity being 21 compensated on a piece-rate basis" - must be at least the minunum wage. (Lab. Code § 226.2 22 (a)(4).) Fourth, a provision that authorizes employers to use reasonable estimates to determine the 23 amount of non-productive time worked in a given pay period. (Lab. Code § 226.2 (a)(5).) 24 However, nowhere - in any of the court cases leading up to AB 1513, in the text of AB 1513, 25 or in thefinalizedand codified text of Section 226.2 - does either a Court or the Legislature require 26 that employers pay piece-rate workers a base hourly rate of minimum wage for every hour worked 27 for both productive and non-productive time. In other words, the law does not require that a piece- 28 rate worker be any particular time-based rate fcM" time working toward the piece rate so long as the LITTLER MENDELSON. P.C. ?04e Canlurr Part Ea*l 6lh Floor Lot AngeFac. CA 900fi7.3t0f DEFENDANT PRIMERITUS FINANCIAL SERVICES, INC.'S REPLY BRIEF IN SLTPPORT OF 3I0.S&1 0301 MOTION FOR SUMMARY ADJUDICATION I employee is paid at least the minimum wage for all time worked for piece rate work. Yet, in reading 2 Plaintiffs opposition - he is arguing just that. 3 Indeed, it seems Plaintiff contends that Primeritus utilized two different pay plans at the same 4 time; one piece-rate, and one hourly. Under his theory. Plaintiff does not have a problem with the 5 piece-rate plan, but instead his hourly pay plan. For example. Plaintiff makes the argument that if he 6 were to attend a one-hoiu- meeting, he did not receive at least the minimum wage because he only 7 received $8.00 for that hour. {See PItf s Opp. at 8:5-6.) But this is not the case. Plaintiff was not an 8 hourly employee, he was a piece-rate employee, and Primeritus compensated Plaintiff using only 9 one pay plan - a piece-rate pay plan which set aside enough base pay such that Plaintiff s 10 nonproductive time meeting would be compensated at no less than minimimi wage. As set forth in II Defendant's moving papers, and in fiirther detail below, Primeritus' piece-rate pay plan complies 12 with the requirements set forth in Section 226.2. 13 B. Primeritus' Piece-Rate Pay Plan Complies with Section 226.2 14 1. Primeritus Separately Compensated Skip Tracers for Rest Periods and Non-Productive Time. 15 Section 226.2 requires that, for piece-rate pay plans, an employer must separately 16 compensate employees for rest periods and "nonproductive time" (which the statute defines as time 17 "that is not directly related to the activity being compensated on a piece rate basis"). Primeritus' Pay 18 Plan does just that by separately paying employees a separate component of pay intended to cover 19 pay for rest breaks and nonproductive time. In fact. Plaintiff admits in his Opposition that he 20 received separate pay for rest periods and non-productive time. {See PItf's Opp. at 2:20-21; 6:14; 21 I 22 7:10.) However, Plaintiff attempts to sweep this under the mg by accusing Defendant of 23 "contradict[ing] with the stipulated fact" by "now asserting that Plaintiff was paid a daily rate of 24 $64.00" as opposed to $8.00 for each hour worked. {See PItf's Opp. at 6:16-20.) This argument is 25 absurd, and can be resolved with simple math. First, Defendant never agreed that Plaintiff was an 26 hourly employee; instead. Defendant maintains (and so stipulated with Plaintiff) that "[e]ach class 27 member was promised that he/she would receive $8.00 for each hoiu" worked." (Defendant's COE, 28 Exhibit 1, Jenkins Deck, Exliibit U at p. 6, ^ 9.) And second, if a class member works a typical eight- LITTLER MENDELSON. P.C. 2040 Century Park Esal 4. &in Floor Lot Angvias CA gOOBr.llOr DEFENDANT PRIMERITUS FINANCIAL SERVICES, INC.'S REPLY BRIEF IN SUPPORT OF 310 SS3 030B MOTION FOR SUMMARY ADJUDICATION 1 hour workday, doing the simple mathematical equation of eight times eight reveals that the class 2 member receives a daily' rate of $64.00 (in addition to their piece-rate pay). Indeed, Primeritus 3 expected all Skip Tracers to work an eight-hour workday, Monday through Friday; but, if for 4 whatever reason a Skip Tracer needed to leave early or start late, and only worked, for example, a 5 six-hour shift, the Skip Tracer received base pay for that day in the amount of $48.00. Regardless of 6 whether the Skip Tracer worked eight hours, six hoiu-s, or only two hours in one day, the Skip Tracer 7 reported to work to actively locate vehicles for repossession and eam a piece-rate pay. The $8.00 for 8 each hour worked was not an hourly pay plan, rather it was the separate component to the piece-rate 9 pay meant to compensate Skip Tracers for rest periods and any non-productive time worked.^ Again, 10 nowhere in Section 226.2 does it require that an employer pay a piece-rate worker an hourly rate of II minimum wage for productive time in addition to piece-rate pay. Accordingly, by separately paying 12 Skip Tracers $8.00 for each hour worked to compensate Skip Tracers for rest periods and any non- 13 productive time worked, Primeritus has complied with tlie principle requirement of Section 226.2. 14 2. Primeritus Separately Compensated Skip Tracers for Rest Breaks At Their Average Hourly Rate 15 Here too, "Plaintiff does not dispute that Primeritus separately compensated the class for rest 16 breaks." (Pltf's Opp. at 6:14.) Rather, Plaintiff contends that this separate compensation violates 17 Section 226.2 because "$8.00 per hour" is less than minimum wage. {Id. at 6:15) Once again. 18 Plaintiff argues that he was paid on an hourly basis instead of on a piece-rate basis. To support this 19 misconception. Plaintiff boldly contends that Defendant is wrong in "asserting that this [] daily rate 20 can be averaged across multiple hours to arrive at amounts above the minimum wage" to 21 compensate for rest periods. {Id. at 6:21-22.) Yet here. Plaintiff blatantly ignores the explicit 22 requirements in Section 226.2, which aptly provide that, "[ejmployees shall be compensated for rest 23 and recovery periods at a regularly hourly rate that is no less than the higher of (i) [a]n average 24 hourly rate determined by dividing the total compensation for the workweek...by the total 25 hours worked during [the workweek...[or] (ii) [t]he applicable minimum wage." (Lab. Code § 26 27 ^ Using the example of a Skip Tracer working less lhan an eight-hour shifl in one day, such as only six hours, the Skip Tracer would have been only entitled to one rest break, rather than the two he would have been entitled to on an eight- 28 hour shift, leaving additional, separate compensation to co^'er any non-productive time worked. LITTLER MENDELSON. P.C. 204E Csnltiiy P«ik E«*i 0th Flooi Lot AnOBl.O. CA 0OOO7 3107 DEFENDANT PRIMERITUS FINANCIAL SERVICES, INC.'S REPLY BRIEF IN SUPPORT OF 310 003 0300 MOTION FOR SUMMARY ADJUDICATION 1 226.2(a)(3)(A).) Indeed, the Legislature has expressly instmcted Primeritus to "average" Plaintiffs 2 total pay and divide by the total hours worked during the workweek in order to properly compensate 3 for rest breaks. Moreover, given the high value of the piece-rate pay, the Skip Tracers' will almost 4 certainly, always be owed the "average hourly rate" instead of the minimum wage rate for rest 5 breaks, as the "average hourly rate" will be higher than the current minimum wage rate, and thus the 6 correct amount owed for rest breaks pursuant to Section 226.2. Consequently, Primeritus could not 7 even begin to calculate the appropriate pay for each rest break until the end of the workweek, when 8 Primeritus would be able to include the piece-rate pay eamed during that same week to determine 9 the "average hourly rate." 10 Even assuming, arguendo, that the Skip Tracers were paid hourly at $12.00 per hour (the 11 ciurent hourly minimiun, wage rate) on top of their piece-rate pay, applying Plaintiff s theory, this 12 would still be a violation of 226.2 because Plaintiff would be owed compensation for his rest periods 13 at his "average hourly rate," and not just ten minutes of time at a rate of $12.00 per hour. In other 14 words, it does not matter what the base pay is for each hour worked, Primeritus needs to ensure that 15 Plaintiff receives his "average hourly rate" for rest periods each workweek to satisfy Section 226.2 - 16 which is exactly what Primeritus did here. Primeritus' compliance with 226.2 is home out by the 17 Skip Tracers' actual time and pay data. Primeritus' expert. Dr. Ward, analyzed the Skip Tracers' 18 time and payroll data to confirm that the $64 per day (or equivalent, such as $48 for a six-hour shift) 19 payments were sufficient to pay Skip Tracers their Average Hourly Rate (all amounts paid divided 20 by all hours worked) for all rest breaks owed for each workday. Dr. Ward's analysis confirms that 21 the Skip Tracers' base pay during the Class Period was sufficient to pay Class Members for all rest ! 22 breaks at their Average Hoiu-ly Rate in 99.99% of workweeks - 14,159 out of 14,160. (Defendant's 23 COE, Exhibit 2, Ward Report, Table 3.) Therefore, Primeritus properly compensated Skip Tracers 24 for rest and recovery periods in accordance with Section 226.2. 25 3. Primeritus Compensated the Skip Tracers' Non-Productive Time At or Above the Minimum Wage 26 Here again, "Plaiintiff does not dispute that Primeritus separately compensated the class for 27 non-productive time." (Pltf's Opp. at 7:10.) Rather, Plaintiff argues that he was an hourly employee, 28 LITTLER MENDELSON. P.C. 6. I M i Contury P«ik Esai btn Floor Lo* Antalaa. CA 900S7.310I DEFENDANT PRIMERITUS FINANCIAL SERVICES, INC.'S REPLY BRIEF IN SUPPORT OF 310 S&J 0301 MOTION FOR SUMMARY ADJUDICATION 1 and that $8.00 is not $12.00 (the current hourly minimum wage requirement). But Plaintiff again 2 ignores the base payment Primeritus paid to Skip Tracers—separate from his piece rate pay— 3 specifically intended to compensate them for rest periods and nonproductive time - a fact which 4 Plaintiff has offered no evidence to contradict. Specifically, Section 226.2 requires that piece-rate 5 workers be guaranteed a rate of at least minimiun wage for any non-productive time. {See Lab. Code 6 § 226.2(a)(4).) Under the Primeritus Pay Plan, as the Ward Report demonstrates, after compensating 7 Skip Tracers at the average rate of pay for rest breaks, except in rare cases (typically during 8 workweeks with irregular hours), there is still more than sufficient compensation to cover other 9 nonproductive time at the minimum wage. (Defendant's SSUF Nos. 29, 30, 31.) Thus, the 10 Primeritus Pay Plan separately compensates Skip Tracers for non-productive time at or above the 11 minimiun wage in accordance with Section 226.2. 12 4. Section 226.2 Expressly Authorizes Primeritus to Reasonably Estimate the Amount of Non-Productive Time and the Data Analysis Supports 13 That Estimate 14 Plaintiff attempts to distract the Court from requirements of Section 226.2 by arguing that, 15 "Plaintiff does not understand the basis for asserting this as an issue for summary adjudication of a 16 legal issue." (Phf's Opp. at 7:16-17.) On the contrary, this is precisely at issue to determine whether 17 the Primeritus Pay Plan is legal. Piece-rate pay plans are govemed by Section 226.2, which clearly 18 provides that, "the amount of nonproductive time may be determined either through actual records 19 or the employer's reasonable estimates, whether for a group of employees or for a particular 20 employee, of other nonproductive time worked during the pay period." (Lab. Code § 21 226.2(a)(5) (emphasis added).) So naturally, this section is relevant to determine whether Primeritus 22 complied with the applicable piece-rate pay plan requirements in Califomia. Here, the Legislature 23 intentionally added this particular subsection to 226.2, which means it must have understood that 24 tme piece-rate workers are meant to be actively working toward eaming a piece (i.e., productive 25 time) during the majority of their workday. However, as pointed out in cases like Gonzalez, there are 26 occasional activities, such as meetings or trainings, that take a piece-rate worker away from being 27 able to earn a piece, in which case, he or she is owed a rate of at least minimum wage for that time. 28 Just like there is no requirement to pay an hourly minimum wage rate for productive time in Section LITTLER MENDELSON, P.C. ?04fi Canlury Park Eaat &ti> Floor Loi Aitsel» CA 800£7.310r DEFENDANT PRIMERITUS FINANCIAL SERVICES, INC.'S REPLY BRIEF IN SUPPORT OF 310 i & i 03DB MOTION FOR SUMMARY ADJUDICATION 1 226.2, there is no requirement to pay an hourly rate for non-productive time {i.e., the worker need 2 not separately clock in and out for a nonproductive time meeting at $12.00 per hour"). Instead, the 3 Legislature permits employers to reasonably estimate the amount of non-productive time worked, 4 and then to pay for that time at a rate equivalent to the hourly minimum wage rate. That is 5 particularly appropriate here where the evidence from other Skip Tracers shows an average of 1.33 6 hours of nonproductive time per week (even Plaintiff s self-serving estimate was minimal). So long 7 as that reasonable amount of non-productive time is compensated by at least at minimum wage, the 8 employer has complied with Section 226.2. 9 Here, taking into account the very little time that Skip Tracers are not actively locating 10 collateral, such as monthly meetings lasting up to one hour, Primeritus reasonably estimated that 11 Skip Tracers could work up to two to three non-productive hours in any given workday, but never 12 more barring unusual circumstances. (Defendant's SSUF Nos. 32, 33.) As such, Primeritus believed 13 that compensating the Skip Tracers at a daily flat rate of $64 per eight hour work day (or its 14 equivalent, such as $48 for a six-hour shift) would sufficiently compensate the Skip Tracers for rest 15 breaks at or above the Average Rate of Pay while still leaving more than enough to pay for any non- 16 productive meetings or trainings they may encounter in any given day. Tellingly, the Ward Report 17 confirms that these estimates were indeed reasonable. The instances of the $8.00 for each hour 18 worked being insufficient under 226.2 were a fraction of one percent. (Defendant's SSUF Nos. 24- 19 33.) Accordingly, Primeritus has not failed to compensate Skip Tracers for rest breaks and 20 nonproductive time because the Pay Plan complies with all requirements set forth in Section 226.2. 21 C. Primeritus Compensated Plaintifl' and the Class At Least Minimum Wage For All Time Worked - It Did Not "Borrow" or "Average" Wages to Meet Minimum 22 Wage 23 Plaintiff ignores pertinent and recent Supreme Court authority and wrongly accuses 24 Primeritus of "assert[ing] that it can average pay over the balance of other hours worked." (Ptlf's 25 Opp. at 8:7-8.) Besides Plaintiffs belief that he was an hourly worker, he also incorrectly perceives 26 that Primeritus "borrows" piece rate pay to make up for its "$8 for each hour worked base pay." Or, 27 altematively, that Primeritus adds the $8 rate and the piece rate together and averages them over all 28 hours worked to meet minimum wage obligations. Primeritus does neither of these things. Rather, LITTLER MENDELSON. P.C. Canluty Park Eaal 8. bth Fiooi Loa Ans«l«t, CA 90037.310? 3to S t i OSDB DEFENDANT PRIMERITUS FINANCIAL SERVICES, INC.'S REPLY BRIEF IN SUPPORT OF MOTION FOR SUMMARY ADJUDICATION 1 Primeritus' paid Skip Tracers on a piece-rate basis, but separately paid for rest breaks and non- 2 productive time, in accordance with Califomia law. And the law instmcts Primeritus to "divide the 3 total compensation by the total hours worked for the workweek" to determine the "average hourly 4 rate" for rest breaks, and to reasonably estimate the amount of non-productive time worked and then 5 ensure that time is paid at an amount no less than minimum wage. Thus, as directed by Section 6 226.2, Primeritus is separately paying for rest breaks and nonproductive time. In many instances, 7 even after these payments are made, the pay set aside to cover rest breaks and nonproductive time 8 results in a surplus, which is sometime used about 20% of the time to ensure that the piece rate 9 payments are sufficient to compensate employees at least the minimum wage. But those amounts 10 are not borrowed from any amount intended to compensate employees for any other work. Thus, 11 they are not borrowing as defined by Armenia or Cardenas. 12 The Supreme Court's June 2020 decision in Oman discusses the critical differences between 13 "averaging" and "borrowing." {Oman, supra, 466 P.3d 325.) As Oman notes, "[i]f a contract or 14 bargaining agreement expressly guarantees compensation for one set of tasks or one specific period, 15 that compensation may iiot be reduced to supplement pay for other tasks or periods within the 16 purview of the contract or bargaining agreement, but otherwise undercompensated by them." {Oman, 17 466 P.3d at 337.) In practical terms, this means that an employer who contracts to pay $18 per hour 18 for two hours of work, but who then demands a third hour of unpaid work, carmot argue that it 19 complied with a $12 hourly minimum wage...because it has paid $36 over three hours." {Id. at 335.) 20 Under this interpretation, the employer must pay the contracted for $18 for two hours of work, and 21 then "for the third uncontracted-for hours for which no compensation was promised, it must pay no 22 less than the applicable minimum wage." {Id.) The key distinction here is that Primeritus' Pay Plan 23 is govemed by Section 226.2. Primeritus has contractually committed to its Skip Tracers to 24 guarantee a piece-rate for completing the task of locating vehicles for repossession. Primeritus does 25 not include this pay in any task that does not work toward eaming a point {e.g., meetings). This is 26 because Primeritus has not guaranteed to pay Skip Tracers anything more than the average hourly 27 rate for rest periods or the minimum wage for nonproductive time. It has merely set aside a 28 sufficient amount to cover what is required to meet Section 226.2's statutory mandate. If the balance LITTLER MENDELSON. P.C. I04E Canlury Paik Eaal Sin Floor Lot Anotiae. CA 90067.3107 DEFENDANT PRIMERITUS FINANCIAL SERVICES, INC.'S REPLY BRIEF IN SUPPORT OF 310 SS3.03CB MOTION FOR SUMMARY ADJUDICATION 1 of the base pay is used to ensiu-e that Skip Tracer's are compensated at or above the minimum wage 2 for all hours worked, this does not constitute borrowing as described by the Supreme Court because 3 that amount is not otherwise promised to Skip Tracer's for any other task. Accordingly, Primeritus 4 complies with the law with respect to its piece-rate pay plan because it provides at least the 5 minimum wage without "borrowing" any piece-rate pay to compensate for non-piece rate eaming 6 tasks, as set forth in Oman. 7 1. The Minimal Number of Instances Where Incentive Pay Fell Below Minimum Wage Do Not Support Adjudication on a Class Wide Basis 8 Plaintiff asserts in a footnote at the conclusion of his brief, that this Motion cannot be granted 9 because of the possibility that a minutiae of wages may be owed to Skip Tracers as determined by 10 the Ward Report. On the contrary, as set forth in Oman, if a piece rate employee fails to produce II enough pieces to equate to the minimum wage {i.e., the contracted-for amount), the employer must 12 make up the difference to ensure that employees are paid at least the minimum wage for all time 13 worked. Generally, the Skip Tracer's incentive pay alone is sufficient to cover the minimum wage. 14 (Defendant's COE, Exhibit 2, Ward Deck, ^ 30, Appendix C, Table 3.) Where though, the incentive 15 pay alone is insufficient (in only 1.16% of all workweeks), the amount below the minimum wage 16 was a matter of pennies. {Id. at f 38, n.5.) Primeritus will provide back wages to each of those 17 employees plus interest at 10% per annum, rendering any Failure to Pay Minimum Wage claim 18 moot. Accordingly, the Primeritus Pay Plan should still be found compliant as a matter of law. 19 m. CONCLUSION 20 Primeritus respectfully requests that the Court grant its motion for summary adjudication and 21 enter judgment for the Defendant as set forth in its Notice. 22 23 Dated: September 4, 2020 24 KEITH A. JACOBY 25 BRADLEY E. SCHWAN NATHANIEL H. JENKINS 26 LITTLER MENDELSON, P.C. Attomeys for Defendant 27 PRIMERITUS FINANCIAL SERVICES, INC. 28 4820-2126-.W6.2 087308.1007 LITTLER MENDELSON. P C. 10. 2040 Cenlury P«ik Ei4l O i l . FIOOI Lot Aooftl.t. CA 00007.3107 DEFENDANT PRIMERITUS FINANCIAL SERVICES, INC.'S REPLY BRIEF FN SUPPORT OF 310.003 0301 MOTION FOR SUMMARY ADJUDICATION