Stephanie Ziesel v. Ballet San Jose Silicon Valley

Case Name: Stephanie Ziesel v. Ballet San Jose Silicon Valley, et al.
Case No.: 2015-1-CV-286768

Demurrer by Defendant Millicent Powers to the First Amended Complaint of Plaintiff Stephanie Ziesel

Factual and Procedural Background

This is an employment action. Plaintiff Stephanie Ziesel (“Plaintiff”) began working for defendant Ballet San Jose Silicon Valley (“Ballet”) on May 19, 2009, as its Executive Director, pursuant to a written employment contract that set her compensation and other terms of employment. (See First Amended Complaint [“FAC”] at ¶ 5.) The written contract had a four-year term. (Ibid.) Defendant Millicent Powers (“Powers”) is the Chair of the Ballet’s Board and Plaintiff’s joint employer as she personally controlled Plaintiff’s wages, hours, and/or working conditions. (Id. at ¶ 3.) Plaintiff alleges that the Ballet failed to pay her wages and reimburse her for business expenses. (Id. at ¶¶ 13, 14, and 19.) Powers, accompanied by another Board member, terminated Plaintiff’s employment in May 2014, with defendants still owing her substantial wages and reimbursements. (Id. at ¶ 15.)

On January 20, 2016, Plaintiff filed a FAC, now the operative pleading, setting forth causes of action for: (1) breach of written contract; (2) breach of oral contract; (3) failure to pay wages upon termination; (4) waiting time penalties; (5) failure to pay minimum wage; (6) failure to pay business expenses; (7) failure to pay overtime; and (8) unfair business practices.

Currently before the Court is defendant Powers’ demurrer to the FAC. Defense counsel has satisfied their obligation to meet and confer before filing the demurrer pursuant to Code of Civil Procedure section 430.41, subdivision (a). Plaintiff filed written opposition along with a request for judicial notice.

Demurrer to the FAC

Powers argues that the third, fourth, fifth, sixth, seventh, and eighth causes of action are subject to demurrer on the ground that they fail to state a claim. (Code Civ. Proc., § 430.10, subd. (e).)

Timeliness

As a preliminary matter, Plaintiff argues that the demurrer is untimely as it was not filed within 30 days after service of the FAC. (See Code Civ. Proc., § 430.40, subd.(a) [demurrer may be filed within 30 days after service of the complaint].) The FAC was served on January 20, 2016. Powers initially filed her demurrer to the FAC on February 22, 2016. Prior to the hearing, the Court posted a tentative ruling taking the demurrer off calendar as defense counsel failed to meet and confer before filing the motion pursuant to Code of Civil Procedure section 430.41. Thus, Plaintiff contends that Powers is now barred from re-filing her demurrer as she failed to contest the Court’s tentative ruling or seek an order from the Court allowing her to refile her demurrer. However, as the motion was taken off calendar, Powers simply needed to exhaust her meet and confer efforts before re-filing her demurrer. As stated above, defense counsel has now satisfied the meet and confer requirements required by statute. Having failed to resolve the pleading dispute, Powers was permitted to re-file her demurrer and has done so here. Furthermore, even if the demurrer was untimely filed, the Court would still have discretion to consider the motion. (See Jackson v. Doe (2011) 192 Cal.App.4th 742, 750 [trial court acted within its broad discretion by considering defendant’s demurrer, notwithstanding plaintiff’s claim that it was untimely]; see also McAllister v. County of Monterey (2007) 147 Cal.App.4th 253, 281-282 [there is no absolute right to have a pleading stricken for lack of timeliness in filing where no question of jurisdiction is involved and the late filing was a mere irregularity; the granting or denial of the motion is a matter which lies within the discretion of the court].) Accordingly, the Court will address the merits of the demurrer.

Request for Judicial Notice

In opposition, Plaintiff seeks judicial notice of the Ballet’s bylaws under Evidence Code section 452, subdivision (h). That section allows a court to take judicial notice of “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” However, as Powers points out, the bylaws have not been authenticated or otherwise shown to be reliable and trustworthy for this Court to take judicial notice. (See Powers’ Objection to Judicial Notice; see also People v. Maxwell (1978) 78 Cal.App.3d 124, 130 [“The burden is on the party requesting judicial notice to supply the court with sufficient, reliable and trustworthy sources of information about the matter.”].) Furthermore, Plaintiff improperly seeks judicial notice of the truth of matters set forth in the bylaws. (See Fremont Indem. Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113 [“Although the existence of a document may be judicially noticeable, the truth of statements contained in the document and its proper interpretation are not subject to judicial notice if those matters are reasonably disputable.”].)

Accordingly, the request for judicial notice is DENIED.

Legal Standard

“In reviewing the sufficiency of a complaint against a general demurer, we are guided by long settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. We also consider matters which may be judicially noticed.’” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213–214.)

“The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. The court does not, however, assume the truth of contentions, deductions or conclusions of law. … [I]t is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.” (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 850.)

Corporations Code Section 5239

With respect to the third, fourth, fifth, sixth, seventh, and eighth causes of action, Powers argues that Corporations Code section 5239 prohibits suits against volunteer directors of a non-profit corporation, and that the instant matter falls squarely within the ambit of section 5239. That section provides:

“There shall be no personal liability to a third party for monetary damages on the part of a volunteer director or volunteer executive officer of a nonprofit corporation subject to this part, caused by the director’s or officer’s negligent act or omission in the performance of that person’s duties as a director or officer, if all of the following conditions are met: (1) The act or omission was within the scope of the director’s or executive officer’s duties. (2) The act or omission was performed in good faith. (3) The act or omission was not reckless, wanton, intentional, or grossly negligent. (4) Damages caused by the act or omission are covered pursuant to a liability insurance policy issued to the corporation, either in the form of a general liability policy or a director’s and officer’s liability policy, or personally to the director or executive officer. In the event that the damages are not covered by a liability insurance policy, the volunteer director or volunteer executive officer shall not be personally liable for the damages if the board of directors of the corporation and the person had made all reasonable efforts in good faith to obtain available liability insurance.”

(Corp. Code, § 5239, subd. (a).)

Powers’ argument with respect to volunteer immunity is not well taken. As a threshold matter, Powers is not identified in the FAC as a “volunteer director” or “volunteer executive officer” of a nonprofit corporation as contemplated by the statute. In fact, subdivision (b) of section 5239 defines a “volunteer” as a person who renders services without compensation. It cannot be determined from the face of the pleading if Powers was rendering services with the Ballet without compensation. Furthermore, the fourth condition requires that “damages caused by the act or omission are covered pursuant to a liability insurance policy.” As the opposition points out, the FAC fails to even address an insurance policy for purposes of applying volunteer immunity. Therefore, this argument fails to provide a proper defense on demurrer.

Payment of Wages

With respect to the third, fourth, fifth, seventh, and eighth causes of action, Powers argues that the claims for failure to pay wages, overtime and penalties fail because Plaintiff admits that she was paid as required by law. Powers relies in part on Labor Code section 201.5, subdivision (c) which provides in relevant part that “payment shall be deemed to have been made on the date that the employee’s wages are mailed to the employee or made available to the employee at the location specified by the employer.” (Lab. Code, § 201.5, subd. (c).) According to the FAC, Plaintiff received multiple paychecks but she could not cash them because the Ballet did not have sufficient funds to pay her. (See FAC at ¶ 7.) Plaintiff also alleges that she was paid zero dollars over multiple periods and that defendants owe her approximately $126,013 in wages upon termination. (Id. at ¶¶ 11 and 28.) For purposes of demurrer, the Court must accept the allegations in paragraphs 11 and 28 of the FAC as true and find that defendants failed to pay wages to the Plaintiff. (See Olson v. Toy (1996) 46 Cal.App.4th 818, 823 [for purposes of demurrer, we accept these allegations as true].) Thus, this argument does not support a basis for demurrer.

Exemption Status

With respect to the fifth, seventh, and eighth causes of action, Powers argues that these claims fail because Plaintiff was an exempt employee under the California Labor Code and Fair Labor Standards Act (“FLSA”). “The employer bears the burden of proving an employee is exempt. [Citation.] Exemptions are narrowly construed against the employer and their application is limited to those employees plainly and unmistakably within their terms. [Citation.]” (Nordquist v. McGraw-Hill Broadcasting Co. (1995) 32 Cal.App.4th 555, 562.) Powers fails to meet this burden as the FAC alleges that defendants paid Plaintiff zero dollars over multiple periods and thus the exemption was not met. (See FAC at ¶ 11.) Accepting the allegations as true, this argument does not support a basis for demurrer.

Liability under California Law

With respect to the third, fourth, fifth, sixth, seventh, and eighth causes of action, Powers argues that she cannot be held personally liable for failing to pay wages, overtime, expenses, or any penalties under California law. (See Reynolds v. Bement (2005) 36 Cal.4th 1075, 1087-1088 [abrogated by Martinez v. Combs (2010) 49 Cal.4th 35 (“Martinez”)]; Jones v. Gregory (2006) 137 Cal.App.4th 798 (“Jones”) [abrogated by Martinez].)

As stated above, Plaintiff alleges that Powers was her joint employer as she personally controlled Plaintiff’s wages, hours and/or working conditions and had the power to suffer or permit Plaintiff to work. (See FAC at ¶ 3.) Martinez is the controlling case on the joint employer issue where the California Supreme Court noted that “[i]n actions under [Labor Code] section 1194 to recover unpaid minimum wages, the [Industrial Welfare Commission’s (“IWC”)] wage orders do generally define the employment relationship, and thus who may be liable.” (Martinez v. Combs, supra, 49 Cal.4th at p. 52.) Under the IWC, and thus under California law, “to employ…has three alternative definitions. It means: (a) to exercise control over the wages, hours, or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship.” (Id. at p. 64.) Control is central to whether there is an employment relationship under California law. (Id. at p. 76.) California law also anticipates the possibility of joint employers, and requires that an entity meet one of the three tests to be liable as such. (Id. at p. 64.)

Here, Plaintiff has alleged facts showing that Powers controlled her wages, hours, and working conditions and had the power to suffer or permit Plaintiff to work. (See FAC at ¶ 3.) Such allegations are sufficient to state a cause of action and must be accepted as true on demurrer. Therefore, this argument does not support a basis for demurrer.

Liability under the FLSA

With respect to the fifth and seventh causes of action, Powers argues that she cannot be held personally liable under the FLSA because Plaintiff fails to allege that Powers was an officer or owner of the Ballet. In support, Powers relies on Jones however that case merely refers to a separate federal decision holding that numerous federal districts have concluded that an individual corporate officer or owner may be deemed an employer under the FLSA. (See Lopez v. Silverman (S.D.N.Y. 1998) 14 F.Supp.2d 405, 412.) However, this is not the standard for determining employer liability under the FLSA.

Instead, “employer” includes any person acting directly or indirectly in the interest of an employer in relations to an employee…” (29 U.S.C. § 203(d).) In fact, “[c]ourts have adopted an expansive interpretation of the definitions of ‘employer’ and ‘employee’ under the FLSA in order to effectuate the broad remedial purposes of the Act.” (Real v. Driscoll Strawberry Assocs. (9th Cir. 1979) 603 F.2d 748, 754.) “The determination of whether an employer-employee relationship exists does not depend on ‘isolated factors but rather upon the circumstances of the whole activity.’ [Citation.] The touchstone is ‘economic reality.’ [Citation.]” (Bonnette v. California Health and Welfare Agency (9th Cir. 1983) 704 F.2d 1465, 1469.)

“An ‘economic reality test’ applies in determining whether a person or entity is an ‘employer’ for purposes of the FLSA. Under this test, a court must consider the totality of the circumstances of the relationship, including such factors as whether the circumstances of the relationship, including such factors as whether the alleged employer had the authority to hire and fire the employee, whether the alleged employer supervised and controlled the employee’s work schedules and the conditions of his or her employment, and whether the alleged employer determined the rate and method of payment, and maintained employment records. [Citation.]” (Futrell v. Payday California, Inc. (2010) 190 Cal.App.4th 1419, 1430.)
Here, Plaintiff alleges that Powers was acting directly or indirectly in the interest of the Ballet in relation to Plaintiff. (See FAC at ¶ 3.) Plaintiff claims that Powers personally controlled Plaintiff’s wages, hours and/or working conditions and had the power to suffer or permit Plaintiff to work. (Ibid.) Finally, Powers had the power to terminate Plaintiff which she ultimately did in May 2014. (Id. at ¶ 15.) Such allegations demonstrate that Powers can be held liable as an employer under the FLSA and must be accepted as true on demurrer.

Disposition

The demurrer to the third, fourth, fifth, sixth, seventh, and eighth causes of action on the ground that each claim fails to state a cause of action is OVERRULED.

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