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1 TIMOTHY J. LONG (STATE BAR NO. 137591)
tj long@orrick.com
2 ORRICK, HERRINGTON & SUTCLIFFE LLP 2C!CFE8-5 PH |: 38
400 Capitol Mall, Suite 3000
3 Sacramento, CA 95814-4497 tOUNryOr SACRA«£NHTQ
Telephone: +1 916 447 9200
4 Facsimile: +1 916 329 4900
5 STEPHANIE GAIL LEE (STATE BAR NO. 285379)
stephanie.lee@orrick.com
6 ORRICK, HERRINGTON & SUTCLIFFE LLP
777 South Figueroa Street, Suite 3200
7 Los Angeles, CA 90017-5855
Telephone: +1-213-629-2020
8 Facsimile: +1-213-612-2499
9 Attorneys for Defendant
HEALTH NET OF CALIFORNIA. INC.
10
11 SUPERIOR COURT OF THE STATE OF CALIFORNIA
12 COUNTY OF SACRAMENTO
13
ANDREA SPEARS, an individual, on behalf Consolidated Case No. 34-2017-00210560-
14 of herself and on behalf of all persons similarly CU-OE-GDS
situated,
15 ^ Plaintiff, MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF
16 DEFENDANT HEALTH NET OF
CALIFORNIA, INCJ'S MOTION FOR
17 HEALTH NET OF CALIFORNIA, INC., a SUMMARY ADJUDICATION
California Corporation; and Does 1 through 50,
18 inclusive, Date: April 26, 2018
Time: 9:00 a.m.
19 Defendants. Dept.: 54 I
Reservation No. 2313007
20
Complaint Filed: April 5,2017
21 FAC Filed: June 29, 2017
Consolidated Complaint Filed: Dec. 21, 2017
22
CO TOMAS R. ARANA, on behalf of himself, all Complaint Filed: August 1,2017
23 others similarly situated,
< Plaintiff,
24
o 25
26
V.
HEALTH NET OF CALIFORNIA, INC., a
DC California corporation; and DOES 1-50,
inclusive.
27
O
28 Defendant.
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
1 TABLE OF CONTENTS
2 Page
3 L INTRODUCTION '. 1
4 IL STATEMENT OF UNDISPUTED MATERL\L FACTS 2
A. The Parties 2
5
B. The Cafeteria Benefits Plan 2
6 C. Bonus Payments 4
7 1. SPOT Bonuses.. 4
2. The ACA Incentive Plan 5
8 D. Shift Differential Pay.; 5
9 E. Timekeeping Practice 6
10 m. PLAINTIFFS'ALLEGATIONS 6
A. Plaintiffs' Regular Rate Allegations 6
II B. Plaintiffs' Rounding Allegations 6
12 IV. SUMMARY ADJUDICATION IS WARRANTED 6
A. Plaintiffs' Overtime Claim And Derivative PAGA Claim Premised On
13
Their Regular Rate Allegations Fail As A Matter Of Law 6
14 1. California Courts Look To Federal Law When Determining The
"Regular Rate" Of Pay For Purposes Of Overtime Calculations 6
15 2. Cash Benefits Received By Plaintiff Spears As A Result Of Her
Waiver Of Medical Coverage Were Properly Excluded From Her
Regular Rate Under The Benefit-Plan Contribution Exception 7
17 a. Contributions Were Made Pursuant To The Plan And Were
Commimicated To HNCA Employees 8
18 b. The Primary Purpose Of The Plan Was To Provide Health
1g And Welfare Benefits To HNCA Employees 8
20
c. Benefits Were Specified Pursuant To The Plan 9
d. HNCA's Contributions Were Paid Irrevocably To Third
22 Party HNI Pursuant To A Fimded Arrangement 9
e. Cash Benefits Provided To Participants Under the Plan
22 Were Incidental And Paid During The Coiorse The
Participants' Employment As Specified In The Plan 9
23
3. HNCA Appropriately Allocated Bonus Payments In Determining
24 The Regular Rate 10
a. SPOT Awards Received By Plaintiff Arana Were Properly
25 Excluded From His Regular Rate Because They Were
Discretionary Bonuses 10
26 b. Bonuses Received By Plaintiff Arana Pursuant To The ACA
27 Incentive Plan Were Included In His Regular Rate 11
4. Shift Differential Premiums Received By Plaintiff Arana Were
28 Included In His Regular Rate.... 12
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1 TABLE OF CONTENTS
(continued)
2 Page
3 5. Because The Underlying Overtime Claim Fails, So Too Does
Plaintiffs PAGA Claim Based On Such Violation 12
4
B. Plaintiffs' Failure To Pay All Wages Claim And Derivative PAGA Claim
5 Premised On Their Rounding Allegations Fail As A Matter Of Law 13
1. HNCA Did Not Have A Practice Of Rounding And Paid Plaintiffs
6 Based On Their Exact In And Out Times 13
7 2. Because The Underlying Alleged Violation Did Not Occur,
Plaintiffs' PAGA Claim Based On Such Violation Also Fails 13
8 V. CONCLUSION 13
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
1 TABLE OF AUTHORITIES
2 Page(s)
3 Cases
4
Advanced-Tech Sec. Servs., Inc. v. Superior Court,
5 163 Cal. App. 4th 700 (2008) ; 7
6 Alonzo V. Maximus, Inc.,
832 F. Supp. 2d 1122 (CD. Cal. 2011) 11
7 Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court,
8 46 Cal. 4th 993 (2009) 12
9 Howard v. Octagon, Inc.,
2013 WL 5122191 (N.D. Cal. Sept. 13,2013) 12
10
11 Huntington Memorial Hosp. v. Superior Court,
131 Cal. App. 4th 893 (2005) '. 7
12
Kim V. Reins Int'l California, Inc.,
13 18 CaL App. 5th 1052 (2017) 12
Prachasaisoradej v. Ralphs Grocery Co., Inc.,
42 Cal. 4th 217 (2007) '. 7
15
|g Rubin'V. Wal-Mart Stores, Inc.,
599 F. Supp. 2d 1176 (N.D. Cal. 2009) 11
17
Thomas v. Home Depot USA Inc.
18 527 F. Supp. 2d 1003 (N.D. CaL 2007) 12
19 Statutes
20 29 C.F.R. §778.208. ; 11
21 29 C.F.R. § 778.211 11
22
29 C.F.R. § 778.215(a) 1,2,8
23
29 U.S.C. § 207(e) 6
24
29 U.S.C. § 207(e)(3) 10
25
29 U.S.C. § 207(e)(3)(a) : 11
26
29 U.S.C. § 207(e)(4) 1,7
27
Employee Retirement Income Security Act 2, 4
28
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
1 Fair Labor Standards Act .passim
2 Internal Revenue Code § 125 2
3 Lab. Code §510 6
4
Lab. Code § 2699(a) 12
5
Lab. Code § 2699(c) 12
6
Patient Protection and Affordable Care Act 5
7
Other Authorities
8
1991.03.06 DLSE Opinion Letter 11
9
Dep't of Labor Op. Letter, 2003 WL 23374600 (July 2, 2003) 9, 10
10
DLSE Manual §49.1.2 ..7
11
12 DLSE Manual § 35.7 11
13 DLSE Manual §49.1.2.4(3) 11
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
1 I. INTRODUCTION
2 Plaintiffs Andrea Spears and Tomas Arana claim that Defendant Health Net of California,
3 Inc. ("HNCA")' failed to properly calculate their regular rates of pay for purposes of computing
4 their overtime compensation. Specifically, Plaintiffs allege that HNCA did not properly account
5 for "cash" it provided to Plaintiff Spears for waiving medical coverage, bonuses awarded to
6 Plaintiff Arana and purportedly to Plaintiff Spears, and shift differential premiums Plaintiff Arana
7 earned. Plaintiffs further allege that HNCA failed to pay them for all hours worked by rounding
8 their start times to the next hour, resulting in systemic under-compensation. Plaintiffs' claims are
9 meritless.
10 First, the Fair Labor Standards Act (FLSA"), which California law follows, specifically
11 excludes from the regular rate the "cash" Plaintiff Spears received when she waived medical
12 coverage under what is known as the Benefit-Plan Contributions Exception. See 29 U.S.C. §
13 207(e)(4); 5eefl/jo 29 C.F.R. § 778.215(a).
14 As for Plaintiffs' bonus clairns. Plaintiff Spears did not receive a single bonus payment and
15 HNCA only excluded the discretionary bonus payments Plaintiff Arana received from his regular
16 rate. By contrast, when he earned nondiscretionary bonuses, HNCA included the payments in his
17 regular rate.
18 Further, Plaintiff Arana's assertion that shift differential premiums should have been
19 included in his regular rate is similarly untenable for the simple, undisputed fact that HNCA
20 included these premiums when calculating his regular rate. >
21 Finally, as to Plaintiffs' rounding claim. Plaintiffs are plain wrong. The undisputed facts
22 show that HNCA did not implement any rounding practice during the pertinent time period, much
23 less beginning January 1, 2017 as Plaintiffs allege.
24 For these reasons, and as explained further below, HNCA is entitled to summary
25 adjudication as to Plaintiffs' claim that it failed to properly calculate their regular rates of pay for
26 purposes of determining their overtime compensation, that it failed to pay them all wages by
)
27 improperly rounding their start times, and their derivative PAGA allegations based thereon.
28
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
1 IL STATEMENT OF UNDISPUTED MATERIAL FACTS
2 A. The Parties
3 HNCA, a subsidiary of Health Net, Inc. ("HNI"), operates as a health maintenance
4 organization ("HMO") in California and provides health insurance products such as commercial
5 HMO plans and healthcare service plans. Declaration of Diane C. Rodes ("Rodes Dec"), ^ 2. It
6 serves "customers" - members, hospitals, medical groups, physicians, etc. - over the telephone out
7 of its call centers in Rancho Cordova and Woodland Hills, California, /c/.
8 Plaintiff Spears served as a non-exempt HNCA customer service representative from
9 September 2014 to October 2016 in Rancho Cordova. UF 1.' Plaintiff Arana also served as a non-
10 exempt customer service representative for HNCA until his promotion in November 2015 to
11 Contact Center Analyst - an exempt position. UF 2.^ At all times during his employment. Plaintiff
12 Arana has worked out of the same Rancho Cordova call center at which Plaintiff Spears worked.
13 Id.
14 B. The Cafeteria Benefits Plan
15 Between January 1,2001 and December 31,2016, HNI sponsored a cafeteria benefits plan
16 - a written health and welfare plan - called the "Health Net, Inc. Associates Benefit Program" (the
17 "Plan"), which HNCA adopted for the benefit of its employees. UF 3. The Plan was governed by
18 Section 125 of the Internal Revenue Code, was subject to the Employee Retirement Income
19 Security Act, and was overseen by a Benefits Committee. UF 4. As called for in the Plan, the
20 Benefits Committee had fiduciary duties and responsibilities to ensure that HNCA's employer
21 contributions to the Plan were tracked, kept in a separate account and used only for proper Plan
22 purposes related to the health and welfare benefits of HNCA employees, including Plaintiffs, and
23 their dependents. UF 5.
24 HNI treated HNCA as a third party for purposes of administering the Plan, and vice versa.
25 UF 6. To that end, and pursuant to the terms of the Plan, HNCA paid the actual costs of benefits
26 under the Plan for its eligible employees who elected to participate ("Participants"), including
27
' References to "UF" are to HNCA's Separate Statement of Undisputed Material Facts.
28 ^ Since June 2017, Plaintiff Arana's title has been Call Center Systems Analyst - also an exempt
position. \JF2.
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
1 Plaintiffs, and their dependents. UF 7. And, pursuant to a funded arrangement between HNI and
2 HNCA, HNCA arranged for these monies to be deposited into an account maintained and controlled
3 by HNI as the Plan's sponsor. UF 8. The contributions made by HNCA pursuant to the Plan were
4 irrevocable - once made to HNI, HNCA was imable to recapture or divert the funds for HNCA's
5 use or benefit. UF 9.
6 The benefits available under the Plan, including the various coverage options and co-
7 payments a Participant was responsible for vn\h respect to the Plan's various covered services and
8 supplies, were explained m detail to HNCA employees in the Summary Plan Descriptions (the
9 "Plan SPD") and Evidence of Coverage ("EOC") documents, which HNCA provided to employees,
10 including Plaintiffs, when hired. UF 10. The Plan provided "core" benefits to Participants such
11 as basic life and basic AD«&D insurance. UF 11. It also provided "optional" benefits to Participants
12 and/or their dependents, such as medical and dental coverage, to select as desired based on their
13 needs. UF 12.
14 To help pay for the cost of medical and dental coverage, and pursuant to the terms of the
15 Plan, Participants received "Flex Dollars." UF 13. The exact amount of Flex Dollars to which a
16 Participant was entitled varied depending on the medical and dental plans he or she chose, the
17 number of dependents covered and the Participant's geographic location, but generally, the amoimt
18 was less than the total cost of the benefit(s) that a Participant elected. UF 14. Thus, in the vast
19 majority of cases, a Participant was required to contribute some amount toward the cost of the
20 benefit(s) he or she selected, and the Participant's portion of the benefit coverage was deducted
21 from his or her paycheck. UF 15.
22 Eligible employees under the Plan were allowed to waive certain benefits. UF 16.
23 However, with respect to medical coverage, waiver was only permitted where the employee had
24 other medical coverage, such as coverage under a spouse's plan. UF 17. In the event that a
25 Participant waived medical and/or dental coverage, the Plan provided that the Participant would
26 receive a portion of the Flex Dollars as cash in his or her paycheck. UF 18.
27 In each of the Plan years 2013, 2014, 2015 and 2016, the total cash benefits provided to
28 Participants who waived dental and/or medical coverage represented a very small percentage of
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
1 HNCA's contributions provided under the Plan for the elected dental and/or medical coverage:
2 1.4% in 2013,1.3% in 2014; 0.9% in 2015; and 0.9% in 2016. UF 19.
3 Throughout Plaintiff Spears' employment with HNCA, she elected dental coverage. UF
4 20. However, she waived medical coverage and, as result, received a cash benefit of $20.00 per
5 pay period pursuant to the Plan. UF 21. Plaintiff Arana, on the other hand, elected to receive both
6 medical and dental coverage and thus never received any cash benefits in lieu of coverage. UF 22.
7 C. Bonus Payments
8 At no time during her employment with HNCA did Plaintiff Spears receive any bonus
9 payments. UF23. And, throughout Plaintiff Arana's employment with HNCA, his bonuses have
10 been limited to only bonuses through the SPOT Cash Awards Program ("SPOT") and incentive pay
11 pursuant to the ACA Customer Service Center & Claims Representative Pay for Performance
12 Incentive Plan ("ACA Incentive Plan"). UF24. Plaintiff Arana has not received any other bonus
13 payments. Id.
14 1. SPOT Bonuses
15 Beginning January 1, 2014 and continuing through December 31, 2016, HNCA adopted
16 SPOT. UF 25. Through SPOT, HNCA spontaneously rewarded certain employees "who
17 demonstrate[d] exceptional behavior on the job . . . whether it [wa]s v^dthin or beyond [the
18 employee's] job scope." UF26. HNCA's SPOT policy informed eligible employees that bonuses
19 were awarded without any promise or incentive being announced beforehand. UF 27.
20 Indeed, there were no pre-established criteria for awarding SPOT bonuses or pre-established
21 amounts to be awarded. UF 28. Rather, the decision of when, for what reason, and in what amount
22 to award a SPOT bonus - within a range - was subject to the discretion of managers and the ultimate
23 approval of the head of the appropriate Business Unit. UF 29. Each Business Unit Leader was
24 allotted an aimual SPOT bonus budget that he or she could elect to use in full, in part, or not at all.
25 UF30.
26 Procedurally, a SPOT bonus was initiated if a manager felt that an employee on his or her
27 team should receive one. UF 31. The manager had the discretion to complete the SPOT Award
28 Nomination Form detailing the reason for nomination, describing the achievement, and identifying
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
1 a specific amount he or she believed appropriate. UF 32. The manager would then submit the form
2 to the head of his or her Business Unit. UF 33. The Business Unit Leader then exercised his or her
3 discretion as to whether to award the SPOT bonus based on the manager's recommendation (or
4 not) and, if so, in what amount. UF 34.
5 If the Business Unit Leader decided to award an employee with a SPOT bonus, the bonus
6 appeared on the recipient's paycheck with the designation "Bonus - SPOT." UF 3 5. SPOT bonuses
7 were not included in recipients'regular rate calculation. UF 36.
8 2. The ACA Incentive Plan
9 Starting January 3, 2014 and lasting through May 31,2014, HNCA implemented the ACA
10 Incentive Plan for eligible employees. UF 37. The purpose of the ACA Incentive Plan was to
11 provide an extra reward if employees voluntarily worked overtime due to the increase in workload,
12 especially at the call centers, as a result of implementation of the Patient Protection and Affordable
13 Care Act. UF 38. Specifically, under the ACA Incentive Plan, eligible employees who worked a
14 certain number of overtime hours each month received bonus payments. UF 39. Such payments
15 were included in recipients' regular rate of pay. UF 40.
16 D. Shift Differential Pay
17 HNCA provides shift differential pay when more than half of an employee's regularly
18 scheduled working hours fall outside 7:00 a.m. and 5:00 p.m. UF41. Specifically, if more than
19 half of an employee's regularly scheduled hours fall in the "second shift" - between 3:00 p.m. and
20 12:00 a.m. - he or she is eligible to receive a 8% premium pay for all hours worked. UF 42. If
21 more than half of an employee's regularly scheduled hours fall in the "third shift" - between 11:00
22 p.m. and 7:00 a.m. - he or she is eligible to receive a 12% premium pay for all hours worked. UF
23 43. Shift differentials are identified in recipients' paycheck and included in their regular rates. UF
24 44.
25 Plaintiff Spears never worked any second or third shifts and thus, never received any shift
26 differential pay. UF 45. On the other hand, Plaintiff Aiana worked the second shift on a few
27 occasions and received corresponding shift differential pay that was included in his regular rate.
28 UF46.
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
1 E. Timekeeping Practice
2 At all times throughout the relevant time period, HNCA has not rounded its employees'
3 recorded time for purposes of generating paychecks. UF47. Indeed, HNCA's timekeeping system
4 does not round any payable time mcrements. UF48. Rather, all non-exempt employees, including
5 Plaintiffs, were responsible for accurately inputting their exact in (start) and out (stop) times into
6 the timekeeping system, and were paid based on what they reported. UF 49.
7 m. PLAINTIFFS' ALLEGATIONS
8 A. Plaintiffs' Regular Rate Allegations
9 As part of their third cause of action for Failure to Pay Hourly Wages, Plaintiffs alleges that
10 HNCA failed to pay them for all overtime hours worked. Namely, on behalf of themselves, others
11 purportedly similarly situated and others allegedly aggrieved, Plaintiffs contend that HNCA
12 "violated the[ir]rights. . . by failing to pay them overtime wages for all overtime hours worked ..
13 . as a result of not correctly calculating their regular rate of pay to include all applicable
14 remuneration, including, but not limited to, non-discretionary bonuses and/or shift differential pay."
15 Consolidated Complaint, TI41.
16 B. Plaintiffs' Rounding Allegations
17 Plaintiffs allege that, as of January 1, 2017, HNCA began to utilize a rounding practice that
18 required Plaintiffs to round their start times to the next hour. Id. at If 35. Plaintiffs' allege that, as
19 a result of this rounding practice, HNCA failed to pay them for all hours worked. Id.
20 IV. SUMMARY ADJUDICATION IS WARRANTED.
21 A. Plaintiffs* Overtime Claim And Derivative PAGA Claim Premised On Their
Regular Rate Allegations Fail As A Matter Of Law.
22
1. California Courts Look To Federal Law When Determining The
23 "Regular Rate" Of Pay For Purposes Of Overtime Calculations.
24 Under California law, an employer must pay non-exempt employees for any hours worked
25 in excess of eight hours in one workday and forty hours in one workweek "at the rate of no less
26 than one and one-half times the regular rate of pay." Lab. Code § 510. However, neither the Wage
27 Orders nor the Labor Code explicitly defines the phrase "regular rate" of pay. As a result, California
28 courts have adopted the definition set forth in the FLSA, 29 U.S.C. § 207(e), and accompanying
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
1 federal regulations. See Prachasaisoradej v. Ralphs Grocery Co., Inc., 42 Cal. 4th 217, 242 n.l4
2 (2007) ("California follows the federal standard for purposes of determining, under the Labor Code,
3 what constitutes the employee's regular pay"); see also Advanced-Tech Sec. Servs., Inc. v. Superior
4 Court, 163 Cal. App. 4th 700, 707 (2008) (California courts look to U.S. Department of Labor
5 regulations interpreting the "regular rate" of pay under the FLSA to interpret that term as used in
6 Labor Code section 510); see also Huntington Memorial Hosp. v. Superior Court, 131 Cal. App.
7 4th 893, 902-03 (2005) (failure of the Industrial Welfare Commission to define the regular rate
8 indicates its intent that California adhere to the FLSA definition; applying section 207 to determine
9 regular rate under California law).
10 Moreover, the Division of Labor Standards Enforcement, charged with enforcing the Wage
11 Orders, also recommends that courts look to the FLSA and adopt its definition of "regular rate" of
12 pay. See DLSE Enforcement Policies & Interpretations Manual § 49.1.2 (2002) ("In determining
13 what pajonents are to be included m or excluded from the calculation of the regular rate of pay,
14 California law adheres to the standards adopted by the U.S. Department of Labor to the extent that
15 those standards are consistent with California law").
16 2. Cash Benefits Received By Plaintiff Spears As A Result Of Her Waiver
Of Medical Coverage Were Properly Excluded From Her Regular Rate
17 Under The Benefit-Plan Contribution Exception.
18 The FLSA specifically excludes from the regular rate the cash benefits HNCA provided to
19 Plaintiff Spears as a result of her waiver of medical coverage under the Plan. See 29 U.S.C. §
20 207(e)(4). Under the "Benefit-Plan Contributions Exception," "contributions irrevocably made by
21 an employer to a trustee or third person pursuant to a bona fide plan for providing old-age,
22 retirement, life, accident, or health insurance or similar benefits for employees" are not to be
23 included in the regular rate. Id. Department of Labor regulations specifyfiveconditions that must
24 be met for a benefit plan to qualify as "bonafide"under the Benefit-Plan Contributions Exception,
25 all of which are satisfied in this instance:
26 (1) The contributions must be made piu"suant to a specific plan or
program adopted by the employer . . . and communicated to the
27 employees. This may be either a company-financed plan or an
employer-employee contributory plan.
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
1 (2) The primary purpose of the plan must be to provide
systematically for the payment of benefits to employees on account
2 of death, disability, advanced age, retirement, illness, medical
expenses, hospitalization, and the like.
3
(3) In a plan or trust... [t]he benefits must be specified or definitely
4 determinable on an actuarial basis .
5 (4) The employer's contributions must be paid irrevocably to a
trustee or third person pursuant to an insurance agreement, trust or
6 other funded arrangement. The trustee must assume the usual
fiduciary responsibilities imposed upon trustees by applicable law.
7 The trust or fund must be set up in such a way that in no event vnll
the employer be able to recapture any of the contributions paid in
8 nor in any way divert the funds to his own use or benefit
9 (5) The plan must not give an employee the right to assign his
benefits under the plan nor the option to receive any part of the
10 employer's contributions in cash instead of the benefits imder the
plan: Provided, however. That if a plan otherwise qualified as a
11 bona fide benefit plan under section 7(e)(4) of the Act, it will still
be regarded as a bona fide plan even though it provides, as an
12 incidental part thereof, for the payment to an employee in cash of
all or a part of the amount standing to his credit . . . during the
13 course ofhis employment imder circumstances specified in the plan
and not inconsistent with the general purposes of the plan to
14 provide the benefits described in section 7(e)(4) of the Act.
15 29 C.F.R. § 778.215(a). HNCA satisfied all of the above requirements.
16 a. Contributions Were Made Pursuant To The Plan And Were
Communicated To HNCA Employees.
17
The Plan meets the first condition because HNCA's contributions were made pursuant to
18
the conditions set forth in the Plan that it adopted. UFs 3-10. Moreover, such conditions were
19
communicated via the Plan SPD and EOC documents distributed to employees, including Plaintiffs,
20
upon hire. Id. Among other things, these documents explained how the Plan worked, outlined who
21
was eligible to participate, detailed Participants' rights, and described the coverage options
22
available for each benefit category under the Plan. Id.
23
b. The Primary Purpose Of The Plan Was To Provide Health And
24 Welfare Benefits To HNCA Employees?
25 The Plan meets the second condition because the primary purpose of the Plan was to provide
26 for a wide range of health and welfare benefits to HNCA employees. UFs 10-12, Ex. K-L.
27 Consistent with the Plan's purpose, eligible employees were offered "core" benefits, including
28 basic life and basic AD&D insurance at no cost to them. UF 11. Additional "optional" benefits
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
1 were also offered to eligible employees and/or their dependents. UF 12. Further, "Flex Dollars"
2 were provided to Participants to apply toward the purchase ofmedical and/or dental coverage under
3 the Plan. UF 13. While some eligible employees elected to waive coverage, they were only allowed
4 to waive medical if they had such coverage elsewhere. UF 16, 17; see also Dep't of Labor Op.
5 Letter, 2003 WL 23374600, at * 1 -2 (July 2,2003) (fmding the employer met the "primary purpose"
6 requirement because it mandated medical coverage unless an employee already had such coverage
7 through another policy). If a Participant waived medical and/or dental coverage, the Plan provided
8 that the Participant would receive only a portion of the Flex Dollars as cash in his or her paycheck.
9 UF18.
10 c. Benefits Were Specified Pursuant To The Plan.
11 The Plan meets the third condition because the Plan, Plan SPD and EOC documents
12 specified the benefits and coverage available under the Plan. UF 10.
13 d. HNCA's Contributions Were Paid Irrevocably To Third Party
HNI Pursuant To A Funded Arrangement.
14
The Plan meets the fourth condition as vvell. Pursuant to the funded arrangement between
15
Plan sponsor HNI and HNCA, HNCA deposited its employer contributions under the Plan into an
16
account maintained and controlled by HNI as the Plan's sponsor. UF 8. And, £is called for in the
17
Plan, the Benefits Committee had fiduciary duties and responsibilities to ensure that HNCA
18
employer's contributions to the Plan was tracked, kept in a separate accoimt and used only for
19
proper Plan purposes related to the health and welfare benefits of HNCA employees and their
20
dependents. UF 5. Once HNCA made these employer contributions to HNI, HNCA was unable to
21
recapture or divert the funds for HNCA's use or benefit. UF 9.
22 „
e. Cash Benefits Provided To Participants Under the Plan Were
23 Incidental And Paid During The Course The Participants'
Employment As Specified In The Plan.
The Plan also meets the fifth condition because the cash benefits provided to Participants
25
under the Plan were "incidental" and paid during the course of their employment under
26
circumstances specified in the Plan and consistent with the general purpose of the Plan to provide
27
health and welfare benefits to employees. UFs 3-4, 10-19. The DOL has interpreted the meaning
28
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
1 of "incidental" in a July 2, 2003 Opinion Letter. Dep't of Labor Op. Letter, 2003 WL 23374600
2 (July 2, 2003). According to the DOL, cash-in-lieu of benefit payments are "incidental" if they
3 account for no more than 20% of the employer's total contribution amount on a plan-wide basis.
4 Id. at *2. Cash benefits paid by HNCA fell well v^dthin this mark and are thus "incidental" such
5 that the Plan was "bona fide" at all relevant times. UF 19.
6 First, in each of the Plan years at issue, the total amount of cash benefits provided under the
7 Plan - as a percentage of the total amount of contributions provided - was well below the 20% cap
8 established by the DOL. Id. In fact, cash benefits represented only 1.4% of HNCA's contributions
9 for medical and dental coverage for Participants and their dependents for the year 2013, 1.3% for
10 2014, 0.9% for 2015, and 0.9% for 2016. Id. Thus, the cash benefits provided under the Plan
11 indisputably qualify as "incidental."
12 Second, the cash benefits were provided "under circumstances that are consistent with the
13 overall primary purpose of the plan of providing benefits." See Dep't of Labor Op. Letter, 2003
14 WL 23374600, at *2 (July 2, 2003). Here, the Plan meets this requirement because the Plan
15 mandated that Participants have other medical insurance before they were permitted to decline that
16 coverage and receive cash, Participants could not elect to receive the entire contribution in cash,
17 and HNCA offered core benefits - including disability and life insurance - under the Plan to eligible
18 employees at no cost to the Participants. UFs 11, 17, 18.
19 Accordingly, the Plan qualifies as a "bona fide" benefits plan under the Benefit-Plan
20 Contributions Exception and HNCA properly excluded cash benefits received by Plaintiff Spears
21 in her regular rate. Her overtime claim premised on HNCA's exclusion of such cash benefits fi-om
22 the regular rate calculation therefore fails as a matter of law.
23 3. HNCA Appropriately Allocated Bonus Payments In Determining The
Regular Rate.
24
a. SPOT Awards Received By Plaintiff Arana Were Properly
25 Excluded From His Regular Rate Because They Were
Discretionary Bonuses.
26
The indisputable facts show that SPOT bonuses awarded to Plaintiff Arana were
27
discretionary and thus properly excluded from his regular rate of pay. In following the FLSA, 29
28
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
1 U.S.C. § 207(e)(3), California provides for the exclusion of discretionary bonuses from regular rate
2 of pay calculations. See DLSE Manual § 49.1.2.4(3); see also 1991.03.06 DLSE Opinion Letter,
3 at 1, n.l (discretionary bonuses are excludable from the "regular rate"); compare DLSE Manual §
4 35.7 (non-discretionary bonuses must be calculated into regular rate of pay). Bonuses are
5 considered discretionary " i f . . . both the fact that payment is to be made and the amount of the
6 payment are determined at the sole discretion of the employer at or near the end of the period and
7 not pursuant to any prior contract, agreement, or promise causing the employee to expect such
8 payments regularly." 29 U.S.C. § 207(e)(3)(a); see also 29 C.F.R. §§ 778.208, 778.211; see also
9 Rubin v. Wal-Mart Stores, Inc., 599 F. Supp. 2d 1176, 1178 (N.D. Cal. 2009) (employer should
10 include "promised bonuses" but not "discretionary bonuses" in the "regular rate").
11 Alonzo V. Maximus. Inc., 832 F. Supp. 2d 1122 (CD. Cal. 2011) is instructive. There, the
12 court held that the employer properly excluded spot bonuses known as "MaxDollar bonuses" from
13 the regular rate calculation due to their discretionary nature. Id. at 1133. There, as here, the spot
14 bonuses were made to employees for their unique or extraordinary contributions to the employer's
15 clients or to the workplace, were not awarded to pursuant to pre-established criteria, and were
16 fundedfroma bonus pool that was available for immediate disbursement or reward. Id.; UFs 26-
17 34. Moreover, there, as here, the spot bonuses were determined at the sole discretion of the
18 employer at or near the time of payment and were not made pursuant to any contract or promise
19 which would lead employees to expect such payments regularly. Alonzo, 832 F. Supp. 2d at 1133;
20 UFs 26-34. Thus, there, as here, the spot bonuses were properly excluded from recipients' regular
21 rate under the FLSA. See Alonzo, 832 F. Supp. 2d at 1133.
22 Plaintiff Arana's claim that his SPOT awards should have been included in his regular rate
23 is therefore untenable.
24 b. Bonuses Received By Plaintiff Arana Pursuant To The ACA
Incentive Plan Were Included In His Regular Rate.
25
All nondiscretionary bonuses received by Plaintiff Arana - namely, incentive pay pursuant
26
to the ACA Incentive Plan - were included in the calculation ofhis regular rate. UF 40. Thus, his
27
28
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
1 overtime claim based on his allegation that pay he received pursuant to the ACA Incentive Plan
2 was not included in his regular rate has no merit.
3 4. Shift Differential Premiums Received By Plaintiff Arana Were Included
^ In His Regular Rate.
Plaintiff Arana's shift differential premiums were included in his regular rate. UFs 44, 46.
5
Therefore, his overtime claim premised on his claim that shift differential premiums were not
6
included holds no water.
7 „
Because The Underlying Overtime Claim Fails, So Too Does Plaintiffs
8 PAGA Claim Based On Such Violation.
9 To prove a claim under the PAGA, a plaintiff must prove an underlying Labor Code
10 violation that he personally experienced. See Kim v. Reins Int'l California, Inc., 18 Cal. App. 5th
11 1052 (2017) ("PAGA was not intended to allow an action to be prosecuted by any person who did
12 not have a grievance against his or her employer for Labor Code violations"); see also
13 Amalgamated Transit Union, Local 1756. AFL-CIO v. Superior Court, 46 Cal. 4th 993,1003 (2009)
14 (the PAGA "is simply a procedural statute allowing an aggrieved employee to recover civil
15 penalties . . . for Labor Code violations"); see also Howard v. Octagon, Inc., 2013 WL 5122191, at
16 *8 (N.D. Cal. Sept. 13, 2013) (dismissing PAGA claim because the plaintiff "alleged no viable
17 claim based on Labor Code violations"). Otherwise, the claim must be dismissed even if the
18 plaintiff purports to represent other employees. See Amalgamated Transit Union, 46 Cal. 4th at
19 1005 (only "aggrieved employees" have standing under the PAGA) (citing Lab. Code § 2699(a),
20 (c)); see also Thomas v. Home Depot USA Inc., 527 F. Supp. 2d 1003, 1009 (N.D. Cal. 2007)
21 (holding that the plaintiff "cannot go forward in a representative capacity with his PAGA claims"
22 where his own claim was time-barred). Here, because Plaintiffs' overtime claim premised on
23 purported miscalculation of their regular rate fails, so too does their PAGA claim based on such
24 alleged violations. See Sections FV.A. 1-4 above.
25
26
27
28
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
1 B. Plaintiffs' Failure To Pay All Wages Claim And Derivative PAGA Claim
Premised On Their Rounding Allegations Fail As A Matter Of Law.
2
1. HNCA Did Not Have A Practice Of Rounding And Paid Plaintiffs Based
3 On Their Exact In And Out Times.
4 During the pertinent time period, HNCA did not utilize or implement any rounding
5 practices. UFs 47-48. Rather, all non-exempt employees, including Plaintiffs, were responsible
6 for accurately inputting their exact in (start) and out (stop) times into the timekeeping system and
7 were paid based on those exact times they reported; the system does not round any payable time
8 increments. UF 49. Thus, Plaintiffs' claims premised on allegations of improper rounding
9 practices fails for the simple reason that HNCA does not round.
10 Therefore, Plaintiffs' failure to pay all wages claim premised on HNCA's alleged roimding
11 practice fails as a matter of law.
12 2. Because The Underlying Alleged Violation Did Not Occur. Plaintiffs'
PAGA Claim Based On Such Violation Also Fails.
13
As explained above, to prove a claim under the PAGA, a plaintiff must prove an underlying
14
Labor Code violation that he personally experienced. Here, because Plaintiffs' failure to pay all
15
wages claim premised on an alleged rounding policy fails, so too does their PAGA claim based on
16
such alleged violations. UFs 47-49.
17
V. CONCLUSION
18
For the reasons set forth above, HNCA requests that the Court grant summary adjudication
19
as to Plaintiffs' claims that (1) it failed to properly calculate their regular rates of pay for purposes
20
of determining their overtime compensation, (2) it failed to pay all wages by improperly rounding
21
their start times, as well as (3) their derivative PAGA allegations based thereon.
22
23 Dated: February 5, 2018 ORRICK, HERRINGTON & SUTCLIFFE LLP
24
25 By:
STEPHANIE GAIL LEE
26 Attorneys for Defendant
HEALTH NET OF CALIFORNIA, INC.
27
28
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION
Preview
1 TIMOTHY J. LONG (STATE BAR NO. 137591) tj long@orrick.com 2 ORRICK, HERRINGTON & SUTCLIFFE LLP 2C!CFE8-5 PH |: 38 400 Capitol Mall, Suite 3000 3 Sacramento, CA 95814-4497 tOUNryOr SACRA«£NHTQ Telephone: +1 916 447 9200 4 Facsimile: +1 916 329 4900 5 STEPHANIE GAIL LEE (STATE BAR NO. 285379) stephanie.lee@orrick.com 6 ORRICK, HERRINGTON & SUTCLIFFE LLP 777 South Figueroa Street, Suite 3200 7 Los Angeles, CA 90017-5855 Telephone: +1-213-629-2020 8 Facsimile: +1-213-612-2499 9 Attorneys for Defendant HEALTH NET OF CALIFORNIA. INC. 10 11 SUPERIOR COURT OF THE STATE OF CALIFORNIA 12 COUNTY OF SACRAMENTO 13 ANDREA SPEARS, an individual, on behalf Consolidated Case No. 34-2017-00210560- 14 of herself and on behalf of all persons similarly CU-OE-GDS situated, 15 ^ Plaintiff, MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF 16 DEFENDANT HEALTH NET OF CALIFORNIA, INCJ'S MOTION FOR 17 HEALTH NET OF CALIFORNIA, INC., a SUMMARY ADJUDICATION California Corporation; and Does 1 through 50, 18 inclusive, Date: April 26, 2018 Time: 9:00 a.m. 19 Defendants. Dept.: 54 I Reservation No. 2313007 20 Complaint Filed: April 5,2017 21 FAC Filed: June 29, 2017 Consolidated Complaint Filed: Dec. 21, 2017 22 CO TOMAS R. ARANA, on behalf of himself, all Complaint Filed: August 1,2017 23 others similarly situated, < Plaintiff, 24 o 25 26 V. HEALTH NET OF CALIFORNIA, INC., a DC California corporation; and DOES 1-50, inclusive. 27 O 28 Defendant. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION 1 TABLE OF CONTENTS 2 Page 3 L INTRODUCTION '. 1 4 IL STATEMENT OF UNDISPUTED MATERL\L FACTS 2 A. The Parties 2 5 B. The Cafeteria Benefits Plan 2 6 C. Bonus Payments 4 7 1. SPOT Bonuses.. 4 2. The ACA Incentive Plan 5 8 D. Shift Differential Pay.; 5 9 E. Timekeeping Practice 6 10 m. PLAINTIFFS'ALLEGATIONS 6 A. Plaintiffs' Regular Rate Allegations 6 II B. Plaintiffs' Rounding Allegations 6 12 IV. SUMMARY ADJUDICATION IS WARRANTED 6 A. Plaintiffs' Overtime Claim And Derivative PAGA Claim Premised On 13 Their Regular Rate Allegations Fail As A Matter Of Law 6 14 1. California Courts Look To Federal Law When Determining The "Regular Rate" Of Pay For Purposes Of Overtime Calculations 6 15 2. Cash Benefits Received By Plaintiff Spears As A Result Of Her Waiver Of Medical Coverage Were Properly Excluded From Her Regular Rate Under The Benefit-Plan Contribution Exception 7 17 a. Contributions Were Made Pursuant To The Plan And Were Commimicated To HNCA Employees 8 18 b. The Primary Purpose Of The Plan Was To Provide Health 1g And Welfare Benefits To HNCA Employees 8 20 c. Benefits Were Specified Pursuant To The Plan 9 d. HNCA's Contributions Were Paid Irrevocably To Third 22 Party HNI Pursuant To A Fimded Arrangement 9 e. Cash Benefits Provided To Participants Under the Plan 22 Were Incidental And Paid During The Coiorse The Participants' Employment As Specified In The Plan 9 23 3. HNCA Appropriately Allocated Bonus Payments In Determining 24 The Regular Rate 10 a. SPOT Awards Received By Plaintiff Arana Were Properly 25 Excluded From His Regular Rate Because They Were Discretionary Bonuses 10 26 b. Bonuses Received By Plaintiff Arana Pursuant To The ACA 27 Incentive Plan Were Included In His Regular Rate 11 4. Shift Differential Premiums Received By Plaintiff Arana Were 28 Included In His Regular Rate.... 12 - i- 1 TABLE OF CONTENTS (continued) 2 Page 3 5. Because The Underlying Overtime Claim Fails, So Too Does Plaintiffs PAGA Claim Based On Such Violation 12 4 B. Plaintiffs' Failure To Pay All Wages Claim And Derivative PAGA Claim 5 Premised On Their Rounding Allegations Fail As A Matter Of Law 13 1. HNCA Did Not Have A Practice Of Rounding And Paid Plaintiffs 6 Based On Their Exact In And Out Times 13 7 2. Because The Underlying Alleged Violation Did Not Occur, Plaintiffs' PAGA Claim Based On Such Violation Also Fails 13 8 V. CONCLUSION 13 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 TABLE OF AUTHORITIES 2 Page(s) 3 Cases 4 Advanced-Tech Sec. Servs., Inc. v. Superior Court, 5 163 Cal. App. 4th 700 (2008) ; 7 6 Alonzo V. Maximus, Inc., 832 F. Supp. 2d 1122 (CD. Cal. 2011) 11 7 Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court, 8 46 Cal. 4th 993 (2009) 12 9 Howard v. Octagon, Inc., 2013 WL 5122191 (N.D. Cal. Sept. 13,2013) 12 10 11 Huntington Memorial Hosp. v. Superior Court, 131 Cal. App. 4th 893 (2005) '. 7 12 Kim V. Reins Int'l California, Inc., 13 18 CaL App. 5th 1052 (2017) 12 Prachasaisoradej v. Ralphs Grocery Co., Inc., 42 Cal. 4th 217 (2007) '. 7 15 |g Rubin'V. Wal-Mart Stores, Inc., 599 F. Supp. 2d 1176 (N.D. Cal. 2009) 11 17 Thomas v. Home Depot USA Inc. 18 527 F. Supp. 2d 1003 (N.D. CaL 2007) 12 19 Statutes 20 29 C.F.R. §778.208. ; 11 21 29 C.F.R. § 778.211 11 22 29 C.F.R. § 778.215(a) 1,2,8 23 29 U.S.C. § 207(e) 6 24 29 U.S.C. § 207(e)(3) 10 25 29 U.S.C. § 207(e)(3)(a) : 11 26 29 U.S.C. § 207(e)(4) 1,7 27 Employee Retirement Income Security Act 2, 4 28 - iii - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION 1 Fair Labor Standards Act .passim 2 Internal Revenue Code § 125 2 3 Lab. Code §510 6 4 Lab. Code § 2699(a) 12 5 Lab. Code § 2699(c) 12 6 Patient Protection and Affordable Care Act 5 7 Other Authorities 8 1991.03.06 DLSE Opinion Letter 11 9 Dep't of Labor Op. Letter, 2003 WL 23374600 (July 2, 2003) 9, 10 10 DLSE Manual §49.1.2 ..7 11 12 DLSE Manual § 35.7 11 13 DLSE Manual §49.1.2.4(3) 11 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - IV - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION 1 I. INTRODUCTION 2 Plaintiffs Andrea Spears and Tomas Arana claim that Defendant Health Net of California, 3 Inc. ("HNCA")' failed to properly calculate their regular rates of pay for purposes of computing 4 their overtime compensation. Specifically, Plaintiffs allege that HNCA did not properly account 5 for "cash" it provided to Plaintiff Spears for waiving medical coverage, bonuses awarded to 6 Plaintiff Arana and purportedly to Plaintiff Spears, and shift differential premiums Plaintiff Arana 7 earned. Plaintiffs further allege that HNCA failed to pay them for all hours worked by rounding 8 their start times to the next hour, resulting in systemic under-compensation. Plaintiffs' claims are 9 meritless. 10 First, the Fair Labor Standards Act (FLSA"), which California law follows, specifically 11 excludes from the regular rate the "cash" Plaintiff Spears received when she waived medical 12 coverage under what is known as the Benefit-Plan Contributions Exception. See 29 U.S.C. § 13 207(e)(4); 5eefl/jo 29 C.F.R. § 778.215(a). 14 As for Plaintiffs' bonus clairns. Plaintiff Spears did not receive a single bonus payment and 15 HNCA only excluded the discretionary bonus payments Plaintiff Arana received from his regular 16 rate. By contrast, when he earned nondiscretionary bonuses, HNCA included the payments in his 17 regular rate. 18 Further, Plaintiff Arana's assertion that shift differential premiums should have been 19 included in his regular rate is similarly untenable for the simple, undisputed fact that HNCA 20 included these premiums when calculating his regular rate. > 21 Finally, as to Plaintiffs' rounding claim. Plaintiffs are plain wrong. The undisputed facts 22 show that HNCA did not implement any rounding practice during the pertinent time period, much 23 less beginning January 1, 2017 as Plaintiffs allege. 24 For these reasons, and as explained further below, HNCA is entitled to summary 25 adjudication as to Plaintiffs' claim that it failed to properly calculate their regular rates of pay for 26 purposes of determining their overtime compensation, that it failed to pay them all wages by ) 27 improperly rounding their start times, and their derivative PAGA allegations based thereon. 28 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION 1 IL STATEMENT OF UNDISPUTED MATERIAL FACTS 2 A. The Parties 3 HNCA, a subsidiary of Health Net, Inc. ("HNI"), operates as a health maintenance 4 organization ("HMO") in California and provides health insurance products such as commercial 5 HMO plans and healthcare service plans. Declaration of Diane C. Rodes ("Rodes Dec"), ^ 2. It 6 serves "customers" - members, hospitals, medical groups, physicians, etc. - over the telephone out 7 of its call centers in Rancho Cordova and Woodland Hills, California, /c/. 8 Plaintiff Spears served as a non-exempt HNCA customer service representative from 9 September 2014 to October 2016 in Rancho Cordova. UF 1.' Plaintiff Arana also served as a non- 10 exempt customer service representative for HNCA until his promotion in November 2015 to 11 Contact Center Analyst - an exempt position. UF 2.^ At all times during his employment. Plaintiff 12 Arana has worked out of the same Rancho Cordova call center at which Plaintiff Spears worked. 13 Id. 14 B. The Cafeteria Benefits Plan 15 Between January 1,2001 and December 31,2016, HNI sponsored a cafeteria benefits plan 16 - a written health and welfare plan - called the "Health Net, Inc. Associates Benefit Program" (the 17 "Plan"), which HNCA adopted for the benefit of its employees. UF 3. The Plan was governed by 18 Section 125 of the Internal Revenue Code, was subject to the Employee Retirement Income 19 Security Act, and was overseen by a Benefits Committee. UF 4. As called for in the Plan, the 20 Benefits Committee had fiduciary duties and responsibilities to ensure that HNCA's employer 21 contributions to the Plan were tracked, kept in a separate account and used only for proper Plan 22 purposes related to the health and welfare benefits of HNCA employees, including Plaintiffs, and 23 their dependents. UF 5. 24 HNI treated HNCA as a third party for purposes of administering the Plan, and vice versa. 25 UF 6. To that end, and pursuant to the terms of the Plan, HNCA paid the actual costs of benefits 26 under the Plan for its eligible employees who elected to participate ("Participants"), including 27 ' References to "UF" are to HNCA's Separate Statement of Undisputed Material Facts. 28 ^ Since June 2017, Plaintiff Arana's title has been Call Center Systems Analyst - also an exempt position. \JF2. -2- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION 1 Plaintiffs, and their dependents. UF 7. And, pursuant to a funded arrangement between HNI and 2 HNCA, HNCA arranged for these monies to be deposited into an account maintained and controlled 3 by HNI as the Plan's sponsor. UF 8. The contributions made by HNCA pursuant to the Plan were 4 irrevocable - once made to HNI, HNCA was imable to recapture or divert the funds for HNCA's 5 use or benefit. UF 9. 6 The benefits available under the Plan, including the various coverage options and co- 7 payments a Participant was responsible for vn\h respect to the Plan's various covered services and 8 supplies, were explained m detail to HNCA employees in the Summary Plan Descriptions (the 9 "Plan SPD") and Evidence of Coverage ("EOC") documents, which HNCA provided to employees, 10 including Plaintiffs, when hired. UF 10. The Plan provided "core" benefits to Participants such 11 as basic life and basic AD«&D insurance. UF 11. It also provided "optional" benefits to Participants 12 and/or their dependents, such as medical and dental coverage, to select as desired based on their 13 needs. UF 12. 14 To help pay for the cost of medical and dental coverage, and pursuant to the terms of the 15 Plan, Participants received "Flex Dollars." UF 13. The exact amount of Flex Dollars to which a 16 Participant was entitled varied depending on the medical and dental plans he or she chose, the 17 number of dependents covered and the Participant's geographic location, but generally, the amoimt 18 was less than the total cost of the benefit(s) that a Participant elected. UF 14. Thus, in the vast 19 majority of cases, a Participant was required to contribute some amount toward the cost of the 20 benefit(s) he or she selected, and the Participant's portion of the benefit coverage was deducted 21 from his or her paycheck. UF 15. 22 Eligible employees under the Plan were allowed to waive certain benefits. UF 16. 23 However, with respect to medical coverage, waiver was only permitted where the employee had 24 other medical coverage, such as coverage under a spouse's plan. UF 17. In the event that a 25 Participant waived medical and/or dental coverage, the Plan provided that the Participant would 26 receive a portion of the Flex Dollars as cash in his or her paycheck. UF 18. 27 In each of the Plan years 2013, 2014, 2015 and 2016, the total cash benefits provided to 28 Participants who waived dental and/or medical coverage represented a very small percentage of -3 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION 1 HNCA's contributions provided under the Plan for the elected dental and/or medical coverage: 2 1.4% in 2013,1.3% in 2014; 0.9% in 2015; and 0.9% in 2016. UF 19. 3 Throughout Plaintiff Spears' employment with HNCA, she elected dental coverage. UF 4 20. However, she waived medical coverage and, as result, received a cash benefit of $20.00 per 5 pay period pursuant to the Plan. UF 21. Plaintiff Arana, on the other hand, elected to receive both 6 medical and dental coverage and thus never received any cash benefits in lieu of coverage. UF 22. 7 C. Bonus Payments 8 At no time during her employment with HNCA did Plaintiff Spears receive any bonus 9 payments. UF23. And, throughout Plaintiff Arana's employment with HNCA, his bonuses have 10 been limited to only bonuses through the SPOT Cash Awards Program ("SPOT") and incentive pay 11 pursuant to the ACA Customer Service Center & Claims Representative Pay for Performance 12 Incentive Plan ("ACA Incentive Plan"). UF24. Plaintiff Arana has not received any other bonus 13 payments. Id. 14 1. SPOT Bonuses 15 Beginning January 1, 2014 and continuing through December 31, 2016, HNCA adopted 16 SPOT. UF 25. Through SPOT, HNCA spontaneously rewarded certain employees "who 17 demonstrate[d] exceptional behavior on the job . . . whether it [wa]s v^dthin or beyond [the 18 employee's] job scope." UF26. HNCA's SPOT policy informed eligible employees that bonuses 19 were awarded without any promise or incentive being announced beforehand. UF 27. 20 Indeed, there were no pre-established criteria for awarding SPOT bonuses or pre-established 21 amounts to be awarded. UF 28. Rather, the decision of when, for what reason, and in what amount 22 to award a SPOT bonus - within a range - was subject to the discretion of managers and the ultimate 23 approval of the head of the appropriate Business Unit. UF 29. Each Business Unit Leader was 24 allotted an aimual SPOT bonus budget that he or she could elect to use in full, in part, or not at all. 25 UF30. 26 Procedurally, a SPOT bonus was initiated if a manager felt that an employee on his or her 27 team should receive one. UF 31. The manager had the discretion to complete the SPOT Award 28 Nomination Form detailing the reason for nomination, describing the achievement, and identifying -4- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION 1 a specific amount he or she believed appropriate. UF 32. The manager would then submit the form 2 to the head of his or her Business Unit. UF 33. The Business Unit Leader then exercised his or her 3 discretion as to whether to award the SPOT bonus based on the manager's recommendation (or 4 not) and, if so, in what amount. UF 34. 5 If the Business Unit Leader decided to award an employee with a SPOT bonus, the bonus 6 appeared on the recipient's paycheck with the designation "Bonus - SPOT." UF 3 5. SPOT bonuses 7 were not included in recipients'regular rate calculation. UF 36. 8 2. The ACA Incentive Plan 9 Starting January 3, 2014 and lasting through May 31,2014, HNCA implemented the ACA 10 Incentive Plan for eligible employees. UF 37. The purpose of the ACA Incentive Plan was to 11 provide an extra reward if employees voluntarily worked overtime due to the increase in workload, 12 especially at the call centers, as a result of implementation of the Patient Protection and Affordable 13 Care Act. UF 38. Specifically, under the ACA Incentive Plan, eligible employees who worked a 14 certain number of overtime hours each month received bonus payments. UF 39. Such payments 15 were included in recipients' regular rate of pay. UF 40. 16 D. Shift Differential Pay 17 HNCA provides shift differential pay when more than half of an employee's regularly 18 scheduled working hours fall outside 7:00 a.m. and 5:00 p.m. UF41. Specifically, if more than 19 half of an employee's regularly scheduled hours fall in the "second shift" - between 3:00 p.m. and 20 12:00 a.m. - he or she is eligible to receive a 8% premium pay for all hours worked. UF 42. If 21 more than half of an employee's regularly scheduled hours fall in the "third shift" - between 11:00 22 p.m. and 7:00 a.m. - he or she is eligible to receive a 12% premium pay for all hours worked. UF 23 43. Shift differentials are identified in recipients' paycheck and included in their regular rates. UF 24 44. 25 Plaintiff Spears never worked any second or third shifts and thus, never received any shift 26 differential pay. UF 45. On the other hand, Plaintiff Aiana worked the second shift on a few 27 occasions and received corresponding shift differential pay that was included in his regular rate. 28 UF46. -5 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION 1 E. Timekeeping Practice 2 At all times throughout the relevant time period, HNCA has not rounded its employees' 3 recorded time for purposes of generating paychecks. UF47. Indeed, HNCA's timekeeping system 4 does not round any payable time mcrements. UF48. Rather, all non-exempt employees, including 5 Plaintiffs, were responsible for accurately inputting their exact in (start) and out (stop) times into 6 the timekeeping system, and were paid based on what they reported. UF 49. 7 m. PLAINTIFFS' ALLEGATIONS 8 A. Plaintiffs' Regular Rate Allegations 9 As part of their third cause of action for Failure to Pay Hourly Wages, Plaintiffs alleges that 10 HNCA failed to pay them for all overtime hours worked. Namely, on behalf of themselves, others 11 purportedly similarly situated and others allegedly aggrieved, Plaintiffs contend that HNCA 12 "violated the[ir]rights. . . by failing to pay them overtime wages for all overtime hours worked .. 13 . as a result of not correctly calculating their regular rate of pay to include all applicable 14 remuneration, including, but not limited to, non-discretionary bonuses and/or shift differential pay." 15 Consolidated Complaint, TI41. 16 B. Plaintiffs' Rounding Allegations 17 Plaintiffs allege that, as of January 1, 2017, HNCA began to utilize a rounding practice that 18 required Plaintiffs to round their start times to the next hour. Id. at If 35. Plaintiffs' allege that, as 19 a result of this rounding practice, HNCA failed to pay them for all hours worked. Id. 20 IV. SUMMARY ADJUDICATION IS WARRANTED. 21 A. Plaintiffs* Overtime Claim And Derivative PAGA Claim Premised On Their Regular Rate Allegations Fail As A Matter Of Law. 22 1. California Courts Look To Federal Law When Determining The 23 "Regular Rate" Of Pay For Purposes Of Overtime Calculations. 24 Under California law, an employer must pay non-exempt employees for any hours worked 25 in excess of eight hours in one workday and forty hours in one workweek "at the rate of no less 26 than one and one-half times the regular rate of pay." Lab. Code § 510. However, neither the Wage 27 Orders nor the Labor Code explicitly defines the phrase "regular rate" of pay. As a result, California 28 courts have adopted the definition set forth in the FLSA, 29 U.S.C. § 207(e), and accompanying -6- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION 1 federal regulations. See Prachasaisoradej v. Ralphs Grocery Co., Inc., 42 Cal. 4th 217, 242 n.l4 2 (2007) ("California follows the federal standard for purposes of determining, under the Labor Code, 3 what constitutes the employee's regular pay"); see also Advanced-Tech Sec. Servs., Inc. v. Superior 4 Court, 163 Cal. App. 4th 700, 707 (2008) (California courts look to U.S. Department of Labor 5 regulations interpreting the "regular rate" of pay under the FLSA to interpret that term as used in 6 Labor Code section 510); see also Huntington Memorial Hosp. v. Superior Court, 131 Cal. App. 7 4th 893, 902-03 (2005) (failure of the Industrial Welfare Commission to define the regular rate 8 indicates its intent that California adhere to the FLSA definition; applying section 207 to determine 9 regular rate under California law). 10 Moreover, the Division of Labor Standards Enforcement, charged with enforcing the Wage 11 Orders, also recommends that courts look to the FLSA and adopt its definition of "regular rate" of 12 pay. See DLSE Enforcement Policies & Interpretations Manual § 49.1.2 (2002) ("In determining 13 what pajonents are to be included m or excluded from the calculation of the regular rate of pay, 14 California law adheres to the standards adopted by the U.S. Department of Labor to the extent that 15 those standards are consistent with California law"). 16 2. Cash Benefits Received By Plaintiff Spears As A Result Of Her Waiver Of Medical Coverage Were Properly Excluded From Her Regular Rate 17 Under The Benefit-Plan Contribution Exception. 18 The FLSA specifically excludes from the regular rate the cash benefits HNCA provided to 19 Plaintiff Spears as a result of her waiver of medical coverage under the Plan. See 29 U.S.C. § 20 207(e)(4). Under the "Benefit-Plan Contributions Exception," "contributions irrevocably made by 21 an employer to a trustee or third person pursuant to a bona fide plan for providing old-age, 22 retirement, life, accident, or health insurance or similar benefits for employees" are not to be 23 included in the regular rate. Id. Department of Labor regulations specifyfiveconditions that must 24 be met for a benefit plan to qualify as "bonafide"under the Benefit-Plan Contributions Exception, 25 all of which are satisfied in this instance: 26 (1) The contributions must be made piu"suant to a specific plan or program adopted by the employer . . . and communicated to the 27 employees. This may be either a company-financed plan or an employer-employee contributory plan. -7- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION 1 (2) The primary purpose of the plan must be to provide systematically for the payment of benefits to employees on account 2 of death, disability, advanced age, retirement, illness, medical expenses, hospitalization, and the like. 3 (3) In a plan or trust... [t]he benefits must be specified or definitely 4 determinable on an actuarial basis . 5 (4) The employer's contributions must be paid irrevocably to a trustee or third person pursuant to an insurance agreement, trust or 6 other funded arrangement. The trustee must assume the usual fiduciary responsibilities imposed upon trustees by applicable law. 7 The trust or fund must be set up in such a way that in no event vnll the employer be able to recapture any of the contributions paid in 8 nor in any way divert the funds to his own use or benefit 9 (5) The plan must not give an employee the right to assign his benefits under the plan nor the option to receive any part of the 10 employer's contributions in cash instead of the benefits imder the plan: Provided, however. That if a plan otherwise qualified as a 11 bona fide benefit plan under section 7(e)(4) of the Act, it will still be regarded as a bona fide plan even though it provides, as an 12 incidental part thereof, for the payment to an employee in cash of all or a part of the amount standing to his credit . . . during the 13 course ofhis employment imder circumstances specified in the plan and not inconsistent with the general purposes of the plan to 14 provide the benefits described in section 7(e)(4) of the Act. 15 29 C.F.R. § 778.215(a). HNCA satisfied all of the above requirements. 16 a. Contributions Were Made Pursuant To The Plan And Were Communicated To HNCA Employees. 17 The Plan meets the first condition because HNCA's contributions were made pursuant to 18 the conditions set forth in the Plan that it adopted. UFs 3-10. Moreover, such conditions were 19 communicated via the Plan SPD and EOC documents distributed to employees, including Plaintiffs, 20 upon hire. Id. Among other things, these documents explained how the Plan worked, outlined who 21 was eligible to participate, detailed Participants' rights, and described the coverage options 22 available for each benefit category under the Plan. Id. 23 b. The Primary Purpose Of The Plan Was To Provide Health And 24 Welfare Benefits To HNCA Employees? 25 The Plan meets the second condition because the primary purpose of the Plan was to provide 26 for a wide range of health and welfare benefits to HNCA employees. UFs 10-12, Ex. K-L. 27 Consistent with the Plan's purpose, eligible employees were offered "core" benefits, including 28 basic life and basic AD&D insurance at no cost to them. UF 11. Additional "optional" benefits -8- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION 1 were also offered to eligible employees and/or their dependents. UF 12. Further, "Flex Dollars" 2 were provided to Participants to apply toward the purchase ofmedical and/or dental coverage under 3 the Plan. UF 13. While some eligible employees elected to waive coverage, they were only allowed 4 to waive medical if they had such coverage elsewhere. UF 16, 17; see also Dep't of Labor Op. 5 Letter, 2003 WL 23374600, at * 1 -2 (July 2,2003) (fmding the employer met the "primary purpose" 6 requirement because it mandated medical coverage unless an employee already had such coverage 7 through another policy). If a Participant waived medical and/or dental coverage, the Plan provided 8 that the Participant would receive only a portion of the Flex Dollars as cash in his or her paycheck. 9 UF18. 10 c. Benefits Were Specified Pursuant To The Plan. 11 The Plan meets the third condition because the Plan, Plan SPD and EOC documents 12 specified the benefits and coverage available under the Plan. UF 10. 13 d. HNCA's Contributions Were Paid Irrevocably To Third Party HNI Pursuant To A Funded Arrangement. 14 The Plan meets the fourth condition as vvell. Pursuant to the funded arrangement between 15 Plan sponsor HNI and HNCA, HNCA deposited its employer contributions under the Plan into an 16 account maintained and controlled by HNI as the Plan's sponsor. UF 8. And, £is called for in the 17 Plan, the Benefits Committee had fiduciary duties and responsibilities to ensure that HNCA 18 employer's contributions to the Plan was tracked, kept in a separate accoimt and used only for 19 proper Plan purposes related to the health and welfare benefits of HNCA employees and their 20 dependents. UF 5. Once HNCA made these employer contributions to HNI, HNCA was unable to 21 recapture or divert the funds for HNCA's use or benefit. UF 9. 22 „ e. Cash Benefits Provided To Participants Under the Plan Were 23 Incidental And Paid During The Course The Participants' Employment As Specified In The Plan. The Plan also meets the fifth condition because the cash benefits provided to Participants 25 under the Plan were "incidental" and paid during the course of their employment under 26 circumstances specified in the Plan and consistent with the general purpose of the Plan to provide 27 health and welfare benefits to employees. UFs 3-4, 10-19. The DOL has interpreted the meaning 28 -9- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION 1 of "incidental" in a July 2, 2003 Opinion Letter. Dep't of Labor Op. Letter, 2003 WL 23374600 2 (July 2, 2003). According to the DOL, cash-in-lieu of benefit payments are "incidental" if they 3 account for no more than 20% of the employer's total contribution amount on a plan-wide basis. 4 Id. at *2. Cash benefits paid by HNCA fell well v^dthin this mark and are thus "incidental" such 5 that the Plan was "bona fide" at all relevant times. UF 19. 6 First, in each of the Plan years at issue, the total amount of cash benefits provided under the 7 Plan - as a percentage of the total amount of contributions provided - was well below the 20% cap 8 established by the DOL. Id. In fact, cash benefits represented only 1.4% of HNCA's contributions 9 for medical and dental coverage for Participants and their dependents for the year 2013, 1.3% for 10 2014, 0.9% for 2015, and 0.9% for 2016. Id. Thus, the cash benefits provided under the Plan 11 indisputably qualify as "incidental." 12 Second, the cash benefits were provided "under circumstances that are consistent with the 13 overall primary purpose of the plan of providing benefits." See Dep't of Labor Op. Letter, 2003 14 WL 23374600, at *2 (July 2, 2003). Here, the Plan meets this requirement because the Plan 15 mandated that Participants have other medical insurance before they were permitted to decline that 16 coverage and receive cash, Participants could not elect to receive the entire contribution in cash, 17 and HNCA offered core benefits - including disability and life insurance - under the Plan to eligible 18 employees at no cost to the Participants. UFs 11, 17, 18. 19 Accordingly, the Plan qualifies as a "bona fide" benefits plan under the Benefit-Plan 20 Contributions Exception and HNCA properly excluded cash benefits received by Plaintiff Spears 21 in her regular rate. Her overtime claim premised on HNCA's exclusion of such cash benefits fi-om 22 the regular rate calculation therefore fails as a matter of law. 23 3. HNCA Appropriately Allocated Bonus Payments In Determining The Regular Rate. 24 a. SPOT Awards Received By Plaintiff Arana Were Properly 25 Excluded From His Regular Rate Because They Were Discretionary Bonuses. 26 The indisputable facts show that SPOT bonuses awarded to Plaintiff Arana were 27 discretionary and thus properly excluded from his regular rate of pay. In following the FLSA, 29 28 - 10- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION 1 U.S.C. § 207(e)(3), California provides for the exclusion of discretionary bonuses from regular rate 2 of pay calculations. See DLSE Manual § 49.1.2.4(3); see also 1991.03.06 DLSE Opinion Letter, 3 at 1, n.l (discretionary bonuses are excludable from the "regular rate"); compare DLSE Manual § 4 35.7 (non-discretionary bonuses must be calculated into regular rate of pay). Bonuses are 5 considered discretionary " i f . . . both the fact that payment is to be made and the amount of the 6 payment are determined at the sole discretion of the employer at or near the end of the period and 7 not pursuant to any prior contract, agreement, or promise causing the employee to expect such 8 payments regularly." 29 U.S.C. § 207(e)(3)(a); see also 29 C.F.R. §§ 778.208, 778.211; see also 9 Rubin v. Wal-Mart Stores, Inc., 599 F. Supp. 2d 1176, 1178 (N.D. Cal. 2009) (employer should 10 include "promised bonuses" but not "discretionary bonuses" in the "regular rate"). 11 Alonzo V. Maximus. Inc., 832 F. Supp. 2d 1122 (CD. Cal. 2011) is instructive. There, the 12 court held that the employer properly excluded spot bonuses known as "MaxDollar bonuses" from 13 the regular rate calculation due to their discretionary nature. Id. at 1133. There, as here, the spot 14 bonuses were made to employees for their unique or extraordinary contributions to the employer's 15 clients or to the workplace, were not awarded to pursuant to pre-established criteria, and were 16 fundedfroma bonus pool that was available for immediate disbursement or reward. Id.; UFs 26- 17 34. Moreover, there, as here, the spot bonuses were determined at the sole discretion of the 18 employer at or near the time of payment and were not made pursuant to any contract or promise 19 which would lead employees to expect such payments regularly. Alonzo, 832 F. Supp. 2d at 1133; 20 UFs 26-34. Thus, there, as here, the spot bonuses were properly excluded from recipients' regular 21 rate under the FLSA. See Alonzo, 832 F. Supp. 2d at 1133. 22 Plaintiff Arana's claim that his SPOT awards should have been included in his regular rate 23 is therefore untenable. 24 b. Bonuses Received By Plaintiff Arana Pursuant To The ACA Incentive Plan Were Included In His Regular Rate. 25 All nondiscretionary bonuses received by Plaintiff Arana - namely, incentive pay pursuant 26 to the ACA Incentive Plan - were included in the calculation ofhis regular rate. UF 40. Thus, his 27 28 -11 - MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION 1 overtime claim based on his allegation that pay he received pursuant to the ACA Incentive Plan 2 was not included in his regular rate has no merit. 3 4. Shift Differential Premiums Received By Plaintiff Arana Were Included ^ In His Regular Rate. Plaintiff Arana's shift differential premiums were included in his regular rate. UFs 44, 46. 5 Therefore, his overtime claim premised on his claim that shift differential premiums were not 6 included holds no water. 7 „ Because The Underlying Overtime Claim Fails, So Too Does Plaintiffs 8 PAGA Claim Based On Such Violation. 9 To prove a claim under the PAGA, a plaintiff must prove an underlying Labor Code 10 violation that he personally experienced. See Kim v. Reins Int'l California, Inc., 18 Cal. App. 5th 11 1052 (2017) ("PAGA was not intended to allow an action to be prosecuted by any person who did 12 not have a grievance against his or her employer for Labor Code violations"); see also 13 Amalgamated Transit Union, Local 1756. AFL-CIO v. Superior Court, 46 Cal. 4th 993,1003 (2009) 14 (the PAGA "is simply a procedural statute allowing an aggrieved employee to recover civil 15 penalties . . . for Labor Code violations"); see also Howard v. Octagon, Inc., 2013 WL 5122191, at 16 *8 (N.D. Cal. Sept. 13, 2013) (dismissing PAGA claim because the plaintiff "alleged no viable 17 claim based on Labor Code violations"). Otherwise, the claim must be dismissed even if the 18 plaintiff purports to represent other employees. See Amalgamated Transit Union, 46 Cal. 4th at 19 1005 (only "aggrieved employees" have standing under the PAGA) (citing Lab. Code § 2699(a), 20 (c)); see also Thomas v. Home Depot USA Inc., 527 F. Supp. 2d 1003, 1009 (N.D. Cal. 2007) 21 (holding that the plaintiff "cannot go forward in a representative capacity with his PAGA claims" 22 where his own claim was time-barred). Here, because Plaintiffs' overtime claim premised on 23 purported miscalculation of their regular rate fails, so too does their PAGA claim based on such 24 alleged violations. See Sections FV.A. 1-4 above. 25 26 27 28 -12- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION 1 B. Plaintiffs' Failure To Pay All Wages Claim And Derivative PAGA Claim Premised On Their Rounding Allegations Fail As A Matter Of Law. 2 1. HNCA Did Not Have A Practice Of Rounding And Paid Plaintiffs Based 3 On Their Exact In And Out Times. 4 During the pertinent time period, HNCA did not utilize or implement any rounding 5 practices. UFs 47-48. Rather, all non-exempt employees, including Plaintiffs, were responsible 6 for accurately inputting their exact in (start) and out (stop) times into the timekeeping system and 7 were paid based on those exact times they reported; the system does not round any payable time 8 increments. UF 49. Thus, Plaintiffs' claims premised on allegations of improper rounding 9 practices fails for the simple reason that HNCA does not round. 10 Therefore, Plaintiffs' failure to pay all wages claim premised on HNCA's alleged roimding 11 practice fails as a matter of law. 12 2. Because The Underlying Alleged Violation Did Not Occur. Plaintiffs' PAGA Claim Based On Such Violation Also Fails. 13 As explained above, to prove a claim under the PAGA, a plaintiff must prove an underlying 14 Labor Code violation that he personally experienced. Here, because Plaintiffs' failure to pay all 15 wages claim premised on an alleged rounding policy fails, so too does their PAGA claim based on 16 such alleged violations. UFs 47-49. 17 V. CONCLUSION 18 For the reasons set forth above, HNCA requests that the Court grant summary adjudication 19 as to Plaintiffs' claims that (1) it failed to properly calculate their regular rates of pay for purposes 20 of determining their overtime compensation, (2) it failed to pay all wages by improperly rounding 21 their start times, as well as (3) their derivative PAGA allegations based thereon. 22 23 Dated: February 5, 2018 ORRICK, HERRINGTON & SUTCLIFFE LLP 24 25 By: STEPHANIE GAIL LEE 26 Attorneys for Defendant HEALTH NET OF CALIFORNIA, INC. 27 28 -13- MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEFENDANT'S MOTION FOR SUMMARY ADJUDICATION