A California appeals court affirmed a ruling against Alaska Airlines that found the company did not comply with pay stub requirements for employees under state law, but it reversed some $25 million in penalties previously awarded to flight attendants.
The California Court of Appeals for the Fourth Appellate District upheld a lower court decision Wednesday that said flight attendants are entitlted to pay stubs form Alaska Airlines under Section 26 of the state’s Private Attorneys General Act. Section 226 requires that employers provide workers with specific details on their pay stubs that shows how an employee’s wages were calculated, based on information such as the total number of hours worked, hourly rates and piece-rate units earned.
The three-judge panel reversed a decision from the Superior Court of California for San Diego County awarding $25 million to Julie Gunther and a group of fellow flight attendants over claims that the airline provided inadequate pay stubs and remanded the case back to the lower court to recalculate the penalties.
The panel argued that the trial court incorrectly calculated Gunther's award relying on a "heightened penalties" section under PAGA known as 226.3, which applies when an employer does not produce wage statements or keep a record of earnings.
The panel stated, "it is undisputed that Alaska [Airlines] provided wage statements to its flight attendants," and thus the trial court's calculation of penalties should not have relied on Section 226.3.
Gunther sued Alaska Airlines in 2017 on behalf of flight attendants who live in California but worked out of the airline's headquarters in Washington state. She alleged the company violated PAGA by not providing specific information on pay stubs about total hours worked, total trips for pay earned and the rate of pay per hour.
The trial court awarded Gunther $25 million in 2019 and ruled that the flight attendants should have access to pay stubs with detailed information about their wages.
In the recent decision, the panel referenced a Ninth Circuit decision in February known as Ward v. United Airlines Inc. that upheld a ruling from the California Supreme Court. The ruling said federal law does not prevent PAGA from applying to flight attendants who are considered interstate transportation workers.
Following the Ward decision, the airline argued that state law does not automatically apply wage statements issued to California-based flight attendants.
Alaska Airlines had argued before the Ward decision that the wage statement requirement did not apply to Gunther and other flight attendants because they "spend the vast majority of their time working in federal airspace and in other states for an out-of-state employer," according to the opinion.
Gunther argued that the trial court's ruling was consistent with the decision in Ward because flight attendants were based in California and "do not work primarily in any single state," according to the opinion. The panel agreed with Gunther, claiming that her argument satisfied the standard in Ward that a flight attendant's connections to a state would "trigger application of that state's laws."
"Gunther and the aggrieved employees anticipated and satisfied the Ward I test because substantial evidence showed they are California-based and do not perform the majority of their work in any one state," the panel said.
The appeals court did not reverse the trial court's award of more than $944,000 in attorney fees.
"We conclude that the trial court did not abuse its discretion in awarding Gunther attorney's fees for the time spent on her dismissed claims and affirm the attorney fees award," the panel said.
Shannon F. Nocon, counsel for Gunther and the flight attendants, stated that she was pleased with the appeals court's application of the Ward decision. "What the trial court did in this case is consistent with what the California Supreme Court held in Ward, and we were really happy to see that the appellate court agreed with us," Nocon said.
Shay Dvoretzky, counsel for Alaska Airlines, said in a statement following the decision that he was pleased with the appeals court's decision to set aside the $25 million award.
"The court of appeal properly recognized that plaintiff has not shown that Alaska Airlines is subject to heightened PAGA penalties, or to penalties for subsequent violations," Dvoretzky said. "We therefore expect that any award by the trial court on remand will be dramatically reduced to a small fraction of the previous $25 million judgment."