Vasquez v. Franklin Management Real Estate Fund, Inc.

Facts

The case arises from a single Labor Code violation with an outsized economic effect. Labor Code section 2802 requires an employer to “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.” (Vasquez, supra, 222 Cal.App.4th at p. 823, fn. 1, quoting Lab. Code, § 2802.) Under Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4th 554, 567–568, that duty extends to “automobile expenses actually and necessarily incurred in performing employment-related tasks.” (Vasquez, supra, at p. 823, fn. 1.)

Franklin Management employed Jorge L. Vasquez as a maintenance technician from May 2009 until August 2010, paying him $10 per hour for a 40-hour week. (Vasquez, supra, 222 Cal.App.4th at p. 823.) After his first month, his supervisors began directing him to drive his own truck on work-related errands — going to the hardware store, for instance, to buy items for apartments the company owned or managed. (Ibid.) Vasquez estimated he thereafter drove “a minimum of 30 miles per day” running such errands. (Ibid.) He told his supervisors “nearly every week that he could not afford to pay for the gasoline and vehicle maintenance, and he requested reimbursement.” (Ibid.) Despite the repeated requests, the supervisors “continued to assign him tasks that required many miles of driving and consistently informed him he would not be reimbursed.” (Ibid.)

By August 2010, Vasquez told a new supervisor he could not afford to maintain his vehicle because his money was going to gasoline for work errands; he said he could not “tolerate the work environment of only being paid $10.00 per hour, not being paid for gas and having to drive around town for work without being reimbursed for mileage.” (Vasquez, supra, 222 Cal.App.4th at p. 824.) When the company continued to refuse reimbursement, he “had ‘no choice but to resign.’” (Ibid.)

The first amended complaint quantified the squeeze. Vasquez alleged he “should have been reimbursed $330 per month” — 30 miles each workday at the standard 55-cents-per-mile rate — and that this “represented a significant percentage of his $1,600 monthly salary,” effectively reducing his $10 hourly wage to less than the minimum wage. (Vasquez, supra, 222 Cal.App.4th at p. 825.) The parties agreed the minimum wage at the time was $8 per hour. (Ibid., fn. 4.) In opposition to the second demurrer, Vasquez added that his daily tasks required him to drive from his Toluca Lake check-in point as far as Santa Monica, sometimes more than once a day. (Id. at pp. 825, 828.) The court later worked the arithmetic: at $80 a day in gross pay, minus $16.50 in owed mileage, his effective daily wage fell to $63.50 — about $7.94 an hour, below the $8 floor. (Id. at p. 828, fn. 8.)

Procedural history

Vasquez sued in November 2010, pleading a Labor Code section 2802 claim along with causes of action for constructive wrongful termination in violation of public policy and intentional infliction of emotional distress; a fourth, unfair-competition count was voluntarily dismissed. (Vasquez, supra, 222 Cal.App.4th at pp. 823–824 & fns. 1–2.) The trial court sustained the employer’s first demurrer with leave to amend as to constructive discharge and without leave as to IIED, finding the complaint alleged no “outrageous conduct.” (Id. at p. 824.)

The first amended complaint added the mileage and below-minimum-wage detail. (Vasquez, supra, 222 Cal.App.4th at p. 825.) On the renewed demurrer, the trial court ruled that “failing to pay mileage expenses of $15/day is not conduct that is so intolerable or aggravated that a reasonable person in the employee’s position would have felt no choice but to resign,” so the decision to quit was “not a forced or coerced decision.” (Ibid.) The court added — though the employer had not raised it — that no fundamental public policy was implicated, the failure to reimburse relating “solely to [appellant’s] interests and not to the benefit of the public at large.” (Id. at p. 825 & fn. 6.) It sustained the demurrer without leave to amend. After settling his mileage claim, Vasquez dismissed the remaining causes with prejudice and appealed. (Ibid.)

The Court of Appeal, Division Four, reversed and remanded in a unanimous opinion by Justice Manella. (Vasquez, supra, 222 Cal.App.4th at pp. 822–823, 833.) Filed December 3, 2013 as an unpublished decision, the opinion was ordered published December 31, 2013; the Supreme Court denied review on April 9, 2014. (Id. at p. 819 [reporter caption]; id. at p. 833.)

Issue

The court framed the question as “whether the facts alleged supported claims for constructive discharge in violation of public policy or intentional infliction of emotional distress, or could be amended based on factual contentions made by appellant to state such causes of action.” (Vasquez, supra, 222 Cal.App.4th at pp. 823–824.) That divides into three: (1) Can an unreimbursed-mileage scheme that effectively pushes a low-wage worker below the minimum wage state a constructive discharge — or is intolerability resolvable on demurrer? (2) Does such a wage deprivation implicate a “fundamental public policy” sufficient to sustain a tort claim for wrongful constructive discharge? (3) Can the same conduct support an IIED claim, or does workers’ compensation exclusivity bar it?

Holding

Reasoning

The demurrer standard sets a forgiving frame. Because the demurrer was sustained without leave to amend, the court first reviewed the complaint de novo “to determine whether [it] alleges facts sufficient to state a cause of action under any legal theory,” then asked whether the trial court abused its discretion in denying leave to amend — which it would find if “there is a reasonable probability that the complaint could have been amended to cure its defects.” (Vasquez, supra, 222 Cal.App.4th at p. 826.) Critically, the plaintiff may show that probability through “factual contentions made by appellant” on appeal, not only the four corners of the pleading. (Id. at pp. 823–824, 826.)

The constructive-discharge standard is objective — and ordinarily a jury question. Drawing on Turner, the court restated the elements: the employer must have “intentionally created or knowingly permitted working conditions that were so intolerable or aggravated at the time of the employee’s resignation that a reasonable employer would realize that a reasonable person in the employee’s position would be compelled to resign.” (Vasquez, supra, 222 Cal.App.4th at pp. 826–827, quoting Turner, supra, 7 Cal.4th at p. 1251.) An employee “may not simply ‘quit and sue’”; the resignation must be “coerced,” not “simply one rational option.” (Id. at p. 827, quoting Turner, supra, at p. 1246.) The standard is objective — “whether a reasonable person faced with the allegedly intolerable employer actions or conditions of employment would have no reasonable alternative except to quit” — and, decisively here, “‘[w]hether conditions were so intolerable as to justify a reasonable employee’s decision to resign is normally a question of fact.’” (Id. at p. 827, quoting Turner, supra, at p. 1248, and Valdez v. City of Los Angeles (1991) 231 Cal.App.3d 1043, 1056.)

The general rule cut against Vasquez — but his facts were not the typical case. The court forthrightly acknowledged the doctrine running the other way: “the existence of a legal violation within the workplace does not, standing alone, establish that the working conditions are intolerable,” and “[n]or do deprivations of salary or other economic benefits generally support a constructive discharge claim.” (Vasquez, supra, 222 Cal.App.4th at p. 828, citing Turner, supra, 7 Cal.4th at pp. 1247, 1254.) “Accordingly, in the typical case, an employer’s failure to reimburse an employee for expenses … would not create such intolerable working conditions that the employee would have no option but to resign.” (Ibid.) The pivot was the magnitude of the deprivation relative to a low wage: Vasquez alleged not merely a reimbursement violation, but that “the duties respondent assigned required such extensive driving that the reimbursement to which he was entitled represented a significant percentage of his already low salary.” (Id. at p. 828.)

The “untenable position” analysis. Forced “to divert so much of his salary to gasoline and vehicle maintenance, he was unable to pay basic living expenses,” and was “wearing out the very vehicle he needed to maintain his livelihood, either by retaining his employment … or finding another job.” (Vasquez, supra, 222 Cal.App.4th at p. 828.) “Had he continued, he would soon have found himself with no job and no vehicle.” (Ibid.) Having “repeatedly informed his supervisors of his dire situation,” he was met with repeated refusal by an employer that had “effectively passed on a portion of its normal operating expenses to a low wage worker.” (Id. at pp. 828–829.) The court found supportive reasoning in federal decisions distinguishing an ordinary pay cut from one that “leaves the employee with an unlivable wage and no choice but to resign.” (Id. at p. 829, fn. 9, citing, e.g., Lit v. Infinity Broadcasting Corp. (E.D.Pa. 2005) 423 F.Supp.2d 485, 490–491.) On those allegations, a reasonable trier of fact “could find” intolerability under Turner, so the demurrer was an abuse of discretion. (Id. at p. 829.)

The minimum wage supplies the fundamental public policy. A tortious-discharge claim requires a policy that is “‘firmly established,’” “‘fundamental,’” and “‘substantial,’” and “tethered to fundamental polices that are delineated in constitutional or statutory provisions.” (Vasquez, supra, 222 Cal.App.4th at p. 829, quoting Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 671, fn. 11, and Gantt v. Sentry Insurance (1992) 1 Cal.4th 1083, 1095.) The trial court had reasoned the reimbursement failure served only Vasquez’s private interest. The Court of Appeal reframed the claim around the minimum wage: “California has long regarded the timely payment of employee wage claims as indispensable to the public welfare,” because the failure to pay wages “injures not only the employee, but the public at large.” (Id. at pp. 829–830, quoting Smith v. Superior Court (2006) 39 Cal.4th 77, 82, and Pineda v. Bank of America, N.A. (2010) 50 Cal.4th 1389, 1400.) Following Gould v. Maryland Sound Industries, Inc. (1995) 31 Cal.App.4th 1137 and Phillips v. Gemini Moving Specialists (1998) 63 Cal.App.4th 563, which had recognized overtime and wage-protection policies as fundamental, the court held the minimum wage “at least as firmly established, fundamental, and substantial,” and concluded it “represents a fundamental policy for purposes of a claim for wrongful termination or constructive discharge in violation of public policy.” (Id. at pp. 830–832.)

Anticipating amendment. The court was careful that this theory had not been fully pleaded below; in the FAC, Vasquez “did not invoke the minimum wage statutes.” (Vasquez, supra, 222 Cal.App.4th at p. 825.) But on appeal he “contend[ed] he could amend the complaint to allege violations of Labor Code section 1194, subdivision (a)” — the private right of action for sub-minimum wages — and that suffices on the leave-to-amend prong. (Id. at pp. 827, 826.) The court thus reversed to permit amendment, expressly declining to reach the alternative unfair-competition public-policy basis. (Id. at p. 832 & fn. 10.)

The IIED claim fails on workers’ compensation exclusivity. Here the court agreed with the trial court, though on a ground of broader reach. After restating the elements of IIED — “outrageous conduct,” intent or reckless disregard, “severe or extreme emotional distress,” and causation — and the pleading rule that a plaintiff must allege the outrageous acts “with ‘great[] specificity,’” the court turned to the decisive bar. (Vasquez, supra, 222 Cal.App.4th at p. 832.) Vasquez relied on Cabesuela, Leibert, and Phillips for the proposition that a public-policy termination can ground an IIED claim, but those cases “all predate” Miklosy v. Regents of University of California (2008) 44 Cal.4th 876. (Id. at p. 832.) Under Miklosy, “‘severe emotional distress’ arising from ‘outrageous’ conduct that occurred ‘at the worksite, in the normal course of the employer-employee relationship’ is the type of injury that falls within the exclusive province of workers’ compensation,” even where the conduct could be called “‘manifestly unfair, outrageous, harassment, or intended to cause emotional disturbance.’” (Id. at pp. 832–833, quoting Miklosy, supra, at p. 902, and Singh v. Southland Stone, U.S.A., Inc. (2010) 186 Cal.App.4th 338, 366.) The trial court therefore “did not abuse its discretion” in sustaining the IIED demurrer without leave to amend. (Id. at p. 833.)

Significance

Vasquez is the rare published decision to locate the line between a non-actionable economic grievance and an intolerable working condition — and to put that line, in a close case, in front of a jury rather than resolving it on the pleadings. It does not overturn the settled rule that a bare wage or reimbursement violation does not by itself make conditions intolerable. (Vasquez, supra, 222 Cal.App.4th at p. 828.) Its contribution is the qualifier: when the deprivation is large enough relative to a low wage that it drops the employee below the statutory minimum and forces a choice between starving and surrendering the very tool of the trade, the question of intolerability becomes one of fact for trial. (Id. at pp. 828–829.) The decision thus extends the “unlivable wage” reasoning of out-of-state and federal authority into a published California holding, and it situates the case within the Turner line by treating intolerability as “normally a question of fact.” (Id. at p. 827.)

On public policy, Vasquez adds California’s minimum wage to the recognized roster of fundamental wage policies that can anchor a Tameny-style tort, alongside the overtime policy of Gould and the wage-protection policy of Phillips. (Vasquez, supra, 222 Cal.App.4th at pp. 830–832.) And on IIED, the opinion is a clean post-Miklosy illustration that the older line of cases permitting an emotional-distress claim to ride along with a wrongful-discharge theory has been displaced by workers’ compensation exclusivity for distress arising in the ordinary employment relationship. (Id. at pp. 832–833.)

Key quotes

“Although situations may exist where the employee’s decision to resign is unreasonable as a matter of law, ‘[w]hether conditions were so intolerable as to justify a reasonable employee’s decision to resign is normally a question of fact.’” (Vasquez, supra, 222 Cal.App.4th at p. 827.)

“Forced to divert so much of his salary to gasoline and vehicle maintenance, he was unable to pay basic living expenses. … Had he continued, he would soon have found himself with no job and no vehicle.” (Id. at p. 828.)

“California’s minimum wage law represents a fundamental policy for purposes of a claim for wrongful termination or constructive discharge in violation of public policy.” (Id. at p. 832.)

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Practice pointer

Open questions

The reversal is a pleadings ruling, not a merits judgment: the court held only that “a reasonable trier of fact could find” intolerability, expressly leaving for trial “[s]hould appellant present evidence establishing these facts” whether the conditions in fact compelled resignation. (Vasquez, supra, 222 Cal.App.4th at pp. 828–829.) Because the court rested the public-policy element on the minimum wage, it “need not consider appellant’s argument that the alleged violation of the unfair competition law … provided an alternate public policy basis,” leaving that theory unresolved. (Id. at p. 832, fn. 10.) The opinion also does not fix how large a wage deprivation must be, or how far below the minimum it must drive effective pay, before the “typical case” rule yields to a jury question — it decided only that this combination of a 30-percent-plus reimbursement shortfall, a sub-minimum effective wage, and the loss of an essential vehicle sufficed. (Id. at pp. 828–829 & fn. 8.) Finally, the court did not resolve whether any future amended pleading would survive a renewed demurrer; it held only that there was “a reasonable probability that the complaint could have been amended.” (Id. at p. 826.)