Armenta v. Osmose, Inc

In Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314, a company that serviced utility poles did not pay its employees for travel time and time spent loading equipment and supplies. The Court held that California's labor statutes reflect a strong public policy in favor of full payment of wages for all hours worked. "The FLSA Fair Labor Standards Act model of averaging all hours worked 'in any work week' to compute an employer's minimum wage obligation under California law is inappropriate. The minimum wage standard applies to each hour worked by respondents for which they were not paid." (Id., at p. 324.) In Armenta, the employer violated its own CBA and written employment policies which required that employees be paid for time spent driving company vehicles to and from job sites. (Armenta, supra, 135 Cal.App.4th at p. 319.) The Division of Labor Standards Enforcement issued an opinion letter stating that the employees were entitled to compensation for all hours worked. (Id., at pp. 319-320.) The Court concluded that the Division of Labor Standards Enforcement opinion letter did not have the force of law but the reasoning expressed in the letter was persuasive. (Armenta, supra, 135 Cal.App.4th at p. 324.) The opinion letter noted that Labor Code sections 221, 222, and 223 prohibit an employer from "withholding from the employee, or secretly paying to the employee, some amount less than the employee's actual agreed wages for work performed by the employee." (135 Cal.App.4th at p. 320.) The Court held that the state "minimum wage standard applies to each hour worked by employees for which they were not paid." (Id., at p. 324.) An employer may not invoke a federal wage averaging formula to defend against a minimum wage claim where the employer, in violation of its own wage agreement, pays no wage for an hour worked. "California's labor statutes reflect a strong public policy in favor of full payment of wages for all hours worked." (Ibid.) In Armenta v. Osmose, Inc. (2005) the employer maintained wood utility poles for major utility companies; the employees claimed unpaid wages for time they spent traveling to and from remote jobsites in company trucks, attending crew meetings, maintaining the trucks, completing paperwork, and other tasks the employer referred to as "nonproductive time." (Armenta, at pp. 316-319.) Although the Armenta court observed that California law was unsettled regarding the propriety of using "an average hourly wage to determine whether the minimum wage law was violated," that court concluded that the presumption of good faith that this legal uncertainty might have given the employer was outweighed by evidence that the employer was in fact aware that its employees were not being fully compensated for their time. (Id. at pp. 325-326.) The court concluded that the trial court's findings that the employer's "supervisors created an environment in which the foremen were strongly discouraged from recording time spent ... performing nonproductive tasks" and evidence that the workers "raised the issue to supervisors but were told by supervisors and area managers that they would not be compensated for such time" showed that the employer's "failure to pay for nonproductive time was intentional and willful" and supported imposition of the penalty. (Id. at p. 326.) Applying the substantial evidence review, the appellate court upheld the trial court's finding of willfulness. (Id. at pp. 325-327.) The Court of Appeal, Second Appellate District construed the same language in the same wage order that is at issue here and concluded that it "expresses the intent to ensure that employees be compensated at the minimum wage for each hour worked." (Armenta, supra, 135 Cal.App.4th at p. 323.) The court in Armenta further concluded that the employer's method of averaging employees' hours worked in a given pay period in order to compute its minimum wage obligations violated the minimum wage law. The plaintiffs in Armenta were employed by a company that maintained utility poles in rural or remote locations. The company provided the employees with a truck that carried the tools and equipment needed to perform the work in the field, and employees were required to travel in the truck from a central meeting place to the various job sites. (Armenta, supra, 135 Cal.App.4th at p. 317.) Employees' time was considered "productive" if directly related to maintaining utility poles in the field and "nonproductive" if spent performing other tasks such as traveling to and from a job site, loading or maintaining vehicles, and attending safety meetings. (Ibid.) Employees were only paid for "productive" time. The employer argued that its compensation system did not violate state minimum wage laws because under the terms of the employees' collective bargaining agreement, it paid hourly wages substantially higher than the applicable minimum wage and total employee compensation exceeded the product of total hours worked (both paid and unpaid) and the minimum wage, resulting in an average hourly rate that was higher than the applicable minimum wage. (Armenta, supra, 135 Cal.App.4th at p. 319.) The court in Armenta ruled that the employer had violated the minimum wage law by not compensating employees for travel time and for time spent on daily paperwork. (Id. at p. 320.)