Aleksick v. 7-Eleven: Franchisor Not Liable for Wage and Hour Violations

In Patterson v. Domino's Pizza (6/27/12) --- Cal.App.4th --- (discussed here), Division Six of the Second District Court of Appeal (Justices Gilbert, Yegan, and Perren) held that a franshisor may be liable for a franchisee's alleged violations of the Fair Employment and Housing Act (FEHA).  

In Aleksick v. 7-Eleven (5/8/12) --- Cal.App.4th ---, Division One of the Fourth Appellate District (Justices McConnell, Huffman, and Nares) held that 7-Eleven is not liable for allegedly shorting its franchisees' employees of earned wages.   

Plaintiff Kimberly Aleksick worked for Michael Tucker, who owned franchises for two 7-Eleven stores.  Tucker's franchise agreement with 7-Eleven required him to use 7-Eleven's payroll services.  After her employment ended, Aleksick sued 7-Eleven, alleging that: 

7-Eleven's practice of converting hours worked from minutes to hundredths of an hour sometimes shorts employees of time and commensurate pay, and thus violates Labor Code wage statutes.  She focuses on the following elementary example:  20 minutes is one-third of an hour, and at an hourly rate of $12, pay should be $4.  When 7-Eleven converts the 20 minutes to 0.33, however, and multiplies that figure by $12, pay is $3.96. 

Slip op. at 1-2.  Aleksick alleged that 7-Eleven violated the unlawful and unfair prongs of the UCL.  The parties stipulated to class certification and made cross-motions for summary judgment / summary adjudication.  

As a side note, 7-Eleven's stipulation to class certification is very interesting.  As a result of that stipulation and the Court's decision, 7-Eleven now has a binding judgment against all class members, not just against Aleksick.  Had 7-Eleven moved for summary judgment against Aleksick alone, absent class members would have been free to bring subsequent actions alleging the same violations.  See Smith v. Bayer Corp., 564 U.S. ---, 131 S.Ct. 2368 (6/16/11) (discussed here); Bridgeford v. Pacific Health Corp. (2012) 202 Cal.App.4th 1034 (discussed here). 

The trial court (Imperial County Superior, Judge Jeffrey B. Jones) granted 7-Eleven's motion for summary judgment and denied Aleksick's motion for summary adjudication, holding that 7-Eleven's system was "inherently reasonable."  The Court did not address 7-Eleven's arguments that Aleksick failed to identify a statutory predicate for her UCL claim or that 7-Eleven is not the class members' employer.  Aleksick appealed, and the Court of Appeal affirmed. 

First, the Court held that Aleksick failed to identify a statutory predicate for her UCL claim, thus forfeiting the argument: 

Her complaint does not allege any statutory predicate for the UCL cause of action.  The complaint merely alleges 7-Eleven "has violated both California law and/or its own contractual promise, thereby depriving the class members of money earned by them."  This vague allegation did not notify 7-Eleven that in moving for summary judgment it was required to address Labor Code sections 204, subdivision (a), 223, 510, subdivision (a), 1182.12, and 1194, subdivision (a) [which Aleksick identified for the first time on appeal].  

Slip op. at 9-10.  

Second, the Court held that the "undisputed evidence shows 7-Eleven was not the class members' employer."  Slip op. at 10.  Relying on Martinez v. Combs (2010) 49 Cal.4th 35 (discussed here) and Futrell v. Payday California, Inc. (2010) 190 Cal.App.4th 1419 (discussed here), the Court held: 

7-Eleven exercised no control over Tucker's employees, including their hiring or firing, rate of pay, work hours and conditions; 7-Eleven did not "suffer or permit" the employees to work; and it did not engage them in work. 

Aleksick did not meet her burden of raising a material issue of fact on the employment issue.  Indeed, in supplemental briefing we requested, Aleksick concedes "it is undisputed that 7-Eleven is not the employer of the class members."

Slip op. at 17 (emphasis in original).  

Third, the Court held that Aleksick failed to raise a triable issue of fact on her claim that 7-Eleven violated the UCL's "unfair" prong.  Noting the uncertainty regarding the scope of that prong in consumer cases, the Court followed Gregory v. Albertson's, Inc. (2002) 104 Cal.App.4th 845, 854, which held: 

[Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163]  . . . may signal a narrower interpretation of the prohibition of unfair acts or practices in all unfair competition actions and provides reason for caution in relying on the broad language in earlier decisions that the court found to be 'too amorphous.'  Moreover, where a claim of an unfair act or practice is predicated on public policy, we read Cel-Tech to require that the public policy which is a predicate to the action must be 'tethered' to specific constitutional, statutory or regulatory provisions." 

Slip op. at 20-21.  

Aleksick argued that 7-Eleven had violated the public policy in favor of full and prompt payment of wages, but she cited only to cases in which employees sued their employers.  Because the Court held that7-Eleven could not be liable as the class members' employer, it held that these cases were inapposite, and Aleksick's claim failed.  

The Court did not reach the issue of whether an employer could be liable under the Labor Code wage statutes and the UCL for the conversion of any partial hour worked from minutes to hundredths of an hour. 

The opinion is available here.