Court of Appeal,
Fourth District, Division 1, California.
Mario MIRANDA et al., Plaintiffs and Respondents,
v.
PACER CARTAGE, INC., Defendant and Appellant.
D069425
|
Filed 8/30/2017
APPEAL from a judgment of the Superior Court of San Diego County, Jay M. Bloom, Judge. Affirmed in part, reversed in part, and remanded with directions. (Super. Ct. No. 37–2014–00008552–CU–JR–CTL)
Attorneys and Law Firms
Littler Mendelson, Robert G. Hulteng, Perry K. Miska, Philip B. Baldwin and Chad Anderton for Defendant and Appellant.
Rivera Shackelford, D. Briana Rivera, Patricia A. Shackelford; Law Offices of David M. Korrey and David M. Korrey for Plaintiffs and Respondents.
Opinion
O’ROURKE, J.
*1 Pacer Cartage, Inc. (Pacer) is an intermodal logistics provider, meaning that it facilitates the movement of goods using various modes of transportation. Mario Miranda, Jesus Prieto, Jose Javier Perez, Jr., Carlos Pena Peraza, Manuel Sanchez Santiago, Alejandro Rivera, and Mauricio Vitela (together, Plaintiffs) were truck drivers for Pacer. Plaintiffs filed claims with the California Labor Commissioner, alleging Pacer misclassified them as independent contractors. They requested reimbursement for their business expenses under Labor Code section 2802.1 After the Labor Commissioner found in favor of Plaintiffs and awarded them more than $2,000,000, Pacer appealed to the superior court. The superior court held a trial and entered judgment in favor of Plaintiffs, finding they were independent contractors and were entitled to reimbursement.
Pacer appeals, arguing: (1) the trial court erred by failing to accept its lump sum reimbursement method that covered both wages and expenses; (2) the evidence did not support a finding that Plaintiffs were not reimbursed for their expenses; (3) the trial court failed to make a reasonable approximation of the extent of nonreimbursement; and (4) the trial court erred in awarding Plaintiffs reimbursement for their truck lease payments.2 We conclude the trial court erred in awarding Plaintiffs their truck lease payments. In all other respects, we affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Pacer, a subsidiary of Pacer International, Inc., facilitates the trucking of goods between the Port of Los Angeles or the Port of Long Beach and railroads and warehouses. Pacer had agreements with most steamship lines operating in those ports and with all major rail carriers. Plaintiffs drove trucks for Pacer, making deliveries to and from the ports.
Plaintiffs drove routes from Pacer’s yard in San Diego to the Port of Los Angeles or the Port of Long Beach. In general, they made one round trip per day, which took approximately seven to 10 hours. Plaintiffs were paid approximately $400 per round trip. Some Plaintiffs chose to hire other drivers, called “second seat drivers,” to complete deliveries in Plaintiffs’ trucks after Plaintiffs had completed their own shifts for the day. Plaintiffs paid the second seat drivers approximately $120 for a round trip.
Prior to 2009, Plaintiffs owned and used their own trucks. In mid–2008, the Port of Los Angeles and the Port of Long Beach entered into a Clean Air Action Plan that required trucks entering the ports to meet heightened emissions standards or the owners of the goods would be subject to a port fee. Plaintiffs’ trucks did not meet the new emissions standards.
In order for Pacer to stay in business, Pacer International, Inc., created a leasing entity, CTP Leasing (CTP), to acquire compliant trucks and lease them to Pacer’s drivers. As required by Department of Transportation regulations, CTP leased the trucks to Plaintiffs, who then leased the trucks back to Pacer. In January 2009, Pacer had each driver enter into a Vehicle Lease and Independent Contractor Hauling Agreement (Hauling Agreement). Each Hauling Agreement was identical, containing the same provisions.
*2 Under the terms of the Hauling Agreements, Plaintiffs would be paid a “combined amount” for “Vehicle use and [their] services …, except to the extent of any separate accessorial charges referenced for driver services.” “Accessorial charges” were for services that Plaintiffs rendered that were not part of a “regular intermodal drayage move.” Additionally, the Hauling Agreement provided that Plaintiffs would be paid a separate fuel surcharge that fluctuated based on the price of fuel. Plaintiffs authorized Pacer to deduct from their gross compensation amounts due to Pacer, including Plaintiffs’ lease, insurance, and fuel expenses. Plaintiffs could object, in writing, within 90 days of receiving their earnings statements if any charges or payment amounts were incorrect or otherwise disputed.
The Hauling Agreements provided for three incentive programs. First, Plaintiffs could earn “Clean Truck Incentive Payments” by hauling loads to or from the Port of Los Angeles or Port of Long Beach with a truck that met the heightened emissions standards for exemption from port fees. Second, Plaintiffs earned a $2,000 sign-on award if they entered into a lease agreement with CTP. Third, Plaintiffs could earn safety, productivity and performance awards if they met certain criteria such as having no preventable accidents, timely completing deliveries, and hauling loads 48 out of 52 weeks of the year.
Under the Hauling Agreements, Plaintiffs “irrevocably authorize[d]” Pacer to pay the incentive payments they had earned to CTP “regardless of whether necessary to meet current obligations under the [truck lease].” The incentive payments were funneled into security reserve accounts that were used to make Plaintiffs’ lease payments, which were $1,480 per month. “[I]f the amount of per load clean truck incentives earned in any month [was] not sufficient to fully pay the monthly lease payment” or if the amounts of Plaintiffs’ security reserves fell below a required minimum, Pacer would deduct money from Plaintiffs’ paychecks. Plaintiffs could borrow funds from their security reserve accounts to facilitate repairs to their trucks. Those loans were repaid through deductions from Plaintiffs’ paychecks. If there was money remaining in their security reserve accounts at the end of the seven-year lease period, Plaintiffs could use those funds to purchase their trucks for approximately $18,000 or $19,000.
Pacer provided Plaintiffs with weekly earnings statements, referred to as “settlement” sheets, that detailed their gross earnings, deductions, and net pay. The “Earnings” section of the settlement sheets included an item called “Regular,” which was Plaintiffs’ “base settlement rate” for use of the truck, compensation for fuel, maintenance, and the driver’s earnings. It was essentially payment for the driver’s moves to and from ports and rail yards. The “Earnings” section also showed compensation for waiting time and other services that fell outside the “Regular” earnings category such as “accessorial charges.” Further, the “Earnings” section showed amounts Plaintiffs earned through the incentive programs, including the clean truck incentive payments, sign-on bonuses, and safety awards. Lastly, the “Earnings” section identified Pacer’s reimbursement for Plaintiffs’ out-of-pocket expenditures for scales and tolls. The sum of the amounts categorized in the “Earnings” section was labeled “Gross Pay.”
Plaintiffs’ weekly settlement sheets also included a section identified as “Deductions.” In that portion, Pacer itemized deductions for fuel that Plaintiffs purchased at Pacer’s yard, insurance, truck licensing and registration fees, truck parking, administrative fees and other “miscellaneous” items. The “Deductions” section also showed a corresponding deduction for each incentive, bonus and award identified in the “Earnings” section. Those deductions were placed in Plaintiffs’ security reserve accounts from which lease payments were made. The “Deductions” section further showed whether Plaintiffs had taken loans against their future earnings to pay for truck repairs or other items. Lastly, that section identified the amount that was deposited in Plaintiffs’ bank accounts, which constituted Plaintiffs’ earnings after deductions. If a driver’s earnings were less than his deductions, the “negative settlement would perpetuate each week until there was a positive settlement.” Essentially, the driver would not be paid when his earnings were less than deductions. The bottom of the earnings statements identified the “Net Pay” for the week, which was the “Gross Pay” minus items set forth in the “Deductions” section.
*3 In April 2012, Plaintiffs filed claims with the Labor Commissioner. After the Labor Commissioner found Plaintiffs were employees rather than independent contractors and awarded them more than $2,000,000, Pacer appealed to the superior court. The superior court heard evidence and entered judgment in favor of Plaintiffs, finding they were misclassified as independent contractors and were entitled to reimbursement for their business expenses.
In its statement of decision, the superior court noted that Plaintiffs had testified as to their expenses and provided written documentation for those expenses. Thus, Pacer had the burden to rebut Plaintiffs’ claims. The superior court found that Pacer did not rebut Plaintiffs’ evidence. In particular, Pacer failed to present specific evidence regarding Plaintiffs’ daily salary and the number of days each driver worked. According to the superior court, there was some evidence that Plaintiffs were paid $400 per day and “[i]t appear[ed] the daily salary was about $150 per day.” However, the court noted that those numbers were not precise. The superior court further found that Pacer failed to present evidence to show Plaintiffs were actually reimbursed for their claimed expenses.
In its analysis, the superior found that Gattuso v. Harte–Hanks Shoppers, Inc. (2007) 42 Cal.4th 554 (Gattuso ), relied on by Pacer to support its lump sum compensation method combining payment for services and expenses, was not relevant because Pacer failed to provide a “means or method to apportion the enhanced compensation, if there was any, to determine what amount is for labor and what amount is to reimburse business expenses.” Ultimately, the court awarded $168,318.91 to Prieto, $310,323.36 to Peraza, $76,632.88 to Miranda, $375,789.82 to Vitela, $336,173.31 to Santiago, $378,936.34 to Perez, and $317,245.45 to Rivera.
DISCUSSION
- Pacer’s Payment and Reimbursement Method
Pacer argues the trial court erred by failing to accept its lump sum reimbursement method that covered both wages and expenses. Specifically, Pacer contends the trial court erred by finding that Pacer did not provide a means or method within the meaning of Gattuso to identify the amount of the combined payment that was wages and the amount that was for business expense reimbursement. (Gattuso, supra, 42 Cal.4th at pp. 573–574.) We reject Pacer’s arguments.
- Legal Principles
Section 2802 states that “[a]n employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.” This section “is designed to prevent employers from passing their operating expenses on to their employees. For example, if an employer requires an employee to travel on company business, the employer must reimburse the employee for the cost of that travel under Section 2802.” (Gattuso, supra, 42 Cal.4th at p. 562.)
For automobile expenses, an employer can comply with section 2802 through various payment methods. (Gattuso, supra, 42 Cal.4th at pp. 568–570.) For example, the employer can reimburse an employee using the “actual expense method” by calculating the expenses the employee actually and necessarily incurred and then separately paying the employee that amount. (Id. at p. 568.) This method imposes onerous burdens on both the employer and employee, such as detailed record keeping. (Id. at pp. 568–569.) Alternatively, an employer may use the “mileage reimbursement method” whereby the employee keeps a record of the number of miles driven to perform job duties and the employer multiplies the mileage by “a predetermined amount that approximates the per-mile cost of owning and operating an automobile.” (Id. at p. 569.) Lastly, the employer can provide the employee with reimbursement through a “lump-sum payment.” (Id. at p. 570.) “Under this method, the employee need not submit any information to the employer about work-required miles driven or automobile expenses incurred. The employer merely pays a fixed amount for automobile expense reimbursement. … The amount is generally based on the employer’s understanding of the employee’s job duties, including the number of miles that the employee typically or routinely must drive to perform those duties.” (Ibid.)
*4 In Gattuso, our high court concluded that an employer utilizing the lump sum method may reimburse employees through an increase in base salary or commission rate. (Gattuso, supra, 42 Cal.4th at pp. 572–573.) When an employer “combin[es] wages and business expense reimbursements in a single enhanced employee compensation payment[,] … the employer must provide some method or formula to identify the amount of the combined employee compensation payment that is intended to provide expense reimbursement. Using that method or formula, the employee (and also officials charged with enforcement of state and federal wage laws) then can readily determine whether the employer has discharged all of its legal obligations as to both wages and business expense reimbursement.” (Ibid.) The employer “must also communicate to its employees the method or basis for apportioning any increases in compensation between compensation for labor performed and business expense reimbursement.” (Id. at p. 574.) “Because providing an apportionment method is a practical necessity for effective enforcement of section 2802 ‘s reimbursement provisions, it is implicit in the statutory scheme.” (Id. at p. 573.)
- Pacer’s Apportionment Method
Pacer argues it complied with section 2802 by compensating Plaintiffs for labor and expenses through a combined lump sum payment. Pacer contends the means and method for apportioning the enhanced compensation between labor and services was set forth in the Hauling Agreements and Plaintiffs’ weekly settlement sheets were consistent with Pacer’s means and method of apportionment. In regard to the Hauling Agreements, Pacer relies on the provision that provides, “Compensation includes payment for Vehicle use and your services as a combined amount, except to the extent of any separate accessorial charges referenced for driver services. … We will also pay you a fuel surcharge on the applicable linehaul settlement rates according to our then current fuel surcharge schedule on file at the applicable terminal from time to time, or as otherwise agreed in writing by you and us.” The Hauling Agreements went on to state that Plaintiffs authorized Pacer to deduct from their gross compensation amounts due to Pacer, including Plaintiffs’ lease, insurance, and fuel expenses.
The Hauling Agreement provisions relied upon by Pacer fall far short of the method or formula requirements of Gattuso, supra, 42 Cal.4th at p. 572. As we discussed, Gattuso requires a “means or method to apportion the enhanced compensation to determine what amount is being paid for labor performed and what amount is reimbursement for business expenses.” (Id. at p. 559.) The purpose of that requirement is to provide employees and officials charged with enforcing wage laws a way to “readily determine whether the employer has discharged all of its legal obligations as to both wages and business expense reimbursement.” (Id. at p. 573.) The Hauling Agreements simply state that Plaintiffs would be paid for “[v]ehicle use” and their services as a combined amount and Pacer would pay Plaintiffs a fuel surcharge. The Hauling Agreements also identified the cost of Plaintiffs’ lease and insurance payments. These provisions do not allow employees or officials to discern whether Pacer actually reimbursed employees for expenses necessarily incurred, fully reimbursed for those expenses, and complied with wage laws. Further, “[v]ehicle use” was not a defined term, and thus did not necessarily mean business expenses within the meaning of section 2802. Stating that employees are paid a combined amount for vehicle use and services plus a fuel surcharge and identifying the cost of lease and insurance payments does not satisfy Gattuso’s “method or formula” requirement or its purpose. (Espejo v. The Copley Press, Inc. (2017) 13 Cal.App.5th 329, 366 (Espejo ) [evidence that newspaper company had communicated to its delivery carriers that it factored expenses into compensation, listed fees it paid in contracts, and detailed deductions, credits, and fees in monthly invoices did not satisfy Gattuso’s requirements because it did “not show that the carriers were generally provided a means of determining how much of their gross pay was intended to reimburse expenses”].)
*5 Similarly, the weekly settlement sheets Pacer provided to Plaintiffs, even when combined with the Hauling Agreements’ terms, fell short of Gattuso’s requirements. As we previously discussed, Plaintiffs’ settlement sheets had an “Earnings” section that listed various compensation categories, including a category called “Regular.” According to Glen Kinum, a former vice president of Pacer, the “Regular” category included compensation for use of the truck, fuel, maintenance, and driver earnings. Other items categorized in the “Earnings” section included amounts Plaintiffs earned through incentive programs and reimbursement for scales and tolls. The sum of the “Earnings” items was identified as “Gross Pay.” The settlement sheets then listed various deduction categories that the Hauling Agreements had identified as deductions Pacer may take from Plaintiffs’ checks. The last number on the settlement sheets was “Net Pay,” which was the “Gross Pay” minus deductions.
Pacer contends the “Net Pay” “represented the amount of the lump-sum payment that was intended solely as payment for services” and “Gross Pay” represented the total payment for services and expenses. Thus, Pacer contends that Plaintiffs had a means or method to determine their business expense reimbursement by subtracting “Net Pay” from “Gross Pay.” According to Pacer, the “Deductions” set forth on the settlement sheets were an itemization of business expense reimbursements. This argument fails. Although there are several items listed as deductions, including insurance, those items were subtracted from Plaintiffs’ earnings and there is no way to ensure that Plaintiffs were reimbursed for those items as business expenses in the “Earnings” section, as “Gross Pay” or otherwise. For example, the “Earnings” section includes a category of “Regular” earnings that Kinum testified included payment for the driver’s services and compensation for truck expenses, but there was no method of apportioning “Regular” earnings between services and expenses. Pacer’s subtraction method does not allow employees or officials charged with enforcing wage laws to determine whether employees were fully reimbursed for their section 2802 expenses and paid proper wages. In our view, Pacer’s subtraction method does not comply with the requirements of Gattuso. (Espejo, supra, 13 Cal.App.5th at p. 366 [rejecting argument that deductions from gross pay listed on newspaper carriers’ monthly invoices served as a breakdown of the amount of enhanced compensation that was intended to cover expenses]; Smith v. Cardinal Logistics Management Corp. (N.D. Cal. Aug. 19, 2009, No. 07–2014 SC) 2009 U.S.Dist. LEXIS 80759, at *10–11 [rejecting similar argument that deductions on settlement sheets were functionally equivalent to expense reimbursements]; Villalpando v. Excel Direct Inc. (N.D. Cal. 2016) 161 F.Supp.3d 873, 886, fn. 3 [employer must provide drivers sufficient information to verify earnings “actually covered the items for which deductions were later taken”].)3
Further, Pacer’s complicated system of awarding Plaintiffs bonuses through incentive programs and then funneling those amounts into security reserve accounts does not show that Pacer complied with section 2802. First, nothing in the Hauling Agreements indicates that the incentive payments were business expense reimbursements. To the contrary, the Hauling Agreements indicate the incentive programs provided rewards to Plaintiffs for operating trucks meeting heightened emissions standards, entering into a lease agreement with CTP, and meeting safety, productivity and performance goals. Second, under Pacer’s deduction system, Plaintiffs’ deductions could exceed earnings, including incentive awards, leaving Plaintiffs with zero take-home pay until the security reserves were funded and Plaintiffs’ earnings exceeded deductions. Thus, Pacer’s incentive payments to Plaintiffs do not satisfy Pacer’s section 2802 obligation to fully reimburse Plaintiffs for business expenses necessarily incurred.
- Pacer’s Chargeback System
*6 Pacer argues the trial court misunderstood Pacer’s chargeback system in which Pacer prepaid driver expenses and then took a corresponding deduction from the driver’s ultimate lump sum payment. Specifically, Pacer argues the trial court improperly found chargebacks unlawful because it stated “[Plaintiffs] were entitled to reimbursement for the expenses they claimed instead of having these deducted from their pay.” According to Pacer, any interpretation of California law that would prevent chargebacks is preempted by federal law. We reject Pacer’s arguments.
The Federal Motor Carrier Safety Regulations permit a motor carrier to chargeback certain items to drivers, meaning the motor carrier initially pays for the items and then deducts the amounts from the driver’s compensation. (49 C.F.R. § 376.12, subd. (h).) In the case before us, the trial court found California labor laws are not preempted by federal law. “ ‘ “[C]ourts are reluctant to infer preemption, and it is the burden of the party claiming that Congress intended to preempt state law to prove it.” ’ ” (Viva! Internat. Voice for Animals v. Adidas Promotional Retail Operations, Inc. (2007) 41 Cal.4th 929, 936.)
“The Supreme Court has recognized ‘ “four species of federal preemption: express, conflict, obstacle, and field.” ’ ” (Rodriguez v. RWA Trucking Company, Inc. (2013) 238 Cal.App.4th 1375, 1391.) Pacer does not specify a type of preemption on appeal, but argued in the trial court that obstacle preemption applies. Thus, we assume Pacer is arguing obstacle preemption on appeal. “ ‘ “[O]bstacle preemption arises when ‘ “under the circumstances of [a] particular case, [the challenged state law] stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” ’ ” ‘ ” (Ibid.)
Pacer failed to meet its burden to establish federal preemption because it does not argue, much less demonstrate, how section 2802 stands as an obstacle to the purposes and objectives of the federal regulation relating to chargebacks. Pacer does not set forth the standards of preemption, discuss how preemption applies in the context of section 2802, or explain how Congress intended to preempt state law. Thus, to the extent Pacer raises a preemption argument, we reject it for failure to make “any reasonable effort to develop a preemption theory and we will not develop such arguments for it.” (Barratt American, Inc. v. City of San Diego (2004) 117 Cal.App.4th 809, 819.) Further, we note that the trial court did not find chargebacks unlawful in general. Rather, reading the trial court’s statement in context, it merely found that because Plaintiffs were employees, rather than independent contractors, they were entitled to reimbursement for their expenses.
- Trial Court’s Statements About Plaintiffs’ Compensation
Pacer contends the trial court recognized that Plaintiffs were paid for some of their expenses and suggests that the trial court should have apportioned Plaintiffs’ compensation between labor and expenses. Pacer points to the trial court’s statements that “[i]t appears the daily salary was about $150 per day” and “there was some evidence, the total daily payout was $400, but could be more under some special circumstances.” Based on these statements, Pacer contends the difference of $250 between the daily salary and daily payout was payment for business expenses Plaintiffs incurred.
Pacer’s suggestion that the trial court should have found Plaintiffs were reimbursed $250 per day for business expenses fails because the trial court did not unequivocally find that Plaintiffs’ daily salary was $150 per day. Instead, the trial court found that Plaintiffs’ daily salary was never made clear to the court. The trial court also stated, “[w]ithout knowing the daily salary, it is difficult to determine how much, if any amounts, were reimbursed” for business expenses. Further, Pacer fails to argue how taking the difference between approximate daily salary and approximate daily payout meets the requirements of Gattuso that the employer provide a method to apportion wages and business expenses and communicate that method to the employee. (Gattuso, supra, 42 Cal.4th at pp. 572–574.)
- Evidence of Plaintiffs’ Salary and Reimbursement
- Burden of Proof
*7 Section 2802 requires an employer to fully reimburse “his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.” In general, the plaintiff “has the burden of proof as to each fact the existence or nonexistence of which is essential to the claim for relief.” (Evid. Code, § 500.) “On occasion, however, courts may alter the normal allocation of the burden of proof. [Citations.] ‘ “In determining whether the normal allocation of the burden of proof should be altered, the courts consider a number of factors: the knowledge of the parties concerning the particular fact, the availability of the evidence to the parties, the most desirable result in terms of public policy in the absence of proof of the particular fact, and the probability of the existence or nonexistence of the fact.” [Citation.]’ ” (Amaral v. Cintas Corp. No. 2 (2008) 163 Cal.App.4th 1157, 1188 (Amaral ).)
“One long-standing application of burden shifting occurs in the wage and hour context when an employer’s compensation records are so incomplete or inaccurate that an employee cannot prove his or her damages. When the United States Supreme Court addressed this problem with regard to claims under the Fair Labor Standards Act of 1938 (29 U.S.C. § 201 et seq.), it observed that the remedial nature of the statute and public policy ‘militate against making [the evidentiary burden] an impossible hurdle for the employee.’ [Citation.] Considering that an employer has a statutory duty to maintain proper records of wages, hours and work conditions and is in the best position to know salient facts about the nature and amount of work performed, the court concluded it is appropriate to shift the burden of proof to the employer. [Citation.] Specifically, once an employee proves he or she ‘has in fact performed work’ that was improperly compensated, and presents enough evidence to allow an inference as to the amount of this work, the burden shifts to the employer to prove the precise amount of work performed or to negate the inference drawn from the employee’s evidence. [Citation.] The high court observed that applying the normal burden of proof in such circumstances would unfairly penalize an employee for the employer’s failure to keep proper records and would allow the employer to keep the benefits of the employee’s labors without paying full compensation.” (Amaral, supra, 163 Cal.App.4th at p. 1189.)
Similarly, in the context of this case, burden shifting is appropriate because Pacer did not provide a means or method for Plaintiffs to apportion their compensation to determine what amount was for business expense reimbursement. Thus, once Plaintiffs put forth evidence that they incurred 2802 business expenses for which they were not properly reimbursed, Pacer had the burden to establish that it fully reimbursed Plaintiffs for those expenses. (Lindell v. Synthes United States (E.D. Cal. 2016) 155 F.Supp.3d 1068, 1079 [“Gattuso does not require a plaintiff to show that he was inadequately reimbursed if his employer did not communicate an apportionment method to him to establish liability. [Citation.] This is only logical because a plaintiff cannot be expected to show that he was not reimbursed if his employer’s failure to comply with [section] 2802 prevents him from doing so.”].)
- Evidence of Reimbursement
Pacer argues the evidence did not support the trial court’s finding that Plaintiffs were owed for business expenses because six of the seven Plaintiffs admitted during cross-examination that the payment they received from Pacer was for services and expenses. We set forth below the testimony Pacer relies upon.
- Jesus Prieto
“Q: During the time that you worked as an owner operator before and after January 1 of 2009, you would receive a weekly payment for the load that you completed from Pacer—by Pacer; correct?
*8 “A: Yes.
“Q: And that payment would include a payment for the truck and the expenses of the truck; correct?
“A: Yes.
“Q: As well as the driver’s services; correct?
“A: Yes.”
- Jose Javier Perez, Jr.
“Q: Each week you received an earnings statement; correct?
“A: Yes.
[¶] … [¶]
“Q: And that payment was for use of the truck, the truck expenses, and the driving services provided by the driver; correct?
“A: Yes.”
Perez also testified that he was paid around $400 for a roundtrip from San Diego to the Los Angeles area, plus port fees and a fuel surcharge.
- Carlos Pena Peraza
“Q: With regard to the compensation that you received from Pacer, that was about $400 to $450 per round trip; correct?
“A: Yes.
“Q: And that compensation that you received from Pacer covered not only your services but also all the expenses for operating the truck; correct?
“A: Yes.”
- Manuel Sanchez Santiago
“Q: So that the payments that you received for the loads from Pacer for a round trip were approximately $400 to $450 for your operating the truck?
“A: Yes.
“Q: And those payments would cover not only your driving services, meaning your labor, but it would also cover the expenses for operating the truck, all of the expenses; correct?
“A: Yes.”
- Alejandro Rivera
Pacer relies on three portions of Rivera’s testimony. First, Rivera testified that he turned in paperwork to receive compensation for his services and use of his truck:
“Q: Now, in period one you needed to turn in paperwork in order to get paid for the work you were performing; correct?
“A: Correct.
“Q: And then you did the same thing in period two, you completed paperwork and you turned it in so you could get paid for your services and for the use of your truck; correct?
“A: Yes.”
Second, Rivera testified about how he allocated his payment:
“Q: And how much would you pay the [second seat] drivers?
“A: 120.
“Q: How much would you receive from Pacer for a round trip that a driver performed?
“A: Around 400.
Q: So the difference is about $280. What would you do with that $280 difference?
“A: That was to pay the fuel, the diesel. That’s all.
“Q: Would you be able to retain any of that money for yourself?
“A: I had to eat.
“Q: So some of the money you used to buy food, other supplies for yourself?
“A: Of course, yes.”
Third, Rivera testified that he used some of his pay from Pacer to pay truck expenses:
“Q: The pay that you received from Pacer while you were operating the Freightliner, did you use that pay to cover some of the expenses for your truck?
“A: Yes.
“Q: Such as fuel and any insurance and lease payments on the truck; correct?
[¶] … [¶]
“A: Yes.”
- Mauricio Vitela
On direct examination, Vitela testified that when he used a second seat driver, Pacer paid him $400 and he paid the driver $120. Vitela initially stated that the $400 payment covered the amount he paid to the second seat driver and truck expenses, but then clarified that $400 did not always cover his expenses. For example, sometimes he needed to repair the truck or replace its tires. On cross-examination, Vitela testified:
*9 “Q: And the expenses for your—for your deliveries—the expenses you incurred were all paid out of the monies that Pacer paid you; correct?
“A: Yes.
“Q: So the amount included payment for expenses of the truck; correct?
“A: Some, yes.”
Vitela went on to testify that he received a fuel surcharge and $50 as a “truck fee.”
Pacer does not dispute the evidence Plaintiffs presented regarding their business expenses. Instead, Pacer contends Plaintiffs did not establish that they were not reimbursed for those business expenses. As we previously explained, the burden shifted to Pacer to prove it fully reimbursed Plaintiffs because Pacer did not provide Plaintiffs a means or method to apportion their compensation between labor and expenses.
“ ‘In reviewing the evidence on appeal, we resolve all conflicts in favor of the prevailing party, and we indulge in all legitimate and reasonable inferences to uphold the finding if possible. Our power begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, that will support the finding. When two or more inferences can be reasonably deduced from the facts, we cannot substitute our own deductions for those of the trial court. [Citation.]’ ” (Garcia v. Seacon Logix, Inc. (2015) 238 Cal.App.4th 1476, 1483–1484.)
Viewing the evidence in the light most favorable to Plaintiffs and drawing all reasonable inferences to support the judgment, Plaintiffs’ testimony that their weekly payments included payment for services and expenses does not establish that they were fully reimbursed for expenses. Rather, the trier of fact could reasonably infer that the weekly compensation Plaintiffs received was their total payment and, from that payment, they had to cover their business expenses, whether the payment was sufficient or not. If Pacer had fully reimbursed Plaintiffs for their truck-related expenses, Plaintiffs would not have had to borrow from their security reserve accounts to pay for repairs to their trucks and then repay the loans from future paychecks. Further, evidence that a driver would not be paid when his earnings were less than deductions contradicts Pacer’s position that it fully reimbursed Plaintiffs for business expenses.
Pacer contends Plaintiffs’ testimony constituted “[c]ritical and [u]nmodified [a]dmissions.” Plaintiffs’ statements that their payments from Pacer included payment for services and expenses do not constitute unequivocal admissions or concessions that they were fully reimbursed as required under section 2802. We must view the testimony in light of other evidence in the case that Pacer treated Plaintiffs as independent contractors and required them to pay for their own truck expenses. Evidence that Plaintiffs had to borrow from their security reserves to pay for truck repairs, they would not be paid when their security reserves were deficient, and that Plaintiffs had to pay from their net earnings for “[a]ny deductions or any expenses … that were not part of the authorized deduction process” suggests Plaintiffs’ compensation did not include full expense reimbursement.
Pacer also contends the trial court mischaracterized testimony of two of Pacer’s witnesses, Kirk Cowles and Kinum. Specifically, Pacer argues the trial court’s finding that these two witnesses “essentially admitted there was not full reimbursement” was inaccurate. When asked if Pacer paid Plaintiffs $400 per roundtrip, Cowles, a former Pacer manager, testified that he was not aware of the $400 amount but thought Plaintiffs were paid $150 for each leg of the trip plus a fuel surcharge. Pacer argues Cowles’s testimony does not support the trial court’s statement. However, Pacer ignores that Cowles also stated that the amount Pacer paid Plaintiffs varied and, at one time, “[Plaintiffs] actually had to take less money when business was bad. [Pacer] offered them less, and if they wanted to take it, they could.” This testimony supports the trial court’s conclusion that Plaintiffs were not always fully reimbursed.
*10 Kinum testified that if a driver’s earnings were less than his deductions, the “negative settlement would perpetuate each week until there was a positive settlement.” Essentially, the driver would not be paid when his earnings were less than deductions. According to Pacer, Kinum was testifying as to a hypothetical situation that never actually occurred. Even if there was no evidence in the record of a negative settlement actually occurring, Kinum’s testimony established that Pacer had an accounting practice that did not fully pay Plaintiffs for wages and expenses. In other words, if Pacer’s enhanced compensation method fully covered drivers’ business expenses, there would never be a situation in which drivers earned nothing for a week.
Lastly, Pacer contends Plaintiffs’ documentation of the expenses they incurred does not constitute substantial evidence that those expenses were unreimbursed. As we already explained, once Plaintiffs presented evidence that they incurred business expenses, Pacer had the burden to prove it reimbursed Plaintiffs for those expenses. Pacer failed to meet that burden. It did not establish Plaintiffs’ daily or roundtrip wages, the number of days each driver worked during given periods, that Plaintiffs were actually paid for their claimed expenses, or its particular means and method for apportioning compensation between wages and expenses.
- Evidence of Plaintiffs’ Daily Salary
Pacer contends that because there was evidence to support the trial court’s findings that Pacer paid Plaintiffs approximately $400 per day and their daily salary was about $150 per day, there is no substantial evidence to support a finding that Plaintiffs were not reimbursed for their section 2802 expenses. We are not convinced by this argument.
Initially, we note that Pacer mischaracterizes the trial court’s finding about Plaintiffs’ daily salary. In discussing the evidence, the trial court noted that Pacer argued the daily salary was $120 per day, but there was no evidence to support that number. The evidence only showed that second seat drivers were compensated $120 per day, which was an amount determined by Plaintiffs. That amount was not set by Pacer as the value for Plaintiffs’ services. The court also noted that at various points Pacer had taken the position that Plaintiffs’ daily salary was $150 per day. At least one driver testified that he believed he earned about $150 per day after expenses. While it appeared to the court that Plaintiffs’ daily salary was “about $150 per day,” the trial court unequivocally found that this was not a precise number and “it was never made clear to the court by either side what the salary per day was.” The trial court’s indefinite finding that Plaintiffs’ daily salary was “about $150 per day” is of no significance because it was merely conjecture in the trial court’s discussion of how the uncertain evidence made it difficult to calculate waiting time penalties. (See Lawrence Block Co. v. Scholer (1958) 166 Cal.App.2d 608, 615 [trial court’s indefinite finding was of no significance where trial court had made a definite finding on the matter and then proceeded to make the indefinite finding on a hypothetical basis of assuming contrary facts].)
Based on our review of the record, substantial evidence does not support Pacer’s position that Plaintiffs’ daily salary or payout per roundtrip was $150. The evidence was not clear on the matter. Moreover, there was no evidence that Pacer communicated to Plaintiffs that $150 of their daily compensation should be apportioned for their services, with the remaining amounts apportioned to expenses. Because we reject Pacer’s argument that substantial evidence supported a finding that Plaintiffs’ daily or roundtrip salary was $150, we also reject Pacer’s argument that this amount subtracted from Plaintiffs’ daily payout of approximately $400 established that Pacer reimbursed Plaintiffs for business expenses.
III. Measure of Damages
*11 Pacer contends the trial court erred as a matter of law when it measured damages by adding up the expenses Plaintiffs incurred rather than determining the extent of nonreimbursement. We reject Pacer’s argument.
Public policy prohibits making an employee’s proof of damages an impossible hurdle. (Hernandez v. Mendoza (1988) 199 Cal.App.3d 721, 727.) “[W]here the employer’s records are inaccurate or inadequate and the employee cannot offer convincing substitutes, a … difficult problem arises. The solution, however, is not to penalize the employee by denying him any recovery on the ground that he is unable to prove the precise extent of uncompensated work. Such a result would place a premium on an employer’s failure to keep proper records in conformity with his statutory duty; it would allow the employer to keep the benefits of an employee’s labors without paying due compensation as contemplated by the Fair Labor Standards Act. In such a situation we hold that an employee has carried out his burden if he proves that he has in fact performed work for which he was improperly compensated and if he produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference. The burden then shifts to the employer to come forward with evidence of the precise amount of work performed or with evidence to negative the reasonableness of the inference to be drawn from the employee’s evidence. If the employer fails to produce such evidence, the court may then award damages to the employee, even though the result be only approximate.” (Anderson v. Mt. Clemens Pottery Co. (1946) 328 U.S. 680, 687–688 (Anderson ).)
Here, Plaintiffs put forth evidence of their section 2802 expenses. Due to Pacer’s failure to provide Plaintiffs with a means or method to apportion their compensation between expenses and wages, Pacer had the burden to negative Plaintiffs’ claims of nonreimbursement. However, Pacer failed to present any evidence that it actually reimbursed Plaintiffs for their expenses. Instead, Pacer argued it had an enhanced compensation system that adequately covered Plaintiffs’ labor and business expenses. Yet Pacer did not provide any precise evidence as to Plaintiffs’ wages, the number of days each driver worked, and the number of trips each driver made. There was simply no way for the trial court to precisely measure damages.
Pacer argues the trial court should have approximated damages by taking the difference between Plaintiffs’ approximate daily payout ($400) and daily salary ($150) and multiplying that figure by the number of days each Plaintiff worked. As we previously explained, Pacer failed to present evidence to establish Plaintiffs’ daily salaries. The evidence regarding Plaintiffs’ wages was unclear. Further, Pacer presented evidence of the average number of days Plaintiffs worked; however, those figures did not account for the number of trips or loads Plaintiffs took per day or their use of second seat drivers. Pacer is essentially arguing for one imprecise measure over another.
The consequences of Pacer’s failure to have a proper means or method to apportion Plaintiffs’ wages and expenses should fall on Pacer, not Plaintiffs. (Hernandez v. Mendoza, supra, 199 Cal.App.3d at p. 727.) “The employer cannot be heard to complain that the damages lack the exactness and precision of measurement that would be possible” had it utilized and communicated a proper means and method to apportion the alleged enhanced compensation it provided to its employees. (See Anderson, supra, 328 U.S. at p. 688.) Under the circumstances of this case, we conclude the trial court did not err in its measure of damages.
- Recovery of Lease Payments
*12 Relying on Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1 (Estrada ), Pacer argues the trial court erred when it awarded Plaintiffs reimbursement for their vehicle lease payments. We agree.
In Estrada, three package delivery drivers brought a class action against FedEx Ground Package System, Inc. (FedEx), contending that they were employees entitled to reimbursement for work-related expenses under section 2802. (Estrada, supra, 154 Cal.App.4th at p. 4.) Under the terms of their agreements with FedEx, each driver had to “provide his own truck meeting FedEx’s specifications, mark the truck with the FedEx logo, pay all costs of operating and maintaining the truck …, and use the truck exclusively in the service of FedEx (or mask the logo if the truck is used for any other purpose).” (Id. at p. 5.) The FedEx drivers also had to paint their trucks “ ‘FedEx White’ ” and park their trucks in assigned terminal parking spaces. (Id. at pp. 7–8.) “Although the drivers provide[d] their own trucks and equipment, FedEx [was] involved in the purchasing process, providing funds and recommending vendors.” (Id. at p. 9.)
The trial court found the FedEx drivers were employees within the meaning of section 2802 and ordered FedEx to reimburse some, but not all, of their business expenses. (Estrada, supra, 154 Cal.App.4th at p. 9.) As relevant here, the trial court concluded that the drivers were not entitled to reimbursement for the cost of purchasing or leasing their trucks. (Id. at pp. 21–22.) The Court of Appeal affirmed the trial court’s ruling, concluding that “it is perfectly lawful for an employer to require its employees to provide their own vehicles as a condition of employment, provided only that the employees must be reimbursed for the expenses thereby incurred.” (Id. at pp. 24–25.)
Plaintiffs urge us to depart from the Estrada decision, arguing it was incorrectly decided. They contend that Estrada “fail[ed] to recognize the significant distinction between FedEx’s monopolization of its employees’ trucks compared to an employer who allows its employee to use the vehicle for purposes other than the employer’s business.” Thus, Plaintiffs argue that they should not have to shoulder the truck lease payments because they drove the trucks solely for Pacer, Pacer controlled the trucks, and the trucks remained with Pacer when Plaintiffs left their employment. Similar to Pacer in this case, FedEx exerted control over truck specifications, how the drivers used their trucks, and where they parked their trucks. (Estrada, supra, 154 Cal.App.4th at pp. 5, 7–8.) Although it is unclear whether Plaintiffs actually did so, there is some evidence in the record that they could use their trucks “in pursuit of any other business purpose,” provided that they satisfied certain conditions such as covering any signs or decals identifying Pacer. Further, FedEx, like Pacer, was involved in the purchase or lease of the drivers’ trucks. (Id. at p. 9.) Based on the factual similarities between this case and the circumstances in Estrada, we find Estrada’s holding on point. Thus, we conclude the trial court erred in awarding Plaintiffs their lease payments.
DISPOSITION
*13 The award of Plaintiffs’ lease payments under section 2802 is reversed. The matter is remanded for the trial court to recalculate damages in accordance with this opinion. In all other respects, the judgment is affirmed. The parties are to bear their own costs on appeal.
WE CONCUR:
McCONNELL, P.J.
DATO, J.
All Citations
Not Reported in Cal.Rptr.3d, 2017 WL 3725521
Footnotes
1
Undesignated statutory references are to the Labor Code.
2
Pacer does not challenge the trial court’s finding that Plaintiffs were Pacer’s employees, rather than independent contractors.
3
Federal cases, although not binding, are persuasive authority. (Hall v. Goodwill Industries of Southern California (2011) 193 Cal.App.4th 718, 728, fn. 2, citing Landmark Screens, LLC v. Morgan, Lewis & Bockius, LLP (2010) 183 Cal.App.4th 238 [stating “[a]lthough we may not rely on unpublished California cases, the California Rules of Court do not prohibit citation to unpublished federal cases, which may properly be cited as persuasive, although not binding, authority.”].)
