Seyfarth Shaw LLP | www.seyfarth.com Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) 81 analyzed in Armenta, Delta’s pay structure guaranteed a level of pay for each and every type of work that sufficed to cover the hourly minimum wage for each hour spent performing each task.394 This part of Oman clarifies the prohibition on “wage averaging” announced in Armenta. Specifically, it is not unlawful per se to average wages paid across hours worked in order to comply with minimum wage requirements. As long as the averaging is performed by comparing each contractually agreed type of payment for a specific task to the hours spent on completing that task, it is proper. What is not allowed is “borrowing” wages paid for one task to meet the minimum wage for hours worked performing another task that is paid separately (or not at all) based upon an agreement between the employer and employee. The rule against “wage averaging” or “wage borrowing” affects California law in several ways. First, allowing a minimum wage claim whenever there are some uncompensated work hours will allow employees who could not state a claim for unpaid overtime an alternative basis upon which to sue. For example, unionized employees whose overtime claims are preempted by Section 301 of the Labor Management Relations Act may still be able to sue under California law for unpaid minimum wages. Indeed, the plaintiffs in Armenta were members of a union who had pleaded claims for overtime, but later abandoned them because they recognized that those claims were preempted.395 Minimum wage law claims, by contrast, are generally not preempted given that they can be resolved entirely independently of a collective bargaining agreement.396 Second, employees who sue for minimum wage violations can recover liquidated damages under Labor Code section 1194.1, which are not available for other sorts of wage violations. If liquidated damages are awarded, then employees will recover twice the minimum wage (which would currently amount to $32 per hour) for each hour they can show they worked but received no pay. Third, plaintiffs can plead minimum wage claims in any case where they allege some work time was unpaid.397 For example, in meal period cases where the employer is alleged to have recorded meal periods automatically whether or not the employees actually took them, employees may argue that they worked through the meal period, but were not paid for that work time. 394 Id. 395 Armenta, 135 Cal. App. 4th at 318. Unionized employees’overtime claims often fail because those employees generally work under a collective bargaining agreement that provides premium pay for all hours worked, which then brings the employees within Labor Code section 514’s “collective bargaining exemption.” 396 Id. 397 In Balasanyan v. Nordstrom, Inc., 2012 WL 6675169, at *1-2 (S.D. Cal. Dec. 12, 2012), the court denied Nordstrom’s motion for summary judgment with respect to plaintiff’s claims under Labor Code sections 1194 and 1197. Plaintiffs contended that Nordstrom underpaid its salespeople by compensating them only through commissions earned for time spent on stocking assignments, pre-opening, and post-closing periods. Id. at *1. Plaintiffs contended they worked at least 1.5 hours per work shift without compensation. Id. Nordstrom contended that its commission plan did not violate Sections 1194 and 1197, because “California law permits employers to pay commissions for all hours worked and does not impose any restrictions on the type of work employers can pay with commissions.” Id. at *2. Furthermore, Nordstrom argued that commissions may be used to compensate employees for “non-sell time” work as it is part of the services provided in connection with sales, and that the employment contracts, which comply with minimum wage laws, should govern. Id. at *2-3. Plaintiffs argued that averaging is impermissible under Armenta, and Nordstrom countered that here, unlike Armenta, the commissions Nordstrom paid for selling time here always exceeded minimum wage. Id. at *4. The court rejected Nordstrom’s arguments, noting that under California law, employees are entitled to receive minimum wage for all hours worked, and averaging is improper. Id. at *6.
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