Preview
fl
TIMOTHY J. LONG (STATE BAR NO. 137591) FILEI?
tjlonafgjorrick.com isuoerior u o u n : u f t,aiiforfi!S.
2 NICHOLAS J. HORTON (STATE BAR NO. 289417)
nhorton@orrick.com
i IS I 3l£l3 I Q
3 ORRICK, HERRINGTON & SUTCLIFFE LLP
400 Capitol Mall, Suite 3000
4 Sacramento, CA 95814-4497 QV - L>Bfipru
Telephone; +1 916 447 9200
5 Facsimile: +1 916 329 4900 duattt titJttisJtai.
6 Attorneys for Defendant
HEALTH NET OF CALIFORNIA. INC.
7
8 SUPERIOR COURT OF THE STATE OF CALIFORNIA
9 COUNTY OF SACRAMENTO
10
ANDREA SPEARS, an individual, on behalf Consolidated Case No. 34-2017-00210560-
1 1 of herself and on behalf of all persons similarly CU-OE-GDS
situated.
12 Plaintiff, MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF
13 V. DEFENDANT HEALTH NET OF
CALIFORNIA, INC.'S RENEWED
14 HEALTH NET OF CALIFORNIA, INC., a MOTION FOR SUMMARY
California Corporation; and Does 1 through 50, ADJUDICATION
15 inclusive,
Date: Feburary 4, 2019
16 Defendants. Time: 9:00 a.m.
Dept.: 54
17 Reservation No.: 2380178
18 Complaint Filed: April 5, 2017
FACFiled: June 29, 2017
19 Consolidated Complaint Filed: Dec. 21, 2017
20 TOMAS R. ARANA, on behalf of himself, all
Complaint Filed: August I , 2017
others similarly situated.
21
Plaintiff,
22
V.
23
HEALTH NET OF CALIFORNIA, INC., a
24 California corporation; and DOES 1-50,
inclusive,
25
Defendant.
26
27
28
MEMORANDUM OK POINTS AND AUTHORITIES ISO DEI-'S RENEWED MOTION FOR SUMMARY ADJUDICATION
T A B L E OF CONTENTS
2 Page
3 I. INTRODUCTION 5
4 II. STATEMENT OF UNDISPUTED MATERIAL FACTS 6
A. The Parties 6
5
B. The Cafeteria Benefits Plan 6
6 C. Spears' Earnings.
y D. Arana's Earnings 9
E. Other Earnings 9
I. SPOT Bonuses 10
9 2. The ACA Incentive Payment 10
IQ 3. Wellness Incentive Program 1
III. PLAINTIFFS' ALLEGATIONS 12
A. Plaintiffs' Regular Rate Allegations 12
12 IV. SUMMARY ADJUDICATION MOTIONS MAY BE RENEWED WHEN
SUPPORTED BY NEW MATERIAL FACTS 12
'^ V. SUMMARY ADJUDICATION IS WARRANTED 13
14 A. Plaintiffs'Overtime Claim And Derivative PAGA Claim Premised On
15 Their Regular Rate Allegations Fail As A Matter Of Law 13
1. California Courts Look To Federal Law When Determining The
Jg "Regular Rate" Of Pay For Purposes Of Overtime Calculations 14
2. Flex Dollar Benefits Received By Spears As A Result Of Her
17 Waiver Of Medical Coverage Were Properly Excluded From Her
Regular Rate Under The Benefit-Plan Contribution Exception 15
18
a. Contributions Were Made Pursuant To The Plan And Were
1^ Communicated To HNCA Employees 16
b. The Primary Purpose Of The Plan Was To Provide Health
20 And Welfare Benefits To HNCA Employees 16
21 c. Benefits Were Specified Pursuant To The Plan 16
d. HNCA's Contributions Were Paid Irrevocably To Third
22 Party HNI Pursuant To A Funded Arrangement ;.. 17
23 e. Cash Benefits Provided To Participants Under the Plan
Were Incidental And Paid During The Course Of The
24 Participants' Employment As Specified In The Plan II
3. HNCA Appropriately Allocated Other Forms Of Earnings In
25 Determining The Plaintiffs' Regular Rate 19
2g a. Plaintiffs'Regular Compensation Was The Baseline
Included In The Regular Rate 19
27 b. Plaintiffs' Premium Rate Compensation Did Not Need To
Be Included In The Regular Rate 19
28
1 T A B L E OF CONTENTS
(continued)
2 Page
3 c. Compensation For Non-Work Time Did Not Need To Be
Included In The Regular Rate 20
4 d. Benefits Payments Did Not Need To Be Included In
Spears's Regular Rate 20
5 e. Other Payments 20
6 4. Because The Underlying Overtime Claim Fails. So Too Does
Plaintiffs PAGA Claim Based On Such Violation 23
7 VI. CONCLUSION 24
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
T A B L E OF AUTHORITIES
2 Page(s)
Cases
4
Advanced-Tech Sec. Servs., Inc. v. Superior Court,
5 163Cal.App. 4th 700 (2008) 10
6 Alonzo V. Maximus, Inc.,
832 F. Supp. 2d 1 122 (CD. Cal. 201 1) 17
7
AmalgatJtaled Transit Union. Local 7 7J6. AFL-CIO V. Superior Court,
8 46 Cal. 4th 993 (2009) 19
^ Bagley V. TRW, Inc.,
,Q 73 Cal. App. 4th 1092 (1999).
11 Graham v. Hansen,
128 Cal. App. 3d 965 (1982) 8
12
Howard v. Octagon, Inc.,
13 2013 WL 5122191 (N.D. Cal. Sept. 13, 2013) 19
'^ Huntington Memorial Hasp. v. Superior Court,
15 131 Cal. App. 4th 893 (2005) 10
jg Kim V. Reins Int 7 California, Inc.,
18 Cal. App. 5th 1052(2017) 19
17
Nieto V. Blue Shield of California Life & Heahh Ins. Co.,
18 181 Cal. App. 4th 60 (2010) 9
'9 Prachasaisoradej v. Ralphs Grocery Co., Inc.,
42 Cal. 4th 217 (2007) 10
21 Rubin V. Wal-Mart Stores, Inc.,
599 F. Supp. 2d 1176 (N.D. Cal. 2009) 17
22
Russell V. Government Employees Insurance Company,
23 2018 WL 1210763 (S.D. Cal., Mar. 8, 2018, No. 17-CV-672 JLS (WVG)) 17
24 Thomas v. Home Depot USA Inc.
527 F. Supp. 2d 1003 (N.D. Cal. 2007) 19
26 Statutes
27 29 U.S.C. § 207(e) 10
28 29 U.S.C. § 207(e)(2) 16,18,19
-3-
MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION
29 U.S.C. § 207(e)(3) 17,
2 29 U.S.C. § 207(e)(4) 1,11,16
3 29 U.S.C. § 207(e)(5) 15
4 29 U.S.C. § 207(e)(6) 15
5 Fair Labor Standards Act passim
6 Code Civ. Proc. § 437c 1,8
7 Code Civ. Proc. § 1008(b) 1
Lab. Code § 510 10
9 Lab. Code § 2699(a) 19
10 Lab. Code § 2699(c) 19
11 Regulations
12 29 C.F.R. § 778.208 17
13 29 C.F.R. § 778.21 1 9, 17
14 29 C.F.R. § 778.215(a) 1, 11, 13, 16
15 Other Authorities
16 1991.03.06 DLSE Opinion Letter 17
17 Dep't of Labor Op. Letter, 2003 WL 23374600 (July 2, 2003) 9, 10
18 DLSE Manual §49.1.2 10
19 DLSE Manual § 35.7 17
20 DLSE Manual §49.1.2.4(3) 17
21
22
23
24
25
26
27
28
MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION
1 I. INTRODUCTION
2 This is a renewed motion for summary adjudication brought pursuant to California Code of
3 Civil Procedure, sections 437a(f)(2) and 1008(b) as to claims asserted by Plaintiffs in their Third
4 and Seventh Causes of Action. Defendant Health Net of California, Inc. ("HNCA") is presenting
5 new and different facts in support of this renewed motion targeting Plaintiffs' claim that HNCA
6 failed to include cash benefits received by Spears when calculating the regular rate of pay when
7 computing overtime compensation. Specifically, Plaintiffs allege that HNCA did not properly
8 account for a cash benefit Spears received for waiving medical coverage. However, the Fair Labor
9 Standards Act (FLSA"), which California law follows, specifically excludes from the regular rate
10 the cash benefit Spears received under the Benefit-Plan Contributions Exception. See 29 U.S.C. §
11 207(e)(4); .see also 29 C.F.R. § 778.215(a).
12 This motion also seeks summary adjudication for six distinct issues (Nos. 2-4 and 6-8) that
13 were indirectly addressed in HNCA's first motion for summary adjudication.' These issues more
14 precisely address the remainder of the regular rate claims asserted in Plaintiffs' third cause of
15 action. Further, HNCA has proffered new and different evidence on these issues which should
16 resolve any doubts in the Court's mind that summary adjudication as to Plaintiffs' "bonus" claims
17 is warranted. In fact. Plaintiffs concede two of the claims. Spears concedes she never received
18 three of the four payments that she has characterized as a "bonus," and the fourth (the cash benefit
19 mentioned above) is not a bonus. For his part, Arana appears to allege that HNCA did not include
20 three "bonus" payments in his regular rate, however: (1) he does not dispute that discretionary
21 SPOT bonuses were properly excluded from the regular rate; (2) he does not dispute that non-
22 discretionary ACA Incentive payments were properly included in the regular rate; and (3) he does
23 not dispute that "wellness incentive" payments were not bonuses and were properly excluded from
24 the regular rate.
25 In sum, HNCA is entitled to summary adjudication as to Plaintiffs' claim that HNCA failed
26 to properly calculate their regular rates of pay for purposes of determining their overtime
97
' ' Health Net is not challenging the same "bonus" claim issue presented in its initial motion. Nonetheless, should the
Court construe these issues as a renewal of HNCA's prior motion as to the "bonus" claim issue, HNCA has provided
28 new and different facts in support of the same.
-5-
MEMORANDUM OF POINTS AND AUTI lORI TIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION
1 compensation as to the four payments addressed in this motion, and their derivative PAGA claims
2 based thereon.
3 II. STATEMENT OF UNDISPUTED MATERIAL FACTS
4 A. The Parties
5 HNCA, a subsidiary of Health Net, Inc. ("HNI"), has operated as a health maintenance
6 organization ("HMO") in California and provides health insurance products such as commercial
7 HMO plans and healthcare service plans. Declaration of Diane C. Rodes ("Rodes Dec"), ^1 2. It
8 serves "customers" - members, hospitals, medical groups, physicians, etc. - over the telephone out
9 of its call centers in Rancho Cordova and Woodland Hills, California. Id.
10 Spears worked as a non-exempt HNCA Customer Service Representative ("CSR") from
11 September 2014 to October 2016 in Rancho Cordova. UF I.^ Arana worked was a non-exempt
12 CSR for HNCA until his promotion in November 2015 to Contact Center Analyst - an exempt
13 position. UF 2.^ At all times during his employment, Arana has worked out of the same Rancho
14 Cordova call center at which Spears worked. Id.
•5 B. The Cafeteria Benefits Plan
16 Between January 1, 2001 and December 31, 2016, HNI sponsored and administered a
17 cafeteria benefits plan - a written health and welfare plan - called the "Health Net, Inc. Associates
18 Benefit Program" (the "Plan"), which HNCA adopted for the benefit of its employees. UF 3-5.
19 The Plan was governed by Section 125 of the Internal Revenue Code, was subject to the Employee
20 Retirement Income Security Act, and was overseen by a Benefits Committee. UF 7-9. As called
21 for in the Plan, the Benefits Committee had fiduciary duties and responsibilities to administer the
22 Plan for the benefit of Plan Participants, as that term is defined in the Plan, which included
23 Plaintiffs. UF9-12.
24 HNI treated HNCA as a third party for purposes of administering the Plan, and vice versa.
25 UF 13. To that end, HNCA paid HNI the actual costs of benefits the Plan provided to Plan
26 Participants (including the cash benefits implicated by Plaintiffs'claims). UF 15-18. These Plan
27
= References to "UF" are to HNCA's Separate Statement of Undisputed Material Facts.
28 ^ Since June 2017, Arana's title has been Call Center Systems Analyst - also an exempt position.
UF 2.
-6-
MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION
1 Participants included Plaintiffs. Id. 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 and administrator. UF 19. These contributions made by HNCA
4 pursuant to the Plan were irrevocable - once made to HNI, HNCA was unable to recapture or divert
5 the funds for HNCA's use or benefit. UF 20. HNI, as the Plan sponsor and administrator, then
6 used these funds to pay for benefits under the plan, including the cash benefit that HNI paid to
7 Spears. UF 21-22.
8 The benefits available under the Plan, including the various coverage options and co-
9 payments a Participant was responsible for with respect to the Plan's various covered services and
10 supplies, were explained in detail to Plan Participants in the Summary Plan Descriptions (the "Plan
11 SPD") and Evidence of Coverage ("EOC") documents, which HNI provided to Plan Participants.
12 UF 23-29. The Plan provided "core" benefits to Plan Participants such as basic life and basic
13 AD&D insurance. UF 30. It also provided "optional" benefits to Plan Participants and/or their
14 dependents, such as medical and dental coverage, to select as desired based on their needs. UF 31.
15 To help pay for the cost of medical and dental coverage, and pursuant to the terms ofthe
16 Plan, Plan Participants received "Flex Dollars," which represented HNCA"s employer
17 contributions. UF 32-33. The exact amount of Flex Dollars a Plan Participant received varied
18 depending on the medical and dental plans he or she chose, the number of dependents covered and
19 the Participant's geographic location. UF 34. Generally, the amount of Flex Dollars a Participant
20 received was less than the total cost of the benefit(s) that a participant elected. UF 35. Thus, in the
21 vast majority of cases, a Plan Participant was required to contribute some amount toward the cost
22 of the benefit(s) he or she selected in the form of a paycheck deduction. UF 36-37.
23 All Flex Dollar amounts that Plan Participants received from the Plan are tracked on their
24 pay stub. UF 41. If Flex Dollars exceeded the cost of coverage or i f Plan Participants waived
25 medical and/or dental coverage, the Plan Participant received a portion of the Flex Dollars as a cash
26 benefit. UF 38. The employer contributions paid by HNCA to HNI, as the Plan sponsor and
27 administrator, included all Flex Dollars HNCA employees received from the Plan as Plan
28 Participants, including the cash benefit that is the subject of this Motion. UF 32-33.
-7-
MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION
1 That in most cases the total amount of Flex Dollars the Plan Participant received was used
2 in whole to pay for optional coverage on a pre-tax basis does not change the nature ofthe Flex
3 Dollars (or cash benefit) provided by the Plan. UF 46. In short. Flex Dollars, including cash
4 benefits at issue in this Motion, were Plan Benefits made available to Plan Participants. UF 45-57.
5 Similarly, that Plan benefits received by Plan Participants were tracked under the pay codes
6 "MedFlxElct" and "DenFlxElct" and "MedFlxWave" and "DenFlxWave," did not change the
7 nature of these benefits; they were Plan benefits. UF 41-42.
8 In each of the Plan years 2013, 2014, 2015 and 2016, the total cash benefits provided to
9 Plan Participants who waived dental and/or medical coverage represented a very small percentage
10 of HNCA's employer contributions to the Plan forthe elected dental and/or medical coverage: 1.4%
11 in 2013, 1.3% in 2014; 0.9% in 2015; and 0.9% in 2016. UF48.
12 Throughout Spears' employment with HNCA, she elected dental coverage. UF 49.
13 However, she waived medical coverage and, as result, received the $20 cash benefit described
14 above from HNI ($20 per pay period) as the Plan sponsor and administrator pursuant to the Plan.
15 UF 49, 42, 45, 50. Arana, on the other hand, did not receive this cash benefit because he elected to
16 receive both medical and dental and the cost of his coverage always exceeded the amount of Flex
17 Dollars he received. UF51.
'8 C. Spears' Earnings
19 At no time during her employment with HNCA did Spears receive any form of additional
20 compensation or remuneration that could be construed as a bonus payment. UF 56. Her earnings
21 were limited to compensation she earned based on the hours she worked (both at the regular rate
22 and premium rates) and for certain periods of non-work time, and the Flex Dollars she received
23 pursuant to the Plan. UF 52-61. The following lists all forms of earnings paid to Spears during the
24 relevant time period, as reflected in her payroll data produced in this action, none of which were
25 considered a bonus by HNCA (UF 57):
26 • Regular Rate Compensation: Regular Hours Non-Exempt, Regular Exempt. UF 58.
27 • Premium Rate Compensation: Overtime, Holiday, Holiday Overtime, Floating Holiday,
28 Doubletime. UF 59.
-8-
MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION
1 • Compensated Non-Work Time: Bereavement, DTO, Jury Duty, PTO LOA, PTO
2 Scheduled, PTO Sick, PTO Unscheduled, Prorated PTO Buyout. UF 60.
3 • Benefits: Medical Flex Waive, Dental Flex Elect. UF 61.
4 D. Arana's Earnings
5 The following lists all forms of compensation by Mr. Arana relevant to his claim that HNCA
6 failed to properly calculate his regular rate during the time he was a non-exempt employee, as
7 refiected in his payroll data produced in this matter. UF 63.
8 • Regular Rate Compensation: Regular Hours Non-Exempt. UF 64.
9 • Premium Rate Compensation: Overtime, Holiday, Floating Holiday Overtime,
10 Doubletime. UF 65.
11 • Compensated Non-Work Time: DTO, PTO LOA, PTO Scheduled, PTO Sick, PTO
12 Unscheduled. UF 66.
13 • Benefits: Medical Flex Elect, Dental Flex Elect. UF 67.
14 • Other Earnings: Bonus - SPOT, Bonus - Other Plans, Incentive - Other Plans, Wellness
15 -Incentive. UF 63, 80, 87, 101.
16 The only forms of compensation Arana received that HNCA considered bonuses were the
17 bonuses he received through the SPOT Cash Awards Program ("SPOT") and incentive pay
18 pursuant to the ACA Customer Service & Claims Representative Pay for Performance Incentive
19 Plan (described in his payroll data as "Bonus - Other Plans" and/or "Incentive - Other Plans").
20 UF 62. The payments he received through the Wellness Incentive Program were not bonuses.
21 UF 97-99.
22 E. Other Earnings
23 At no time during her employment with HNCA did Spears receive any payments from
24 HNCA that could be characterized as a "bonus." UF 52-61, 81, 88, 102. She only received the
25 regular, premium rate, non-work time, and benefits payments referenced above. UF 52-61.
26 However, Arana appears to claim three types of earnings he received constitute "bonuses," which
27 should have been included in the regular rate: SPOT Cash Awards Program ("SPOT"), an
28 incentive payment pursuant to the ACA Customer Service Center & Claims Representative Pay for
-9-
MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION
1 Performance Incentive Plan ("ACA Incentive Payment"), and a wellness incentive payment.
2 \. SPOT Bonuses
3 Beginning January 1, 2014 and continuing through December 31, 2016, HNCA paid out
4 SPOT cash awards. UF 68. HNCA spontaneously rewarded SPOT cash awards to certain
5 employees "who demonstrate[d] exceptional behavior on the job . . . whether it [wa]s within or
6 beyond [the employee's] job scope." UF 69. HNCA's SPOT policy informed eligible einployees
7 that bonuses were awarded without any promise or incentive being announced beforehand. UF 70.
8 There were no pre-established criteria for awarding SPOT cash awards or pre-established
9 amounts to be awarded. UF71. Rather, the decision of when, for what reason, and in what amount
10 to award a SPOT cash award - within a range - was subject to the discretion of managers and the
11 ultimate approval of the head of the appropriate Business Unit. UF 72. Each Business Unit Leader
12 was allotted an annual SPOT cash award budget that he or she could elect to use in full, in part, or
13 not at all. UF 73.
14 Procedurally, a SPOT cash award was initiated if a manager felt that an employee on his or
15 her team should receive one. UF 74. The manager had the discretion to seek a SPOT Award for a
16 team member and in what amount. UF 75. The manager would then submit the form to the head
17 of his or her Business Unit. UF 76. The Business Unit Leader then exercised his or her discretion
18 as to whether to award the SPOT cash award based on the manager's recommendation (or not) and,
19 if so, in what amount. UF 77.
20 If the Business Unit Leader decided to award an employee with a SPOT cash award, the
21 amount appeared on the recipient's paycheck with the designation "Bonus-SPOT." UF 78. SPOT
22 cash awards were not included in recipients' regular rate calculation. UF 79. Mr. Arana received
23 SPOT cash awards on three occasions - each in the amount of $1,000. UF 80. These amounts
24 were included on his wage statements dated July 5, 2013; October 25, 2013 and June 5, 2015. Id.
25 Spears did not receive any SPOT bonus. UF81.
26 2. The ACA Incentive Payment
27 Starting January 3, 2014 and lasting through May 31, 2014, HNCA implemented an ACA
28 Incentive Plan for eligible employees. UF 83. The purpose of the ACA Incentive Plan was to
- 10-
MEMORANDUM OF POINTS AND AU I'HORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION
1 provide an extra reward if employees voluntarily worked overtime due to the increase in workload.
2 especially at the call centers, as a result of implementation of the Patient Protection and Affordable
3 Care Act. UF 84. Specifically, under the ACA Incentive Plan, eligible employees who worked a
4 certain number of overtime hours each month received bonus payments. UF 85. Arana received
5 ACA Incentive Payments, as refiected in his payroll data produced under the description "Incentive
6 - Other Plans" or "Bonus - Other Plans." UF 87. These payments were included in Arana's regular
7 rate of pay. UF 86-87. Spears did not receive any payments pursuant to the ACA Incentive Plan.
8 UF88.
9 3. Wellness Incentive Program
10 From April 5, 2013 to December 31, 2016, HNCA had in place a Wellness Incentive
11 Program for eligible employees. UF 90. HNCA adopted this program because the Company
12 determined that it was in its best interest to provide employees an incentive to engage in certain
13 fitness and weight management programs. UF91. More specifically, HNCA encouraged these
14 types of activities to lower HNCA's health care costs, help to improve employees' health and
15 benefit HNCA through increased productivity. UF 92.
16 Under the Wellness Incentive Program, HNCA provided employees $35 for participating
17 in a health club and/or weight management program. UF 93. Employees who participated in the
18 Wellness Incentive Program had to make a request for a wellness incentive payment online
19 through HNCA's intranet in order to receive the $35. UF 94. If the employee's wellness
20 program of choice qualified under the incentive plan, the incentive payment was non-
21 discretionary. UF 95. Employees who requested the incentive payment with evidence of
22 participation in a qualifying wellness program received a fiat monthly incentive of $35, regardless
23 of the actual cost of their qualifying program. UF 96.
24 The payments made to HNCA employees under the Wellness Incentive Program were not
25 tied to hours worked or performance; nor were they provided as any sort of incentive for
26 employees to work harder, better or more efficiently; nor were they compensation for services
27 rendered by employees. UF 97-100. Arana received payments pursuant to the Wellness
28 Incentive Program, but Spears did not. UF 101 -102.
- 11 -
MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION
III. PLAINTIFFS' ALLEGATIONS
2 A. Plaintiffs' Regular Rate Allegations
3 As part of their third cause of action for Failure to Pay Hourly Wages, Plaintiffs allege that
4 HNCA failed to pay them for all overtime hours worked. Namely, Plaintiffs contend that HNCA
5 "violated the[ir] rights . . . by failing to pay them overtime wages for all overtime hours worked . .
6 . as a result of not correctly calculating their regular rate of pay to include all applicable
7 remuneration, including, but not limited to, non-discretionary bonuses." Consol. Complaint, H 41.
8 IV. SUMMARY ADJUDICATION MOTIONS MAY BE RENEWED WHEN
SUPPORTED BY NEW MATERIAL FACTS.
9
California Code of Civil Procedure, section 437c(f)(2) permits prior motions for summary
10
adjudication to be renewed when the moving party "establishes to the satisfaction ofthe court,
11
newly discovered facts or circumstances or a change of law supporting the issues reasserted in the
12
summary judgment motion." When assessing whether the moving party has met its burden under
13
Section 437c(f)(2), courts look to whether the moving party has asserted any new material facts in
14
in support of its motion. See Bagley v. TRW, Inc. (1999) 73 Cal.App.4th 1092, 1097. "Whether
15
the "new" facts alleged on a motion for renewal are sufficient to satisfy the requirements of
16
section 1008, subdivision (b), is a question confided to the sound discretion of the trial court."
17
Graham v. Hansen (1982) 128 Cal. App.3d 965, 971 (upholding trial court's granting of a
18
renewed motion for summary judgment where new facts were submitted via an interrogatory
19
response and a declaration).
20
In denying HNCA's initial motion with respect to the cash benefits paid by the Plan and
21
Plaintiffs' regular rate overtime claims, the Court found that HNCA failed to meet its burden of
22
production on the following grounds. First, the Court found that HNCA failed to set forth
23
material facts necessary to support its motion as to the cash benefits paid by the Plan to Spears,
24
and others, because "Defendant has not clearly identified evidence: (1) that it actually
25
'contributed' the 'cash in lieu of benefits' to third party HNI, and (2) that HNI, not HCNA,
26
actually paid out those amounts to employees."). Declaration of Nicholas J. Horton ("Horton
27
Dec"), Ex. D at 5. HNCA has provided additional material facts addressing the evidence the
28
- 12 -
MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF S RENEWED MOTION FOR SUMMARY ADJUDICATION
Court previously found lacking. These facts unequivocally prove that HNCA's contributions to
2 HNI pursuant to the Plan included cash benefits received by Spears, and others, and that HNI, not
3 HNCA, paid these amounts to Spears, and others. See UF 10-22.
4 Second, the Court found that HNCA failed to meet its burden as to Plaintiffs' vaguely
5 alleged "bonus" claims because HNCA did not define what it considered to be a bonus. Horton
6 Dec, Ex. D at 8. More specifically, as to Spears, the Court found that HNCA failed to state
7 material facts to show that Spears never received "any non-discretionary, promised amounts
potentially causing Spears to expect such payments regularly." Id. (citing 29 C.F.R. § 778.21 1.)
9 As to Arana, the Court found that HNCA "again frames the UF by conclusorily using the
10 undefined word 'bonus' rather than making plain factual assertions independent of that legal
11 term." Id. In this motion, HNCA no longer ties its motion to Plaintiffs' vague allegation of
12 nondiscretionary bonuses, so it is not a renewed motion as to these issues. See Nieto v. Blue
13 Shield of California Life & Health Ins. Co. (2010) 181 CaI.App.4th 60, 72 (holding that Section
14 437c(f)(2) did not apply when a second motion for summary judgment addressed a previously
15 omitted issue).
16 Nonetheless, in the event the Court treats issues 2 through 4 and 6 through 8 as renewed,
17 HNCA has provided additional material facts in support of its motion. Specifically, HNCA has
18 defined what it considered to be a bonus, identified every form of eamings received by Plaintiffs
19 as non-exempt employees, specifically identified which of those eamings it considered to be a
20 bonus, and identified whether those earnings were included in the regular rate. UF 52-67, 80-81,
21 87-88, 101-102.
22 V. SUMMARY ADJUDICATION IS WARRANTED
23 A. Plaintiffs' Overtime Claim And Derivative PAGA Claim Premised On Their
Regular Rate Allegations Fail As A Matter Of Law
24
For the two claims that are the subject of this Motion, the Court previously found that
25
HNCA failed to meet its burden of production, despite no contradictory evidence that created a
26
triable issue of fact, on the basis that HNCA failed to present certain material facts or define
27
certain terms used in its separate statement and supporting evidence. In this renewed motion,
28
- 13 -
MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION
HNCA has added facts to provide those definitions and lo clarify those terms. Specifically,
2 HNCA has added additional facts to make abundantly clear that (1) FINCA's contribution to HNI
3 as the Plan sponsor and administrator for the total cost of benefits included all cash benefits
4 amounts paid to Spears (and others), and (2) neither Plaintiff received any other sort of payment
5 that should have been included in the regular rate, but was not.
6 1. California Courts Look To Federal Law When Determining The
^ "Regular Rate" Of Pay For Purposes Of Overtime Calculations
Under California law, an employer must pay non-exempt employees for any hours worked
in excess of eight hours in one workday and forty hours in one workweek "at the rate of no less
9
than one and one-half times the regular rate of pay." Lab. Code § 510. However, neither the Wage
10
Orders nor the Labor Code explicitly defines the phrase "regular rate" of pay. As a result, California
11
courts have adopted the definition set forth in the FLSA, 29 U.S.C. § 207(e), and accompanying
12
federal regulations. See Prachasaisoradej v. Ralphs Grocery Co., Inc., 42 Cal. 4th 217, 242 n.l4
13
(2007) ("California follows the federal standard for purposes of determining, under the Labor Code,
14
what constitutes the employee's regular pay"); see also Advanced-Tech Sec. Servs., Inc. v. Superior
15
Court, 163 Cal. App. 4th 700, 707 (2008) (California courts look to U.S. Department of Labor
16
regulations interpreting the "regular rate" of pay under the FLSA to interpret that term as used in
17
Labor Code section 510); see also Huntington Memorial Hasp. v. Superior Court, 131 Cal. App.
18
4th 893, 902-03 (2005) (failure of the Industrial Welfare Commission to define the regular rate
19
indicates its intent that Califomia adhere to the FLSA defmition; applying section 207 to determine
20
regular rate under California law).
21
Moreover, the Division of Labor Standards Enforcement, charged with enforcing the Wage
22
Orders, also recommends that courts look to the FLSA and adopt its definition of "regular rate" of
23
pay. See DLSE Enforcement Policies & Interpretations Manual § 49.1.2 (2002) ("In determining
24
what payments are to be included in or excluded from the calculation ofthe regular rate of pay,
25
California law adheres to the standards adopted by the U.S. Department of Labor to the extent that
26
those standards are consistent with California law.").
27
28
14
MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION
1 2. Flex Dollar Benefits Received By Spears As A Result Of Her Waiver Of
Medical Coverage Were Properly Excluded From Her Regular Rate
2 Under The Benefit-Plan Contribution Exception
3 The FLSA specifically excludes from the regular rate the cash benefits HNCA provided to
4 Spears as a result of her waiver of medical coverage under the Plan. See 29 U.S.C. § 207(e)(4).
5 Under the "Benefit-Plan Contributions Exception," "contributions irrevocably made by an
6 employer to a trustee or third person pursuant to a bona fide plan for providing old-age, retirement,
7 life, accident, or health insurance or similar benefits for employees" are not to be included in the
3 regular rate. Id. Department of Labor regulations specify five conditions that must be met for a
9 benefit plan to qualify as "bona fide" under the Benefit-Plan Contributions Exception, all of which
10 are satisfied in this instance:
11 (1) The contributions must be made pursuant to a specific plan or
program adopted by the employer . . . and communicated to the
12 employees. This may be either a company-financed plan or an
employer-employee contributory plan.
13
(2) The primary purpose of the plan must be to provide
14 systematically forthe payment of benefits to employees on account
of death, disability, advanced age, retirement, illness, medical
15 expenses, hospitalization, and the like.
16 (3) In a plan or trust... [t]he benefits must be specified or definitely
determinable on an actuarial basis . . . .
17
(4) The employer's contributions must be paid irrevocably to a
18 trustee or third person pursuant to an insurance agreement, trust or
other funded arrangement. The trustee must assume the usual
19 fiduciary responsibilities imposed upon trustees by applicable law.
The trust or fund must be set up in such a way that in no event will
20 the employer be able to recapture any of the contributions paid in
nor in any way divert the funds to his own use or benefit . . . .
21
(5) The plan must not give an employee the right to assign his
22 benefits under the plan nor the option to receive any part of the
employer's contributions in cash instead of the benefits under the
23 plan: Provided, however. That if a plan otherwise qualified as a
bona fide benefit plan under section 7(e)(4) of the Act, it will still
24 be regarded as a bona fide plan even though it provides, as an
incidental part thereof, for the payment to an employee in cash of
25 all or a part of the amount standing to his credit . . . during the
course of his employment under circumstances specified in the plan
26 and not inconsistent with the general purposes of the plan to
provide the benefits described in section 7(e)(4) of the Act.
27
29 C.F.R. § 778.215(a). HNCA satisfied all of the above requirements.
28
- 15 -
MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION
I a. Contributions Were Made Pursuant To The Plan And Were
Communicated To HNCA Employees
2
The Plan meets the first condition because HNCA's contributions were made pursuant to
3
the conditions set forth in the Plan that HNCA adopted. UF 3-22, 39-47. Moreover, such conditions
4
were communicated via the Plan SPD and EOC documents distributed to employees, including
5
Plaintiffs. UF 23-38. Among other things, these documents explained how the Plan worked,
6
outlined who was eligible to participate, detailed Participants' rights, described the coverage
7
options available for each benefit category under the Plan, and explained Flex Dollars. Id.
b. The Primary Purpose Of The Plan Was To Provide Health And
9 Welfare Benefits To HNCA Employees
10 The Plan meets the second condition because the primary purpose of the Plan was to provide
11 for a wide range of health and welfare benefits to Plan Participants, including HNCA employees.
12 UFs 24-38, Colai Dec, Exhs. J, K, & L. Consistent with the Plan's purpose. Plan Participants were
13 offered "core" benefits, including basic life and basic AD&D insurance at no cost to them. UF 30.
14 Additional "optional" benefits were also offered to Plan Participants and/or their dependents,
15 including medical and dental coverage. UF31. While some Plan Participants (like Spears) elected
16 to waive coverage, they were only allowed to waive medical if they had such coverage elsewhere.
17 UF 43; see also Dep't of Labor Op. Letter, 2003 WL 23374600, at * 1 -2 (July 2, 2003) (finding the
18 employer met the "primary purpose" requirement because it mandated medical coverage unless an
19 employee already had such coverage through another policy).
20 c. Benefits Were Specified Pursuant To The Plan
21 The Plan meets the third condition because the Plan, Plan SPD and EOC documents
22 specified the benefits and coverage available under the Plan. UF 25-38. As it specifically relates
23 to Plaintiffs' claims, the Plan and the SPDs specify the Flex Dollar benefit, including the cash
24 benefit paid to Spears, offered by the Plan. UF 33-38; Colia Dec, Exhs. A (HNCA001021;
25 requiring HNI each year to inform each Plan Participant of the amount of Flex Dollars that will be
26 made available on their behalf), Exh. J (HNCA00092I; "The amount of Flex Dollars will be shown
27 on your personalized enrollment worksheet."), Exh. K (HNCA000764; same).
28
16
MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION
d. HNCA's Contributions Were Paid Irrevocably To Third Party
HNI Pursuant To A Funded Arrangement
2
The Plan meets the fourth condition as well. The regulation defines "irrevocable" as
3
follows: "The trust or fund must be set up in such a way that in no event will the employer be able
4
to recapture any ofthe contributions paid in nor in any way divert the funds to his own use or
5
benefit." 29 C.F.R. § 778.215(a)(4); see also Russell v. GovernmenI Employees Insurance
6
Company (S.D. Cal., Mar. 8, 2018, No. 17-CV-672 JLS (WVG)) 2018 WL 1210763, at *7 ("The
7
Court need not look for a definition for irrevocable beyond the regulation's plain text ...").
8
Pursuant to the terms ofthe Plan, HNCA made employer contributions to HNI in its capacity
9
as Plan sponsor and administrator that covered the actual costs of benefits provided by the Plan to
10
Plan Participants, including Plaintiffs. UF 15-16. The contributions HNCA paid to HNI was the
11
total amount necessary to cover all the benefits the Plan paid out to HNCA's Plan Participants
12
(including Plaintiffs), including both core and optional benefits and all Flex Dollars, including the
13
cash benefit Spears (and others) received as a benefit of the Plan. UF 17-18, 33, 44-47. This
14
contribution specifically included all Flex Dollars Plan Participants (such as Spears) incidentally
15
received as a cash benefit of the Plan. Id.
16
Pursuant to the funded arrangement between the Plan sponsor and administrator, HNI, and
17
HNCA, HNCA deposited its employer contributions under the Plan into an account maintained and
18
controlled by HNI as the Plan's sponsor and administrator which had fiduciary responsibilities to
19
the Plan Participants. UF 8-19, 33, 44-47. HNCA's contributions were irrevocable - once made
20 to HNI, HNCA was unable to recapture or divert the funds for HNCA's use or benefit. UF 20.
21 Instead, HNI as the Plan sponsor and administrator, controlled those monies once these monies
22 were deposited into that account. UF 21. HNI then used these contributions to pay for benefits
23 provided by the Plan, including the cash benefit paid to Spears and others. UF 22, 39. HNI
24 effectuated these payment to Plaintiffs, and others, in its capacity as HNCA's third party payroll
25 processor. UF 14, 40.
26
27
28
17
MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION
1 e. Cash Benefits Provided To Participants Under the Plan Were
Incidental And Paid During The Course Of The Participants'
2 Employment As Specified In The Plan
3 The Plan also meets the fifth condition because the cash benefits at issue in this Motion
4 were "incidental" and paid during the course of their employment under circumstances specified in
5 the Plan and consistent with the general purpose of the Plan to provide health and welfare benefits
6 to employees. UF 24, 49-51. The DOL has interpreted the meaning of "incidental" in a July 2,
7 2003 Opinion Letter. Dep't of Labor Op. Letter, 2003 WL 23374600 (July 2, 2003). According
8 to the DOL, cash benefit payments are "incidental" if they account for no more than 20% of the
9 employer's total contribution amount on a plan-wide basis. Id. at *2. Cash benefits paid by HNCA
10 fell well within this mark and are thus "incidental" such that the Plan was "bona fide" at all relevant
11 times. UF 48.
12 First, in each of the Plan years at issue, the total amount of cash benefits provided under the
13 Plan - as a percentage of the total amount of contributions provided - was well below the 20% cap
14 established by the DOL. Id. In fact, cash benefits represented only 1.4% of HNCA's contributions
15 for medical and dental coverage for Plan Participants and their dependents for the year 2013, 1.3%
16 for 2014, 0.9% for 2015, and 0.9%) for 2016. I d Thus, the cash benefits provided under the Plan
17 indisputably qualify as "incidental."
18 Second, the cash benefits were provided "under circumstances that are consistent with the
19 overall primary purpose of the plan of providing benefits." See Dep't of Labor Op. Letter, 2003
20 WL 23374600, at *2 (July 2, 2003). Here, the Plan meets this requirement because the Plan
21 mandated that Plan Participants have other medical insurance before they w
Preview
fl TIMOTHY J. LONG (STATE BAR NO. 137591) FILEI? tjlonafgjorrick.com isuoerior u o u n : u f t,aiiforfi!S. 2 NICHOLAS J. HORTON (STATE BAR NO. 289417) nhorton@orrick.com i IS I 3l£l3 I Q 3 ORRICK, HERRINGTON & SUTCLIFFE LLP 400 Capitol Mall, Suite 3000 4 Sacramento, CA 95814-4497 QV - L>Bfipru Telephone; +1 916 447 9200 5 Facsimile: +1 916 329 4900 duattt titJttisJtai. 6 Attorneys for Defendant HEALTH NET OF CALIFORNIA. INC. 7 8 SUPERIOR COURT OF THE STATE OF CALIFORNIA 9 COUNTY OF SACRAMENTO 10 ANDREA SPEARS, an individual, on behalf Consolidated Case No. 34-2017-00210560- 1 1 of herself and on behalf of all persons similarly CU-OE-GDS situated. 12 Plaintiff, MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF 13 V. DEFENDANT HEALTH NET OF CALIFORNIA, INC.'S RENEWED 14 HEALTH NET OF CALIFORNIA, INC., a MOTION FOR SUMMARY California Corporation; and Does 1 through 50, ADJUDICATION 15 inclusive, Date: Feburary 4, 2019 16 Defendants. Time: 9:00 a.m. Dept.: 54 17 Reservation No.: 2380178 18 Complaint Filed: April 5, 2017 FACFiled: June 29, 2017 19 Consolidated Complaint Filed: Dec. 21, 2017 20 TOMAS R. ARANA, on behalf of himself, all Complaint Filed: August I , 2017 others similarly situated. 21 Plaintiff, 22 V. 23 HEALTH NET OF CALIFORNIA, INC., a 24 California corporation; and DOES 1-50, inclusive, 25 Defendant. 26 27 28 MEMORANDUM OK POINTS AND AUTHORITIES ISO DEI-'S RENEWED MOTION FOR SUMMARY ADJUDICATION T A B L E OF CONTENTS 2 Page 3 I. INTRODUCTION 5 4 II. STATEMENT OF UNDISPUTED MATERIAL FACTS 6 A. The Parties 6 5 B. The Cafeteria Benefits Plan 6 6 C. Spears' Earnings. y D. Arana's Earnings 9 E. Other Earnings 9 I. SPOT Bonuses 10 9 2. The ACA Incentive Payment 10 IQ 3. Wellness Incentive Program 1 III. PLAINTIFFS' ALLEGATIONS 12 A. Plaintiffs' Regular Rate Allegations 12 12 IV. SUMMARY ADJUDICATION MOTIONS MAY BE RENEWED WHEN SUPPORTED BY NEW MATERIAL FACTS 12 '^ V. SUMMARY ADJUDICATION IS WARRANTED 13 14 A. Plaintiffs'Overtime Claim And Derivative PAGA Claim Premised On 15 Their Regular Rate Allegations Fail As A Matter Of Law 13 1. California Courts Look To Federal Law When Determining The Jg "Regular Rate" Of Pay For Purposes Of Overtime Calculations 14 2. Flex Dollar Benefits Received By Spears As A Result Of Her 17 Waiver Of Medical Coverage Were Properly Excluded From Her Regular Rate Under The Benefit-Plan Contribution Exception 15 18 a. Contributions Were Made Pursuant To The Plan And Were 1^ Communicated To HNCA Employees 16 b. The Primary Purpose Of The Plan Was To Provide Health 20 And Welfare Benefits To HNCA Employees 16 21 c. Benefits Were Specified Pursuant To The Plan 16 d. HNCA's Contributions Were Paid Irrevocably To Third 22 Party HNI Pursuant To A Funded Arrangement ;.. 17 23 e. Cash Benefits Provided To Participants Under the Plan Were Incidental And Paid During The Course Of The 24 Participants' Employment As Specified In The Plan II 3. HNCA Appropriately Allocated Other Forms Of Earnings In 25 Determining The Plaintiffs' Regular Rate 19 2g a. Plaintiffs'Regular Compensation Was The Baseline Included In The Regular Rate 19 27 b. Plaintiffs' Premium Rate Compensation Did Not Need To Be Included In The Regular Rate 19 28 1 T A B L E OF CONTENTS (continued) 2 Page 3 c. Compensation For Non-Work Time Did Not Need To Be Included In The Regular Rate 20 4 d. Benefits Payments Did Not Need To Be Included In Spears's Regular Rate 20 5 e. Other Payments 20 6 4. Because The Underlying Overtime Claim Fails. So Too Does Plaintiffs PAGA Claim Based On Such Violation 23 7 VI. CONCLUSION 24 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 T A B L E OF AUTHORITIES 2 Page(s) Cases 4 Advanced-Tech Sec. Servs., Inc. v. Superior Court, 5 163Cal.App. 4th 700 (2008) 10 6 Alonzo V. Maximus, Inc., 832 F. Supp. 2d 1 122 (CD. Cal. 201 1) 17 7 AmalgatJtaled Transit Union. Local 7 7J6. AFL-CIO V. Superior Court, 8 46 Cal. 4th 993 (2009) 19 ^ Bagley V. TRW, Inc., ,Q 73 Cal. App. 4th 1092 (1999). 11 Graham v. Hansen, 128 Cal. App. 3d 965 (1982) 8 12 Howard v. Octagon, Inc., 13 2013 WL 5122191 (N.D. Cal. Sept. 13, 2013) 19 '^ Huntington Memorial Hasp. v. Superior Court, 15 131 Cal. App. 4th 893 (2005) 10 jg Kim V. Reins Int 7 California, Inc., 18 Cal. App. 5th 1052(2017) 19 17 Nieto V. Blue Shield of California Life & Heahh Ins. Co., 18 181 Cal. App. 4th 60 (2010) 9 '9 Prachasaisoradej v. Ralphs Grocery Co., Inc., 42 Cal. 4th 217 (2007) 10 21 Rubin V. Wal-Mart Stores, Inc., 599 F. Supp. 2d 1176 (N.D. Cal. 2009) 17 22 Russell V. Government Employees Insurance Company, 23 2018 WL 1210763 (S.D. Cal., Mar. 8, 2018, No. 17-CV-672 JLS (WVG)) 17 24 Thomas v. Home Depot USA Inc. 527 F. Supp. 2d 1003 (N.D. Cal. 2007) 19 26 Statutes 27 29 U.S.C. § 207(e) 10 28 29 U.S.C. § 207(e)(2) 16,18,19 -3- MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION 29 U.S.C. § 207(e)(3) 17, 2 29 U.S.C. § 207(e)(4) 1,11,16 3 29 U.S.C. § 207(e)(5) 15 4 29 U.S.C. § 207(e)(6) 15 5 Fair Labor Standards Act passim 6 Code Civ. Proc. § 437c 1,8 7 Code Civ. Proc. § 1008(b) 1 Lab. Code § 510 10 9 Lab. Code § 2699(a) 19 10 Lab. Code § 2699(c) 19 11 Regulations 12 29 C.F.R. § 778.208 17 13 29 C.F.R. § 778.21 1 9, 17 14 29 C.F.R. § 778.215(a) 1, 11, 13, 16 15 Other Authorities 16 1991.03.06 DLSE Opinion Letter 17 17 Dep't of Labor Op. Letter, 2003 WL 23374600 (July 2, 2003) 9, 10 18 DLSE Manual §49.1.2 10 19 DLSE Manual § 35.7 17 20 DLSE Manual §49.1.2.4(3) 17 21 22 23 24 25 26 27 28 MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION 1 I. INTRODUCTION 2 This is a renewed motion for summary adjudication brought pursuant to California Code of 3 Civil Procedure, sections 437a(f)(2) and 1008(b) as to claims asserted by Plaintiffs in their Third 4 and Seventh Causes of Action. Defendant Health Net of California, Inc. ("HNCA") is presenting 5 new and different facts in support of this renewed motion targeting Plaintiffs' claim that HNCA 6 failed to include cash benefits received by Spears when calculating the regular rate of pay when 7 computing overtime compensation. Specifically, Plaintiffs allege that HNCA did not properly 8 account for a cash benefit Spears received for waiving medical coverage. However, the Fair Labor 9 Standards Act (FLSA"), which California law follows, specifically excludes from the regular rate 10 the cash benefit Spears received under the Benefit-Plan Contributions Exception. See 29 U.S.C. § 11 207(e)(4); .see also 29 C.F.R. § 778.215(a). 12 This motion also seeks summary adjudication for six distinct issues (Nos. 2-4 and 6-8) that 13 were indirectly addressed in HNCA's first motion for summary adjudication.' These issues more 14 precisely address the remainder of the regular rate claims asserted in Plaintiffs' third cause of 15 action. Further, HNCA has proffered new and different evidence on these issues which should 16 resolve any doubts in the Court's mind that summary adjudication as to Plaintiffs' "bonus" claims 17 is warranted. In fact. Plaintiffs concede two of the claims. Spears concedes she never received 18 three of the four payments that she has characterized as a "bonus," and the fourth (the cash benefit 19 mentioned above) is not a bonus. For his part, Arana appears to allege that HNCA did not include 20 three "bonus" payments in his regular rate, however: (1) he does not dispute that discretionary 21 SPOT bonuses were properly excluded from the regular rate; (2) he does not dispute that non- 22 discretionary ACA Incentive payments were properly included in the regular rate; and (3) he does 23 not dispute that "wellness incentive" payments were not bonuses and were properly excluded from 24 the regular rate. 25 In sum, HNCA is entitled to summary adjudication as to Plaintiffs' claim that HNCA failed 26 to properly calculate their regular rates of pay for purposes of determining their overtime 97 ' ' Health Net is not challenging the same "bonus" claim issue presented in its initial motion. Nonetheless, should the Court construe these issues as a renewal of HNCA's prior motion as to the "bonus" claim issue, HNCA has provided 28 new and different facts in support of the same. -5- MEMORANDUM OF POINTS AND AUTI lORI TIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION 1 compensation as to the four payments addressed in this motion, and their derivative PAGA claims 2 based thereon. 3 II. STATEMENT OF UNDISPUTED MATERIAL FACTS 4 A. The Parties 5 HNCA, a subsidiary of Health Net, Inc. ("HNI"), has operated as a health maintenance 6 organization ("HMO") in California and provides health insurance products such as commercial 7 HMO plans and healthcare service plans. Declaration of Diane C. Rodes ("Rodes Dec"), ^1 2. It 8 serves "customers" - members, hospitals, medical groups, physicians, etc. - over the telephone out 9 of its call centers in Rancho Cordova and Woodland Hills, California. Id. 10 Spears worked as a non-exempt HNCA Customer Service Representative ("CSR") from 11 September 2014 to October 2016 in Rancho Cordova. UF I.^ Arana worked was a non-exempt 12 CSR for HNCA until his promotion in November 2015 to Contact Center Analyst - an exempt 13 position. UF 2.^ At all times during his employment, Arana has worked out of the same Rancho 14 Cordova call center at which Spears worked. Id. •5 B. The Cafeteria Benefits Plan 16 Between January 1, 2001 and December 31, 2016, HNI sponsored and administered a 17 cafeteria benefits plan - a written health and welfare plan - called the "Health Net, Inc. Associates 18 Benefit Program" (the "Plan"), which HNCA adopted for the benefit of its employees. UF 3-5. 19 The Plan was governed by Section 125 of the Internal Revenue Code, was subject to the Employee 20 Retirement Income Security Act, and was overseen by a Benefits Committee. UF 7-9. As called 21 for in the Plan, the Benefits Committee had fiduciary duties and responsibilities to administer the 22 Plan for the benefit of Plan Participants, as that term is defined in the Plan, which included 23 Plaintiffs. UF9-12. 24 HNI treated HNCA as a third party for purposes of administering the Plan, and vice versa. 25 UF 13. To that end, HNCA paid HNI the actual costs of benefits the Plan provided to Plan 26 Participants (including the cash benefits implicated by Plaintiffs'claims). UF 15-18. These Plan 27 = References to "UF" are to HNCA's Separate Statement of Undisputed Material Facts. 28 ^ Since June 2017, Arana's title has been Call Center Systems Analyst - also an exempt position. UF 2. -6- MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION 1 Participants included Plaintiffs. Id. 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 and administrator. UF 19. These contributions made by HNCA 4 pursuant to the Plan were irrevocable - once made to HNI, HNCA was unable to recapture or divert 5 the funds for HNCA's use or benefit. UF 20. HNI, as the Plan sponsor and administrator, then 6 used these funds to pay for benefits under the plan, including the cash benefit that HNI paid to 7 Spears. UF 21-22. 8 The benefits available under the Plan, including the various coverage options and co- 9 payments a Participant was responsible for with respect to the Plan's various covered services and 10 supplies, were explained in detail to Plan Participants in the Summary Plan Descriptions (the "Plan 11 SPD") and Evidence of Coverage ("EOC") documents, which HNI provided to Plan Participants. 12 UF 23-29. The Plan provided "core" benefits to Plan Participants such as basic life and basic 13 AD&D insurance. UF 30. It also provided "optional" benefits to Plan Participants and/or their 14 dependents, such as medical and dental coverage, to select as desired based on their needs. UF 31. 15 To help pay for the cost of medical and dental coverage, and pursuant to the terms ofthe 16 Plan, Plan Participants received "Flex Dollars," which represented HNCA"s employer 17 contributions. UF 32-33. The exact amount of Flex Dollars a Plan Participant received varied 18 depending on the medical and dental plans he or she chose, the number of dependents covered and 19 the Participant's geographic location. UF 34. Generally, the amount of Flex Dollars a Participant 20 received was less than the total cost of the benefit(s) that a participant elected. UF 35. Thus, in the 21 vast majority of cases, a Plan Participant was required to contribute some amount toward the cost 22 of the benefit(s) he or she selected in the form of a paycheck deduction. UF 36-37. 23 All Flex Dollar amounts that Plan Participants received from the Plan are tracked on their 24 pay stub. UF 41. If Flex Dollars exceeded the cost of coverage or i f Plan Participants waived 25 medical and/or dental coverage, the Plan Participant received a portion of the Flex Dollars as a cash 26 benefit. UF 38. The employer contributions paid by HNCA to HNI, as the Plan sponsor and 27 administrator, included all Flex Dollars HNCA employees received from the Plan as Plan 28 Participants, including the cash benefit that is the subject of this Motion. UF 32-33. -7- MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION 1 That in most cases the total amount of Flex Dollars the Plan Participant received was used 2 in whole to pay for optional coverage on a pre-tax basis does not change the nature ofthe Flex 3 Dollars (or cash benefit) provided by the Plan. UF 46. In short. Flex Dollars, including cash 4 benefits at issue in this Motion, were Plan Benefits made available to Plan Participants. UF 45-57. 5 Similarly, that Plan benefits received by Plan Participants were tracked under the pay codes 6 "MedFlxElct" and "DenFlxElct" and "MedFlxWave" and "DenFlxWave," did not change the 7 nature of these benefits; they were Plan benefits. UF 41-42. 8 In each of the Plan years 2013, 2014, 2015 and 2016, the total cash benefits provided to 9 Plan Participants who waived dental and/or medical coverage represented a very small percentage 10 of HNCA's employer contributions to the Plan forthe elected dental and/or medical coverage: 1.4% 11 in 2013, 1.3% in 2014; 0.9% in 2015; and 0.9% in 2016. UF48. 12 Throughout Spears' employment with HNCA, she elected dental coverage. UF 49. 13 However, she waived medical coverage and, as result, received the $20 cash benefit described 14 above from HNI ($20 per pay period) as the Plan sponsor and administrator pursuant to the Plan. 15 UF 49, 42, 45, 50. Arana, on the other hand, did not receive this cash benefit because he elected to 16 receive both medical and dental and the cost of his coverage always exceeded the amount of Flex 17 Dollars he received. UF51. '8 C. Spears' Earnings 19 At no time during her employment with HNCA did Spears receive any form of additional 20 compensation or remuneration that could be construed as a bonus payment. UF 56. Her earnings 21 were limited to compensation she earned based on the hours she worked (both at the regular rate 22 and premium rates) and for certain periods of non-work time, and the Flex Dollars she received 23 pursuant to the Plan. UF 52-61. The following lists all forms of earnings paid to Spears during the 24 relevant time period, as reflected in her payroll data produced in this action, none of which were 25 considered a bonus by HNCA (UF 57): 26 • Regular Rate Compensation: Regular Hours Non-Exempt, Regular Exempt. UF 58. 27 • Premium Rate Compensation: Overtime, Holiday, Holiday Overtime, Floating Holiday, 28 Doubletime. UF 59. -8- MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION 1 • Compensated Non-Work Time: Bereavement, DTO, Jury Duty, PTO LOA, PTO 2 Scheduled, PTO Sick, PTO Unscheduled, Prorated PTO Buyout. UF 60. 3 • Benefits: Medical Flex Waive, Dental Flex Elect. UF 61. 4 D. Arana's Earnings 5 The following lists all forms of compensation by Mr. Arana relevant to his claim that HNCA 6 failed to properly calculate his regular rate during the time he was a non-exempt employee, as 7 refiected in his payroll data produced in this matter. UF 63. 8 • Regular Rate Compensation: Regular Hours Non-Exempt. UF 64. 9 • Premium Rate Compensation: Overtime, Holiday, Floating Holiday Overtime, 10 Doubletime. UF 65. 11 • Compensated Non-Work Time: DTO, PTO LOA, PTO Scheduled, PTO Sick, PTO 12 Unscheduled. UF 66. 13 • Benefits: Medical Flex Elect, Dental Flex Elect. UF 67. 14 • Other Earnings: Bonus - SPOT, Bonus - Other Plans, Incentive - Other Plans, Wellness 15 -Incentive. UF 63, 80, 87, 101. 16 The only forms of compensation Arana received that HNCA considered bonuses were the 17 bonuses he received through the SPOT Cash Awards Program ("SPOT") and incentive pay 18 pursuant to the ACA Customer Service & Claims Representative Pay for Performance Incentive 19 Plan (described in his payroll data as "Bonus - Other Plans" and/or "Incentive - Other Plans"). 20 UF 62. The payments he received through the Wellness Incentive Program were not bonuses. 21 UF 97-99. 22 E. Other Earnings 23 At no time during her employment with HNCA did Spears receive any payments from 24 HNCA that could be characterized as a "bonus." UF 52-61, 81, 88, 102. She only received the 25 regular, premium rate, non-work time, and benefits payments referenced above. UF 52-61. 26 However, Arana appears to claim three types of earnings he received constitute "bonuses," which 27 should have been included in the regular rate: SPOT Cash Awards Program ("SPOT"), an 28 incentive payment pursuant to the ACA Customer Service Center & Claims Representative Pay for -9- MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION 1 Performance Incentive Plan ("ACA Incentive Payment"), and a wellness incentive payment. 2 \. SPOT Bonuses 3 Beginning January 1, 2014 and continuing through December 31, 2016, HNCA paid out 4 SPOT cash awards. UF 68. HNCA spontaneously rewarded SPOT cash awards to certain 5 employees "who demonstrate[d] exceptional behavior on the job . . . whether it [wa]s within or 6 beyond [the employee's] job scope." UF 69. HNCA's SPOT policy informed eligible einployees 7 that bonuses were awarded without any promise or incentive being announced beforehand. UF 70. 8 There were no pre-established criteria for awarding SPOT cash awards or pre-established 9 amounts to be awarded. UF71. Rather, the decision of when, for what reason, and in what amount 10 to award a SPOT cash award - within a range - was subject to the discretion of managers and the 11 ultimate approval of the head of the appropriate Business Unit. UF 72. Each Business Unit Leader 12 was allotted an annual SPOT cash award budget that he or she could elect to use in full, in part, or 13 not at all. UF 73. 14 Procedurally, a SPOT cash award was initiated if a manager felt that an employee on his or 15 her team should receive one. UF 74. The manager had the discretion to seek a SPOT Award for a 16 team member and in what amount. UF 75. The manager would then submit the form to the head 17 of his or her Business Unit. UF 76. The Business Unit Leader then exercised his or her discretion 18 as to whether to award the SPOT cash award based on the manager's recommendation (or not) and, 19 if so, in what amount. UF 77. 20 If the Business Unit Leader decided to award an employee with a SPOT cash award, the 21 amount appeared on the recipient's paycheck with the designation "Bonus-SPOT." UF 78. SPOT 22 cash awards were not included in recipients' regular rate calculation. UF 79. Mr. Arana received 23 SPOT cash awards on three occasions - each in the amount of $1,000. UF 80. These amounts 24 were included on his wage statements dated July 5, 2013; October 25, 2013 and June 5, 2015. Id. 25 Spears did not receive any SPOT bonus. UF81. 26 2. The ACA Incentive Payment 27 Starting January 3, 2014 and lasting through May 31, 2014, HNCA implemented an ACA 28 Incentive Plan for eligible employees. UF 83. The purpose of the ACA Incentive Plan was to - 10- MEMORANDUM OF POINTS AND AU I'HORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION 1 provide an extra reward if employees voluntarily worked overtime due to the increase in workload. 2 especially at the call centers, as a result of implementation of the Patient Protection and Affordable 3 Care Act. UF 84. Specifically, under the ACA Incentive Plan, eligible employees who worked a 4 certain number of overtime hours each month received bonus payments. UF 85. Arana received 5 ACA Incentive Payments, as refiected in his payroll data produced under the description "Incentive 6 - Other Plans" or "Bonus - Other Plans." UF 87. These payments were included in Arana's regular 7 rate of pay. UF 86-87. Spears did not receive any payments pursuant to the ACA Incentive Plan. 8 UF88. 9 3. Wellness Incentive Program 10 From April 5, 2013 to December 31, 2016, HNCA had in place a Wellness Incentive 11 Program for eligible employees. UF 90. HNCA adopted this program because the Company 12 determined that it was in its best interest to provide employees an incentive to engage in certain 13 fitness and weight management programs. UF91. More specifically, HNCA encouraged these 14 types of activities to lower HNCA's health care costs, help to improve employees' health and 15 benefit HNCA through increased productivity. UF 92. 16 Under the Wellness Incentive Program, HNCA provided employees $35 for participating 17 in a health club and/or weight management program. UF 93. Employees who participated in the 18 Wellness Incentive Program had to make a request for a wellness incentive payment online 19 through HNCA's intranet in order to receive the $35. UF 94. If the employee's wellness 20 program of choice qualified under the incentive plan, the incentive payment was non- 21 discretionary. UF 95. Employees who requested the incentive payment with evidence of 22 participation in a qualifying wellness program received a fiat monthly incentive of $35, regardless 23 of the actual cost of their qualifying program. UF 96. 24 The payments made to HNCA employees under the Wellness Incentive Program were not 25 tied to hours worked or performance; nor were they provided as any sort of incentive for 26 employees to work harder, better or more efficiently; nor were they compensation for services 27 rendered by employees. UF 97-100. Arana received payments pursuant to the Wellness 28 Incentive Program, but Spears did not. UF 101 -102. - 11 - MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION III. PLAINTIFFS' ALLEGATIONS 2 A. Plaintiffs' Regular Rate Allegations 3 As part of their third cause of action for Failure to Pay Hourly Wages, Plaintiffs allege that 4 HNCA failed to pay them for all overtime hours worked. Namely, Plaintiffs contend that HNCA 5 "violated the[ir] rights . . . by failing to pay them overtime wages for all overtime hours worked . . 6 . as a result of not correctly calculating their regular rate of pay to include all applicable 7 remuneration, including, but not limited to, non-discretionary bonuses." Consol. Complaint, H 41. 8 IV. SUMMARY ADJUDICATION MOTIONS MAY BE RENEWED WHEN SUPPORTED BY NEW MATERIAL FACTS. 9 California Code of Civil Procedure, section 437c(f)(2) permits prior motions for summary 10 adjudication to be renewed when the moving party "establishes to the satisfaction ofthe court, 11 newly discovered facts or circumstances or a change of law supporting the issues reasserted in the 12 summary judgment motion." When assessing whether the moving party has met its burden under 13 Section 437c(f)(2), courts look to whether the moving party has asserted any new material facts in 14 in support of its motion. See Bagley v. TRW, Inc. (1999) 73 Cal.App.4th 1092, 1097. "Whether 15 the "new" facts alleged on a motion for renewal are sufficient to satisfy the requirements of 16 section 1008, subdivision (b), is a question confided to the sound discretion of the trial court." 17 Graham v. Hansen (1982) 128 Cal. App.3d 965, 971 (upholding trial court's granting of a 18 renewed motion for summary judgment where new facts were submitted via an interrogatory 19 response and a declaration). 20 In denying HNCA's initial motion with respect to the cash benefits paid by the Plan and 21 Plaintiffs' regular rate overtime claims, the Court found that HNCA failed to meet its burden of 22 production on the following grounds. First, the Court found that HNCA failed to set forth 23 material facts necessary to support its motion as to the cash benefits paid by the Plan to Spears, 24 and others, because "Defendant has not clearly identified evidence: (1) that it actually 25 'contributed' the 'cash in lieu of benefits' to third party HNI, and (2) that HNI, not HCNA, 26 actually paid out those amounts to employees."). Declaration of Nicholas J. Horton ("Horton 27 Dec"), Ex. D at 5. HNCA has provided additional material facts addressing the evidence the 28 - 12 - MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF S RENEWED MOTION FOR SUMMARY ADJUDICATION Court previously found lacking. These facts unequivocally prove that HNCA's contributions to 2 HNI pursuant to the Plan included cash benefits received by Spears, and others, and that HNI, not 3 HNCA, paid these amounts to Spears, and others. See UF 10-22. 4 Second, the Court found that HNCA failed to meet its burden as to Plaintiffs' vaguely 5 alleged "bonus" claims because HNCA did not define what it considered to be a bonus. Horton 6 Dec, Ex. D at 8. More specifically, as to Spears, the Court found that HNCA failed to state 7 material facts to show that Spears never received "any non-discretionary, promised amounts potentially causing Spears to expect such payments regularly." Id. (citing 29 C.F.R. § 778.21 1.) 9 As to Arana, the Court found that HNCA "again frames the UF by conclusorily using the 10 undefined word 'bonus' rather than making plain factual assertions independent of that legal 11 term." Id. In this motion, HNCA no longer ties its motion to Plaintiffs' vague allegation of 12 nondiscretionary bonuses, so it is not a renewed motion as to these issues. See Nieto v. Blue 13 Shield of California Life & Health Ins. Co. (2010) 181 CaI.App.4th 60, 72 (holding that Section 14 437c(f)(2) did not apply when a second motion for summary judgment addressed a previously 15 omitted issue). 16 Nonetheless, in the event the Court treats issues 2 through 4 and 6 through 8 as renewed, 17 HNCA has provided additional material facts in support of its motion. Specifically, HNCA has 18 defined what it considered to be a bonus, identified every form of eamings received by Plaintiffs 19 as non-exempt employees, specifically identified which of those eamings it considered to be a 20 bonus, and identified whether those earnings were included in the regular rate. UF 52-67, 80-81, 21 87-88, 101-102. 22 V. SUMMARY ADJUDICATION IS WARRANTED 23 A. Plaintiffs' Overtime Claim And Derivative PAGA Claim Premised On Their Regular Rate Allegations Fail As A Matter Of Law 24 For the two claims that are the subject of this Motion, the Court previously found that 25 HNCA failed to meet its burden of production, despite no contradictory evidence that created a 26 triable issue of fact, on the basis that HNCA failed to present certain material facts or define 27 certain terms used in its separate statement and supporting evidence. In this renewed motion, 28 - 13 - MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION HNCA has added facts to provide those definitions and lo clarify those terms. Specifically, 2 HNCA has added additional facts to make abundantly clear that (1) FINCA's contribution to HNI 3 as the Plan sponsor and administrator for the total cost of benefits included all cash benefits 4 amounts paid to Spears (and others), and (2) neither Plaintiff received any other sort of payment 5 that should have been included in the regular rate, but was not. 6 1. California Courts Look To Federal Law When Determining The ^ "Regular Rate" Of Pay For Purposes Of Overtime Calculations Under California law, an employer must pay non-exempt employees for any hours worked in excess of eight hours in one workday and forty hours in one workweek "at the rate of no less 9 than one and one-half times the regular rate of pay." Lab. Code § 510. However, neither the Wage 10 Orders nor the Labor Code explicitly defines the phrase "regular rate" of pay. As a result, California 11 courts have adopted the definition set forth in the FLSA, 29 U.S.C. § 207(e), and accompanying 12 federal regulations. See Prachasaisoradej v. Ralphs Grocery Co., Inc., 42 Cal. 4th 217, 242 n.l4 13 (2007) ("California follows the federal standard for purposes of determining, under the Labor Code, 14 what constitutes the employee's regular pay"); see also Advanced-Tech Sec. Servs., Inc. v. Superior 15 Court, 163 Cal. App. 4th 700, 707 (2008) (California courts look to U.S. Department of Labor 16 regulations interpreting the "regular rate" of pay under the FLSA to interpret that term as used in 17 Labor Code section 510); see also Huntington Memorial Hasp. v. Superior Court, 131 Cal. App. 18 4th 893, 902-03 (2005) (failure of the Industrial Welfare Commission to define the regular rate 19 indicates its intent that Califomia adhere to the FLSA defmition; applying section 207 to determine 20 regular rate under California law). 21 Moreover, the Division of Labor Standards Enforcement, charged with enforcing the Wage 22 Orders, also recommends that courts look to the FLSA and adopt its definition of "regular rate" of 23 pay. See DLSE Enforcement Policies & Interpretations Manual § 49.1.2 (2002) ("In determining 24 what payments are to be included in or excluded from the calculation ofthe regular rate of pay, 25 California law adheres to the standards adopted by the U.S. Department of Labor to the extent that 26 those standards are consistent with California law."). 27 28 14 MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION 1 2. Flex Dollar Benefits Received By Spears As A Result Of Her Waiver Of Medical Coverage Were Properly Excluded From Her Regular Rate 2 Under The Benefit-Plan Contribution Exception 3 The FLSA specifically excludes from the regular rate the cash benefits HNCA provided to 4 Spears as a result of her waiver of medical coverage under the Plan. See 29 U.S.C. § 207(e)(4). 5 Under the "Benefit-Plan Contributions Exception," "contributions irrevocably made by an 6 employer to a trustee or third person pursuant to a bona fide plan for providing old-age, retirement, 7 life, accident, or health insurance or similar benefits for employees" are not to be included in the 3 regular rate. Id. Department of Labor regulations specify five conditions that must be met for a 9 benefit plan to qualify as "bona fide" under the Benefit-Plan Contributions Exception, all of which 10 are satisfied in this instance: 11 (1) The contributions must be made pursuant to a specific plan or program adopted by the employer . . . and communicated to the 12 employees. This may be either a company-financed plan or an employer-employee contributory plan. 13 (2) The primary purpose of the plan must be to provide 14 systematically forthe payment of benefits to employees on account of death, disability, advanced age, retirement, illness, medical 15 expenses, hospitalization, and the like. 16 (3) In a plan or trust... [t]he benefits must be specified or definitely determinable on an actuarial basis . . . . 17 (4) The employer's contributions must be paid irrevocably to a 18 trustee or third person pursuant to an insurance agreement, trust or other funded arrangement. The trustee must assume the usual 19 fiduciary responsibilities imposed upon trustees by applicable law. The trust or fund must be set up in such a way that in no event will 20 the employer be able to recapture any of the contributions paid in nor in any way divert the funds to his own use or benefit . . . . 21 (5) The plan must not give an employee the right to assign his 22 benefits under the plan nor the option to receive any part of the employer's contributions in cash instead of the benefits under the 23 plan: Provided, however. That if a plan otherwise qualified as a bona fide benefit plan under section 7(e)(4) of the Act, it will still 24 be regarded as a bona fide plan even though it provides, as an incidental part thereof, for the payment to an employee in cash of 25 all or a part of the amount standing to his credit . . . during the course of his employment under circumstances specified in the plan 26 and not inconsistent with the general purposes of the plan to provide the benefits described in section 7(e)(4) of the Act. 27 29 C.F.R. § 778.215(a). HNCA satisfied all of the above requirements. 28 - 15 - MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION I a. Contributions Were Made Pursuant To The Plan And Were Communicated To HNCA Employees 2 The Plan meets the first condition because HNCA's contributions were made pursuant to 3 the conditions set forth in the Plan that HNCA adopted. UF 3-22, 39-47. Moreover, such conditions 4 were communicated via the Plan SPD and EOC documents distributed to employees, including 5 Plaintiffs. UF 23-38. Among other things, these documents explained how the Plan worked, 6 outlined who was eligible to participate, detailed Participants' rights, described the coverage 7 options available for each benefit category under the Plan, and explained Flex Dollars. Id. b. The Primary Purpose Of The Plan Was To Provide Health And 9 Welfare Benefits To HNCA Employees 10 The Plan meets the second condition because the primary purpose of the Plan was to provide 11 for a wide range of health and welfare benefits to Plan Participants, including HNCA employees. 12 UFs 24-38, Colai Dec, Exhs. J, K, & L. Consistent with the Plan's purpose. Plan Participants were 13 offered "core" benefits, including basic life and basic AD&D insurance at no cost to them. UF 30. 14 Additional "optional" benefits were also offered to Plan Participants and/or their dependents, 15 including medical and dental coverage. UF31. While some Plan Participants (like Spears) elected 16 to waive coverage, they were only allowed to waive medical if they had such coverage elsewhere. 17 UF 43; see also Dep't of Labor Op. Letter, 2003 WL 23374600, at * 1 -2 (July 2, 2003) (finding the 18 employer met the "primary purpose" requirement because it mandated medical coverage unless an 19 employee already had such coverage through another policy). 20 c. Benefits Were Specified Pursuant To The Plan 21 The Plan meets the third condition because the Plan, Plan SPD and EOC documents 22 specified the benefits and coverage available under the Plan. UF 25-38. As it specifically relates 23 to Plaintiffs' claims, the Plan and the SPDs specify the Flex Dollar benefit, including the cash 24 benefit paid to Spears, offered by the Plan. UF 33-38; Colia Dec, Exhs. A (HNCA001021; 25 requiring HNI each year to inform each Plan Participant of the amount of Flex Dollars that will be 26 made available on their behalf), Exh. J (HNCA00092I; "The amount of Flex Dollars will be shown 27 on your personalized enrollment worksheet."), Exh. K (HNCA000764; same). 28 16 MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION d. HNCA's Contributions Were Paid Irrevocably To Third Party HNI Pursuant To A Funded Arrangement 2 The Plan meets the fourth condition as well. The regulation defines "irrevocable" as 3 follows: "The trust or fund must be set up in such a way that in no event will the employer be able 4 to recapture any ofthe contributions paid in nor in any way divert the funds to his own use or 5 benefit." 29 C.F.R. § 778.215(a)(4); see also Russell v. GovernmenI Employees Insurance 6 Company (S.D. Cal., Mar. 8, 2018, No. 17-CV-672 JLS (WVG)) 2018 WL 1210763, at *7 ("The 7 Court need not look for a definition for irrevocable beyond the regulation's plain text ..."). 8 Pursuant to the terms ofthe Plan, HNCA made employer contributions to HNI in its capacity 9 as Plan sponsor and administrator that covered the actual costs of benefits provided by the Plan to 10 Plan Participants, including Plaintiffs. UF 15-16. The contributions HNCA paid to HNI was the 11 total amount necessary to cover all the benefits the Plan paid out to HNCA's Plan Participants 12 (including Plaintiffs), including both core and optional benefits and all Flex Dollars, including the 13 cash benefit Spears (and others) received as a benefit of the Plan. UF 17-18, 33, 44-47. This 14 contribution specifically included all Flex Dollars Plan Participants (such as Spears) incidentally 15 received as a cash benefit of the Plan. Id. 16 Pursuant to the funded arrangement between the Plan sponsor and administrator, HNI, and 17 HNCA, HNCA deposited its employer contributions under the Plan into an account maintained and 18 controlled by HNI as the Plan's sponsor and administrator which had fiduciary responsibilities to 19 the Plan Participants. UF 8-19, 33, 44-47. HNCA's contributions were irrevocable - once made 20 to HNI, HNCA was unable to recapture or divert the funds for HNCA's use or benefit. UF 20. 21 Instead, HNI as the Plan sponsor and administrator, controlled those monies once these monies 22 were deposited into that account. UF 21. HNI then used these contributions to pay for benefits 23 provided by the Plan, including the cash benefit paid to Spears and others. UF 22, 39. HNI 24 effectuated these payment to Plaintiffs, and others, in its capacity as HNCA's third party payroll 25 processor. UF 14, 40. 26 27 28 17 MEMORANDUM OF POINTS AND AUTHORITIES ISO DEF'S RENEWED MOTION FOR SUMMARY ADJUDICATION 1 e. Cash Benefits Provided To Participants Under the Plan Were Incidental And Paid During The Course Of The Participants' 2 Employment As Specified In The Plan 3 The Plan also meets the fifth condition because the cash benefits at issue in this Motion 4 were "incidental" and paid during the course of their employment under circumstances specified in 5 the Plan and consistent with the general purpose of the Plan to provide health and welfare benefits 6 to employees. UF 24, 49-51. The DOL has interpreted the meaning of "incidental" in a July 2, 7 2003 Opinion Letter. Dep't of Labor Op. Letter, 2003 WL 23374600 (July 2, 2003). According 8 to the DOL, cash benefit payments are "incidental" if they account for no more than 20% of the 9 employer's total contribution amount on a plan-wide basis. Id. at *2. Cash benefits paid by HNCA 10 fell well within this mark and are thus "incidental" such that the Plan was "bona fide" at all relevant 11 times. UF 48. 12 First, in each of the Plan years at issue, the total amount of cash benefits provided under the 13 Plan - as a percentage of the total amount of contributions provided - was well below the 20% cap 14 established by the DOL. Id. In fact, cash benefits represented only 1.4% of HNCA's contributions 15 for medical and dental coverage for Plan Participants and their dependents for the year 2013, 1.3% 16 for 2014, 0.9% for 2015, and 0.9%) for 2016. I d Thus, the cash benefits provided under the Plan 17 indisputably qualify as "incidental." 18 Second, the cash benefits were provided "under circumstances that are consistent with the 19 overall primary purpose of the plan of providing benefits." See Dep't of Labor Op. Letter, 2003 20 WL 23374600, at *2 (July 2, 2003). Here, the Plan meets this requirement because the Plan 21 mandated that Plan Participants have other medical insurance before they w