In a class action I recently filed, the employer was not reimbursing minimum wage employees for using their own vehicles in the discharge of their job duties.
The core issues of this matter are:
1. Whether an employer that requires its employees to use their personal vehicles in the discharge of their duties but fails to reimburse the employees for mileage and expenses incurred in using their personal vehicles has violated Labor Code § 2802.
2. Whether an employer who fails to have an identifiable, enhanced compensation or reimbursement plan that fully reimburses the employees for their automobile
expenses necessarily incurred in the discharge of their duties has failed to comply with the holding of the California Supreme Court in Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4th 554,572.
3. Whether an employer’s violation of Labor Code § 2802 that effectively reduces a minimum wage employees’ wages below the state minimum wage, has also violated Labor Code § 1194, California’s minimum wage law.
Summary of Facts:
Plaintiff Malik, the class representative in a putative class, was a former inside Sales Representative for Defendant Freeway Insurance Services, Inc. Plaintiff and the other Sales Representatives spent their time primarily inside Defendant’s office selling from the office location to potential clients that either telephoned Defendant’s office or personally came to Defendant’s office. The Sales Representatives were paid $8.00 per hour.
Defendant Freeway has arrangements with car dealerships that recommend Freeway’s insurance services to purchasers of new vehicles. In addition to their inside sales duties, Sales Representatives are required to drive their personal car to auto dealerships to sell insurance when an auto dealer calls Defendant’s office. Generally, the dealerships call Defendant’s office when an uninsured person is purchasing a car and needs insurance coverage to drive the car off
the lot. Plaintiff’s territory included Long Beach, Anaheim, and Tustin. In a typical week,
Plaintiff and the other Sales Representatives made five to seven trips from Defendant’s central office located in Orange County to car dealerships in their territory. On average, each trip was approximately 30 to 40 miles round trip.
In addition to requiring the Sales Representatives to drive their own cars to the dealerships, Defendants also required the Sales Representative to pay for their gasoline, auto expenses, and repairs. The only compensation Plaintiff and the other Sales Representatives received was two dollars ($2.00) when they sold an insurance policy at the dealership. If a sale was not made, Plaintiffs did not receive the $2.00 or any other type of reimbursement for their expenses. Thus, Plaintiff complained that the Sales Representatives were paid less than minimum wage because paying the gasoline and automobile expenses reduced their wages to less than minimum wage, and the $2.00 they received when they sold an insurance policy was insufficient to cover their actual automobile expenses for a single trip.
California Labor Code section 2802:
Labor Code § 2802(a) provides: “An 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…” The purpose of Section 2802 is to ensure that duty-related
expenses and losses ultimately fall on the business enterprise, not on the individual employee. (Janken v. GM Hughes Electronics (1996) 46 Cal. App. 4th 55, 74)
Plaintiff’s Argument:
In Arriaga v. Florida Pacific Farms (11th Cir. 2002) 305 F.3d 1228, 1237, the federal court of appeals recognized that transportation costs incurred by an employee for the benefit of the employer constituted de facto deductions from the employee’s minimum wages in violation of the minimum wage statute.
Although, not binding, the Court’s holding in Arriaga is persuasive and carries great weight: “There is no legal difference between deducting a cost directly from the worker’s wages and shifting a cost for the employee to bear; employer may not deduct from employee wages the cost of facilities which primarily benefit the employer if such deductions drive wages below the minimum wage.”
What is the actual law? In sum, an employee cannot be paid less than minimum wage. If an employee is paid minimum wage, but has to pay from his/her own pocket expenses that should be paid by the employer, but are not, it can hardly be said the employee is receiving the California Minimum Wage.
This case, Malik vs. Freeway Insurance, is currently in litigation. Defendant, Freeway Insurance, lost their motion to strike the cause of action regarding “failure to pay minimum wage.” The court ruled this issue to be a case of first impression for California. So, this is good news. Feel free to contact Scott Miller, Attorney at (800) 417-2008 if you are having a similar issue with your employment.
