CALIFORNIA CLASS ACTION LAW

In a wage and hour class action, California’s Sixth District Court of Appeal held that a genuine issue of material fact existed as to whether eight-week leave was a sabbatical or regular vacation precluded summary judgment in former employee’s class action against the former employer.  Paton v. Advanced Micro Devices, — Cal. Rptr. 3d —-, 2011 WL 3369346, No. H034618 (6th Dist. Aug. 5, 2011).

Background

Plaintiff Eric Paton sued defendant Advanced Micro Divices, Inc. on behalf of himself and a class of others, alleging that Defendant had failed to pay him for an eight-week sabbatical he earned but had not used when he retired. Id. *1 Salaried employees who served for seven years were eligible for an eight-week fully paid sabbatical.  Id. Plaintiff argued that the sabbatical was extra vacation and, pursuant to Labor Code section 227.3, the employer could not require an employee to forfeit vacation pay.  Id.  Plaintiff cited Suastez v. Plastic Dress-Up Co., 31 Cal. 3d 774 (1982), to support his claim that the sabbatical had vested over the seven years he had worked for defendant and he was entitled to the pay when he resigned.  Id.  Class members who had not worked for the full seven years or more were entitled to payment for the unused sabbatical in proportion to the time they had worked. Id.

The trial court granted defendant’s motion for summary adjudication, finding that the sabbatical program offered a true sabbatical. Id.

Discussion

The court first addressed the issue of what a “vacation” means under Section 227.3.  Id. at *6.  It noted that in Suastez, the California Supreme Court characterized vacation as deferred compensation, or a concurrently earned component of an employee’s wages. Id. Vacation is typically earned in proportion to the length of employment.  Id.  Because vacation is considered deferred compensation, the only requirement for vacation is the employee’s rendering services for the employer. Id. The Sixth District noted that the Suastez Court differentiated vacation from incentive compensation, such as cash bonuses or stock option plans, which are used to induce employees to serve efficiently and faithfully. Id. The material difference is that vacation vests simply by the employee working for his employer while incentive compensation requires that the employee meet certain threshold requirements to earn the compensation. Id.

In the instant case, the Court of Appeal also differentiated vacation from paid time off because paid time off is conditioned on the occurrence of a specific event, such as a federal holiday, or granted for a particular purpose, such as illness. Id. An employee’s right to paid time off vests when the reason for the leave arises and the employee is expected to use the leave for the identified purposes. Id. Vacation, on the other hand, can be used at any time for any purpose. Id.

Therefore, the definition of vacation is paid time off that accrues in proportion to the length of the employee’s service, is not conditioned upon the occurrence of any event or condition, and usually does not impose conditions upon the employee’s use of the time away from work. Id. *7.

Second, the court discussed the definition of “sabbatical” and defined “sabbaticals” as a conditional type of paid leave.  Id.  Sabbaticals are for a special purpose and conditional because the employee is expected to use their time in a certain identified purpose. Id. They also give the employee incentive to continue with the institution that allows them to grow professionally. Id. The court recognized that traditionally, the sabbatical is used in academic settings but could be applied to corporate settings as well. Id.

The court noted that in the corporate setting, sabbaticals are typically shorter and more frequent than the traditional academic sabbatical and do not require the employee to have a particular purpose or to account for his or her time while on leave. Id. The difficulty of determining whether a corporate sabbatical should be considered vacation arises when the sabbatical is granted based only on the length of service and is unconditional as to the use of the employee’s time. Id. *8. The court reasoned that while a sabbatical program like this has elements of a regular vacation, it could still be classified a legitimate sabbatical if the facts show that the leave is designed as an incentive for continued and improved performance by the most experienced employees and not merely as a reward for a prior period of service. Id.

Plaintiff urged the court to apply a federal district court opinion, Drumm v. Morningstar, Inc., 2009 U.S. Dist. LEXIS 108709 (N.D.Cal. Nov. 5, 2009), and a four factor test set forth in DLSE opinion letters.  Id.  The Court noted that it neither Drumm nor the DLSE test is binding on the court and articulated its own four factor test for identifying when a sabbatical program is not regular vacation.  Id. The four factors articulated by the Court were : (1) whether the leave is granted frequently or infrequently; (2) whether the length of the leave is adequate to achieve the employer’s purpose; (3) whether it is granted in addition to a regular vacation; and (4) whether the program incorporates some features to demonstrate that the employee is expected to return to work for the employer after the leave is over. Id.

Additionally, the court noted that other factors, such as the rank or classification of the employee to whom the sabbatical is offered, may be relevant so each case must be decided on its own facts. Id.

Holding

The court concluded that defendant did not meet its burden of showing that one or more of the elements of plaintiff’s wage claim could not be established or there was a complete defense to it. Id. The court found that evidence showed that the defendant’s sabbatical program had elements of a vacation: it was based on the employee’s length of service, allowed defendant to postpone a planned leave for business reasons, and the written policy did not impose any conditions on the time off. Id. *10. Employees did not have to account for the way they spent their time off.  Id.  While the defendant did produce evidence to support its claim that the leave was a legitimate sabbatical, it was not dispositive.  Id.  The court found that a jury could reach a reasonable decision that the policy was intended as an incentive to induce experienced employees to continue working for the program and increase their productivity or creativity when they did return to work; a jury could also reasonably decide that the leave was intended as an additional vacation for longer-term employees. Id. at *11.

The “crucial factual question” for the court was: “What was the true purpose of the program?”  Id. at *10.

Although the underlying facts, such as they are, are essentially undisputed, the ultimate fact to be determined is defendant’s purpose in establishing its sabbatical policy. That is the central fact in dispute and the record before us does not resolve it conclusively. While there are facts to support a finding that the sabbatical was intended as incentive to induce experienced employees to continue working for defendant and increase their productivity or creativity upon return to work, reasonable minds could find, instead, that the leave was actually intended as additional vacation for longer term employees.

Therefore, the court reversed and remanded, deciding that summary judgment was not appropriate.

Judges and Attorneys

Justice Eugene M. Premo wrote the opinion for the Court, with Presiding Justice Conrad L. Rushing and Justice Franklin D. Elia concurring.