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SUPERIOR COURT OF CALIFORNIA,
COUNTY OF SACRAMENTO
GORDON D SCHABER COURTHOUSE
MINUTE ORDER
DATE: 10/23/2018 TIME: 11:12:00 AM DEPT: 54
JUDICIAL OFFICER PRESIDING: Christopher Krueger
CLERK: G. Toda
REPORTER/ERM:
BAILIFF/COURT ATTENDANT:
CASE NO: 34-2017-00210560-CU-OE-GDS CASE INIT.DATE: 04/05/2017
CASE TITLE: Spears vs. Health Net of California Inc
CASE CATEGORY: Civil - Unlimited
ASSOCIATED CASES: 34-2017-00216685-CU-OE-GDS
APPEARANCES
Nature of Proceeding: Ruling on Submitted Matter- (Motion for Summary Adjudication)- Taken
Under Submission 9/27/18
TENTATIVE RULING
Defendant Health Net of California, Inc.'s ("HNCA") Motion for Summary Adjudication as against the
Third and Seventh Causes of Action in the Consolidated Complaint of Plaintiffs Andrea Spears and
Tomas R. Arana (collectively, "Plaintiffs") is DENIED IN PART AND GRANTED IN PART as described
below.
Allegations in Pleading
This is a consolidated wage-and-hour putative class action. Andrea Spears ("Spears") and Tomas R.
Arana ("Arana") (collectively "Plaintiffs") are the named plaintiffs.
Defendant Health Net of California, Inc. ("HNCA" or "Defendant") is the moving party seeking summary
adjudication here.
Plaintiffs allegedly served as hourly, non-exempt employees in HNCA call centers. Arana allegedly was
promoted to a salaried, exempt position in or about November 2015. He alleges HNCA misclassified him
as exempt.
In the consolidated Complaint, Plaintiffs allege that Defendants failed to pay them and all other similarly
situated individuals for all hours worked and failed to pay overtime wages at the correct rate, among
other things. (Complaint at 1 (Register of Actions ("ROA") 66).) There is also a PAGA claim for civil
penalties.
Central to the instant motion are Plaintiffs' overtime claims, which are premised on HNCA's alleged
failure to include "cash benefits" or "cash in lieu of benefits" when calculating the "regular rate" for
overtime. It is undisputed that HNCA employees who waived medical benefits received such "cash" in
their paychecks.
Plaintiffs argue that such "cash" payments should have been included when calculating overtime rates.
Defendant argues that such payments were properly excluded when calculating overtime rates because,
as a matter of law and on undisputed facts, such payments are subject to a statutory exclusion codified
at 29 U.S.C. § 207(e)(4), also known as the Benefit-Plan Contributions Exception.
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Request to Strike Plaintiffs' Amended Opposition
This motion was originally set to be heard on May 30, 2018, but the Court continued the motion to
today's date to allow Plaintiff additional requested discovery of payroll records, and to allow amended
opposition and reply briefing. In that Order of May 30, 2018, the Court found "that Plaintiff has made a
sufficient showing under section 437c, subdivision (h), to justify the exercise of discretion and grant of
the requested continuance."
Defendant now requests that Plaintiffs' Amended Opposition papers be stricken because they do not
"argue why the payroll records they sought created a triable issue of fact" and also because they
contradict portions of the original Opposition papers. (Def.'s Amended Reply at 3.)
Defendant's request is OVERRULED. The Court's prior Order granted the continuance for the additional
discovery and called for the filing of an Amended Opposition, but the Court's Order did not expressly
limit the scope of the Amended Opposition in any way, and Defendant did not request any such
limitation. As a result, the Amended Opposition does not violate the Court's Order of May 30, 2018.
Accordingly, in ruling on this motion, the Court considers the original moving papers, the Amended
Opposition papers, and the Amended Reply papers.
Evidentiary Objections
No separate written objections to evidence were filed.
The Court notes that Defendant filed an Amended Reply Separate Statement of Undisputed Material
Facts, to which Plaintiffs' Opposition papers raised an anticipatory objection. The Court considered the
legal arguments made in Defendants' Amended Reply Separate Statement with respect to the UFs
specifically discussed below herein.
The Court also notes that Defendant filed new evidence with its Reply, i.e., evidence regarding "wellness
payments." However, the Court did not find it necessary to reach the new evidence in ruling on the
instant Motion.
Legal Standard
A defendant moving for summary judgment or summary adjudication may demonstrate that the plaintiff's
cause of action has no merit by showing that (1) one or more elements of the cause of action cannot be
established, or (2) there is a complete defense to that cause of action. (Code Civ. Proc. § 437c(f)(2),
(p)(2); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843, 849.) This showing must be
supported by evidence, such as affidavits, declarations, admissions, interrogatory answers, depositions,
and matters of which judicial notice may be taken. (Code Civ. Proc. § 437c(p)(2); Aguilar, 25 Cal.4th at
850, 855.)
A defendant moving for summary judgment or summary adjudication bears the burden of showing that
the causes of action have no merit or that there are one or more complete defenses to them. (Code Civ.
Proc. § 437c(p)(2).) A judge must grant a motion for summary judgment if all the papers submitted show
that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a
matter of law. (Id. § 437c(c); Mann v. Cracchiolo (1985) 38 Cal.3d 18, 35.) Summary judgment is
properly granted only if the moving party's evidence establishes that there is no issue of material fact to
be tried. (Lipson v. Superior Court (1982) 31 Cal.3d 362, 374.) Once the moving party meets this
burden of production, the burden shifts to the opposing party to produce admissible evidence
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demonstrating the existence of a triable issue of material fact. (Aguilar v. Atlantic Richfield Co. (2001) 25
Cal.4th 826, 849.) A judge may not grant summary judgment when any material factual issue is
disputed. (O'Riordan v. Federal Kemper Life Assur. (2005) 36 Cal.4th 281, 289.)
The issues raised by a motion for summary adjudication or summary judgment are framed by the
pleadings. (Dromy v. Lukovsky (2013) 219 Cal.App.4th 278, 282; Lennar Northeast Partners v. Buice
(1996) 49 Cal.App.4th 1576, 1582.)
Discussion
Third Cause of Action for Failure to Pay Hourly Wages and Failure to Pay Overtime Wages
Issue 1: Plaintiffs' failure to pay overtime wages claim premised on HNCA's alleged failure to
include cash benefits received in lieu of medical payment in Plaintiff Spears' regular rate of pay
fails because cash benefits were properly excluded from her regular rate under the Benefit-Plan
Contributions Exception.
California follows the Fair Labor Standards Act ("FLSA"), which excludes from the regular rate for
purposes of overtime compensation the "cash" employees receive when they waive medical coverage
under what is known as the Benefit-Plan Contributions Exception. (See 29 U.S.C. § 207(e)(4) ("Section
207(e)(4)"); see also 29 C.F.R. § 778.215(a).)
Section 207(e)(4) provides:
(a) "Regular rate" defined. As used in this section the "regular rate" at which an employee is
employed shall be deemed to include all remuneration for employment paid to, or on behalf of, the
employee, but shall not be deemed to include [ . . . ] (4) contributions irrevocably made by an
employer to a trustee or third person pursuant to a bona fide plan for providing old-age, retirement, life,
accident, or health insurance or similar benefits for employees.
(29 U.S.C. § 207(e)(4) (emphasis added); see also Huntington Memorial Hospital v. Superior Court
(2005) 131 Cal.App.4th 893, 903-905 (summarizing how the "regular rate" must be calculated for
purposes of determining overtime pay).)
Courts have applied Section 207(e)(4) so as to find that an employer that pays "cash in lieu of benefits"
directly to employees will not, as a matter of law, be able to have such payments be excluded from the
"regular rate." To be excluded from the "regular rate," the "cash in lieu of benefits" payments must be
made to a "trustee or third party" as employer "contributions" within the plain text of Section 207(e)(4).
(See Flores v. City of San Gabriel (9th Cir. 2016) 824 F.3d 890, 894, 901-03 (because the city paid cash
in lieu of unused benefits directly to employees, such payments had to be included in regular rate of pay
and thus in calculation of overtime rate; payment was not excluded under 29 U.S.C. § 207(e)(4)
because it was paid "directly to employees" and therefore was not a "contribution by the employer"); see
also Local 246 Util. Workers Union v. Southern Cal. Edison Co. (9th Cir. 1995) 83 F.3d 292, 296
(reversing grant of summary judgment to employer because employer failed to show that "supplemental
payments to employees consisted of contributions made by [the employer] irrevocably to a trust.").)
Although neither party identified any decisions from California courts on this issue, both parties cite to
federal district court and Ninth Circuit case law. In Flores, the Ninth Circuit explained:
The City also argues that its cash-in-lieu of benefits payments are properly excluded pursuant to §
207(e)(4). Section 207(e)(4) excludes from the regular rate of pay "contributions irrevocably made by an
employer to a trustee or third person pursuant to a bona fide plan for providing old-age, retirement, life,
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accident, or health insurance or similar benefits for employees."
Because the City pays the unused benefits directly to its employees and not "to a trustee or third
person," its cash-in-lieu of benefits payments cannot be excluded under § 207(e)(4). We rejected
a similar argument in Local 246 when the employer had proffered no evidence that any of the
payments at issue were made to a trust rather than directly to the employees because "[s]ection
207(e)(4) deals with contributions by the employer, not payments to the employee." Local 246, 83
F.3d at 296. That reasoning applies equally here.
The City urges us to find that its cash-in-lieu of benefits payments fall within the ambit of § 207(e)(4)
even though the payments are not made to a trustee or third party because the payments "generally"
meet the requirements of that subsection, arguing that it should not be penalized for administering its
own flexible benefits plan. But " [w]here '[a] statute's language is plain, the sole function of the courts is
to enforce it according to its terms,' because 'courts must presume that a legislature says in a statute
what it means and means in a statute what it says there.'" [Citations.] The City's cash-in-lieu of
benefits payments are not made to a trustee or third party, and therefore those payments do not
meet the requirements of § 207(e)(4). We are not at liberty to add exceptions to the clear requirements
set forth in the statute for payments that "generally" satisfy the requirements of that provision. This is
particularly true here, where exemptions to the FLSA's requirements are to be narrowly construed in
favor of the employee. [Citations.] We thus have no trouble concluding that the City's cash-in-lieu of
benefits payments are not properly excluded from the regular rate of pay pursuant to § 207(e)(4).
(Flores, 824 F.3d at 901-02 (emphasis added) (citations omitted); see also Local 246, 83 F.3d 292, 296
("On this record, however, there is no indication that any of the supplemental payments to the
employees consisted of contributions made by Edison irrevocably to a trust. Section 207(e)(4)
deals with contributions by the employer, not payments to the employee. If the employer meets the
requirements of section 207(e)(4) in making irrevocable contributions to a trust, then those contributions
will not be added to the regular pay rate on the theory that they are a form of indirect bonus to the
worker.") (emphasis added).)
In ruling on this motion, the Court is bound by Section 207(e)(4)'s plain text stating that only employer
"contributions" to a third party will be excluded from the "regular rate." The Court herein also applies
Flores and Local 246, both of which require an employer to produce evidence that "cash in lieu of
benefits" payments were: (1) in fact "contributions" to a "trustee or third party," (2) made pursuant to a
benefits plan, and (3) not paid directly to the employee.
Defendant's moving papers argue that the payments of "cash in lieu of benefits" to employees can be
permissibly excluded from the "regular rate" given that HNI, not HNCA, made those payments to HNCA's
employees. Defendant argues that taking the instant case beyond the scope of Flores, HNCA did not
"directly" pay its employees the "cash" -- HNI did. Defendant argues that HNI is HNCA's parent
company and the "third party" charged with administering HNCA's employee health and welfare benefit
Plan ("Plan"), as well as the third party payroll administrator for HNCA.) Defendant essentially argues
that, by virtue of HNI's involvement as a go-between or intermediary between HNCA and HNCA's
employees, HNCA undisputedly did not make those "cash" payments "directly" to employees, such that
Flores is factually distinguishable.
However, Defendant's actual evidence - itemized in its Separate Statement of Undisputed Facts
("SSUF") - fails to address the actual source of the "cash in lieu of benefits." Instead, the SSUF states
generally that HNCA "paid the actual costs of benefits under the plan" to "eligible employees who
elected to participate" in the Plan. (UF 7 (emphasis added).) Similarly, UF 8 asserts that pursuant to the
Plan, "HNCA arranged for the monies used to pay the actual costs of benefits to be deposited into an
account maintained and controlled by HNI as the Plan's sponsor." (UF 8 (emphasis added).) Both UF 7
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and UF 8 give rise to the inference that HNCA contributed the "actual costs of benefits" to HNI pursuant
to the Plan - but there is no evidence as to what the "actual costs of benefits" actually means. Crucially,
there is no evidence that the "actual costs of benefits" includes the "cash in lieu of benefits" at the heart
of this motion.
In other words, despite the plain text of Section 207(e)(4) requiring an employer to demonstrate that the
amounts it seeks to exclude from the "regular rate" were in fact "contributions" from the employer to a
third party pursuant to a benefits plan, no UF squarely asserts that HNCA "contributed" the "cash in lieu
of benefits" payments to HNI. While there is evidence that HNCA contributed the "actual costs of
benefits" to HNI, no UFs define the phrase "actual costs of benefits." No UFs demonstrate that "cash in
lieu of benefits" is an "actual cost of benefits."
Defendant has not clearly identified evidence: (1) that it actually "contributed" the "cash in lieu of
benefits" to third party HNI, and (2) that HNI, not HCNA, actually paid out those amounts to employees.
Therefore, the Court must find that Defendant did not meet its initial burden on this motion.
The Court has examined the evidence specifically identified as support for the various pertinent UFs,
including those stating that HNCA "paid the actual costs of benefits," that employees can waive medical
benefits, and that employees waiving such benefits would receive a cash payment in their paycheck.
(UFs 7, 8, 9, 16, 18, 19.) But on the Court's review, none of the cited evidence actually states that
HNCA "contributed" the "cash in lieu of benefits" to HNI, or that all "cash in lieu of benefits" payouts
would have necessarily come from funding that HNCA had "contributed" to HNI for the "actual costs of
benefits" under the Plan.
For instance, declarant Kelly Sarabia, the Payroll Director for HNI during the relevant period, declares
that "HNCA paid out" various amounts under "pay codes" for "waived" benefits and "paid out" various
other amounts under "pay codes" for "elected" benefits. (Declaration of Kelly Sarabia ("Sarabia Decl.")
¶¶ 1-5 (emphasis added).) But the declaration is silent as to whether HNCA "contributed" the "cash in
lieu of benefits" funding to HNI pursuant to the Plan in the first place, before "HNCA paid out" those
funds to employees. In fact, the phrasing used in Sarabia's declaration alone, which refers to HNCA and
not HNI as "paying out" these amounts to employees, could suffice to reveal a material factual dispute
as to whether HNI or HNCA actually "paid out" the funds used to pay the "cash in lieu of benefits." In
other words, there must be no factual dispute that HNI is the "third party" entity (see 29 U.S.C. §
207(e)(4)) that "paid out" such "cash in lieu of benefits" payments pursuant to the Plan, yet Sarabia
declares that HCNA "paid out" various amounts. (The Court need not and does not examine Plaintiffs'
evidence offered in Opposition for purposes of showing a material factual dispute on this issue, because
Defendant did not meet its initial burden of showing that HNCA "contributed" to HNI the funds used to
pay "cash in lieu of benefits.")
Declarant Diane C. Rodes, Director of Human Resources for HNI, declares: that HNCA is a subsidiary of
HNI and is familiar with the human resources functions of HNCA; that Plan participants receive "Flex
Dollars" "to help pay for the cost of medical and dental insurance coverage;" that "Flex Dollars received
were reflected in Participants' paychecks," and that "when a Participant waived medical and/or dental
coverage, HNCA provided a cash benefit pursuant to the terms of the Plan [which was] reflected as a
monetary line item in the 'Earnings' section of the Participant's wage statement." (Declaration of Diane
C. Rodes ("Rodes Decl.") ¶¶ 1, 5-8.) But this testimony is silent as to whether HNCA actually
"contributes" the specific "cash in lieu of benefits payments" to HNI before such cash is ultimately paid to
the employees. This testimony is silent as to whether the "cash in lieu of benefits" is part of the "actual
costs of benefits" that HNCA "deposited" (UFs 7-8) into an account controlled by HNI.
Similarly, Declarant Debbie Colia, Vice President of Organizational Effectiveness for HNI, declares: that
"Pursuant to the terms of the Plan, HNCA paid the actual costs of benefits under the Plan for its eligible
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employees who elected to participate;" that "HNCA arranged for these monies to be deposited into an
account maintained and controlled by HNI as the Plan's sponsor;" that participants received "'Flex
Dollars' to help pay for the cost of medical and dental coverage;" that the Participant "was required to
contribute some amount [of the Flex Dollars] toward the cost of the benefit(s) he or she selected;" that
"eligible employees under the Plan could waive one or more of the available benefits;" and that "in the
event that a Participant waived medical and/or dental coverage, the Plan provided that the Participant
would receive a portion of the Flex Dollars as cash in his or her paycheck." (Declaration of Debbie Colia
("Colia Decl.") ¶¶ 1, 4, 9-11.) But again, this testimony is silent as to whether HNCA actually
"contributes" the "cash in lieu of benefits" to HNI in the first place. The testimony is also silent as to
whether the "cash in lieu of benefits" is in fact part of the "actual costs of benefits" that HNCA
undisputedly "deposited" (UFs 7-8) into an account controlled by HNI.
The Court notes that Debbie Colia's declaration attaches copies of Plan documents and various
amendments thereto. However, neither Debbie Colia's declaration nor the SSUF specifically identify
any sections of the Plan, let alone any sections that might demonstrate that HNCA would actually
"contribute" the "cash in lieu of benefits" to HNI. This alone warrants denial of the instant motion. It is
Defendant's burden as the moving party to meaningfully identify supporting evidence in its moving
papers. (Cal. R. Ct. 3.1350(d)(3) (in the Separate Statement, "[c]itation to the evidence in support of
each material fact must include reference to the exhibit, title, page, and line numbers) (emphasis
added).) Moreover, while the Court located a Plan document (Exh. J to Colia Decl. at HNCA 000921)
stating that waived or unused Flex Dollars would be paid out as "cash in your paycheck," this statement
alone does not give rise to an inference that HNCA "contributed" such "cash" to HNI before the
employees would receive it in the form of "cash in [his or her] paycheck."
As such, the record is bereft as to where the money for the "cash in lieu of benefits" came from before it
was paid to employees, and the evidence is in conflict as to whether HNI or HNCA actually "paid out"
that cash to employees. In order for the exclusion described in Section 207(e)(4) to apply to the "cash"
payments central to the instant motion, there must be some evidence that these cash payments were
"contributions" from HNCA to HNI (as its trustee or third party) "pursuant to" the text of the Plan. (See
29 U.S.C. § 207(e)(4) (excluding only "contributions" from employer to trustee or third party "pursuant to"
a plan); Flores, 824 F.3d at 901-02 (in order to apply exclusion stated at Section 207(e)(4), an employer
must have "evidence that any of the payments at issue were made to a trust [or third party] rather
than directly to the employees" because "[s]ection 207(e)(4) deals with contributions by the employer,
not payments to the employee.") (emphasis added); Local 426, 83 F.3d at 296 (same).) Defendant has
not met its burden of identifying such evidence.
In the Reply papers, Defendant argues that it has presented "uncontroverted testimony . . . that HNCA
made irrevocable payments to HNI as the Plan administrator (i.e., a "third party" within the meaning of
the Benefit-Plan contributions Exception) to cover all benefits paid out by the Plan, including the cash
benefits that are the subject of this motion. RUFs 3-19." (Reply at 5-6 (emphasis added).)
The Court is not persuaded. Put simply, none of UFs 3-19 squarely address the "cash benefits that are
the subject of this motion." The wording of these UFs matters. The UFs refer only to the "actual cost of
benefits," a phrase Defendant never defines. As a result, the Court cannot find that "actual cost of
benefits" undisputedly includes "cash in lieu of benefits" or "cash benefits." Therefore, while Defendant
framed UFs 3-19 so as to broadly state that HNCA contributed the "the actual costs of benefits," contrary
to Defendant's assertions in the Reply there is no evidence as to whether the "actual costs of benefits"
includes the "cash benefits" paid in lieu of medical coverage.
Similarly, Defendant argues in Reply that it is "undisputed" that "the cash benefits were deposited
directly into Spears' bank account by HNI, which processed HNCA's payroll (Sarabia Decl. ¶ 1)." (Reply
at 6.) Yet Paragraph 1 of the Sarabia Declaration merely states:
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I am the payroll director for Centene Corporation. Before the merger with Centene Corporation, I was
the payroll director for Health Net, Inc. Between the two companies, I have been employed in this
position for approximately 20 years. As Payroll Director, I oversee all aspects of payroll for Centene
Corporation and its subsidiaries, including Health Net of California, Inc. ("HNCA"). I did the same thing
when I was employed at Health Net Inc.
(Sarabia Decl. ¶ 1.) In the remainder of her declaration, Sarabia also goes on to declare that "HNCA"
"paid out" various amounts for various pay codes for various years.
Contrary to Defendant's argument in Reply (Reply at 6), there is no direct testimony from Sarabia that
"HNI processed HNCA's payroll." Instead, Sarabia declares that she was payroll director for HNI at one
time, and that as current payroll director for Centene she oversees all aspects of payroll for HNCA,
although Sarabia does declare generally that she "did the same thing" when she was employed at HNI.
But contrary to Defendant's suggestion (Reply at 6) there is no testimony from Sarabia that for
employees who waived coverage, "the cash benefits were deposited directly" into employee bank
accounts "by HNI, which processed HNCA's payroll." Sarabia makes no mention of "cash benefits" or
cash in lieu of benefits, does not discuss where the money comes from to pay out such cash, does not
discuss which entity actually pays such "cash" to employees who waive coverage, and does not discuss
whether the funds for such "cash" come from "contributions" from HNCA to HNI pursuant to the Plan as
opposed to funds passed from HNCA to HNI for payroll processing purposes. The Court finds that
Sarabia's declaration is simply not evidence that "HNCA made irrevocable payments to HNI . . . to cover
all benefits paid out by the Plan, including the cash benefits that are the subject of this Motion."
(Reply at 5-6 (emphasis added).)
Also on Reply, Defendant argues that Flores and its progeny are inapplicable to the instant facts (Reply
at 6-7) because "unlike the facts in Flores . . . HNCA did not administer its own benefits plan; instead
HNCA made irrevocable contributions to third party HNI in its capacity as the Plan sponsor and
administrator." (Reply at 7.) Yet Defendant has not identified any authorities suggesting that when a
third party acts as both an employer's plan administrator -- bound to act in a fiduciary/trustee capacity
-- and the employer's payroll processor (as Defendant argues HNI did here), whenever the third party
acts in the capacity of a payroll processor it will nevertheless be considered the sort of "trustee or third
party" referenced in Section 207(e)(4).
Defendant has not shown entitlement to judgment as a matter of law on undisputed facts with respect to
Issue 1.
Accordingly, Defendant's Motion for Summary Adjudication is DENIED as to Issue 1.
Issue 2: Plaintiff's failure to pay overtime wages claim premised on HNCA's alleged failure to
include bonus payments in the regular rate of pay fails because bonus payments were properly
accounted for in the regular rate calculation.
Plaintiffs allege that Defendant improperly calculated the "regular rate" of pay so as to exclude
"non-discretionary bonuses." (Complaint ¶¶ 40-41, 91-92.) Plaintiffs allege that Defendants violated
Labor Code §§ 510, 1194, and 1198 as a result of not correctly calculating the regular rate of pay to
include all applicable remuneration, including "non-discretionary bonuses." (Complaint ¶ 41.)
In general, bonuses are "[s]ums paid in recognition of services performed during a given period." (29
U.S.C. § 207(e)(3); see also 29 C.F.R. 778.208; 778.211.) However, there is no blanket rule concerning
whether bonuses must be included in an employee's "regular rate." Rather, that determination depends
on whether a given bonus was "discretionary." Discretionary bonuses -- i.e., bonuses where the
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employer retains discretion as to both the fact and amount of the payment -- may be excluded from the
regular-rate calculation. (29 C.F.R. §§ 778.208, 778.211(b).) On the other hand, where a bonus
payment is considered a part of the regular rate at which an employee is employed, it must be included
in computing his regular hourly rate of pay and overtime compensation. 29 C.F.R. § 778.209(a). Where
a bonus is "promised" to employees, the bonus must be included in the regular rate. A bonus, to be
excluded under section 7(e)(3)(a), must not be paid "pursuant to any prior contract, agreement, or
promise." (29 C.F.R. 778.211(c).)
Defendant argues that the undisputed facts show that Plaintiff Spears never received any "bonus
payments." (P&As at 4; UF 23.) Defendant's UF 23 simply states that "[a]t no time during Plaintiff
Spears' employment with HNCA did she receive any bonus payments," listing the Rodes Declaration at
¶ 11 as the sole supporting evidence. By using the word "bonus" in the UF, Defendant relies on its own
undefined characterization of the word "bonus." Declarant Rodes likewise does not define what she
personally considers to be a "bonus" payment. Aside from testimony regarding "SPOT awards," she
does not offer evidence as to whether Spears ever received any non-discretionary, promised amounts
potentially causing Spears to expect such payments regularly. (See e.g., 29 C.F.R. 778.211.)
Even if such evidence were sufficient to shift the burden to Plaintiffs here, Plaintiffs identify evidence that
renders UF 23 disputed. (Pl.'s Resp. to UF 23.) Plaintiffs cite evidence that Spears received
nondiscretionary "'MedFlxWave' payments" based on "preestablished criteria" as "compensation for
Plaintiff's work for Defendant." (Pl.'s Resp. to UF 23 (citing evidence that the "MedFlxWave" payment
was made to Plaintiff, evidence that "MedFlxWave" payments are "part of our total remuneration plan,"
and other evidence that the MedFlxWave payment was directly deposited into Plaintiff's bank account).)
Given Defendant's framing of UF 23 -- which turns on an unstated legal definition of the word "bonus" --
at a minimum, a material factual dispute exists as to whether the MedFlxWave payments could
potentially be characterized as nondiscretionary "bonuses" that must be included in the "regular rate"
calculation for overtime. Neither Defendants' moving papers nor its Amended Reply papers include
legal authorities regarding payments analogous to the nondiscretionary MedFlxWave payments, nor do
they demonstrate that these cannot as a matter of law be considered "nondiscretionary bonuses."
With respect to "bonuses" paid to Plaintiff Arana (UF 24), Defendant again frames the UF by conclusorily
using the undefined word "bonus" rather than making plain factual assertions independent of that legal
term. Defendant argues that it is undisputed that the "SPOT Awards" received by Plaintiff Arana were
"properly excluded from his regular rate because they were discretionary bonuses," and undisputed that
the "bonuses received by Plaintiff Arana pursuant to the ACA Incentive Plan" were properly included in
his regular rate. (P&As at 10-12 (emphasis added); UFs 23-40.) Defendant also argues that Plaintiff
Arana never received "any other bonus payments." (P&As at 4; UF 24.)
In the Opposition, Plaintiffs do not challenge Defendant's arguments regarding "SPOT Awards," instead
opting to identify evidence rendering UF 24 disputed by virtue of Plaintiff Arana's having been paid what
they argue was a "Wellness bonus." (Pl.'s Resp. to UF 24.) The Court notes that Defendant cannot be
heard to take issue with Plaintiff's conclusory assertion of a "bonus" when Defendant itself conclusorily
asserts the lack of a "bonus" in UF 24. Defendant's moving papers include legal authorities regarding
nondiscretionary bonuses, but except with respect to the "SPOT" bonuses specifically, their UFs do not
include any "facts" regarding whether HNCA had any discretion in whether to pay out other,
non-"SPOT" amounts. And Plaintiffs' proffered evidence in support of the "wellness bonus" is deposition
testimony by Diane Rodes, wherein Rodes testifies that the wellness payments were nondiscretionary
payments to employees who fulfilled certain requirements. (Exh. 5 to Amended Declaration of Aparajit
Bhowmik (transcript of deposition of Diane Rodes) at 99-103.)
Defendant has not shown that the "wellness" payments cannot be considered nondiscretionary bonuses
as a matter of law. At a minimum, while it is apparently undisputed that "wellness" payments were made
DATE: 10/23/2018 MINUTE ORDER Page 8
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CASE TITLE: Spears vs. Health Net of California Inc CASE NO: 34-2017-00210560-CU-OE-GDS
to Arana, a material factual dispute exists as to whether such "wellness" payments were in fact
"bonuses" -- or, more accurately, were "nondiscretionary" payments that might be a required part of the
"regular rate" calculation.
In the Amended Reply, Defendant argues that the Court should ignore Plaintiffs' arguments based on
evidence of a "wellness" payment because such payments were not specifically alleged in the pleading.
(Amended Reply at 7-8.) The Court declines to ignore Plaintiffs' "wellness payment" argument. The
pleading alleged that nondiscretionary bonuses were improperly excluded from the regular rate
(Complaint ¶¶ 40-41, 91-92), and Defendant has not shown that the pleading was required to specifically
itemize each and every alleged "bonus" payment.
Defendant has not shown entitlement to judgment as a matter of law on undisputed facts with respect to
this cause of action. The Motion is DENIED as to Issue 2.
Issue 3: Plaintiffs' failure to pay overtime wages claim premised on HNCA's alleged failure to
include shift differential premiums in the regular rate of pay fails because these premiums were
included in the regular rate calculation.
The Motion is GRANTED as to Issue 3.
Defendant's moving papers and SSUF includes undisputed facts showing that HNCA did properly
include shift differential premiums in its regular rate calculation. (UFs 41-46.) Plaintiffs expressly state
that these UFs are indeed "undisputed," and their Opposition makes no arguments as to this Issue.
While by this Order the Court also denied Defendant's Motion with respect to Issues 1 and 2, which
challenged the Third Cause of Action for Failure to Pay Hourly and Overtime Wages, the Court finds it
appropriate to grant Defendant's Motion with respect to Issue 3, which challenges that same Third
Cause of Action insofar as it is based on exclusion of shift differential premiums specifically. (See, e.g.,
Lilienthal & Fowler v. Superior Court (Karr) (1993) 12 Cal.App.4th 1848, 1854-1856 (despite language of
Code of Civil Procedure §437c(f), trial court may determine merits of summary adjudication motions
"involving separate and distinct wrongful acts which are combined in the same cause of action").)
Issue 4: Plaintiffs' failure to pay all wages claim premised on HNCA's alleged rounding practice
fails because HNCA did not implement any rounding practice during the pertinent time period.
The Motion is GRANTED as to Issue 4.
Defendant's moving papers and SSUF includes undisputed facts showing that HNCA did not engage in
rounding. (UFs 47-48.) Plaintiffs expressly state that these UFs are indeed "undisputed," and their
Opposition makes no arguments as to this Issue.
While by this Order the Court also denied Defendant's Motion with respect to Issues 1 and 2, which
challenged the Third Cause of Action for Failure to Pay Hourly and Overtime Wages, the Court finds it
appropriate to grant Defendant's Motion with respect to Issue 4, which challenges that same Third
Cause of Action insofar as it is based on engaging in rounding practices specifically. (See, e.g.,
Lilienthal, 12 Cal.App.4th at 1854-1856 (despite language of Code of Civil Procedure §437c(f), trial court
may determine merits of summary adjudication motions "involving separate and distinct wrongful acts
which are combined in the same cause of action").)
Seventh Cause of Action For Civil Penalties Pursuant to Labor Code §§ 2698, et seq. (PAGA)
Issue 5: Plaintiff's PAGA claim based on alleged failure to pay overtime wages as a result of
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CASE TITLE: Spears vs. Health Net of California Inc CASE NO: 34-2017-00210560-CU-OE-GDS
alleged failure to include cash benefits received in lieu of medical payment in Plaintiff Spears' regular
rate of pay fails because the underlying alleged Labor Code violation did not occur.
For the same reasons discussed above in connection with Issue 1, the Court must deny the motion as to
Issue 5. Defendant has not met its initial burden of identifying evidence that payments of cash in lieu of
benefits were in fact "contributions" from HNCA to HNI (as its trustee or third party) pursuant to the Plan.
Accordingly, the Motion is DENIED as to Issue 5.
Issue 6: Plaintiffs' PAGA claim based on alleged failure to pay overtime wages as alleged failure
to include bonuses awarded to Plaintiffs in the regular rate of pay calculation fails because the
underling alleged Labor Code violation did not occur.
For the same reasons discussed above in connection with Issue 2, the Court must deny the motion as to
Issue 6. Defendant has not shown entitlement to judgment as a matter of law on undisputed facts that
neither the MedFlxWave payments to Plaintiff Spears nor the Wellness payments to Plaintiff Arana
cannot, as a matter of law, be considered "nondiscretionary bonuses" such that they would need to be
included in the "regular rate."
Accordingly, the Motion is DENIED as to Issue 6.
Issue 7: Plaintiffs' PAGA claim based on alleged failure to include shift differential premiums in
Plaintiff Arana's regular rate of pay fails because the underlying alleged Labor Code violation did
not occur.
The Motion is GRANTED as to Issue 7 for the same reasons discussed above in connection with Issue
3.
Defendant's moving papers and SSUF includes undisputed facts showing that HNCA did properly
include shift differential premiums in its regular rate calculation. (UFs 41-46.) Plaintiffs expressly state
that these UFs are indeed "undisputed," and their Opposition makes no arguments as to this Issue.
While by this Order the Court also denied Defendant's Motion with respect to Issues 5 and 6, which
challenged the Seventh Cause of Action For Civil Penalties Pursuant to PAGA, the Court finds it
appropriate to grant Defendant's Motion with respect to Issue 7, which challenges that same Seventh
Cause of Action insofar as it is based on exclusion of shift differential premiums specifically. (See, e.g.,
Lilienthal, 12 Cal.App.4th at 1854-1856 (despite language of Code of Civil Procedure §437c(f), trial court
may determine merits of summary adjudication motions "involving separate and distinct wrongful acts
which are combined in the same cause of action").)
Issue 8: Plaintiff's PAGA claim based on alleged rounding practice fails as a matter of law
because the underlying alleged Labor Code violation did not occur.
The Motion is GRANTED as to Issue 8 for the same reasons discussed above in connection with Issue
4.
Defendant's moving papers and SSUF includes undisputed facts showing that HNCA did not engage in
rounding. (UFs 47-48.) Plaintiffs expressly state that these UFs are indeed "undisputed," and their
Opposition makes no arguments as to this Issue.
While by this Order the Court also denied Defendant's Motion with respect to Issues 5 and 6, which
challenged the Seventh Cause of Action For Civil Penalties Pursuant to PAGA, the Court finds it
appropriate to grant Defendant's Motion with respect to Issue 8, which challenges that same Seventh
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CASE TITLE: Spears vs. Health Net of California Inc CASE NO: 34-2017-00210560-CU-OE-GDS
Cause of Action insofar as it is based on exclusion of shift differential premiums specifically. (See, e.g.,
Lilienthal, 12 Cal.App.4th at 1854-1856 (despite language of Code of Civil Procedure §437c(f), trial court
may determine merits of summary adjudication motions "involving separate and distinct wrongful acts
which are combined in the same cause of action").)
Conclusion
Defendants' Motion for Summary Adjudication is DENIED as to Issues 1, 2, 5, and 6.
Defendants' Motion for Summary Adjudication is undisputed and is GRANTED as to Issues 3, 4, 7 and
8.
This minute order is effective immediately. Defendant is directed to prepare a formal order complying
with Code Civ. Proc. § 437c(g) and C.R.C. Rule 3.1312.
COURT RULING
The matter was argued and submitted.
The matter was taken under submission.
SUBMITTED MATTER RULING
Having taken the matter under submission, the Court now rules as follows:
The Court affirmed the tentative ruling.
DATE: 10/23/2018 MINUTE ORDER Page 11
DEPT: 54 Calendar No.
Preview
SUPERIOR COURT OF CALIFORNIA, COUNTY OF SACRAMENTO GORDON D SCHABER COURTHOUSE MINUTE ORDER DATE: 10/23/2018 TIME: 11:12:00 AM DEPT: 54 JUDICIAL OFFICER PRESIDING: Christopher Krueger CLERK: G. Toda REPORTER/ERM: BAILIFF/COURT ATTENDANT: CASE NO: 34-2017-00210560-CU-OE-GDS CASE INIT.DATE: 04/05/2017 CASE TITLE: Spears vs. Health Net of California Inc CASE CATEGORY: Civil - Unlimited ASSOCIATED CASES: 34-2017-00216685-CU-OE-GDS APPEARANCES Nature of Proceeding: Ruling on Submitted Matter- (Motion for Summary Adjudication)- Taken Under Submission 9/27/18 TENTATIVE RULING Defendant Health Net of California, Inc.'s ("HNCA") Motion for Summary Adjudication as against the Third and Seventh Causes of Action in the Consolidated Complaint of Plaintiffs Andrea Spears and Tomas R. Arana (collectively, "Plaintiffs") is DENIED IN PART AND GRANTED IN PART as described below. Allegations in Pleading This is a consolidated wage-and-hour putative class action. Andrea Spears ("Spears") and Tomas R. Arana ("Arana") (collectively "Plaintiffs") are the named plaintiffs. Defendant Health Net of California, Inc. ("HNCA" or "Defendant") is the moving party seeking summary adjudication here. Plaintiffs allegedly served as hourly, non-exempt employees in HNCA call centers. Arana allegedly was promoted to a salaried, exempt position in or about November 2015. He alleges HNCA misclassified him as exempt. In the consolidated Complaint, Plaintiffs allege that Defendants failed to pay them and all other similarly situated individuals for all hours worked and failed to pay overtime wages at the correct rate, among other things. (Complaint at 1 (Register of Actions ("ROA") 66).) There is also a PAGA claim for civil penalties. Central to the instant motion are Plaintiffs' overtime claims, which are premised on HNCA's alleged failure to include "cash benefits" or "cash in lieu of benefits" when calculating the "regular rate" for overtime. It is undisputed that HNCA employees who waived medical benefits received such "cash" in their paychecks. Plaintiffs argue that such "cash" payments should have been included when calculating overtime rates. Defendant argues that such payments were properly excluded when calculating overtime rates because, as a matter of law and on undisputed facts, such payments are subject to a statutory exclusion codified at 29 U.S.C. § 207(e)(4), also known as the Benefit-Plan Contributions Exception. DATE: 10/23/2018 MINUTE ORDER Page 1 DEPT: 54 Calendar No. CASE TITLE: Spears vs. Health Net of California Inc CASE NO: 34-2017-00210560-CU-OE-GDS Request to Strike Plaintiffs' Amended Opposition This motion was originally set to be heard on May 30, 2018, but the Court continued the motion to today's date to allow Plaintiff additional requested discovery of payroll records, and to allow amended opposition and reply briefing. In that Order of May 30, 2018, the Court found "that Plaintiff has made a sufficient showing under section 437c, subdivision (h), to justify the exercise of discretion and grant of the requested continuance." Defendant now requests that Plaintiffs' Amended Opposition papers be stricken because they do not "argue why the payroll records they sought created a triable issue of fact" and also because they contradict portions of the original Opposition papers. (Def.'s Amended Reply at 3.) Defendant's request is OVERRULED. The Court's prior Order granted the continuance for the additional discovery and called for the filing of an Amended Opposition, but the Court's Order did not expressly limit the scope of the Amended Opposition in any way, and Defendant did not request any such limitation. As a result, the Amended Opposition does not violate the Court's Order of May 30, 2018. Accordingly, in ruling on this motion, the Court considers the original moving papers, the Amended Opposition papers, and the Amended Reply papers. Evidentiary Objections No separate written objections to evidence were filed. The Court notes that Defendant filed an Amended Reply Separate Statement of Undisputed Material Facts, to which Plaintiffs' Opposition papers raised an anticipatory objection. The Court considered the legal arguments made in Defendants' Amended Reply Separate Statement with respect to the UFs specifically discussed below herein. The Court also notes that Defendant filed new evidence with its Reply, i.e., evidence regarding "wellness payments." However, the Court did not find it necessary to reach the new evidence in ruling on the instant Motion. Legal Standard A defendant moving for summary judgment or summary adjudication may demonstrate that the plaintiff's cause of action has no merit by showing that (1) one or more elements of the cause of action cannot be established, or (2) there is a complete defense to that cause of action. (Code Civ. Proc. § 437c(f)(2), (p)(2); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843, 849.) This showing must be supported by evidence, such as affidavits, declarations, admissions, interrogatory answers, depositions, and matters of which judicial notice may be taken. (Code Civ. Proc. § 437c(p)(2); Aguilar, 25 Cal.4th at 850, 855.) A defendant moving for summary judgment or summary adjudication bears the burden of showing that the causes of action have no merit or that there are one or more complete defenses to them. (Code Civ. Proc. § 437c(p)(2).) A judge must grant a motion for summary judgment if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law. (Id. § 437c(c); Mann v. Cracchiolo (1985) 38 Cal.3d 18, 35.) Summary judgment is properly granted only if the moving party's evidence establishes that there is no issue of material fact to be tried. (Lipson v. Superior Court (1982) 31 Cal.3d 362, 374.) Once the moving party meets this burden of production, the burden shifts to the opposing party to produce admissible evidence DATE: 10/23/2018 MINUTE ORDER Page 2 DEPT: 54 Calendar No. CASE TITLE: Spears vs. Health Net of California Inc CASE NO: 34-2017-00210560-CU-OE-GDS demonstrating the existence of a triable issue of material fact. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849.) A judge may not grant summary judgment when any material factual issue is disputed. (O'Riordan v. Federal Kemper Life Assur. (2005) 36 Cal.4th 281, 289.) The issues raised by a motion for summary adjudication or summary judgment are framed by the pleadings. (Dromy v. Lukovsky (2013) 219 Cal.App.4th 278, 282; Lennar Northeast Partners v. Buice (1996) 49 Cal.App.4th 1576, 1582.) Discussion Third Cause of Action for Failure to Pay Hourly Wages and Failure to Pay Overtime Wages Issue 1: Plaintiffs' failure to pay overtime wages claim premised on HNCA's alleged failure to include cash benefits received in lieu of medical payment in Plaintiff Spears' regular rate of pay fails because cash benefits were properly excluded from her regular rate under the Benefit-Plan Contributions Exception. California follows the Fair Labor Standards Act ("FLSA"), which excludes from the regular rate for purposes of overtime compensation the "cash" employees receive when they waive medical coverage under what is known as the Benefit-Plan Contributions Exception. (See 29 U.S.C. § 207(e)(4) ("Section 207(e)(4)"); see also 29 C.F.R. § 778.215(a).) Section 207(e)(4) provides: (a) "Regular rate" defined. As used in this section the "regular rate" at which an employee is employed shall be deemed to include all remuneration for employment paid to, or on behalf of, the employee, but shall not be deemed to include [ . . . ] (4) contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing old-age, retirement, life, accident, or health insurance or similar benefits for employees. (29 U.S.C. § 207(e)(4) (emphasis added); see also Huntington Memorial Hospital v. Superior Court (2005) 131 Cal.App.4th 893, 903-905 (summarizing how the "regular rate" must be calculated for purposes of determining overtime pay).) Courts have applied Section 207(e)(4) so as to find that an employer that pays "cash in lieu of benefits" directly to employees will not, as a matter of law, be able to have such payments be excluded from the "regular rate." To be excluded from the "regular rate," the "cash in lieu of benefits" payments must be made to a "trustee or third party" as employer "contributions" within the plain text of Section 207(e)(4). (See Flores v. City of San Gabriel (9th Cir. 2016) 824 F.3d 890, 894, 901-03 (because the city paid cash in lieu of unused benefits directly to employees, such payments had to be included in regular rate of pay and thus in calculation of overtime rate; payment was not excluded under 29 U.S.C. § 207(e)(4) because it was paid "directly to employees" and therefore was not a "contribution by the employer"); see also Local 246 Util. Workers Union v. Southern Cal. Edison Co. (9th Cir. 1995) 83 F.3d 292, 296 (reversing grant of summary judgment to employer because employer failed to show that "supplemental payments to employees consisted of contributions made by [the employer] irrevocably to a trust.").) Although neither party identified any decisions from California courts on this issue, both parties cite to federal district court and Ninth Circuit case law. In Flores, the Ninth Circuit explained: The City also argues that its cash-in-lieu of benefits payments are properly excluded pursuant to § 207(e)(4). Section 207(e)(4) excludes from the regular rate of pay "contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing old-age, retirement, life, DATE: 10/23/2018 MINUTE ORDER Page 3 DEPT: 54 Calendar No. CASE TITLE: Spears vs. Health Net of California Inc CASE NO: 34-2017-00210560-CU-OE-GDS accident, or health insurance or similar benefits for employees." Because the City pays the unused benefits directly to its employees and not "to a trustee or third person," its cash-in-lieu of benefits payments cannot be excluded under § 207(e)(4). We rejected a similar argument in Local 246 when the employer had proffered no evidence that any of the payments at issue were made to a trust rather than directly to the employees because "[s]ection 207(e)(4) deals with contributions by the employer, not payments to the employee." Local 246, 83 F.3d at 296. That reasoning applies equally here. The City urges us to find that its cash-in-lieu of benefits payments fall within the ambit of § 207(e)(4) even though the payments are not made to a trustee or third party because the payments "generally" meet the requirements of that subsection, arguing that it should not be penalized for administering its own flexible benefits plan. But " [w]here '[a] statute's language is plain, the sole function of the courts is to enforce it according to its terms,' because 'courts must presume that a legislature says in a statute what it means and means in a statute what it says there.'" [Citations.] The City's cash-in-lieu of benefits payments are not made to a trustee or third party, and therefore those payments do not meet the requirements of § 207(e)(4). We are not at liberty to add exceptions to the clear requirements set forth in the statute for payments that "generally" satisfy the requirements of that provision. This is particularly true here, where exemptions to the FLSA's requirements are to be narrowly construed in favor of the employee. [Citations.] We thus have no trouble concluding that the City's cash-in-lieu of benefits payments are not properly excluded from the regular rate of pay pursuant to § 207(e)(4). (Flores, 824 F.3d at 901-02 (emphasis added) (citations omitted); see also Local 246, 83 F.3d 292, 296 ("On this record, however, there is no indication that any of the supplemental payments to the employees consisted of contributions made by Edison irrevocably to a trust. Section 207(e)(4) deals with contributions by the employer, not payments to the employee. If the employer meets the requirements of section 207(e)(4) in making irrevocable contributions to a trust, then those contributions will not be added to the regular pay rate on the theory that they are a form of indirect bonus to the worker.") (emphasis added).) In ruling on this motion, the Court is bound by Section 207(e)(4)'s plain text stating that only employer "contributions" to a third party will be excluded from the "regular rate." The Court herein also applies Flores and Local 246, both of which require an employer to produce evidence that "cash in lieu of benefits" payments were: (1) in fact "contributions" to a "trustee or third party," (2) made pursuant to a benefits plan, and (3) not paid directly to the employee. Defendant's moving papers argue that the payments of "cash in lieu of benefits" to employees can be permissibly excluded from the "regular rate" given that HNI, not HNCA, made those payments to HNCA's employees. Defendant argues that taking the instant case beyond the scope of Flores, HNCA did not "directly" pay its employees the "cash" -- HNI did. Defendant argues that HNI is HNCA's parent company and the "third party" charged with administering HNCA's employee health and welfare benefit Plan ("Plan"), as well as the third party payroll administrator for HNCA.) Defendant essentially argues that, by virtue of HNI's involvement as a go-between or intermediary between HNCA and HNCA's employees, HNCA undisputedly did not make those "cash" payments "directly" to employees, such that Flores is factually distinguishable. However, Defendant's actual evidence - itemized in its Separate Statement of Undisputed Facts ("SSUF") - fails to address the actual source of the "cash in lieu of benefits." Instead, the SSUF states generally that HNCA "paid the actual costs of benefits under the plan" to "eligible employees who elected to participate" in the Plan. (UF 7 (emphasis added).) Similarly, UF 8 asserts that pursuant to the Plan, "HNCA arranged for the monies used to pay the actual costs of benefits to be deposited into an account maintained and controlled by HNI as the Plan's sponsor." (UF 8 (emphasis added).) Both UF 7 DATE: 10/23/2018 MINUTE ORDER Page 4 DEPT: 54 Calendar No. CASE TITLE: Spears vs. Health Net of California Inc CASE NO: 34-2017-00210560-CU-OE-GDS and UF 8 give rise to the inference that HNCA contributed the "actual costs of benefits" to HNI pursuant to the Plan - but there is no evidence as to what the "actual costs of benefits" actually means. Crucially, there is no evidence that the "actual costs of benefits" includes the "cash in lieu of benefits" at the heart of this motion. In other words, despite the plain text of Section 207(e)(4) requiring an employer to demonstrate that the amounts it seeks to exclude from the "regular rate" were in fact "contributions" from the employer to a third party pursuant to a benefits plan, no UF squarely asserts that HNCA "contributed" the "cash in lieu of benefits" payments to HNI. While there is evidence that HNCA contributed the "actual costs of benefits" to HNI, no UFs define the phrase "actual costs of benefits." No UFs demonstrate that "cash in lieu of benefits" is an "actual cost of benefits." Defendant has not clearly identified evidence: (1) that it actually "contributed" the "cash in lieu of benefits" to third party HNI, and (2) that HNI, not HCNA, actually paid out those amounts to employees. Therefore, the Court must find that Defendant did not meet its initial burden on this motion. The Court has examined the evidence specifically identified as support for the various pertinent UFs, including those stating that HNCA "paid the actual costs of benefits," that employees can waive medical benefits, and that employees waiving such benefits would receive a cash payment in their paycheck. (UFs 7, 8, 9, 16, 18, 19.) But on the Court's review, none of the cited evidence actually states that HNCA "contributed" the "cash in lieu of benefits" to HNI, or that all "cash in lieu of benefits" payouts would have necessarily come from funding that HNCA had "contributed" to HNI for the "actual costs of benefits" under the Plan. For instance, declarant Kelly Sarabia, the Payroll Director for HNI during the relevant period, declares that "HNCA paid out" various amounts under "pay codes" for "waived" benefits and "paid out" various other amounts under "pay codes" for "elected" benefits. (Declaration of Kelly Sarabia ("Sarabia Decl.") ¶¶ 1-5 (emphasis added).) But the declaration is silent as to whether HNCA "contributed" the "cash in lieu of benefits" funding to HNI pursuant to the Plan in the first place, before "HNCA paid out" those funds to employees. In fact, the phrasing used in Sarabia's declaration alone, which refers to HNCA and not HNI as "paying out" these amounts to employees, could suffice to reveal a material factual dispute as to whether HNI or HNCA actually "paid out" the funds used to pay the "cash in lieu of benefits." In other words, there must be no factual dispute that HNI is the "third party" entity (see 29 U.S.C. § 207(e)(4)) that "paid out" such "cash in lieu of benefits" payments pursuant to the Plan, yet Sarabia declares that HCNA "paid out" various amounts. (The Court need not and does not examine Plaintiffs' evidence offered in Opposition for purposes of showing a material factual dispute on this issue, because Defendant did not meet its initial burden of showing that HNCA "contributed" to HNI the funds used to pay "cash in lieu of benefits.") Declarant Diane C. Rodes, Director of Human Resources for HNI, declares: that HNCA is a subsidiary of HNI and is familiar with the human resources functions of HNCA; that Plan participants receive "Flex Dollars" "to help pay for the cost of medical and dental insurance coverage;" that "Flex Dollars received were reflected in Participants' paychecks," and that "when a Participant waived medical and/or dental coverage, HNCA provided a cash benefit pursuant to the terms of the Plan [which was] reflected as a monetary line item in the 'Earnings' section of the Participant's wage statement." (Declaration of Diane C. Rodes ("Rodes Decl.") ¶¶ 1, 5-8.) But this testimony is silent as to whether HNCA actually "contributes" the specific "cash in lieu of benefits payments" to HNI before such cash is ultimately paid to the employees. This testimony is silent as to whether the "cash in lieu of benefits" is part of the "actual costs of benefits" that HNCA "deposited" (UFs 7-8) into an account controlled by HNI. Similarly, Declarant Debbie Colia, Vice President of Organizational Effectiveness for HNI, declares: that "Pursuant to the terms of the Plan, HNCA paid the actual costs of benefits under the Plan for its eligible DATE: 10/23/2018 MINUTE ORDER Page 5 DEPT: 54 Calendar No. CASE TITLE: Spears vs. Health Net of California Inc CASE NO: 34-2017-00210560-CU-OE-GDS employees who elected to participate;" that "HNCA arranged for these monies to be deposited into an account maintained and controlled by HNI as the Plan's sponsor;" that participants received "'Flex Dollars' to help pay for the cost of medical and dental coverage;" that the Participant "was required to contribute some amount [of the Flex Dollars] toward the cost of the benefit(s) he or she selected;" that "eligible employees under the Plan could waive one or more of the available benefits;" and that "in the event that a Participant waived medical and/or dental coverage, the Plan provided that the Participant would receive a portion of the Flex Dollars as cash in his or her paycheck." (Declaration of Debbie Colia ("Colia Decl.") ¶¶ 1, 4, 9-11.) But again, this testimony is silent as to whether HNCA actually "contributes" the "cash in lieu of benefits" to HNI in the first place. The testimony is also silent as to whether the "cash in lieu of benefits" is in fact part of the "actual costs of benefits" that HNCA undisputedly "deposited" (UFs 7-8) into an account controlled by HNI. The Court notes that Debbie Colia's declaration attaches copies of Plan documents and various amendments thereto. However, neither Debbie Colia's declaration nor the SSUF specifically identify any sections of the Plan, let alone any sections that might demonstrate that HNCA would actually "contribute" the "cash in lieu of benefits" to HNI. This alone warrants denial of the instant motion. It is Defendant's burden as the moving party to meaningfully identify supporting evidence in its moving papers. (Cal. R. Ct. 3.1350(d)(3) (in the Separate Statement, "[c]itation to the evidence in support of each material fact must include reference to the exhibit, title, page, and line numbers) (emphasis added).) Moreover, while the Court located a Plan document (Exh. J to Colia Decl. at HNCA 000921) stating that waived or unused Flex Dollars would be paid out as "cash in your paycheck," this statement alone does not give rise to an inference that HNCA "contributed" such "cash" to HNI before the employees would receive it in the form of "cash in [his or her] paycheck." As such, the record is bereft as to where the money for the "cash in lieu of benefits" came from before it was paid to employees, and the evidence is in conflict as to whether HNI or HNCA actually "paid out" that cash to employees. In order for the exclusion described in Section 207(e)(4) to apply to the "cash" payments central to the instant motion, there must be some evidence that these cash payments were "contributions" from HNCA to HNI (as its trustee or third party) "pursuant to" the text of the Plan. (See 29 U.S.C. § 207(e)(4) (excluding only "contributions" from employer to trustee or third party "pursuant to" a plan); Flores, 824 F.3d at 901-02 (in order to apply exclusion stated at Section 207(e)(4), an employer must have "evidence that any of the payments at issue were made to a trust [or third party] rather than directly to the employees" because "[s]ection 207(e)(4) deals with contributions by the employer, not payments to the employee.") (emphasis added); Local 426, 83 F.3d at 296 (same).) Defendant has not met its burden of identifying such evidence. In the Reply papers, Defendant argues that it has presented "uncontroverted testimony . . . that HNCA made irrevocable payments to HNI as the Plan administrator (i.e., a "third party" within the meaning of the Benefit-Plan contributions Exception) to cover all benefits paid out by the Plan, including the cash benefits that are the subject of this motion. RUFs 3-19." (Reply at 5-6 (emphasis added).) The Court is not persuaded. Put simply, none of UFs 3-19 squarely address the "cash benefits that are the subject of this motion." The wording of these UFs matters. The UFs refer only to the "actual cost of benefits," a phrase Defendant never defines. As a result, the Court cannot find that "actual cost of benefits" undisputedly includes "cash in lieu of benefits" or "cash benefits." Therefore, while Defendant framed UFs 3-19 so as to broadly state that HNCA contributed the "the actual costs of benefits," contrary to Defendant's assertions in the Reply there is no evidence as to whether the "actual costs of benefits" includes the "cash benefits" paid in lieu of medical coverage. Similarly, Defendant argues in Reply that it is "undisputed" that "the cash benefits were deposited directly into Spears' bank account by HNI, which processed HNCA's payroll (Sarabia Decl. ¶ 1)." (Reply at 6.) Yet Paragraph 1 of the Sarabia Declaration merely states: DATE: 10/23/2018 MINUTE ORDER Page 6 DEPT: 54 Calendar No. CASE TITLE: Spears vs. Health Net of California Inc CASE NO: 34-2017-00210560-CU-OE-GDS I am the payroll director for Centene Corporation. Before the merger with Centene Corporation, I was the payroll director for Health Net, Inc. Between the two companies, I have been employed in this position for approximately 20 years. As Payroll Director, I oversee all aspects of payroll for Centene Corporation and its subsidiaries, including Health Net of California, Inc. ("HNCA"). I did the same thing when I was employed at Health Net Inc. (Sarabia Decl. ¶ 1.) In the remainder of her declaration, Sarabia also goes on to declare that "HNCA" "paid out" various amounts for various pay codes for various years. Contrary to Defendant's argument in Reply (Reply at 6), there is no direct testimony from Sarabia that "HNI processed HNCA's payroll." Instead, Sarabia declares that she was payroll director for HNI at one time, and that as current payroll director for Centene she oversees all aspects of payroll for HNCA, although Sarabia does declare generally that she "did the same thing" when she was employed at HNI. But contrary to Defendant's suggestion (Reply at 6) there is no testimony from Sarabia that for employees who waived coverage, "the cash benefits were deposited directly" into employee bank accounts "by HNI, which processed HNCA's payroll." Sarabia makes no mention of "cash benefits" or cash in lieu of benefits, does not discuss where the money comes from to pay out such cash, does not discuss which entity actually pays such "cash" to employees who waive coverage, and does not discuss whether the funds for such "cash" come from "contributions" from HNCA to HNI pursuant to the Plan as opposed to funds passed from HNCA to HNI for payroll processing purposes. The Court finds that Sarabia's declaration is simply not evidence that "HNCA made irrevocable payments to HNI . . . to cover all benefits paid out by the Plan, including the cash benefits that are the subject of this Motion." (Reply at 5-6 (emphasis added).) Also on Reply, Defendant argues that Flores and its progeny are inapplicable to the instant facts (Reply at 6-7) because "unlike the facts in Flores . . . HNCA did not administer its own benefits plan; instead HNCA made irrevocable contributions to third party HNI in its capacity as the Plan sponsor and administrator." (Reply at 7.) Yet Defendant has not identified any authorities suggesting that when a third party acts as both an employer's plan administrator -- bound to act in a fiduciary/trustee capacity -- and the employer's payroll processor (as Defendant argues HNI did here), whenever the third party acts in the capacity of a payroll processor it will nevertheless be considered the sort of "trustee or third party" referenced in Section 207(e)(4). Defendant has not shown entitlement to judgment as a matter of law on undisputed facts with respect to Issue 1. Accordingly, Defendant's Motion for Summary Adjudication is DENIED as to Issue 1. Issue 2: Plaintiff's failure to pay overtime wages claim premised on HNCA's alleged failure to include bonus payments in the regular rate of pay fails because bonus payments were properly accounted for in the regular rate calculation. Plaintiffs allege that Defendant improperly calculated the "regular rate" of pay so as to exclude "non-discretionary bonuses." (Complaint ¶¶ 40-41, 91-92.) Plaintiffs allege that Defendants violated Labor Code §§ 510, 1194, and 1198 as a result of not correctly calculating the regular rate of pay to include all applicable remuneration, including "non-discretionary bonuses." (Complaint ¶ 41.) In general, bonuses are "[s]ums paid in recognition of services performed during a given period." (29 U.S.C. § 207(e)(3); see also 29 C.F.R. 778.208; 778.211.) However, there is no blanket rule concerning whether bonuses must be included in an employee's "regular rate." Rather, that determination depends on whether a given bonus was "discretionary." Discretionary bonuses -- i.e., bonuses where the DATE: 10/23/2018 MINUTE ORDER Page 7 DEPT: 54 Calendar No. CASE TITLE: Spears vs. Health Net of California Inc CASE NO: 34-2017-00210560-CU-OE-GDS employer retains discretion as to both the fact and amount of the payment -- may be excluded from the regular-rate calculation. (29 C.F.R. §§ 778.208, 778.211(b).) On the other hand, where a bonus payment is considered a part of the regular rate at which an employee is employed, it must be included in computing his regular hourly rate of pay and overtime compensation. 29 C.F.R. § 778.209(a). Where a bonus is "promised" to employees, the bonus must be included in the regular rate. A bonus, to be excluded under section 7(e)(3)(a), must not be paid "pursuant to any prior contract, agreement, or promise." (29 C.F.R. 778.211(c).) Defendant argues that the undisputed facts show that Plaintiff Spears never received any "bonus payments." (P&As at 4; UF 23.) Defendant's UF 23 simply states that "[a]t no time during Plaintiff Spears' employment with HNCA did she receive any bonus payments," listing the Rodes Declaration at ¶ 11 as the sole supporting evidence. By using the word "bonus" in the UF, Defendant relies on its own undefined characterization of the word "bonus." Declarant Rodes likewise does not define what she personally considers to be a "bonus" payment. Aside from testimony regarding "SPOT awards," she does not offer evidence as to whether Spears ever received any non-discretionary, promised amounts potentially causing Spears to expect such payments regularly. (See e.g., 29 C.F.R. 778.211.) Even if such evidence were sufficient to shift the burden to Plaintiffs here, Plaintiffs identify evidence that renders UF 23 disputed. (Pl.'s Resp. to UF 23.) Plaintiffs cite evidence that Spears received nondiscretionary "'MedFlxWave' payments" based on "preestablished criteria" as "compensation for Plaintiff's work for Defendant." (Pl.'s Resp. to UF 23 (citing evidence that the "MedFlxWave" payment was made to Plaintiff, evidence that "MedFlxWave" payments are "part of our total remuneration plan," and other evidence that the MedFlxWave payment was directly deposited into Plaintiff's bank account).) Given Defendant's framing of UF 23 -- which turns on an unstated legal definition of the word "bonus" -- at a minimum, a material factual dispute exists as to whether the MedFlxWave payments could potentially be characterized as nondiscretionary "bonuses" that must be included in the "regular rate" calculation for overtime. Neither Defendants' moving papers nor its Amended Reply papers include legal authorities regarding payments analogous to the nondiscretionary MedFlxWave payments, nor do they demonstrate that these cannot as a matter of law be considered "nondiscretionary bonuses." With respect to "bonuses" paid to Plaintiff Arana (UF 24), Defendant again frames the UF by conclusorily using the undefined word "bonus" rather than making plain factual assertions independent of that legal term. Defendant argues that it is undisputed that the "SPOT Awards" received by Plaintiff Arana were "properly excluded from his regular rate because they were discretionary bonuses," and undisputed that the "bonuses received by Plaintiff Arana pursuant to the ACA Incentive Plan" were properly included in his regular rate. (P&As at 10-12 (emphasis added); UFs 23-40.) Defendant also argues that Plaintiff Arana never received "any other bonus payments." (P&As at 4; UF 24.) In the Opposition, Plaintiffs do not challenge Defendant's arguments regarding "SPOT Awards," instead opting to identify evidence rendering UF 24 disputed by virtue of Plaintiff Arana's having been paid what they argue was a "Wellness bonus." (Pl.'s Resp. to UF 24.) The Court notes that Defendant cannot be heard to take issue with Plaintiff's conclusory assertion of a "bonus" when Defendant itself conclusorily asserts the lack of a "bonus" in UF 24. Defendant's moving papers include legal authorities regarding nondiscretionary bonuses, but except with respect to the "SPOT" bonuses specifically, their UFs do not include any "facts" regarding whether HNCA had any discretion in whether to pay out other, non-"SPOT" amounts. And Plaintiffs' proffered evidence in support of the "wellness bonus" is deposition testimony by Diane Rodes, wherein Rodes testifies that the wellness payments were nondiscretionary payments to employees who fulfilled certain requirements. (Exh. 5 to Amended Declaration of Aparajit Bhowmik (transcript of deposition of Diane Rodes) at 99-103.) Defendant has not shown that the "wellness" payments cannot be considered nondiscretionary bonuses as a matter of law. At a minimum, while it is apparently undisputed that "wellness" payments were made DATE: 10/23/2018 MINUTE ORDER Page 8 DEPT: 54 Calendar No. CASE TITLE: Spears vs. Health Net of California Inc CASE NO: 34-2017-00210560-CU-OE-GDS to Arana, a material factual dispute exists as to whether such "wellness" payments were in fact "bonuses" -- or, more accurately, were "nondiscretionary" payments that might be a required part of the "regular rate" calculation. In the Amended Reply, Defendant argues that the Court should ignore Plaintiffs' arguments based on evidence of a "wellness" payment because such payments were not specifically alleged in the pleading. (Amended Reply at 7-8.) The Court declines to ignore Plaintiffs' "wellness payment" argument. The pleading alleged that nondiscretionary bonuses were improperly excluded from the regular rate (Complaint ¶¶ 40-41, 91-92), and Defendant has not shown that the pleading was required to specifically itemize each and every alleged "bonus" payment. Defendant has not shown entitlement to judgment as a matter of law on undisputed facts with respect to this cause of action. The Motion is DENIED as to Issue 2. Issue 3: Plaintiffs' failure to pay overtime wages claim premised on HNCA's alleged failure to include shift differential premiums in the regular rate of pay fails because these premiums were included in the regular rate calculation. The Motion is GRANTED as to Issue 3. Defendant's moving papers and SSUF includes undisputed facts showing that HNCA did properly include shift differential premiums in its regular rate calculation. (UFs 41-46.) Plaintiffs expressly state that these UFs are indeed "undisputed," and their Opposition makes no arguments as to this Issue. While by this Order the Court also denied Defendant's Motion with respect to Issues 1 and 2, which challenged the Third Cause of Action for Failure to Pay Hourly and Overtime Wages, the Court finds it appropriate to grant Defendant's Motion with respect to Issue 3, which challenges that same Third Cause of Action insofar as it is based on exclusion of shift differential premiums specifically. (See, e.g., Lilienthal & Fowler v. Superior Court (Karr) (1993) 12 Cal.App.4th 1848, 1854-1856 (despite language of Code of Civil Procedure §437c(f), trial court may determine merits of summary adjudication motions "involving separate and distinct wrongful acts which are combined in the same cause of action").) Issue 4: Plaintiffs' failure to pay all wages claim premised on HNCA's alleged rounding practice fails because HNCA did not implement any rounding practice during the pertinent time period. The Motion is GRANTED as to Issue 4. Defendant's moving papers and SSUF includes undisputed facts showing that HNCA did not engage in rounding. (UFs 47-48.) Plaintiffs expressly state that these UFs are indeed "undisputed," and their Opposition makes no arguments as to this Issue. While by this Order the Court also denied Defendant's Motion with respect to Issues 1 and 2, which challenged the Third Cause of Action for Failure to Pay Hourly and Overtime Wages, the Court finds it appropriate to grant Defendant's Motion with respect to Issue 4, which challenges that same Third Cause of Action insofar as it is based on engaging in rounding practices specifically. (See, e.g., Lilienthal, 12 Cal.App.4th at 1854-1856 (despite language of Code of Civil Procedure §437c(f), trial court may determine merits of summary adjudication motions "involving separate and distinct wrongful acts which are combined in the same cause of action").) Seventh Cause of Action For Civil Penalties Pursuant to Labor Code §§ 2698, et seq. (PAGA) Issue 5: Plaintiff's PAGA claim based on alleged failure to pay overtime wages as a result of DATE: 10/23/2018 MINUTE ORDER Page 9 DEPT: 54 Calendar No. CASE TITLE: Spears vs. Health Net of California Inc CASE NO: 34-2017-00210560-CU-OE-GDS alleged failure to include cash benefits received in lieu of medical payment in Plaintiff Spears' regular rate of pay fails because the underlying alleged Labor Code violation did not occur. For the same reasons discussed above in connection with Issue 1, the Court must deny the motion as to Issue 5. Defendant has not met its initial burden of identifying evidence that payments of cash in lieu of benefits were in fact "contributions" from HNCA to HNI (as its trustee or third party) pursuant to the Plan. Accordingly, the Motion is DENIED as to Issue 5. Issue 6: Plaintiffs' PAGA claim based on alleged failure to pay overtime wages as alleged failure to include bonuses awarded to Plaintiffs in the regular rate of pay calculation fails because the underling alleged Labor Code violation did not occur. For the same reasons discussed above in connection with Issue 2, the Court must deny the motion as to Issue 6. Defendant has not shown entitlement to judgment as a matter of law on undisputed facts that neither the MedFlxWave payments to Plaintiff Spears nor the Wellness payments to Plaintiff Arana cannot, as a matter of law, be considered "nondiscretionary bonuses" such that they would need to be included in the "regular rate." Accordingly, the Motion is DENIED as to Issue 6. Issue 7: Plaintiffs' PAGA claim based on alleged failure to include shift differential premiums in Plaintiff Arana's regular rate of pay fails because the underlying alleged Labor Code violation did not occur. The Motion is GRANTED as to Issue 7 for the same reasons discussed above in connection with Issue 3. Defendant's moving papers and SSUF includes undisputed facts showing that HNCA did properly include shift differential premiums in its regular rate calculation. (UFs 41-46.) Plaintiffs expressly state that these UFs are indeed "undisputed," and their Opposition makes no arguments as to this Issue. While by this Order the Court also denied Defendant's Motion with respect to Issues 5 and 6, which challenged the Seventh Cause of Action For Civil Penalties Pursuant to PAGA, the Court finds it appropriate to grant Defendant's Motion with respect to Issue 7, which challenges that same Seventh Cause of Action insofar as it is based on exclusion of shift differential premiums specifically. (See, e.g., Lilienthal, 12 Cal.App.4th at 1854-1856 (despite language of Code of Civil Procedure §437c(f), trial court may determine merits of summary adjudication motions "involving separate and distinct wrongful acts which are combined in the same cause of action").) Issue 8: Plaintiff's PAGA claim based on alleged rounding practice fails as a matter of law because the underlying alleged Labor Code violation did not occur. The Motion is GRANTED as to Issue 8 for the same reasons discussed above in connection with Issue 4. Defendant's moving papers and SSUF includes undisputed facts showing that HNCA did not engage in rounding. (UFs 47-48.) Plaintiffs expressly state that these UFs are indeed "undisputed," and their Opposition makes no arguments as to this Issue. While by this Order the Court also denied Defendant's Motion with respect to Issues 5 and 6, which challenged the Seventh Cause of Action For Civil Penalties Pursuant to PAGA, the Court finds it appropriate to grant Defendant's Motion with respect to Issue 8, which challenges that same Seventh DATE: 10/23/2018 MINUTE ORDER Page 10 DEPT: 54 Calendar No. CASE TITLE: Spears vs. Health Net of California Inc CASE NO: 34-2017-00210560-CU-OE-GDS Cause of Action insofar as it is based on exclusion of shift differential premiums specifically. (See, e.g., Lilienthal, 12 Cal.App.4th at 1854-1856 (despite language of Code of Civil Procedure §437c(f), trial court may determine merits of summary adjudication motions "involving separate and distinct wrongful acts which are combined in the same cause of action").) Conclusion Defendants' Motion for Summary Adjudication is DENIED as to Issues 1, 2, 5, and 6. Defendants' Motion for Summary Adjudication is undisputed and is GRANTED as to Issues 3, 4, 7 and 8. This minute order is effective immediately. Defendant is directed to prepare a formal order complying with Code Civ. Proc. § 437c(g) and C.R.C. Rule 3.1312. COURT RULING The matter was argued and submitted. The matter was taken under submission. SUBMITTED MATTER RULING Having taken the matter under submission, the Court now rules as follows: The Court affirmed the tentative ruling. DATE: 10/23/2018 MINUTE ORDER Page 11 DEPT: 54 Calendar No.