Yesterday, a California appellate court ruled that an employer who fully complied with AB 1513’s safe harbor provision has an affirmative defense against any employee claims for failure to properly compensate piece-rate employees for rest and recovery (“R+R”) and/or other nonproductive time (“Other NPT”) for any time periods prior to and including December 31, 2015, and not just between July 1, 2012-December 31, 2015.
As many employers recall, AB 1513 (Labor Code 226.2(b)), enacted in 2015, gave employers a brief window to make back payments to piece rate employees for improperly compensated R+R and Other NPT by either paying the actual sums owed or 4% of the employee’s gross earnings in pay periods where any piece rate was worked with offsets allowed for nonproductive time (“NPT”) already paid – even if this was less than the actual sums owed. Employers were only required to calculate the amounts owed between July 1, 2012-December 31, 2015, and make payments to affected employees by December 15, 2016, to take advantage of the “safe harbor.” This safe harbor, if properly complied with, gave employers an affirmative defense to any future R+R and Other NPT claims. However, it was unclear as to whether that safe harbor applied to all R+R and Other NPT claims before December 31, 2015, as stated in the statute, or whether it only applied to claims that occurred between July 1, 2012-December 31, 2015, and would allow R+R and Other NPT claims filed on June 30, 2012 and earlier to continue.
Here, on May 14, 2015, Jose Roberto Lainez (“Lainez”) filed a class action lawsuit against his former employer, Jackpot Harvesting Company, Inc. (“Jackpot”), alleging, among other things, unpaid R+R and Other NPT from May 14, 2011, to the present. On January 1, 2016, approximately six months after Lainez filed his class action complaint, AB 1513 went into effect. In March 2016, Jackpot filed a first amended answer to the class action complaint alleging compliance with AB 1513 as an affirmative defense. Jackpot then moved for summary adjudication on the R+R and Other NPT claims, contending that it had complied with all of the safe harbor requirements by making back payments to Lainez and 1,137 other current and former employees. Lainez argued that the AB 1513 safe harbor provision did not offer a complete defense to Jackpot because the statute did not immunize the company against unpaid minimum wage claims accruing prior to July 1, 2012.
The superior court denied the motion, concluding that the language of the statute was unclear and that, while section 226.2(b) provided a safe harbor to employers against claims by piece-rate workers for unpaid R+R and Other NPT accruing between July 1, 2012-December 31, 2015, it did not provide a defense for such claims accruing prior to July 1, 2012.
The appellate court reversed, stating that the unambiguous language of AB 1513 provides the employer a safe harbor for all employee claims for unpaid R+R and Other NPT accruing on or prior to December 31, 2015, where the employer has complied with all the requirements of the safe harbor as outlined above. The appellate court directed the trial court to enter an order granting Jackpot’s motion for summary adjudication and to dismiss the R+R and Other NPT claims against Jackpot.
COUNSEL TO MANAGEMENT:
This is welcome news for the thousands of California employers who paid out millions of dollars in back payments for R+R and Other NPT under AB 1513’s safe harbor provision. This is the second win for employers regarding AB 1513 – almost a year to the day, a federal court ruled that AB 1513’s safe harbor provision was constitutional. You can read more about that here. If you have any other questions regarding AB 1513 or the payment of NPT, contact The Saqui Law Group.