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Class Action Defense Cases-Wang v. Chinese Daily News: Class Action Reporters Owed Overtime Under Federal FLSA And Defense Vacation "Buy Back" Policy Violated State Law And Required Payment At Employees’ Hourly Rate Of Pay California Court Holds

Federal District Court Rejects Defense to Class Action Claims Under Fair Labor Standards Act (FLSA) and State Law Claims, and Grants Summary Judgment in Favor of Class

News reporters filed in California federal court a class action against their employer that alleged numerous violations of federal and state labor laws, as well as California Business and Professions Code §§ 17200 et seq. (unfair competition). Wang v. Chinese Daily News, Inc., ___ F.Supp.2d ___, 2006 WL 1663638 (C.D. Cal. June 7, 2006). The parties filed cross-motions for summary judgment; the court denied the defense motion and granted the plaintiffs’ motion. In so doing, the court inter alia rejected the defense argument that the reporters were exempt under the FLSA’s “creative professional exemption,” and ruled against the defense on the applicable statute of limitations governing California Labor Code § 226.7 claims (meal and rest periods). The opinion is quite detailed; this article discusses only some of the court’s holdings.

The employer had a policy that allowed vacation time to accrue and to carryover into following years, provided that “accumulated vacation days cannot exceed 30 days” and that “[m]oney shall be paid for unused vacation days exceeding 30 days at $64 per day ” Slip Opn., at 3. California law permits employers to adopt “no additional accrual” policies, so the question before the federal court was whether $64 per day was lawful or whether the employer was required to “buy back” the vacation time at the employees’ hourly rate of pay. The court concluded that this question turned on whether the “unused vacation days” should be deemed “vested” or “accrued.” Id., at 4. The court suggested that if the employer had followed its vacation policy then it would have been lawful; however, the evidence before the court established that employees routinely accrued upwards of 70 days of vacation and held that the in “actual practice,” then, the employer treated the vacation time as “accrued.” Id., at 5. Accordingly, the employer was required to buy back the vacation days at the employees’ hourly rate of pay. Id., at 6.

With respect to overtime claims, the court held that the FLSA’s “creative professional exemption,” 29 U.S.C. § 213(a)(1), 29 C.F.R. § 541.302, did not apply to the reporters because their jobs did not primarily require “invention, imagination, originality, or talent.” Slip Opn., at 11. The court found particularly compelling that the “vast majority” of articles provided to the court by the employer were merely “press release rewrites,” id., at 15. The court further concluded that because the employer’s custom “was to give bonuses to all employees on an annual basis,” id., at 18, “the bonuses should have been included as remuneration under FLSA and California state law for the purpose of calculating the regular rate of pay,” id., at 19.

Finally, it bears noting that the court concluded that meal and rest period claims under California Labor Code § 226.7 are properly characterized as “wages” rather than penalties, so the four-year statute of limitations applied to those class claims. Slip Opn., at 22.

NOTE: The court also held that the employer intentionally violated California labor laws regarding wage statements because it always put down 86.66 hours worked “regardless of the actual hours worked, the length of the pay period, or the number of days in the pay period.” Slip Opn., at 7.

Download PDF file of Wang v.Chinese Daily News