SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CLARA

KELLIE HOPSTEIN, on behalf of herself and other class members,

Plaintiff,

vs.

HEWLETT PACKARD ENTERPRISE COMPANY, a Delaware corporation; ENTERPRISE SERVICES LLC, a Delaware limited liability company; and DOES 3 through 10, inclusive,

Defendants.
Case No. 2017-1-CV-305577

TENTATIVE RULING RE: DEMURRER TO FOURTH AMENDED COMPLAINT

The above-entitled action comes on for hearing before the Honorable Thomas E. Kuhnle on August 10, 2018, at 9:00 a.m. in Department 5. The Court now issues its tentative ruling as follows:

I. INTRODUCTION

This is a putative class action arising out of various alleged Labor Code violations. The Fourth Amended Complaint (“4AC”), filed on May 14, 2018, sets forth the following causes of action: (1) Failure to Pay Meal Periods (Labor Code §§ 226.7 and 512); (2) Failure to Provide Rest Periods (Labor Code § 226.7); (3) Failure to Pay Overtime Compensation (Labor Code § 510); (4) Failure to Provide Accurate Wage Statements (IWC Wage Order 4-2001(7)(A), Labor Code § 226); (5) Failure to Pay Timely Earned Wages (Labor Code § 204) ; (6) Unfair Competition (Business & Professions Code § 17200, et seq.); and (7) Violation of Private Attorney General Act (PAGA) (Labor Code § 2699, et seq.). Defendants Hewlett Packard Enterprise Company and Enterprise Services LLC (together, “Defendants”) demur to the fourth cause of action in the 4AC.

II. DISCUSSION

The fourth cause of action is for failure to provide accurate wage statements. The 4AC sets forth two main classes – Class A and Class B – and alleges several subclasses for each. The fourth cause of action relates to subclasses A3 and B3. Subclass A3 is defined as “[a]ll software testers and business analysts who worked for Defendants in the State of California who received at least one wage statement from Defendants.” (4AC, ¶ 22(a)(iii).) Subclass B3 is defined as “[a]ll Service Information Developer I’s, and/or employees performing the roles of software testers and/or business analysts who received at least one wage statement from Defendants.” (4AC, ¶ 22(b)(iii).)

Plaintiff alleges Defendants failed to furnish Plaintiff and subclass A3 with timely and accurate itemized statements showing gross wages, net wages, and overtime wages earned and the proper rates, in that the premiums owed to Plaintiff and the members of subclass A3 for untimely or interrupted meal and rest periods and overtime wages were not included in gross wages earned by Plaintiff and subclass A3. (4AC, ¶ 72.) Plaintiff alleges Defendants failed to furnish Plaintiff and subclass B3 with timely and accurate itemized statements showing the gross wages and net wages earned and the proper rates, in that the premiums owed to Plaintiff and the members of subclass B3 for untimely or interrupted meal and rest periods were not included in gross wages earned by Plaintiff and subclass B3. (4AC, ¶ 73.)

Section 226, subdivision (a) provides that a wage statement must include (with certain exceptions) the following information:

(1) gross wages earned;
(2) total hours worked by the employee;
(3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis;
(4) all deductions, provided that all deductions made on written orders of the employee may be aggregated and shown as one item;
(5) net wages earned;
(6) the inclusive dates of the period for which the employee is paid;
(7) the name of the employee and only the last four digits of his or her social security number or an employee identification number other than a social security number;
(8) the name and address of the legal entity that is the employer; and
(9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee.
Section 226 provides further that an employee suffering injury as a result of a violation of subdivision (a) can recover penalties. (Lab. Code, § 226, subd. (e)(1).) With regard to “injury,” the statute states, in relevant part:
An employee is deemed to suffer injury for purposes of this subdivision if the employer fails to provide accurate and complete information as required by any one or more of items (1) to (9), inclusive, of subdivision (a) and the employee cannot promptly and easily determine from the wage statement alone one or more of the following:

(i) The amount of the gross wages or net wages paid to the employee during the pay period or any of the other information required to be provided on the itemized wage statement pursuant to items (2) to (4), inclusive, (6), and (9) of subdivision (a).

(ii) Which deductions the employer made from gross wages to determine the net wages paid to the employee during the pay period. Nothing in this subdivision alters the ability of the employer to aggregate deductions consistent with the requirements of item (4) of subdivision (a).

(iii) The name and address of the employer and, if the employer is a farm labor contractor, as defined in subdivision (b) of Section 1682, the name and address of the legal entity that secured the services of the employer during the pay period.

(iv) The name of the employee and only the last four digits of his or her social security number or an employee identification number other than a social security number.

(Lab. Code, § 226, subd. (e)(2)(B).)

Defendants argue subclass B3 does not have a claim because the failure to show gross and net wages earned on a wage statement does not give rise to penalties under Labor Code section 226. Although gross and net wages earned must be included on a wage statement, an employee is only injured by the absence of such information if it renders the employee unable to determine the amount paid to the employee. (See Lab. Code, § 226, subd. (e)(2)(B)(i).) This is because gross and net wages are items (1) and (5) of subdivision (a), and the absence of the information for those categories is not sufficient by itself to constitute injury. (Ibid.) Plaintiff does not allege she cannot determine the amount paid to her. Therefore, she cannot maintain the fourth cause of action for herself or subclass B3 based on the absence of gross or net wages on her wage statement.

Plaintiff argues her wage statement also failed to include all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate (item 9 of subdivision (a)). To the extent this is directed at missed breaks, those missed breaks would result in penalties (from a different statute – Labor Code section 226.7), not in unpaid wages at a particular hourly rate.

The Court notes that Subclass A3 is similar to subclass B3, but also includes an allegation that the wage statements did not show overtime wages earned. (4AC, ¶ 72.) To the extent Plaintiff’s argument is directed at unpaid overtime, Defendants argue the case of Maldonado v. Epsilon Plastics, Inc. (2018) 22 Cal.App.5th 1308 stands for the proposition that failure to account for overtime allegedly earned by misclassified employees does not trigger penalties under section 226.

In Maldonado, the court considered the issue of whether the wage statements were inaccurate because they did not properly indicate the ninth and tenth hours worked by employees per day were overtime. (Maldonado v. Epsilon Plastics, Inc., supra, 22 Cal.App.5th at p. 1334.) In its discussion, the court stated:

[Defendant] argues that if plaintiffs’ argument were followed to its logical conclusion, the only way it could have avoided wage statement penalties while operating under the [alternate work schedule] it believed was legitimate would have been to issue a wage statement which bore no similarity to the pay the employees were actually receiving. As it is illogical to think this is what the Legislature intended, plaintiffs’ counter argument boils down to the proposition that any failure to pay overtime at the appropriate rate also generates a wage statement injury justifying the imposition of wage statement penalties—an apparent unintentional double recovery.

(Maldonado v. Epsilon Plastics, Inc., supra, 22 Cal.App.5th at p. 1336.)
The court stated further:

There is a clearly a significance to the Legislature’s decision that injury is not presumed when a wage statement fails to include wages “earned” but is presumed when the wage statement fails to include hours “worked at” a particular rate. The difference, we believe, is to account for precisely this situation—where at the time the work was performed, the work was done and paid for at a particular rate, but it was subsequently determined that the employee had actually earned the right to additional compensation. Wage statements should include the hours worked at each rate and the wages earned. In a perfect world, the first numbers will calculate out to the second. But when there is a wage and hour violation, the hours worked will differ from what was truly earned. But only the absence of the hours worked will give rise to an inference of injury; the absence of accurate wages earned will be remedied by the violated wage and hour law itself, as is the case here.

(Maldonado v. Epsilon Plastics, Inc., supra, 22 Cal.App.5th at pp. 1336-1337, emphasis in original.)

The court concluded:

Here, [defendant’s] plant was operating under the [alternate work schedule]; Epsilon paid its employees pursuant to the [alternate work schedule]; and its wage statements accurately reflected the pay under the [alternate work schedule]. That the [alternate work schedule] ultimately turned out to be invalid mandates that the employees receive unpaid overtime, interest, and attorney’s fees. (§ 1194, subd. (a).) It does not mandate that they also receive penalties for the wage statements which accurately reflected their compensation under the rates at which they had worked at the time.

(Maldonado v. Epsilon Plastics, Inc., supra, 22 Cal.App.5th at p. 1337.)

Plaintiff contends Maldonado is inapplicable because it involved an alternate work schedule, which is not at issue here. While this is true factually, the holding in Maldonado did not depend specifically on the existence of the alternate work schedule; rather, the court was concerned that the wage statements would reflect the pay received by employees. (See Maldonado v. Epsilon Plastics, Inc., supra, 22 Cal.App.5th at pp. 1337 [noting that the purpose of section 226 is to document the paid wages to ensure the employee is fully informed regarding the calculation of those wages].)

Plaintiff also argues Maldonado is distinguishable because it was a post-trial decision and because the premium wage rate was not part of the trial. But Maldonado involved an overtime claim, just like in this case. The fact that it was decided post-trial had no impact on the court’s analysis and is a distinction without a difference.

Maldonado makes it clear that Plaintiff cannot obtain section 226 penalties based on Plaintiff’s overtime claim. As discussed previously, Plaintiff also has not alleged a right to recover section 226 penalties for untimely or interrupted meal and rest periods. Accordingly, Defendants’ demurrer is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

As a final matter, Plaintiff asserts there is a certified question pending before the California Supreme Court from the Ninth Circuit that might affect this case. The question at issue is:
Do violations of the meal period regulations, which require payment of a “premium wage” for each improper meal period, give rise to claims under sections 203 and 226 of the California Labor Code where the employer does not include the premium wage in the employee’s pay or pay statements during the course of the violations?

Plaintiff states she is not requesting a stay pending a decision by the Supreme Court, but simply leave to amend in the future if the answer to the certified question makes it necessary. The Court is not prepared now to issue any order based on speculation regarding what may happen in the future. Regardless, Plaintiff has been given leave to amend at this time. Should Plaintiff want leave to amend at some other point in this case, Plaintiff is free to file an appropriate motion or stipulation.

The Court will prepare the final order if this tentative ruling is not contested.