Posts belonging to Category Caselaw Developments

COVID-19 Airline Refund Cases Survive Headwinds

Shortly after the outbreak of the COVID-19 pandemic last year, some consumers sued airlines for refusing to refund the money they spent on flights that their airlines did not provide. We had reported on some of these cases, including Bombin v. Southwest Airlines Co., No. 20-01883 (E.D. Penn., filed April 13, 2020) (“Bombin”), and Levey v. Concesionaria Vuela Compania de Aviacion SAPI de CV et al., No. 20- 02215 (N.D. Ill., filed May 8, 2020) (“Levey”). A year later, we have decided to check in on the progress of these airline refund cases.

Bombin is a typical example; in Bombin, the plaintiffs booked flights to Cuba and Arizona. The flight to Cuba was cancelled and the flight to Arizona was rescheduled three times. Both of the plaintiffs sought refunds from Southwest, and were denied. Instead, Southwest offered the plaintiffs travel credits toward future flights in lieu of refunds. The plaintiffs then filed a class action against Southwest alleging breach of contract.

The Bombin plaintiffs’ breach of contract class action recently survived a motion to dismiss. Bombin v. Southwest Airlines Co., No. 20-01883 (E.D. Penn. March 29, 2021) (slip op. available here). In its motion, Southwest argued that the claim should be dismissed because its Contract of Carriage is unambiguous and vests Southwestern with discretion to issue fare credits instead of refunds. Id. at 10. The plaintiffs argued that the Contract of Carriage is ambiguous, stating that it can reasonably be interpreted to provide customers with the right to choose a refund. The court agreed with the plaintiffs. Acknowledging “the labyrinthine nature of the Contract of Carriage,” the district court held that the plaintiffs plausibly alleged a breach of contract claim under the unclear contract because “Southwest failed to give Plaintiffs the option of a refund.” Id. at 10, 13.

The Bombin court also rejected Southwest’s argument that the plaintiffs’ breach of contract claim is preempted by the Airline Deregulation Act (“ADA”). Id. at 13. The ADA “stops States from imposing their own substantive standards with respect to rates, routes, or services, but not from affording relief to a party who claims and proves that an airline dishonored a term the airline itself stipulated.” Am. Airlines v. Wolens, 513 U.S. 219, 232-233, 115 S.Ct. 817, 130 L.Ed.2d 715 (1995). Because the plaintiffs’ claim is based on Southwest’s alleged breach of its own Contract of Carriage (i.e., “a term the airline itself stipulated”), the court held that Southwest’s preemption argument fails under Wolens.

Other courts have reached similar conclusions. In Levey, the plaintiff alleged the airline canceled flights amid the pandemic and refused to refund travelers or let them rebook their flights without penalty. The airline moved to dismiss, arguing (among other things) that it did not breach its Contract of Carriage and that the plaintiff’s claims are preempted by the ADA. As in Bombin, the district court declined to dismiss the breach of contract claim at the pleading stage, holding that it is plausible that the plaintiff was entitled to a prompt refund of her airfare under the terms of the Contract of Carriage. Levey v. Concesionaria Vuela Compania de Aviacion SAPI de CV, et al., No. 20- 02215 (N.D. Ill., March 29, 2021), at 12. The court also rejected the airline’s preemption argument, citing the “Wolens exception” to ADA preemption, discussed in Bombin. Id. at 7.

In another case filed after the onset of the pandemic, the plaintiffs alleged that British Airways breached its Contract of Carriage by failing to provide them with refunds after their flights were cancelled. Ide, et al. v. British Airways, PLC, No. 20-3542 (S.D.N.Y., March 26, 2021) at 1 (slip op. available here). First, the plaintiffs alleged that the airline offered them travel vouchers instead of refunds to which they are entitled under the contract. Second, the plaintiffs alleged that British Airways actually frustrated their attempts to obtain refunds: “[B]y removing refund claim forms from its website and channeling their refund requests through overburdened and inadequate call centers, British Airways frustrated their ability to secure refunds.” Id. at 13-14. British Airways moved to dismiss. The district court found that the plaintiffs plausibly alleged breaches of contract on both theories. Also, as in the other cases, the court rejected the airline’s preemption argument based on the “Wolens exception.” Id. at 14-15.

One year since March 2020, these airline refund cases have set the course. They have generally been successful in alleging breaches of the airlines’ Contract of Carriage and evaded preemption under the ADA based on the Wolen exception. We will check in with them again when there are further developments.

Authored by:
Robert Friedl, Senior Counsel

Donohue v. AMN Services, LLC: It’s About Time

In Donohue v. AMN Services, LLC, Cal. Sup. Ct., No. S253677, Feb. 25, 2021 (“Donohue”) (slip op. available here), the California Supreme Court reached two significant holdings. The Court first held that employers may not engage in the practice of rounding time punches when recording time for meal periods. Second, the Court held that an employer’s time records that show noncompliant meal periods raise a rebuttable presumption of meal period violations. In reaching this conclusion, the Court adopted the reasoning in Justice Werdegar’s concurrence in Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004 (2012) (“Brinker”). These holdings are significant because they clarify how employers must record employees’ time, and the role of time records in establishing a prima facie showing of meal period violations. 

In Donohue, the plaintiff’s employer AMN Services, Inc. (“AMN”) used an electronic timekeeping system called “Team Time” to track its employees’ compensable time. Employees would use Team Time to punch in and out of work at the beginning of the day, at the beginning of lunch, at the end of lunch, and at the end of the day. Team Time rounded time punches to the nearest 10-minute increment. Slip op. at 2-3. AMN relied on the Team Time punches to manage potentially non-compliant meal periods—i.e., whether a meal period was missed, shorter than 30 minutes, or taken after five hours of work. However, because the time punches were rounded, some non-compliant meal periods would have appeared as compliant meal periods on Team Time and would not have resulted in payment of premium wages. Id. at 3-4. The plaintiff alleged in her class action that AMN denied its employees compliant meal periods, improperly rounded time records for meal periods on Team Time, and failed to pay premium wages for those violations. Id. at 5.   

The Donohue Court first examined whether rounded time punches properly calculated the time for the 30-minute meal periods required by California Labor Code section 512(a). The Court made clear that the purpose of the inquiry was to determine whether AMN’s rounding policy resulted in the proper payment of premiums for meal period violations, not whether rounding practices result in employees not receiving pay for all time worked. Slip op. at 8.

Employers have long been permitted to use rounded time punches to calculate regular and overtime wages, as long as the rounding policy is neutral on its face and as applied. Slip op. at 16 (citing See’s Candy Shops, Inc. v. Superior Court, 210 Cal.App.4th 889, 907 (2012) (“Candy I”)). The reasoning in Candy I is that the rounding policy averages out for purposes of calculating wages (“counting slightly fewer wages one day can be made up by counting a few more minutes another day”). Id. at 15-16. However, that reasoning does not apply to shorter or delayed meal periods because “rounding policies are at odds with the requirement that employers pay the full premium wage for meal period violations.” Id. at 16. For example, in Donohue, AMN’s rounding policy, automatically applied by “Team Time,” would not always trigger premium pay for noncompliant meal periods. Id. at 20. This is inconsistent with Labor Code section 226.7, under which “even a minor infringement of the meal period triggers the premium pay obligation.” Id. at 12.

The Court then discussed the significance of AMN’s time records. According to the plaintiff’s expert, those time records showed over 40,000 shortened meal periods and over 6,000 delayed meal periods for which premium wages were not paid because of rounding. The Court held that the introduction of these time records would trigger a “rebuttable presumption” of meal period violations. 

This “rebuttable presumption” was first discussed in Justice Werdegar’s concurrence in Brinker. Slip op. at 21-22. Noting that “[e]mployers covered by Industrial Welfare Commission (IWC) wage order No. 5-2001 (Cal.Code Regs., tit. 8, § 11050) have an obligation both to relieve their employees for at least one meal period for shifts over five hours (id., subd. 11(A)) and to record having done so . . .,” Justice Werdegar concluded “[i]f an employer’s records show no meal period for a given shift over five hours, a rebuttable presumption arises that the employee was not relieved of duty and no meal period was provided.” Brinker, 53 Cal.4th at 1053 (conc. opn. of Werdegar, J., emphasis in original). The Donohue Court adopted this rebuttable presumption. It also clarified that “the presumption applies to records showing short and delayed meal periods as well. Providing employees with short or delayed meal periods is just as much a violation of the meal period provisions as failing to provide employees with a meal period at all.” Slip op. at 24.

Donohue is also noteworthy because it discusses the impact of technology on timekeeping issues. As for rounding, the Court recognized that the practice was developed as a means to efficiently calculate hours worked, “[b]ut technological advances may help employers to track time more precisely.” Slip op. at 21. In fact, Team Time recorded the employees’ time in unrounded punches, and then had to take an extra step to round them. The Court concluded that “[a]s technology continues to evolve, the practical advantages of rounding may diminish further.” Id.

Although Donohue was confined to rounding time for meal period violations, the question remains whether, considering today’s technology, there is any reasonable basis to round time punches in any context. The Court stated, “[t]his court has never decided the validity of the rounding standard articulated in See’s Candy I, and we are not asked to do so here.” Slip op. at 19. Does this foreshadow the eventual overruling of Candy I? Only time will tell.

Authored by:
Robert Friedl, Senior Counsel

Wilson v. IKEA: Thin Evidence of Amount in Controversy Requires Remand of W&H Case, Says C.D. Cal. Dist. Ct.

In Wilson v. Ikea North America Services, LLC, C.D. Cal. Dec. 14, 2020 (slip op. available here), the district court found on a motion to remand that Ikea failed to meet its burden of proof that the amount in controversy exceeded the $5 million required for Class Action Fairness Act (“CAFA”) jurisdiction.

Ikea had removed the case to federal court alleging that the amount in controversy exceeded $22 million. Unlike a notice of removal, which need only include plausible allegations that the amount in controversy exceeds the minimal jurisdictional requirements, on a motion to remand, the removing party must submit evidence, and the court decides by a preponderance of the evidence whether the amount in controversy is met. Slip op. at 4. “Under this system, CAFA’s requirements are to be considered by real evidence and the reality of what is at stake in the litigation, using reasonable assumptions of underlying the defendant’s theory of damages exposure.” Id., quoting Ibarra v. Manheim Invs., Inc., 775 F.3d 1193, 1198 (9th Cir. 2015) (emphasis added).

Ikea failed to meet this burden. It presented “thin evidence” of the amount in controversy consisting of the number of employees and the number of workweeks for three calendar years; and it presented no evidence that every employee suffered all of the injuries alleged in the complaint. Slip op. at 5 (emphasis in original). Instead, Ikea relied on the plaintiff’s “pattern and practice” allegations to establish that point. The complaint, however, did not allege that Ikea violated wage and hour laws on each and every shift, so there was no judicial admission in play to support Ikea.

In closing remarks, the district court reminded that although Ikea’s $22 million estimate is far above the $5 million CAFA threshold, “it is not the Court’s job to perform the mathematical calculations to justify it. . . .  That is Ikea’s burden.” Slip op. at 6. Something to consider from a plaintiff’s perspective—that sometimes the removing defendant should be put to the task of proving up potential damages on a motion to remand after a flimsy notice of removal.

Authored by:
Robert Friedl, Senior Counsel

Gulf Offshore Logistics, LLC v. Sup. Ct.: Offshore Workers Based in CA Are Entitled to Labor Code Protections

In Gulf Offshore Logistics, LLC v. The Superior Court of Ventura County, Cal. Ct. App. 2d Dist., No. B298318, Dec. 7, 2020 (slip op. available here), the Court of Appeal, on remand from the California Supreme Court, reconsidered whether Louisiana law applied to employees of Louisiana-based companies that operated outside the territorial waters of California. Following recent precedent in Ward v. United Airlines, Inc., 9 Cal.5th 732 (2020), and Oman v. Delta Air Lines, Inc., 9 Cal.5th 762 (2020), the court concluded that the California Labor Code applies to workers whose “base of work operations” is in California.

The plaintiffs are former crew members (two able-bodied seamen and an engineer), none of whom were California residents. They were flown into Los Angeles International Airport by their employers and shuttled to the ship, where they were employed for a “hitch” of 21 to 42 days before returning to their homes. The Adele Elise, an offshore supply ship that stationed in Port Hueneme, California, supplied four oil platforms located outside the boundaries of the state of California (a typical voyage lasted 24 hours). The plaintiffs alleged violations of the California Labor Code relating to minimum wages and overtime pay, meal and rest periods, maintenance of accurate work records, and provision of accurate and complete wage statements.

In a prior opinion, the court applied a conflict of law analysis and determined that Louisiana law governed the dispute “because that state had more significant contacts with the parties and a greater interest in regulating the employment relationships at issue.” On remand, the court acknowledged that was a mistake. Slip op. at 11. “Oman clarifies that the relevant consideration is the location in which work is performed. Here, that location is California. Other considerations, such as the residence of the employees or the location of the employer, are not relevant.” Id.

Ward and Oman applied California’s wage and hour laws to airline employees based in California, even though they worked in federally regulated airspace. Gulf extends this important concept to the federal waters off the California coast. Seamen based in California are entitled to the protections of the state’s wage and hour laws, even if their work takes them offshore.

Authored by:
Robert Friedl, Senior Counsel