SUPERIOR COURT OF CALIFORNIA

COUNTY OF SANTA CLARA

FABIOLA TORRENTO, an individual, on behalf of herself and on behalf of all persons similarly situated,

Plaintiff,

vs.

LUCILE SALTER PACKARD CHILDREN’S HOSPITAL AT STANFORD, a California Corporation, and DOES 1 through 50, inclusive,

Defendants.

Case No. 2016-1-CV-291035

TENTATIVE RULING RE: DEFENDANT’S MOTION FOR SUMMARY ADJUDICATION; PLAINTIFF’S MOTION FOR SUMMARY ADJUDICATION

The above-entitled action comes on for hearing before the Honorable Thomas E. Kuhnle on April 19, 2019, at 9:00 a.m. in Department 5. The Court now issues its tentative ruling as follows:

I. INTRODUCTION
II.
This is a class action arising out of various alleged Labor Code violations. The Second Amended Complaint (“SAC”), filed on October 20, 2017, sets forth the following causes of action: (1) Unfair Competition in Violation of Cal. Bus. & Prof. Code, § 17200, et seq.; (2) Unfair Competition in Violation of Cal. Bus. & Prof. Code, § 17200, et seq.; (3) Failure to Pay Overtime Wages in Violation of Cal. Lab. Code, § 510, et seq.; (4) Failure to Provide Accurate Itemized Statements in Violation of Cal. Lab. Code, § 226; (5) Failure to Provide Wages When Due in Violation of Cal. Lab. Code, §§ 201, 202 and 203; and (6) Violation of the Private Attorneys General Act. On July 16, 2018, the Court granted class certification in this matter.

Defendant Lucile Salter Packard Children’s Hospital at Stanford (“Defendant”) previously moved for summary judgment, but the Court denied the motion without prejudice because Defendant’s motion only addressed Defendant’s Clean Air payments and it appeared Plaintiff may still have had other claims in this case. The parties have stipulated to have the following issue of law adjudicated pursuant to Code of Civil Procedure section 437c, subdivision (t): whether, during the class period, Defendant was required by law to include Clean Air payments in putative class members’ “regular rate of pay.” Defendant and Plaintiff have each filed motions for summary adjudication of this issue.

III. DISCUSSION
IV.
A. Defendant’s Motion for Summary Adjudication
B.
Defendant provides evidence that Stanford University (“Stanford”) started a program called “Commute Club” in Stanford’s Parking & Transportation Services Department as a way to encourage people who might otherwise drive onto campus during peak traffic hours – e.g. students, faculty, employees, and contractors – to use alternative methods of transportation. (Separate Statement of Undisputed Material Facts in Support of Defendant’s Motion for Summary Adjudication (“UMF”), No. 9.) Stanford created the program at least in part due to the requirements of Stanford’s General Use Permit (“GUP”), adopted by the Santa Clara County Board of Supervisors in December 2000. (UMF, Nos. 2-4, 9.) The General Use Permit requires Stanford to “mitigate the transportation impacts of its additional development and population growth . . . through a program of ‘no net new commute trips.’” (UMF, No. 4.)

The “Clean Air” program is one of the Commute Club’s programs. (UMF, No. 11.) Eligibility to participate is extended to particular employees who work on campus, students, faculty, professors, visiting professors, contractors, consultants, vendors, and others. (UMF, No. 11.) For Defendant’s employees to be eligible, they must work over 20 hours a week, during the day shift, on the main campus, and the employees’ main work address has to be a building that is eligible for Commute Club. (UMF, No. 12.)

Defendant makes the following arguments: (1) Commute Club payments are not “remuneration for work” and therefore are properly excluded from the regular rate of pay; (2) even if Clean Air payments could be construed as “remuneration for work,” they are excluded from the regular rate because they constitute “other similar payments that are not compensation for hours of employment” under section 207(e) of the FLSA; (3) construing Clean Air payments as part of the regular rate of pay is inconsistent with the statutory purpose behind the overtime pay requirement; (4) Clean Air payments are not “non-discretionary bonuses” that must be included in the regular rate of pay; and (5) policy considerations support the conclusion that Clean Air payments are not part of the regular rate of pay.

An employee’s “regular rate of pay” is generally deemed to include all remuneration for employment paid to, or on behalf of, the employee. (29 U.S.C. § 207(e).) The regular rate of pay is used in calculating overtime. (Lab. Code, § 510, subd. (a).) The parties disagree about whether Clean Air payments are “remuneration for employment.”

Defendant correctly points out that the general rule is that ordinary home-to-job-site travel is not compensable.

An employee who travels from home before his regular workday and returns to his home at the end of the workday is engaged in ordinary home to work travel which is a normal incident of employment. This is true whether he works at a fixed location or at different job sites. Normal travel from home to work is not worktime.

(29 C.F.R. § 785.35; see also Kuebel v. Black & Decker Inc. (2d Cir. 2011) 643 F.3d 352, 360.)

Defendant argues therefore that the Commute Club does not pay employees for commuting. For example, an employee who drives to work (i.e. commutes) alone is not eligible for payment pursuant to the Commute Club.

To participate in Commute Club, an employee must meet a number of requirements. Among these requirements, employees must be at Stanford’s main campus at least 20 hours per week during normal business hours. (SAC, Ex. 5.) Evening and night-shift employees are not eligible. (Ibid.) Importantly, membership in Commute Club is not restricted to employees, but is also open to students and “other.” (Ibid.)

Defendant provides evidence the purpose of Commute Club is to incentivize commuters to use public alternative transportation. (UMF, No. 10.) Defendant also provides evidence the 20-hours-a-week requirement is meant to ensure only those employees who commute to work at least 2.5 days every week are eligible, so as to maximize the number of vehicles not driving on campus. (UMF, No. 16.)

Defendant asserts the most instructive case for the present circumstance is Minizza v. Stone Container Corp. Corrugated Container Div. East Plant (3d Cir. 1988) 842 F.2d 1456. Minizza involved a dispute regarding whether certain lump sum payments received pursuant to the terms of collective bargaining agreements should be excluded from the regular rate of pay. (Id. at pp. 1457-1458.) The court concluded the “payments were nothing more or less than an inducement by the employers to the employees to ratify the agreement on the terms proposed by the employers.” (Id. at p. 1462.)

The instant case is similar in that the evidence leads to the conclusion that Clean Air payments are intended as an inducement to commuters to Stanford (employees and non-employees) to use alternative transportation. As stated above, payments for commute time are generally not compensable. That leads to the conclusion that the payments here are not for employees’ commutes, but for another purpose – i.e. to encourage participation in Commute Club.

Plaintiff argues Commute Club is different than the situation in Minizza because it has a requirement for employees to work at least 20 hours a week. In other words, the incentive is tied to hours worked. However, the amount of the incentive payment is not tied to the number of hours worked. There is no evidence an employee who works 20 hours will receive a different payment than an employee who works 40 hours. Rather, the 20-hour requirement is just a qualification to participate in the program. As stated previously, Defendant provides evidence the 20-hour requirement is meant to ensure only employees who commute at least 2.5 days every week are eligible.

Moreover, the 20-hour-a-week requirement is not tied to work. Participants in Commute Club are not required to work a certain number of hours, but only “to be at Stanford’s main campus at least 20 hours per week during normal business hours.” (SAC, Ex. 5.)

Plaintiff argues this case is similar to Pietrzycki v. Heights Tower Service, Inc. (N.D. Ill. 2017) 290 F.Supp.3d 822. Pietrzycki concerned payments to technicians for time spent driving between cell phone towers. The Court discussed whether the “drive time” payments were subject to any exclusion from the regular rate of pay.

Defendants contend Drive Time payments fit within the statutory exclusion in 29 U.S.C. § 207(e)(2). This exclusion must be interpreted narrowly and Defendants bear the burden of proving that it applies.

Section 207(e)(2) has three parts. The first excludes “payments made for occasional periods when no work is performed due to vacation, holiday, illness, failure of the employer to provide sufficient work, or other similar cause.” 29 U.S.C. § 207(e)(2). The Court will assume for a moment that employees do not perform work during Drive Time. Even then, this provision would not apply. Employees, who were traveling to job sites, were not on vacation, taking a holiday, or ill. HTS did not fail to provide work because of “unpredictable obstacles beyond [its] control.” 29 C.F.R. § 778.218(c). And the catchall—“other similar cause”—cannot save Defendants because that provision only covers “payments made for periods of absence” when those absences are “of a nonroutine character which are infrequent or sporadic or unpredictable.” 29 C.F.R. § 778.218(d).

The second part of § 207(e)(2) excludes “reasonable payments for traveling expenses, or other expenses, incurred by an employee in the furtherance of his employer’s interests and properly reimbursable by the employer.” 29 U.S.C. § 207(e)(2). Drive Time payments are not made to reimburse employees for expenses they incurred.

The third part of § 207(e)(2) excludes “other similar payments to an employee which are not made as compensation for his hours of employment.” 29 U.S.C. § 207(e)(2). This provision encompasses payments ‘similar’ in character to the payments specifically described in” § 207(e)(2). 29 C.F.R. § 778.224. As already explained, the payments specified are not similar to Drive Time payments. Moreover, the last clause of § 207(e)(2) does not provide an independent basis for excluding payments from the regular rate calculation because it is but a mere re articulation of the ‘remuneration for employment’ requirement set forth in the preambulary language of § 207(e).

(Pietrzycki v. Heights Tower Service, Inc. (N.D. Ill. 2017) 290 F.Supp.3d 822, 842, quotation marks and citations omitted.)

Plaintiff contends this case should have the same result and that none of the exceptions apply. However, Pietrzycki is distinguishable. In Pietrzycki, employees were compensated for travel time from work site to work site during the work day. In contrast, the payments for Commute Club are connected to time spent traveling to work and from work – i.e. a normal “commute,” which is generally not compensable time.

Plaintiff cites to Harris v. Best Buy Stores, L.P. (N.D. Cal. 2016) 2016 WL 4073327, at *3, in which the court stated “[t]he FLSA defines ‘regular rate’ to include ‘all remuneration for employment paid to, or on behalf of, the employee’ unless it falls under one of eight statutory exceptions.” Plaintiff argues therefore that Defendant must establish an exception applies and Defendant has not done so.

The problem with Plaintiff’s argument is that an exception is only necessary to exclude remuneration for employment from the regular rate of pay when there is remuneration for employment. In other words, there must first be remuneration for employment to which an exception can be applied. Here, the evidence demonstrates Clean Air payments are not remuneration for employment. Consequently, no exception is necessary.

The evidence before the Court demonstrates the Commute Club program is available to both employees and non-employees (including students) and is not tied to any work performed. The Court concludes payments under the program (clean air cash) are not remuneration for work and therefore should not be included in the regular rate of pay. Defendant’s motion for summary adjudication is GRANTED.

C. Plaintiff’s Motion for Summary Adjudication
D.
Plaintiff’s motion for summary adjudication is essentially an opposition to Defendant’s motion. In fact, Plaintiff’s moving papers for its cross-motion are also its opposition to Defendant’s motion. Similarly, Defendant’s opposition to Plaintiff’s motion is also Defendant’s reply to its own motion.

Accordingly, for the reasons discussed in connection with Defendant’s motion, Plaintiff’s motion for summary adjudication is DENIED.

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