Helde v. Knight Transportation, Inc. (982 F. Supp. 2d 1189, 2013)

ORDER GRANTING IN PART DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

ROBERT S. LASNIK, District Judge.

This matter comes before the Court on “Defendant Knight Transportation, Inc.’s Motion for Partial Summary Judgment.” Dkt. # 51. Summary judgment is appropriate when, viewing the facts in the light most favorable to the nonmoving party, there is no genuine dispute as to any material fact that would preclude the entry of judgment as a matter of law. L.A. Printex Indus., Inc. v. Aeropostale, Inc., 676 F.3d 841, 846 (9th Cir.2012). The party seeking summary dismissal of the case “bears the initial responsibility of informing the district court of the basis for its motion” (Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)) and identifying those portions of the materials in the record that show the absence of a genuine issue of material fact (Fed.R.Civ.P. 56(c)(1)). Once the moving party has satisfied its burden, it is entitled to summary judgment if the non-moving party fails to identify specific factual disputes that must be resolved at trial. Hexcel Corp. v. Ineos Polymers, Inc., 681 F.3d 1055, 1059 (9th Cir.2012). The mere existence of a scintilla of evidence in support of the non-moving party’s position will not preclude summary judgment, however, unless a reasonable jury viewing the evidence in the light most favorable to the non-moving party could return a verdict in its favor. U.S. v. Arango, 670 F.3d 988, 992 (9th Cir.2012).

Having reviewed the memoranda, declarations, and exhibits submitted by the parties and having heard the arguments of counsel, the Court finds as follows:

A. Preemption of Rest Break Claims

Defendant argues that plaintiffs first, second, and fourth claims for relief are preempted by the Federal Aviation Administration Authorization Act (“the FAAAA”), 49 U.S.C. § 14501(c)(1), which prohibits states from regulating the price, routes, and/or services offered by motor carriers. Washington’s rest break law provides:

Employees shall be allowed a rest period of not less than 10 minutes, on the employer’s time, for each 4 hours of working time. Rest periods shall be scheduled as near as possible to the midpoint of the work period. No employee shall be required to work more than three hours without a rest period.

WAC 296-126-092(4). In the alternative, defendant argues that Washington’s rest break regulations impermissibly conflict •with the federal Hours of Service (“HOS”) regulations which set uniform máximums for drivers. 49 C.F.R. § 395.3.

The party urging preemption has the burden of establishing that the defense applies. Jimeno v. Mobil Oil Corp., 66 F.3d 1514, 1526 n. 6 (9th Cir.1995). The FAAAA prohibits states from enacting or enforcing “a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier ... with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1). The Act does not expressly preempt state wage laws in general or rest break laws in particular. Nevertheless, preemption “is compelled whether Congress’ command is explicitly stated in the statute’s language or implicitly contained in its structure and purpose.” Morales v. Trans World Airlines, Inc., 504 U.S. 374, 383, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992).

The FAAAA, like the Airline Deregulation Act before it, was enacted to promote “maximum reliance on competitive market forces” in establishing prices, routes and services in the transportation industry. Rowe v. N.H. Motor Transp. Ass’n, 552 U.S. 364, 367-68, 371, 128 S.Ct. 989, 169 L.Ed.2d 933 (2008) (quoting 49 U.S.C.App. § 1302(a)(4) (1988 ed.)). State laws and regulations that curbed or thwarted competitive market forces were deemed impediments to innovation, efficiency, variety, lower prices, and better service. Thus, Congress included preemption provisions in the statutes in order to “ensure that the States would not undo federal deregulation with regulation of their own.” Morales, 504 U.S. at 378, 112 S.Ct. 2031; Rowe, 552 U.S. at 368, 128 S.Ct. 989. Given the purpose and language of the FAAAA preemption provision, the Ninth Circuit has found that preemption is appropriate when the state law or regulation, “directly or indirectly, binds the carrier to a particular price, route or service and thereby interferes with competitive market forces within the industry.” Am. Trucking Ass’ns, Inc. v. City of Los Angeles, 660 F.3d 384, 397 (9th Cir.2011) (internal quotation marks and ellipses omitted) (rev’d on other grounds, — U.S. -, 133 S.Ct. 2096, 186 L.Ed.2d 177 (2013)). Regulations of general applicability that have a remote or tenuous effect on the price, routes, or services offered by a motor carrier are not preempted. Dan’s City Used Cars, Inc. v. Pelkey, — U.S. -, 133 S.Ct. 1769, 1778, 185 L.Ed.2d 909 (2013); Tillison v. Gregoire, 424 F.3d 1093, 1099 (9th Cir.2005).

In Californians for Safe and Competitive Dump Truck Transp. v. Mendonca, 152 F.3d 1184, 1188 (9th Cir.1998), the Ninth Circuit determined that California’s prevailing wage law was not preempted by the FAAAA. Plaintiff in that case argued that the state’s requirement that it pay employees “not less than the general prevailing rate” increased its costs, thereby forcing it to raise prices by 25% and to reroute equipment in an effort to reduce expenditures. The Ninth Circuit acknowledged these impacts, but declined to equate a mere causal relationship with “related to” for purposes of the FAAAA. The court found that (a) the prevailing wage law did not fall into the field of laws related to pricing, routes, and services and (b) the law would not “frustrate[ ] the purpose of deregulation by acutely interfering with the forces of competition” in the industry. 152 F.3d at 1189 (emphasis in original). It therefore concluded that any effect the law had on prices, routes, and services was too indirect, remote, and tenuous to trigger preemption.

While it is clear that, after Mendonca, general wage laws are not preempted by the FAAAA, the fate of meal and rest break requirements has varied. The majority of district courts that have addressed the issue find that the imposition of scheduled breaks throughout the day affects the routes a motor carrier can choose, the scheduling of service, and/or the prices charged. See Miller v. Southwest Airlines, Co., 923 F.Supp.2d 1206, 1212-13 (N.D.Cal.2013) (applying preemption provision of Airline Deregulation Act); Cole v. CRST, Inc., 2012 WL 4479237, at *4 (C.D.Cal. Sept. 27, 2012); Jasper v. C.R. England, Inc., 2012 WL 7051321, at *7 (C.D.Cal. Aug. 30, 2012); Campbell v. Vitran Express, Inc., 2012 WL 2317233, at *4 (C.D.Cal. June 8, 2012); Aguiar v. Cal. Sierra Express, Inc., 2012 WL 1593202, at *1 (E.D.Cal. May 4, 2012); Esquivel v. Vistar Corp., 2012 WL 516094, at *5 (C.D.Cal. Feb. 8, 2012); Dilts v. Penske Logistics LLC, 819 F.Supp.2d 1109, 1118—19 (S.D.Cal.2011). Dilts and Campbell are currently on appeal to the Ninth Circuit. Two district courts have found that preemption does not apply. See Mendez v. R+L Carriers, Inc., 2012 WL 5868973, at *6 (N.D.Cal. Nov. 19, 2012); Dunbar Armored, Inc. v. Rea, C04-0602WQH (S.D.Cal. July 8, 2004). These cases are based primarily on the fact that California’s meal and rest break law allows employers to forego meal and rest breaks in favor of paying the employee an additional hour of wages per day, thereby avoiding any potential impact the law would otherwise have on rates or services. Washington’s law does not contain a similar provision. Finally, two courts have determined that further factual development was necessary before the impact of the meal and rest break statute on the carrier’s prices, service, and routes could be determined. See Reinhardt v. Gemini Motor Transp., 869 F.Supp.2d 1158, 1166 (E.D.Cal.2012); Cardenas v. McLane FoodServices, Inc., 796 F.Supp.2d 1246, 1255-56 (C.D.Cal.2011).

In order to determine whether Washington’s rest break requirement “relate[s] to a price, route, or service of any motor carrier” for purposes of 49 U.S.C. § 14501(c)(1), the Court “must examine the actual or likely effect of’ the requirement. Am. Trucking, 660 F.3d at 396. In close cases where the law will have an impact on a carrier’s prices, routes, and services even though the state has not attempted to regulate the carrier’s operations directly, the proper inquiry is whether the regulation binds carriers to particular prices, routes, or services, thereby interfering with the industry’s competitive market forces. Id. at 396-97. State interference with market forces in the trucking industry is forbidden, but the FAAAA does not preclude states from enforcing laws of general applicability that have only a tenuous or remote effect on the market.

Defendant has provided evidence in the form of its Chief Operations Officer’s declaration regarding the impact of requiring rest periods for each four hours of working time, scheduled “as near as possible to the midpoint of the work period.” WAC 296-126-092(4). Mr. Quast states that compelling the rest breaks would (a) increase Knight’s costs, (b) reduce services to customers, and (c) limit the routes drivers could take. Decl. of Kevin Quast (Dkt. # 57) at ¶ 35. The first impact is irrelevant. The issue is whether the services offered, prices charged, or routes traversed by defendant would have to be altered to comply with the state’s regulation. The fact that defendant’s costs will increase, even with the attendant possibility that defendant might choose to pass those costs along to consumers, does not mean that the regulation binds defendant to particular prices. See Air Transport Ass’n of Am. v. City and County of San Francisco, 266 F.3d 1064, 1072-73 (9th Cir.2001) (although the antidiscrimination ordinance would increase costs, the airlines retained the freedom “to set whatever terms, conditions and prices they want” and failed to prove that the ordinance would compel or coerce them to change their routes or services); Mendonca, 152 F.3d at 1189 (increase in prices of 25% related to requirement that contractors pay the prevailing wage is merely an indirect, remote, and tenuous effect of the regulation that does not “frustrate[] the purpose of deregulation by acutely interfering with the forces of competition.”) (emphasis in original).

Defendant argues that enforcing the rest break regulation would compel changes in the services it offers its customers. Services, for purposes of the FAAAA, “refers to such things as the frequency and scheduling of transportation, and to the selection of markets to or from which transportation is provided.” Air Transport Ass’n, 266 F.3d at 1071. Mr. Quast states that each required rest break would reduce a driver’s productive time by approximately thirty minutes given the need to find a suitable stopping place, to safely park and secure the tractor and trailer, and to return to the original route. Decl. of Kevin Quast (Dkt. # 57) at ¶¶ 27-28. Defendant provided evidence that not only would this lost time impact the scheduled delivery time of long-haul shipments, but the driver would also be unavailable two or three times a day to do pickups and deliveries, limiting the schedule on which such services can be offered. Decl. of Kevin Quast (Dkt. # 57) at ¶¶ 34.

Finally, Mr. Quast states that compliance with Washington’s rest break regulation would limit the number of routes available to a driver because he or she would have to choose roads with suitable stopping points spaced along the route at distances compelled by the regulation. Decl. of Kevin Quast (Dkt. # 57) at ¶ 29. Although Mr. Quast discusses the need to find a suitable stopping place and the mechanics of parking, he provides no facts regarding the roads of Washington, the services provided on those roads, the routes currently utilized, or any changes that would be compelled by the regulation. While the Court has no doubt that there are roads that do not have services suitable for tractor-trailers, there is no evidence that defendant currently uses those routes or that WAC 296-126-092(4) would compel the carrier to either choose or abandon any specific route.

For all of the foregoing reasons, the Court finds that defendant has not met its burden of establishing that WAC 296-126-092(4) relates to a price or route of a motor carrier. The regulation does, however, relate to the services offered by the carrier because it directly impacts the schedule on which trucking services are performed by compelling mid-shift breaks within specified time frames. The Court is therefore inclined to rule in defendant’s favor on the preemption issue and must consider plaintiffs’ request that it delay ruling until after the Ninth Circuit has decided the appeals in Dilts and Campbell. While the Court has the power to stay proceedings, a partial stay of only one issue while discovery and motion practice proceeds between the parties on the remaining claims would not promote efficiency or expedite the resolution of this litigation. The Court declines to stay consideration of this issue and finds that plaintiffs rest break claims are preempted by the FAAAA.

The Court need not determine whether the rest break regulations also conflict with the federal Hours of Service (“HOS”) regulations.

B. Unpaid Miles Claims

Plaintiffs’ first and second claims for relief are based in part on the claim that defendant failed to pay plaintiffs “for each mile driven.” First Amended Complaint (Dkt. # 22) at ¶¶ 41 and 49. Defendant argues, however, that plaintiffs have no statutory or contractual guarantee to payment for actual miles driven, and that these claims must be dismissed because plaintiffs agreed to accept payment based on dispatch, rather than actual, miles.

The wage laws provide flexibility in negotiating compensation systems, as long as the employer pays its employees no less than the equivalent of the minimum wage rate for each hour of work regardless of the system chosen. WAC 296-128-550. Defendant asserts, and plaintiffs do not contest, that plaintiffs agreed to be compensated based on a combination of dispatch miles and extra duty payments. Plaintiffs have not alleged that defendant contracted to pay them for each and every mile driven, nor have they identified a statute or regulation that gives them a right to such payments. Although plaintiffs may be able to show that the trip and extra duty pay system under which they were employed resulted in hourly wages of less than the statutory minimum or that defendants engaged in false or deceptive advertising, they have not established a statutory or contractual right to pay “for each mile driven.”

C. Payroll Card Charges

Plaintiffs have asserted a claim for relief regarding “unlawful deductions.” Dkt. # 22 at ¶¶ 62-66. In the First Amended Complaint, plaintiffs presented factual allegations to support a claim that the use of payroll cards deprived plaintiffs of the full value of their wages. Dkt. # 22 at ¶¶ 22-27. Defendant, however, pointed out that none of the named plaintiffs had opted to receive his wages through a payroll card, raising serious questions regarding their standing to pursue the “full value” claim. In response to the motion for summary judgment, plaintiffs seem to have abandoned the “full value” claim in favor of a more general claim that certain fees associated with the payroll cards were not authorized in writing by the employees, in violation of WAC 296-126-028(2). Dkt. # 71 at 18-19. Defendant is entitled to summary judgment to the extent plaintiffs claim that the use of the payroll cards, in and of itself, deprived them of access to the full value of their wages.

Pursuant to WAC 296-126-028(2), “[djuring an on-going employment relationship, an employer may deduct wages when the employee expressly authorizes the deduction in writing and in advance for a lawful purpose for the benefit of the employee. These deductions may reduce the employee’s gross wages below the state minimum wage.” Defendant argues, without any citations to case law or the governing regulations, that its deduction of amounts plaintiff Helde borrowed from defendant plus a $1.00 service fee charged by the payroll card vendor is not “a deduction from wages at all.” Dkt. # 75 at 5-6. It is not clear what, in defendant’s view, qualifies as a “deduction from wages” if not an itemized reduction in the amount of one’s paycheck. To the extent defendant is relying on the fact that the deduction reflects a loan made to plaintiff Helde, preauthorization is still required. WAC 296-126-028(2) expressly contemplates this exact situation and requires an employer who loans an employee money to obtain the employee’s written agreement, in advance, to both the terms and method of repayment before it can recoup the funds through payroll deductions. Defendant has not shown that it is entitled to judgment on plaintiffs claim that the $1.00 payroll deductions associated with each loan violated Washington law.

D. Per Diem Plan

Plaintiffs allege that defendant takes deductions of 2$ per mile from their base pay rate under a “per diem plan” and that these deductions are not authorized in writing (in violation of WAC 296-126-028(2)) and work to the financial benefit of the employer (in violation of WAC 296-126-028(3)). Having reviewed the evidence, the Court finds that there is a fact issue regarding the nature of defendant’s “per diem plan” that precludes summary judgment. There is evidence from which one could conclude that the per diem plan is actually a separate pay structure under which employees agree to accept 31 $ per mile — 2$ less than they otherwise would have received — in exchange for avoiding the hassles of having to itemize hotel and meal costs on their annual tax return. If that were the case, the 2$ difference in pay would reflect a different negotiated “regular rate of pay,” and no deduction, authorized or unauthorized, would occur during the pay period. This is the conclusion drawn by the Circuit Court of the State of Oregon for the County of Multnomah in Griffus v. Knight Transp., Inc., Case No. 1006-08538, on September 13, 2013.

Defendant’s steadfast insistence that this is the appropriate characterization of the per diem plan is contradicted by significant evidence in the record, however. One could reasonably conclude that, in fact, defendant pays its employees 33$ per mile — the minimum pay rate advertised— unless they opt for the per diem plan, in which case it reduces the base, taxable pay by 13$ per mile and gives back only 11$ as untaxed per diem reimbursement. The missing 2$ are pocketed by defendant — the employees are told that the company takes the 2$ to offset “lost tax benefits to the company.” Decl. of Toby J. Marshall (Dkt. #72), Ex. 7 at DEF0000216. See also Id., Ex. 18 at DEF0002107 (“Per Diem wages are only 75% tax deductible for the company so the 2 cents helps to cover the company from losing tax money.”). Although the subtracting and adding of different amounts obscures the fact that a payroll deduction has been made, the jury could conclude that defendant has taken unauthorized deductions for its own benefit and has failed to openly and clearly record the deductions in violation of various state wage regulations.

E. Consumer Protection Act

One of the elements of a Consumer Protection Act (“CPA”) claim in Washington is that the unfair or deceptive act is causally connected to plaintiffs’ injury. Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wash.2d 778, 780, 719 P.2d 531 (1986). Plaintiffs allege that defendant advertised a per mile pay rate that was higher than that actually paid, that plaintiffs reviewed the advertisements and accepted positions with defendant in reliance thereon, and that they were damaged by the reduction in pay rate. Defendant asserts that, in fact, none of the named plaintiffs relied on the advertised pay rates when applying and that, if they did, any misstatements were corrected during orientation and before plaintiffs accepted their first driving assignment with defendant.

Taking the evidence in the light most favorable to plaintiffs, a reasonable factfinder could conclude that defendant’s representations regarding rate of pay were material and affected plaintiffs decision to submit at application. Both Bodily and Tena stated that they reviewed advertisements that included defendant’s per mile rate of pay and that they subsequently applied for a position with defendant. Neither plaintiff could remember, years later, the full extent of pay rate information contained in the advertisements, although Tena noted that you could make up to 41