82 Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) Seyfarth Shaw LLP | www.seyfarth.com Those facts might trigger minimum wage claims. Similarly, a claim that an employee worked controlled standby time that the employer erroneously treated as unpaid time will trigger a minimum wage claim.398 The rule against wage “borrowing” does not apply, however, where the state minimum wage law is preempted by federal law. In Fitzgerald v. Skywest Airlines, Inc.,399 the plaintiff was a flight attendant. Her governing contract called for her to receive $1.60 an hour for “block time” while her aircraft was readied for flight, while passengers boarded and disembarked, and for flight standbys. On the whole, however, only a fraction of her hours were block time, the remainder of her hours was paid at a rate of $20 to $30 per hour, and there was no evidence that wages paid to the employee averaged less than minimum wage for even one day. Nonetheless, the plaintiff argued, under Armenta, that paying only $1.60 for each hour of “block time” was a violation of the minimum wage law. The Court of Appeal rejected this argument and affirmed summary judgment for the employer based primarily on the doctrine of federal preemption under the Railway Labor Act.400 B. The Conflict Between Piece-Rate Formulas and the Requirement to Pay Minimum Wage Several cases have called into question the ability of employers to pay workers on a piece-rate basis. In Bluford v. Safeway Stores, Inc.,401 the Court of Appeal held that rest breaks must be separately compensated under a piecerate system because the breaks are considered to be work time. There, the plaintiff was a truck driver who was compensated based on the miles he drove and for the performance of specific tasks. The plaintiff argued that because his employer did not separately pay him for the time he spent on rest breaks, this constituted a violation of the California minimum wage law. The Court in Bluford agreed, holding that a piecerate compensation formula that does not provide separate wages for time spent on rest breaks is improper. Piece-rate compensation systems were dealt another significant blow in Gonzalez v. Downtown LA Motors, LP.402 In Gonzalez, the plaintiffs were automobile service technicians who were paid a flat rate based on a formula for 398 Employers may also face both contractual liability and Labor Code penalties for failing to pay workers in accordance with a city “living wage” ordinance that sets minimum pay above the statutory minimum wage rate. Amaral v. Cintas Corp., 163 Cal. App. 4th 1157 (2008) (class of employees could bring claims to recover contract damages for unpaid wages, as well as Labor Code penalties for failure to pay wages and accrued vacation on termination, and for improper wage statements, pursuant to living wage clause in laundry services contract between the City of Hayward and Cintas). 399 Fitzgerald v. Skywest Airlines, Inc., 155 Cal. App. 4th 411 (2007). 400 Id. at 421-22. However, the Court of Appeal upheld a decision that an employer’s “hourly rate system” that paid employees at an hourly rate that varied from pay period to pay period was lawful because the employees were always paid a wage for all hours worked that exceeded the minimum wage. Certified Tire & Serv. Centers Wage & Hour Cases, 28 Cal. App. 5th 1 (2018), cause transferred by In re Certified Tire & Serv. Centers Wage & Hour Cases, 473 P.3d 312 (Cal. 2020), aff’d, Certified Tire & Serv. Centers Wage & Hour Cases, No. D072265, 2021 WL 2766406 (Cal. Ct. App. July 2, 2021). The employees could earn more than the guaranteed rate based on a formula that rewarded them for repair work that was billed to customers. 28 Cal. App. 5th at 4. Because the employees were paid an hourly rate at or above the minimum wage for each hour on the clock, the Court concluded that this case did not involve improper averaging of an employee’s hourly rate. Id. at 14. This case suggests that employers may utilize hourly rate systems that are designed to incentivize employees to be more productive and that allow them to significantly increase their hourly compensation based on their level of efficiency. To be valid, though, these hourly rate systems must pay at least the minimum wage for rest periods and for each hour worked. 401 Bluford v. Safeway Stores, Inc., 216 Cal. App. 4th 864 (2013). 402 Gonzalez v. Downtown LA Motors, LP, 215 Cal. App. 4th 36 (2013).
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