2014-00160711-CU-OE

Judy Baker vs. Advanced Disability Management, Inc.

Nature of Proceeding: Motion for Summary Judgment and/or Adjudication

Filed By: Davenport, Gregory R.

Defendant Advanced Disability Management, Inc.’s (“Defendant”) Motion for Summary Judgment, or in the alternative, Summary Adjudication, is DENIED as follows.

Request for Judicial Notice

Plaintiffs’ request for judicial notice of (1) the Interim Arbitration Award in the matter of Taylor-Thomas v. Genex Holding, Inc., JAMS Reg. No. 1100090976, and (2) the DLSE Opinion Letter regarding the professional exemption is GRANTED. In taking judicial notice of these documents, the Court accepts the fact of their existence, not the truth of their contents. (See Professional Engineers v. Dep’t of Transp. (1997) 15 Cal. 4th 543, 590 [judicial notice of findings of fact does not mean that those findings of fact are true].)

Defendant’s request for judicial notice on reply of the Board of Registered Nursing “Explanation of the Scope of RN Practice Including Standardized Procedures” is

GRANTED.

Factual Background

This is a wage and hour class action. Plaintiff Judy Baker, on behalf of herself and others similarly situated (“Plaintiffs”), filed this action March 25, 2014, alleging that Defendant improperly classified other current and former medical case managers (“MCMs”) who worked for Defendant from March 25, 2010, until the present. Plaintiffs allege that this improper classification rendered them improperly exempt from the overtime requirements of the California Labor Code and the Fair Labor Standards Act (“FLSA”). The operative First Amended Complaint alleges the following five causes of action: (1) unfair competition in violation of Business & Professions Code section 17200 et seq.; (2) failure to pay overtime (violation of Labor Code sections 510, 515, 1194, and 1198); (3) failure to provide accurate itemized statements; (4) failure to provide wages when due; and (5) Labor Code Private Attorney General Act (“PAGA”). Defendant’s Answer filed on October 24, 2014, does not allege any affirmative defenses.

On April 25, 2016, the Court granted the parties’ stipulation to certify the class of MCMs. On June 13, 2016, the Court granted the parties’ stipulation seeking approval of a class notice to be mailed to the class members. On October 12, 2016, the claims administrator provided a final list of all non-opt out class members to the parties.

On November 9, 2017, the Court denied Plaintiffs’ Motion for Summary Adjudication, finding that Plaintiffs failed to meet their initial burden on the UCL, Failure to Pay, Failure to Provide Accurate Wage Statements, and Failure to Provide Wages (First through Fourth causes of action). (ROA 138.) The Court further found that there was a question of material fact as to whether Plaintiffs were “engaged in the practice of nursing” and whether Plaintiffs “exercised discretion and independent judgment.” (Id.) As the PAGA cause of action is derivative of the other causes of action, summary adjudication of the PAGA claim was also denied. (Id.) Trial is currently set for February 5, 2019.

Defendant has now filed this motion for summary judgment, or in the alternative, summary adjudication. Defendant asserts that all of Plaintiffs’ causes of action rely on their position that Defendant misclassified them as exempt from the overtime requirements of the FLSA and California Labor Code. However, Defendants argue that the MCMs (and therefore Plaintiffs) were indisputably properly classified because they (1) satisfy FLSA’s and California’s professional exemption and as a matter of law, and (2) satisfy FLSA’s and California’s administrative exemption, as a matter of law.

Defendant contends that Plaintiffs were properly classified because Plaintiffs, as MCMs, are experienced in workers’ compensation Medical Case Management and maintain their Registered Nurses Licenses, yet they do not engage in the practice of nursing or provide any type of health care or nursing services. (UMFs 29-31.) Additionally, Defendant asserts that Plaintiffs, as MCMs, provided consultation and recommendations to Defendant’s customers to help reduce the costs associated with workers’ compensation injuries and ensure that they are provided with appropriate care so they can return to work as quickly as possible. (UMF 19, 25, 30, 32, 66, 81, 83, 91-93.) The MCMs also advise Defendant’s customers as to whether their treatment plans are compliant with the American College of Occupational and Environmental Medicine (“ACOEM”) guidelines. (UMF 17, 71.) Defendant contends that for these reasons, and those specifically set forth in UMF nos. 1-95, MCMS are exempt professional employees and/or exempt administrative employees as a matter of law, and thus Plaintiffs’ claims against Defendant all must fail.

Plaintiffs oppose. The Court’s discussion follows.

Standards on Motions for Summary Adjudication/Summary Judgment

In evaluating a motion for summary judgment or summary adjudication the court engages in a three step process. The Court first identifies the issues framed by the pleadings. The pleadings define the scope of the issues on a motion for summary judgment or summary adjudication. (FPI Dev. Inc. v. Nakashima (1991) 231 Cal. App. 3d 367, 381-382). Because a motion for summary judgment or summary adjudication is limited to the issues raised by the pleadings (Lewis v. Chevron (2004) 119 Cal. App. 4th 690, 694), all evidence submitted in support of or in opposition to the motion must be addressed to the claims and defenses raised in the pleadings. An issue that is “within the general area of issues framed by the pleadings” is properly before the court on a summary judgment or summary adjudication motion. (Lennar Northeast Partners v. Buice (1996) 49 Cal. App. 4th 1576, 1582-1583.) The Court cannot consider an unpleaded issue in ruling on motion for summary judgment or adjudication. Roth v. Rhodes (1994) 25 Cal.App.4th 530, 541. The papers filed in response to a defendant’s motion for summary judgment may not create issues outside the pleadings and are not a substitute for an amendment to the pleadings. Tsemetzin v. Coast Federal Savings & Loan Assn. (1997) 57 Cal.App.4th 1334, 1342.

Next, the Court is required to determine whether the moving party has met its burden. A defendant [or, as here, cross-defendant] moving for summary judgment bears the burden of persuasion that one or more elements of the plaintiffs/opposing party’s cause of action cannot be established, or that there is a complete defense to the cause of action. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal 4th 826, 850, quoting CCP § 437c(p)(2)). A defendant is not required to conclusively negate one or more elements of the plaintiffs cause of action; (Saelzer v Advance, Group 400 (2001) 25 Cal. 4th 763, 780-781). Rather, to meet its burden, the defendant is only required to show that the plaintiff cannot prove an element of its cause of action, i.e., that the plaintiff does not possess and cannot reasonably obtain evidence necessary to show this element. Aguilar v Atlantic Richfield Co., supra, 25 Cal 4th at pp. 853-855). Once the moving party has met its burden, the burden shifts to the opposing party to show that a material factual issue exists as to the cause of action alleged or a defense to it. CCP 437c(p). (see, generally Bush v. Parents Without Partners (1993) 17 Cal. App. 4th 322, 326-327). In ruling on the motion, the court must consider the evidence and inferences reasonably drawn from the evidence in the light most favorable to the party opposing the motion. (Aguilar, supra, 25 Cal.4th at p. 843.)

Once the burden shifts, Plaintiff may not rely on mere allegations or denials, but instead must set forth evidence of specific facts. (Code Civ. Proc, § 437c, subd. (o).) Speculation does not constitute the kind of “substantial responsive evidence” plaintiff needs to carry her burden on a motion for summary judgment. (Hersant v. Department of Social Services (1997) 57 Cal.App.4th 997, 1009.)

Discussion

Affirmative Defenses/Waiver

At the outset, Plaintiffs argue that Defendant’s motion must be summarily denied because Defendant did not plead any affirmative defenses in its Answer to the operative FAC, and specifically, Defendant did not assert an exemption from the overtime laws as an affirmative defense.

The assertion of an exemption from the overtime laws is considered to be an affirmative defense, and therefore the employer bears the burden of proving the employee’s exemption. (Ramirez v. Yosemite Water Co. (1999) 20 Cal. 4th 785, 794-795.) Here, while the Answer does not expressly plead affirmative defenses that Class Members satisfied the professional exemption and administrative exemption, the Answer does contain the following language: “Defendant denies the material allegations of [Paragraph 24 & Paragraph 84], Labor Code section 226 does not apply to any employee whose compensation is solely based on a salary and who is exempt from payment of overtime under subdivision (a) of Section 515 or any applicable order of the Industrial Welfare Commission.” (Ans. ¶¶ 24, 84)(emphasis added.)

Labor Code section 515(a) states the exemption for executive, administrative, and professional employees. (Labor Code § 515(a).) Accordingly, this defense is properly preserved in Defendant’s pleadings, and has not been waived. The Court therefore finds that the applicability of the professional and administrative exemption may properly be addressed on summary judgment or summary adjudication. (Lennar Northeast Partners, 49 Cal. App. 4th at 1582-1583 [An issue that is “within the general area of issues framed by the pleadings” is properly before the court on a summary judgment or summary adjudication motion.])

MCMs as Exempt Professional and/or Administrative Employees

Next, the Court turns to Defendant’s substantive arguments. The Court notes that Defendant’s motion for summary judgment relies on 99 purportedly undisputed material facts (“UMFs’). Issues 1-5 each address a specific cause of action to be summarily adjudicated, though Issue 1 addresses the UCL cause of action and contains the first 95 UMFs. The remaining issues each contain one additional UMF specific to the cause of action they address, while incorporating all the prior UMFs. Thus, if any of the first 95 material facts set forth in the Separate Statement are disputed, summary adjudication of any of the issues, as well as summary judgment, cannot be granted. (O’Riordan v. Federal Kemper Life Assur. (2005) 36 Cal.4th 281, 289.)

All of Plaintiffs’ causes of action rely on the contention that Defendant improperly classified them as exempt from the overtime requirements of the FLSA and California Labor Code.

California Labor Code section 510 and the applicable Wage Order 4-2001 (defined below) require employers to pay employees one-and-one-half (1-1/2) times the regular hour rate for all those hours worked in excess of eight (8) in one workday and in excess of forty (40) hours in one workweek and for the first eight (8) hours worked on the seventh (7th) day of work in any one workweek. Any work in excess of 12 hours in one day shall be compensated at the rate of no less than twice the regular rate of pay for an employee. In addition, any work in excess of eight hours on any seventh (7th) day of a workweek shall be compensated at the rate of no less than twice the regular rate of pay of an employee.

Defendant moves for summary adjudication and/or summary judgment on the grounds that Plaintiffs are properly classified because they fall under two exemptions from the overtime compensation requirements: (1) the professional exemption, and (2) the administrative exemption. Indeed, California Labor Code section 515 provides the IWC may establish exemptions from section 510’s overtime compensation requirement. Pursuant to section 515, the IWC has promulgated exemptions for professional and administrative employees. (See California Wage Order 4-2001, codified as 8 Cal. Code. Regs. §§ 11040 (“Wage Order 4-2001″).)

As Defendant does not separate the applicability of the professional exemption and the administrative exemption into separate issues, if the Court finds that there is a dispute of material fact as to the applicability of either exemption, the motion must be denied in its entirety.

Pursuant to 8 CCR 11040, subd. (1)(A), an exempt professional is, in relevant part, an employee who (a) is licensed or certified by the Satie of California and is primarily engaged in the practice of one of the following recognized professions: law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting, or (b) is primarily engaged in an occupation commonly recognized as a learned or artistic profession. An exempt professional must also be an employee who (c) “customarily and regularly exercises discretion and independent judgment in the performance of duties set forth in subparagraphs (a) and (b),” and (d) earns a monthly salary equivalent of no less than two times the state minimum wage or full-time employment.” (8 CCR 11040, subd. (1)(A)(3).)

As noted by Plaintiffs in their opposition, Labor Code section 515(f)(1) and Wage Order 4-2001, section 1(A)(3) (Professional Exemption) states: ” … registered nurses employed to engage in the practice of nursing, shall not be considered exempt professional employees, nor shall they be considered exempt from coverage for the purposes of this subparagraph unless they individually meet the criteria established for exemption as executive or administrative employees.” (emphasis added.)

Business and Professions Code section 2725 defines the “practice of nursing” as “those functions, including basic health care, that help people cope with difficulties in daily living that are associated with their actual or potential health or illness problems or the treatment thereof, and that require a substantial amount of scientific knowledge or technical skill, including all of the following:

(1) Direct and indirect patient care services that ensure the safety, comfort, personal hygiene, and protection of patients; and the performance of disease prevention and restorative measures.

(2) Direct and indirect patient care services, including, but not limited to, the administration of medications and therapeutic agents, necessary to implement a treatment, disease prevention, or rehabilitative regimen ordered by and within the scope of licensure of a physician, dentist, podiatrist, or clinical psychologist, as defined by Section 1316.5 of the Health and Safety Code.

(3) The performance of skin tests, immunization techniques, and the withdrawal of human blood from veins and arteries.

(4) Observation of signs and symptoms of illness, reactions to treatment, general behavior, or general physical condition, and (A) determination of whether the signs, symptoms, reactions, behavior, or general appearance exhibit abnormal characteristics, and (B) implementation, based on observed abnormalities, of appropriate reporting, or referral, or standardized procedures, or changes in treatment regimen in accordance with standardized procedures, or the initiation of emergency procedures.”

Wage and hour regulations are remedial in nature and are for the benefit and protection of employees. (Ramirez, 20 Cal.4th at 794-95.) As such, they are construed liberally with an eye towards such protections. Eicher v. Advanced Business Integrators, Inc. (2007) 151 Cal. App. 4th 1363, 1369.)

The result of this liberal construction is that any exemption from these protections is narrowly construed and an employee must fit plainly and unmistakably within an exemption in order to excuse an employer from the requirement to pay an employee 1-1/2 times his regular rate of pay. (Ramirez, supra, 20 Cal.4th 785, 794; Nordquist v. McGraw-Hill Broad Co. (1995) 32 Cal.App.4th 555, 562.)

Courts must perform a factual and quantitative analysis of the actual duties the employee performed to determine whether an exemption applies (the “duties test”). (See e.g., Labor Code § 515(e); California Code of Regulations (“CCR”), tit. 8, § 11040(1)(A)(l)(e), (l)(A)(2)(f), (l)(A)(3)(b); see also, Industrial Welfare Commission’s (“IWC”) Wage Order 4-2001).

Determining whether an employer has satisfied its burden of establishing an exemption requires itemizing the actual job duties of the employee and the percentage of time spent, per workweek, on that particular duty. (In re United Parcel Service Wage and Hour Cases (2010) 190 Cal.App.4th 1001, 1014-1015.) This also allows meaningful review of any determination that exempts an employee from the remedial protection of wages under California law. (Ramirez, supra, 20 Cal.4th at 794-95, 802-803, 803, n.5.) Under the wage orders, an employee is “primarily” engaged in intellectual, managerial or creative work if more than half of his work time is devotes to such duties. (8 C.C.R. 11110, subd. 2 (k)., Nordquist, supra, 32 Cal.App.4th 555, 562.)

Defendant asserts that the professional exemption is applicable because Plaintiffs are indisputably (a) licensed by the State of California as registered nurses, in the recognized profession of medicine. Defendant further asserts that in the alternative, Plaintiffs are indisputably (b) engaged in “learned professions” because they (b)(i) have advanced knowledge in a field (medicine) customarily acquired by a prolonged course of specialized intellectual instruction and study, because they are registered nurses who had to obtain specialized knowledge through prolonged instruction to obtain a nursing degree. (UMF 1-3, 22, 71, 80.)

Defendant avers that Plaintiffs also indisputably completed work that is predominantly intellectual and varied and character, such that the output and result of the work could not be standardized. As evidence of these assertions, Defendant provides evidence that each MCM assignment required a detailed and knowledgeable analysis of medical records, consultations with doctors, patients, and insurance adjusters, and the creation of an individualized report and recommendation specific to each case. (UMF 9, 114-15, 25-27, 78-80.) Defendant asserts that there were no standardized forms provided for the MCM reports, and that there were no employees above the MCMs to control, dictate, or second guess the MCM’s analysis and findings. (UMF 25-27, 78-79, 81, 91.)

Defendant further avers that, based on the foregoing evidence and additional evidence set forth below, Plaintiffs customarily and regularly exercised discretion and independent judgment in the performance of their duties. Here, the Court finds that there is a dispute of material fact. To determine whether the criteria of this section is met, the Court looks at (1) whether an employee exercised any discretion and independent judgment, and if so, (2) whether that discretion and independent judgment was exercised with regards to or in relation to matters of significance. (Boyd v. Bank of Am. Corp. (2015) 109 F. Supp. 3d 1273, 1293.)

With respect to the first factor, Defendant provides deposition testimony from Ms. Baker that the specific procedures and protocols followed by MCMs were to “immediately call the adjuster, to make an appointment with the injured worker, to answer the phone within 24 hours, to prepare monthly or weekly reports, turn in billing before 9:00 a.m. each day, get clerical things done in a timely manner, coordinate the file, report any problems to ADM, do annual self-appraisals and keep their RN licenses current”. (Opp. at 13:26-14:3, summarizing testimony from Baker Depo. at 103:18-105:25.) Ms. Baker further testified that any recommendations by MCMs to change the treatment plan did not need approval by Defendant, explaining that “ADM was not medical.” (Baker Dep. at 74:23-75:1.) Thus, Defendant concludes, based on this testimony and supporting evidence, that MCM’s analysis, decisions, and recommendations were wholly independent and discretionary. (UMF 9, 14-15, 25, 27.) Defendant further explains that MCM recommendations regarding regulatory compliance required significant discretion and judgment, as it is a complicated process that is specific to each individual to determine whether a treatment plan is “reasonably required.” (Lab. Code § 4600, UMF 16-19, 32, 66, 69, 71, 74-75, 81, 83, 94.)

Defendant further provides evidence that this relates to work that is of substantial importance, because MCM’s recommendations to doctors and insurance adjusters are of substantial importance on matters of significance to Defendant its customers. Specifically, the medical treatment must comply with the applicable regulations (ACOEM Guidelines), and MCM’s recommendations ensure appropriate treatment for individuals, and they help the insurance providers save money. (UMF 9, 25, 78, 81, 85, 91, 93.)

In opposition, Plaintiffs provide evidence that Plaintiffs acted as the liaisons between the workers’ compensation claims adjuster, the healthcare provider, the patients, and the employer. (PMF 7, 8, 25.) Pursuant to Defendant’s PMK, the role of the case manager is to provide recommendations regarding the treatment for injured workers because “the medical case manager . . . [is] not hired to make decisions. (PMF 15.) Only the claims adjusters and medical providers could prescribe, modify, or restrict treatment to injured workers. (PMF 13-14, 21, 28.) Indeed, Plaintiffs provide evidence that MCMs solely provided recommendations and did not make any decisions related to the treatment of the patients or the course of action for the case. (PMF 8-9, 13-15, 21, 23, 28, 29). Moreover, Plaintiffs were required to adhere to Quality Assurance metrics and reporting requirements which are standard within the medical case management community. (PMF 16-18, 20).

The evidence submitted by Plaintiffs in opposition is sufficient to raise a triable question of material fact as to whether MCMs exercised discretion and independent judgment. Although not relevant to the disposition of the motion given how Defendant drafted the Separate Statement, the Court notes that both the professional and administrative exemptions require that Plaintiffs customarily and regularly exercise discretion and independent judgment. (Wage Order 11040(1)(A)(2)(b), (3)(c).) As there is a triable issue of material fact regarding whether Defendant properly classified the Class Members as exempt professional and administrative employees, the motion must be denied on all Issues 1-5.

Additionally, the above referenced evidence raises a triable issue of material fact as to whether Plaintiffs were “registered nurses employed to engage in the practice of nursing.” (Labor Code section 515(f)(1) and Wage Order 4-2001, section 1(A)(3).) As set forth above, if Plaintiffs are found to be registered nurses employed to engage in the practice of nursing, they “shall not be considered exempt professional employees, nor shall they be considered exempt from coverage for the purposes of this subparagraph unless they individually meet the criteria established for exemption as executive or administrative employees.” (emphasis added.)

Specifically, the evidence shows that the MCMs were registered nurses who engaged in what could qualify as “indirect patient care services that ensure the safety, comfort, personal hygiene, and protection of patients,” such as the assessment of patients’ treatment plans and any adjustments to treatment that the MCMs deem necessary to help them recover. Moreover, MCMs review the injured employees’ medical reports and make recommendations to doctors for specific diagnostic procedures and treatment plans, which could also fit within the broad scope of nursing work defined by section 2725, particularly in subsection 4, which includes: “Observation of signs and symptoms of illness, reactions to treatment, general behavior, or general physical condition, and (A) determination of whether the signs, symptoms, reactions, behavior, or general appearance exhibit abnormal characteristics, and (B) implementation, based on observed abnormalities, of appropriate reporting, or referral, or standardized procedures, or changes in treatment regimen in accordance with standardized procedures, or the initiation of emergency procedures.” (Cal. Bus. & Prof. Code § 2725.)

As there is a question of material fact as to whether Plaintiffs engaged in the practice of nursing as defined by section 2725, and thus a question of whether Plaintiffs qualify for the professional exemption as a matter of law. The motion fails on these grounds as well.

As the Court finds that there is a dispute of material fact as to whether Plaintiffs are properly classified as exempt professional and administrative employees, summary adjudication of Issues 1-5 is DENIED. Defendant’s motion for summary judgment is also DENIED.

The minute order is effective immediately. No formal order pursuant to CRC Rule 3.1312 or further notice is required.