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An Unfair Competition Law Class Claim Predicated on Unpaid Meal Period Premium Wages May Be Certified Even Absent Proof of the Failure to Provide the Meal Periods.

Safeway, Inc. v. Super. Ct. (July 22, 2015) 238 Cal.App.4th 1138

Four employees brought a class action for failure to provide meal and rest periods (Lab. Code §§ 226.7, 512), failure to provide itemized pay statements (Lab. Code § 226), unfair business practices under the Unfair Competition Law (UCL, Bus. & Prof. Code § 17200, et seq.), and civil penalties under the Labor Code Private Attorneys General Act of 2004 (PAGA, Lab. Code § 2698, et seq.). The UCL defines “unfair competition” broadly, encompassing “any unlawful, unfair or fraudulent business act or practice.”[i] The employees sought class certification for over 200,000 store-level hourly employees, alleging that the company’s policy of not paying meal premium wages[ii] constituted both an “unlawful” and an “unfair” business practice under the UCL. The employees sought restitution for the class-wide loss of their statutory benefits under Section 226.7 but not the actual premium wages accrued by the class members. The trial court granted certification of the meal period class under the following analysis:

[The employees] proved that [] before June 17, 2007, Safeway did not pay meal break premiums…Safeway does not contest this fact. Safeway had thousands or tens of thousands of workers, but for years it never paid statutory meal break premiums. Why? One explanation is human perfection: Safeway never, ever erred. This explanation is possible. But human perfection is rare. Another explanation is deep, system-wide error: that Safeway was unaware of, or for some other reason[,] violated[] its duty to pay statutory premiums when required. [¶] This situation presents the central and predominating common issue: did Safeway’s system-wide failure to pay appropriate meal break premiums make it liable to the class during this period. This dominant common issue makes certification proper . . . .”

The Second District Court of Appeal reviewed the trial court’s order for abuse of discretion, not on the merits of class certification. The key questions were whether common issues predominated and whether litigation of individual issues could be managed “fairly and efficiently.”[iii] The court of appeal concluded that an employer’s failure to pay meal period premium wages when required, i.e., when it impermissibly pressured employees to miss, shorten or delay meal periods, could serve as the predicate act of a UCL claim.[iv]

Safeway contended that a UCL claim could not be predicated on a practice of failing to pay premium wages if there was no proof that the employer had failed to provide the required meal breaks, arguing that in Kirby v. Imoos the California Supreme Court held that a Section 226.7 claim was an action for failure to provide meal periods, not failure to pay premium wages, and that the high court had decided in Brinker that an employer was not required to ensure its employees did not work during their meal periods. The court of appeal held that neither of those arguments reached the employees’ theory of liability, that the employer had failed to pay the wages when required, which presumed a failure to properly provide meal periods. The appellate court also rejected Safeway’s argument that a UCL claim for an unfair practice could not survive absent an underlying claim for a Labor Code violation[v] because a statutory violation was not required to find that a business practice was “unfair,” and in any event the court found the alleged practice was unfair.

As for commonality, the court of appeal found that the employees’ theory that they and others had experienced the loss of “the compensation guarantee and enhanced enforcement” as required under Section 226.7 was substantially supported by : the employees’ own declarations and deposition testimony (as well as the testimony of Safeway’s managers) showing a practice of instructing or pressuring employees to not take meal periods and that Safeway did not calculate if or when premium wages would be due; and a declaration from an expert witness, who based his opinion on statistical sampling of time punch data and payroll records[vi] and opined that there were over 27 million meal break violations, i.e., where the data showed meal periods that were either omitted, shortened, or delayed beyond the requisite five-hour time periods, and that Safeway had made no premium wage payments. Further, because the employees were seeking restitution for their lost 226.7 benefits as a result of Safeway’s illegal practice and not the actual unpaid premium wages, individualized inquiry of time records was not necessary. The appellate court noted, without offering an opinion, that the employees had offered to use a “market value” approach to calculating a fair value of the requested restitution.

Thus, the court of appeal found that the trial court did not abuse its discretion in finding that common issues predominated and that it had properly certified the meal period class.

[i] Bus. & Prof. Code § 17200.
[ii] See Lab. Code §§ 512, 226.7; Brinker Rest. Corp. v. Super. Ct. (2012) 53 Cal.4th 1004, 1039-40 (employers must provide a meal period for every five hours worked and must pay an hour of premium pay if the meal period is not provided); and Murphy v. Kenneth Cole Prod., Inc. (2007) 40 Cal.4th 1094, 1102-1111 (compensation under Section 226.7 is a premium wage, not a penalty); but see Kirby v. Imoos Fire Protection, Inc. (2012) 53 Cal.4th 1244, 1256-57 (a violation of Section 226.7 is not the failure to pay a premium wage but rather the failure to provide the meal and/or rest period).
[iii] Duran v. U.S. Bank Nat’l Ass’n. (2014) 59 Cal.4th 1, 28-29; Sav-on Drug Stores, Inc. v. Super. Ct. (2004) 34 Cal.4th 319, 327.
[iv] See Cortez v. Purolator Air Filtration Prod. Co. (2000) 23 Cal.4h 163, 177 (failure to pay earned wages is an unlawful business practice); and Tomlinson v. Indymac Bank F.S.B. (2005) 359 F.Supp.2d 891, 895-97 (failure to pay meal period premium wages was an unlawful business practice under the UCL).
[v] Cel-Tech Commc’n, Inc. v. Los Angeles Cellular Tel. Co. (1999) 20 Cal.4th 163, 180-81.
[vi] See Brinker, supra, 53 Cal.4th at p. 1052-54 (concurring opinion of Werdegar, J.) (placing a special emphasis on an employer’s obligations to accurately record meal breaks).