Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-00142/USCOURTS-caed-2_04-cv-00142-1/pdf.json

Nature of Suit Code: 790
Nature of Suit: Other Labor Litigation
Cause of Action: 28:1441 Petition for Removal

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 1 Because oral argument will not be of material

assistance, the court orders the matter submitted on the briefs. 

E.D. Cal. Local Rule 78-230.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

KENNETH DRAKE,

NO. CIV. S-04-0142 FCD JFM

Plaintiff,

v. MEMORANDUM AND ORDER

LOWE’S COMPANIES, INC.,

Defendant.

__________________________/

----oo0oo----

This matter is before the court on motion by defendant,

Lowe’s Companies, Inc. (“Lowe’s”), for summary judgment pursuant

to Federal Rule of Civil Procedure 56(c).1

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 1 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2 Drake’s objection to this evidence is OVERRULED. The

evidence is material to explain the identity of the named

defendant and its relationship to the corporations for which

Drake worked, Lowe’s HIW, Inc. and Lowe’s Home Centers, Inc. 

Fed. R. Evid. 401. 

3 The court refers to Lowe’s Companies, Inc. and its

subsidiary corporations collectively as “Lowe’s”. References to

a subsidiary corporation refer to that subsidiary specifically.

4 Drake’s objection to the admissibility of Drake’s

employment application, employment contract, document regarding

Drake’s employment in California, and transfer acknowledgment,

Exhibits A, B, C and D respectively, attached to the Declaration

of Timothy Moore, on the ground that they lack foundation, is

OVERRULED. The declaration of Timothy Moore is sufficient to

support a finding that the exhibits are what they purport to be. 

Fed. R. Evid. 901. 

2

BACKGROUND

 Defendant, Lowe’s Companies, Inc., is the parent

corporation of several subsidiary corporations, including Lowe’s

HIW, Inc., that run and operate retail home improvement stores in

forty eight states.2,

3 (Def.’s Reply SUF (“SUF”) ¶ 1.) 

Employees who work in Lowe’s home improvement stores must sign

at-will employment agreements with Lowe’s. (SUF ¶ 2.) Lowe’s

written employment contract specifies that any modification

thereto must be in writing and signed by the President of

Lowe’s.4 (SUF ¶ 3.)

On August 22, 1994, plaintiff, Kenneth Drake (“Drake”), was

hired by Lowe’s to work at one of its retail stores in Indiana. 

(SUF ¶ 4.) Drake signed an at-will employment contract with

Lowe’s after he was hired, which specifically stated that Drake’s

employment was “for an indefinite term and shall be terminable at

the will of either party without notice and without cause. (SUF

¶¶ 5-6.) The written at-will employment contract was signed and

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 2 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5 The transfer acknowledgment, exhibit D to the Moore

declaration, indicates that Lowe’s requested Drake’s transfer

back to Indiana. However, as Drake does not dispute that he

requested the transfer, the court accepts this version of events. 

3

executed in Indiana. (SUF ¶ 7.) 

In 1999, Drake requested and received a transfer to

California, believing that there were greater promotional

opportunities there. Drake was transferred to a store in

Temecula, California, where he commenced work in October 1999. 

(SUF ¶ 8.) As part of the transfer to California, on October 19,

1999, Drake signed a document acknowledging his employment with

Lowe’s was at-will. (SUF ¶ 9.) Drake then applied for and

received a promotion to store manager at a Lowe’s store in

Vacaville, California, which position he assumed in March 2001. 

He managed the Vacaville store for approximately two years. 

Wanting to return home to Indiana, Drake applied for a store

manager opening at one of Lowe’s stores in Indiana.5 His

transfer was approved. (SUF ¶ 11.) As part of his transfer to

Indiana, Drake signed a transfer agreement acknowledging that his

employment relationship with Lowe’s was at-will. Drake’s last

day at the Vacaville store was January 31, 2003. (SUF ¶ 12.) 

Prior to his departure for Indiana, on February 1, 2003,

Drake returned to the Vacaville store and asked one of his former

subordinates, Ron Drago, who was the manager on duty, to pay him

$1,502.00 to cash out some of his accrued vacation time. Mr.

Drago complied and paid Drake $1,502.00 from the store safe. (SUF

¶ 16.) To credit Lowe’s for the cash he received, Drake changed

his January payroll records to reflect that he had taken vacation

on his regular days off that month. According to Drake, he took

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 3 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6 The evidence cited by Drake to dispute this evidence

does not create a triable issue. Drake states that he informed

the district manager, Mark Waller, of his concern that he would

forfeit vacation pay upon his transfer and requested his

assistance. Drake also states that neither Ms. Johnice nor Mr.

Walker provided assistance to him, despite his repeated efforts

to contact them. However, Drake admits that he did not inform

Mr. Walker of his intent to take a cash withdrawal for his

vacation time, and did not obtain his approval to do so. (Drake

Dep. at 88:3-6.) 

7 Drake’s objections that this policy is not the one in

place at the time Drake was terminated is OVERRULED. (Huie Supp.

Decl. ¶ 2.) Moreover, Drake’s legal arguments and analysis of the

document does not create a triable issue. 

8 Drake’s objection to this evidence is OVERRULED. The

evidence is not hearsay as it is introduced not to prove the

truth of the matter asserted, but to demonstrate that the

information was conveyed to Mr. Moore. Fed. R. Evid. 801(c). 

4

this action after being informed by the Region 8 Human Resources

Manager, Dee Dee Johnice, that he would forfeit any unused and

accrued vacation time when he transferred to Indiana. (Drake

Decl. ¶ 3.) Drake did not have authorization from his district

manager to make the cash withdrawal.6 (SUF ¶ 18.) 

Lowe’s vacation policy states that a California employee’s

accrued vacation time will transfer with the employee if they are

transferred to another state, though it appears that Drake was

not informed of this policy when he contacted Lowe’s human

resources department.7 (SUF ¶ 20; Drake Decl. ¶ 3.) 

On February 5, 2003, the same week Drake started working at

the Indiana store, Drake’s supervisor, Timothy Moore (“Moore”),

was informed about Drake’s unapproved cash withdrawal from the

safe at the Vacaville store.8 (SUF ¶¶ 21, 22.) On February 7,

2003, Moore interviewed Drake regarding the cash withdrawal. 

Drake admitted that he took the cash from the Vacaville store,

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 4 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9 The evidence Drake cites does not create a triable

issue as to this fact.

5

and explained that he did so to avoid losing his accrued

California vacation time.9 (SUF ¶ 23; Moore Dep. at 45:6-23,

exh. A to Dec. of Randal Barnum.) After consulting with

individuals from Lowe’s Human Resources department, Mr. Moore

determined that Drake should be terminated for taking the cash

withdrawal without approval from the Vacaville store. (SUF ¶

24.) 

Drake was terminated on February 7, 2003. (SUF ¶ 25.) That

day, which was a regular payday at Lowe’s, Drake was paid for all

the hours he worked in California since the last day in that pay

period ended on January 31, 2003. (SUF ¶ 31.) On March 12,

2003, Drake was paid for all accrued vacation time, without any

deduction for the $1,502.00 withdrawn from the Vacaville store. 

(SUF ¶ 24.) According to Lowe’s, it was relying on its Indiana

policy and the law of that state to distribute Drake’s final pay. 

(SUF ¶ 24.) 

Drake subsequently filed the instant complaint in Solano

County Superior Court, seeking damages for breach of implied-infact contract, breach of the covenant of good faith and fair

dealing, tortious discharge in violation of public policy, unfair

competition under California Business and Professions Code

section 17200, and waiting penalties under California Labor Code

section 203. (See First Amended Complaint (“FAC”), Exh. A to

Def.’s Notice of Removal, filed January 22, 2004.) Lowe’s

removed the action to this court on January 22, 2004. Lowe’s

then filed a motion to dismiss, which was denied by this court by 

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 5 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

order dated May 21, 2004. Lowe’s now seeks summary judgment of

all claims.

STANDARD

Summary judgment is appropriate when “the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with affidavits, if any, show that there is no genuine

issue as to any material fact and that the moving party is

entitled to a judgment as a matter of law.” Fed. R. Civ. P.

56(c). One of the principal purposes of the rule is to dispose

of factually unsupported claims or defenses. Celotex Corp. v.

Catrett, 477 U.S. 317, 325 (1986).

In considering a motion for summary judgment, the court must

examine all the evidence in the light most favorable to the

non-moving party. United States v. Diebold, Inc., 369 U.S. 654,

655 (1962). If the moving party does not bear the burden of

proof at trial, he or she may discharge his burden of showing

that no genuine issue of material fact remains by demonstrating

that “there is an absence of evidence to support the non-moving

party’s case.” Celotex, 477 U.S. at 325. Once the moving party

meets the requirements of Rule 56 by showing there is an absence

of evidence to support the non-moving party’s case, the burden

shifts to the party resisting the motion, who “must set forth

specific facts showing that there is a genuine issue for trial.” 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). 

Genuine factual issues must exist that “can be resolved only

by a finder of fact, because they may reasonably be resolved in

favor of either party.” Id. at 250. In judging evidence at the

summary judgment stage, the court does not make credibility

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 6 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10 Lowe’s submitted a document, signed by Drake on August

22, 1994, with a section entitled “Contract of Employment.” (Ex.

B to Moore Decl.) Lowe’s also submitted two documents, the dates

on which correspond to Drake’s transfer to California in 1999 and

(continued...)

7

determinations or weigh conflicting evidence. See T.W. Elec.

Serv., Inc. v. Pacific Elec. Contractors Ass’n, 809 F.2d 626,

630-31 (9th Cir. 1987) (citing Matsushita Elec. Indus. Co., Ltd.

v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). The evidence

presented by the parties must be admissible. Fed. R. Civ. P.

56(e). Conclusory, speculative testimony in affidavits and

moving papers is insufficient to raise genuine issues of fact and

defeat summary judgment. See Falls Riverway Realty, Inc. v. City

of Niagara Falls, 754 F.2d 49, 57 (2d Cir. 1985); Thornhill

Publ’g Co., Inc. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979).

ANALYSIS

I. Contract-Based Claims

Lowe’s seeks summary judgment of Drake’s First and Second

Claims, for breach of an implied-in-fact employment contract and

breach of the covenant of good faith and fair dealing. 

Specifically, Lowe’s contends that Indiana law applies to Drake’s

contract-based claims, under which the claims fail. 

Alternatively, Lowe’s contends that summary judgment is

appropriate even under California law. In response, Drake argues

that summary judgment is inappropriate under California law, but

omits any discussion of Indiana law.

The court’s analysis of the threshold conflict of law issue

is complicated by the parties’ dispute regarding what constitutes

the “contract”.10 Parties devote little time in their papers to

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 7 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10(...continued)

to Indiana in 2003, also signed by Drake, which contain language

regarding the at-will nature of Drake’s employment. (Exs. C and

D to Moore Decl.) It is unclear from parties papers, if the

subsequent documents are addenda to the original contract or

constitute separate and independent employment agreements. By

contrast, Drake appears to deny the existence an express written

contract, and argue instead that parties formed an implied-infact contract over the course of Drake’s eight and a half year

employment at Lowe’s. However, Drake also asserts, somewhat

contradictorily, that his employer at the Vacaville store was

“different” than his employer at the Indiana store, and that, he

terminated his employment when he transferred to Indiana and

began a new employment relationship with the Indiana Lowe’s

store. 

11 Lowe’s is correct that Drake’s contract claims fail

under Indiana law. See Orr v. Westminster Village North, 689

N.E. 2d 712, 717 (Ind. 1997); Keating v. Burton, 545 N.E. 2d 35

(Ind. Ct. App. 1989)(consideration required for enforceable job

security agreement based on oral statements). 

8

this rather tricky legal question. Fortunately, the court need

not determine which state’s law applies because, even applying

California law, as Drake requests, Drake cannot prevail.11 See

Anderson v. Savin, Corp., 206 Cal. App. 3d 356, 366

(1988)(finding no conflict of law where the outcome under either

state’s law would be the same).

B. Breach of Implied Contract

 California Labor Code section 2922 provides in relevant

part, “An employment, having no specified term, may be terminated

at the will of either party on notice to the other . . ..” This

statutory presumption may be superseded by a contract, express or

implied, limiting the employer’s right to discharge the employee. 

Foley v. Interactive Data Corp., 47 Cal. 3d 654, 679-80 (1988).

In determining whether parties entered into an implied-in-fact

employment security agreement, California courts evaluate a

variety of factors, including “the personnel policies or

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 8 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12 Arguably, Drake’s statement that he was told by “his

superiors” that he would have job security, is inadmissible

hearsay. Fed. R. Evid. 802. However, Lowe’s does not object to

the admission of this statement. 

9

practices of the employer, the employee’s longevity of service,

actions or communications by the employer reflecting assurances

of continued employment, and the practices of the industry in

which the employee is engaged.” Pugh v. See's Candies, Inc., 116

Cal. App. 3d 311, 327 (1981); Foley, 47 Cal. 3d at 680 (1988).

However, an at-will provision in an express written

agreement, signed by the employee, cannot be overcome by proof of

an implied contrary understanding. Halvorsen v. Aramark Uniform

Services, Inc., 65 Cal. App. 4th 1383, 1387-89 (1998). 

Drake contends that there is a triable issue regarding the

existence of an implied-in-fact contract. Specifically, Drake

points to the following evidence: his eight-and-a-half years of

continuous employment with Lowe’s, his promotions, salary

increases and merit pay raises, as well as representations by

“defendant” that he would have job security with defendant and

that Plaintiff would not be terminated except for good cause.”12

(FAC ¶ 15.) 

However, Drake’s argument ignores the undisputed evidence

that parties had an express at-will employment agreement. Lowe’s

submitted evidence that Drake signed an employment contract in

1994 which stated expressly that his employment was “for an

indefinite term and . . . terminable at the will of either party

without notice and without cause.” (Ex. B to Moore Decl.) 

Moreover, the two additional documents signed by Drake in 1999

and 2003 reaffirmed that his employment was “at will.” 

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 9 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

13 Drake erroneously argues that a fully integrated

employment agreement is required to establish at-will employment. 

Tot the contrary, an express at-will agreement, even if not fully

integrated, precludes the existence of an implied contract

requiring good cause for termination. Starzynski v. Capital

Public Radio, Inc., 88 Cal. App. 4th 33, 38 (2001). 

10

Specifically, the document signed October 18, 1999 provides:

II. EMPLOYMENT AT WILL - I UNDERSTAND THAT MY

EMPLOYMENT WITH LOWE’S HIW, INC. IS FOR AN INDEFINITE

PERIOD AND THAT I HAVE A RIGHT TO TERMINATE MY

EMPLOYMENT RELATIONSHIP FOR ANY REASON AT ANY TIME, AND

THAT LOWE’S HIW, INC. RESERVES THE RIGHT TO DO THE

SAME. THIS WILL ALSO CONFIRM THAT I UNDERSTAND THAT NO

EXPRESS OR IMPLIED PROMISE OR GUARANTEE WITH REGARD TO

THE DURATION OF AN EMPLOYEE’S EMPLOYMENT, WAGES, OR

BENEFITS, IS BINDING UPON LOWE’S HIW, INC. UNLESS MADE

IN WRITING AND DULY EXECUTED BY THE PRESIDENT OF LOWE’S

HIW, INC AND CLEARLY AND SPECIFICALLY IDENTIFIED AS AN

EMPLOYMENT CONTRACT OR AGREEMENT.

(Ex. C to Moore Decl.) Similarly, the document Drake signed on

January 16, 2003 states: 

Your employment relationship with Lowe’s is governed by

the “Employment At Will” doctrine. This policy cannot

be modified by any statements or omissions of

statements by any member of management or Company

representative, manuals, guides, employment documents

or Company materials provided in connection with your

employment, whether made pre or post offer unless

approved, in writing, by the President of Lowe’s. 

(Ex. D to Moore Decl.) 

“There cannot be a valid express contract and an implied

contract, each embracing the same subject, but requiring

different results.” Shapiro v. Wells Fargo Realty Advisors, 152

Cal. App. 3d 467, 482 (1984), disapproved on other grounds by

Foley, 47 Cal.3d at p. 688. The express term is controlling even

if it is not contained in a fully integrated employment

contract.13 Halvorsen v. Aramark Uniform Services, Inc., 65 Cal.

App. 4th at 1386 (citing Gerdlund v. Electronic Dispensers Int’l,

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 10 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

14 The court does not decide that Lowe’s lacked good cause

to terminate Drake, only that no good cause was required. 

11

190 Cal. App. 3d 263, 272 (1987)). Thus, the parties’ express

at-will agreement precludes the existence of an implied contract

requiring good cause for termination. 

C. Breach of Covenant of Good Faith and Fair Dealing

For the same reasons, Drake’s claim for breach of the 

covenant of good faith and fair dealing fails. In Slivinsky v.

Watkins-Johnson Co., 221 Cal. App. 3d 799, 806 (1990), the

California appellate court explained that, 

The covenant is designed to effectuate the intentions and

reasonable expectations of parties reflected by mutual

promises within the contract. Here the parties agreed that

their relationship was terminable at will. Therefore,

terminating an employee without good cause does not deprive

the employee of the benefits of the agreement.

Id. (internal citations omitted). The parties’ express

employment agreement provided that Drake could be terminated at

will. As a result, Drake’s termination “without good cause” did

not deprive him of the benefits of the agreement.14 

II. Tort and Statutory Claims

Drake’s Third through Fifth Claims allege violation of

California Labor Code sections 201 and 227.3, tortious discharge

in violation of public policy, and unfair business practices

under California Business and Professions Code section 17200. 

Lowe’s contends that, under Indiana law, all three claims fail. 

Alternatively, Lowe’s contends that summary judgment is

appropriate under California law because Lowe’s did not violate

California Labor Code sections 203 or 227.3. 

/////

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 11 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12

Drake responds that California law applies because his tort

and statutory claims are predicated not on Drake’s termination

from the Indiana store on February 7, 2003 – as he has heretofore

asserted – but on his “termination” from employment at Lowe’s

HIW, Inc. in California on January 31, 2003. Essentially, Drake

now contends that he resigned employment from Lowe’s HIW, Inc. in

California and initiated a new employment relationship with a

separate employer, Lowe’s Home Centers, Inc., at the store in

Indiana. Since he was “terminated” on January 31, Drake contends

that Lowe’s violated California Labor Code sections 201 and 227.3

by not paying him his wages and accrued vacation pay on that

date.

 The court rejects Drake’s eleventh-hour effort to rewrite

his complaint, which expressly states that his “termination”

occurred on February 7, 2003. (Compl. ¶ 28.) Moreover, this new

version of the facts directly contradicts Drake’s contention, in

his contract claims, that his termination from employment in

Indiana on February 7, 2003 violated an implied contract created

in California during his continuous eight-and-a-half years of

employment. (See Pl.’s Statement of Add’l Facts, incorporated in

Pl.’s Statement of Genuine Issues of Material Fact in Opp’n Summ.

J. at 12, ¶ 38.) Finally, Drake’s contention that he was

terminated on January 31, 2003 is unsupported by the evidence,

which clearly demonstrates that Drake “transferred” to the

Indiana store. Indeed, Drake admits that he was “transferred.” 

(SUF ¶ 11.) He signed a document entitled “Relocation from #1143

to #1135,” which characterizes Drake’s move to the Indiana store

as a “transfer” and discusses pay differences applicable to his

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 12 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

13

new assignment. (See Exh. D to Moore Dec.) The meager evidence

submitted by Drake, that the two stores kept separate payrolls

and issued different W-2 forms and tax statements is not

sufficient to support a jury finding that he was “terminated”

from Lowe’s on January 31, for purposes of triggering the Labor

Code’s obligation to pay all wages and accrued vacation time. 

See Matsushita, 475 U.S. at 586-87 (“Where the record taken as a

whole could not lead a rational trier of fact to find for the

nonmoving party, there is no ‘genuine issue for trial.’” 

The court now turns to the conflict of law issue.

A. Conflict of Law 

When determining which state’s substantive law is applicable

to a diversity case, federal courts use the rules of the forum

state. Shannon-Vail Five, Inc. v. Bunch, 270 F.3d 1207, 1210

(9th Cir. 2001). Since this case was removed from the Superior

Court of the State of California, in and for the County of

Solano, on grounds of diversity of citizenship, California

conflict of law rules apply in this case. Shannon-Vail Five,

Inc., 270 F.3d at 1210. 

 In the absence of an applicable statute, California uses a

three-part governmental interest test in choice of law cases. 

Id. at §§ 19:53, 19:56; Reich v. Purcell, 67 Cal.2d 551 (1967);

Arno v. Club Med Inc., 22 F.3d 1464, 1467 (9th Cir. 1994). Under

that test, the court should first determine whether the two

states’ laws actually differ. Arno, 22 F.3d at 1467. If so, the

court evaluates whether a true conflict exists by examining each

state’s interest in applying its law. Id. Finally, the court

compares the impairment to each state under the other’s rule of

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 13 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

14

law. Id.; McGhee v. Arabian American Oil Co., 871 F.2d 1412,

1422 (9th Cir. 1989) (citing Offshore Rental Co. v. Continental

Oil Co., 22 Cal.3d 157, 161-65 (1978)). 

 The court first determines whether there is a conflict

between California and Indiana laws. Drake’s Third through Fifth

claims are predicated on violation of California Labor Code

sections 201 and 227.3, which differ from Indiana law. Compare

Cal. Labor Code § 201 (employer must pay wages of terminated

employee on final date of employment) with Indiana Code § 22-2-9-

2 (employer must pay wages of terminated employee on regular pay

day for pay period in which separation occurred). Further, while

both California and Indiana recognize a public policy exception

to the doctrine of at-will employment, the scope of the exception

significantly differs between the two states. See Tameny v.

Atlantic Richfield Co., 27 Cal. 3d 167, 172 (1980); Orr v.

Westminster Village North, Inc., 689 N.E.2d 712, 718 (Ind. 1997). 

Indiana law recognizes only a limited exception to the doctrine

of at-will employment, such as discharge of an employee either

for filing a workmen’s compensation claim or for refusing to

commit an illegal act. Orr, 689 N.E.2d at 718; Coutee v.

Lafayette Neighbourhood Housing Services, Inc., 792 N.E.2d 907,

911 (Ind. Ct. App. 2003). California law, on the other hand,

recognizes a much broader range of public policy exceptions to

the doctrine of at-will employment based on state and federal law

or regulations. Green v. Ralee Eng. Co., 19 Cal. 4th 66, 79-80

(1998). 

Because the laws of California and Indiana differ, the court

must next examine each state’s interest in applying its law. 

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 14 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

15

Arno, 22 F.3d at 1467. At the time Drake was terminated from his

employment on February 7, 2003, he was working and earning wages

in Indiana, albeit for only seven days. It is unclear from the

facts whether Drake changed his residency from California to

Indiana, but, for purposes of this motion, the court accepts

Drake’s assertion that he was still a California resident. Thus,

Indiana has a legitimate interest in “reliably defining the

duties and scope of liability of an employer doing business

within its borders,” while California claims an interest in

providing compensation to its residents and in the prompt payment

of such compensation. See Arno, 22 F.3d at 1468; Gould v.

Maryland Sound Inds. Inc., 31 Cal. App. 4th 1137, 1147 (1995). 

California’s interest is strengthened by the fact that Drake

earned the vacation pay at issue as a wage earner in California.

Finally, the court must determine the impairment to each

state if its laws are not applied. If Indiana law is applied,

Drake will not be denied any compensation due him; thus, only

California’s interest in ensuring prompt payment would be

impaired. As Drake received all he was owed within 33 days of

his termination, California’s interest is minimally impaired. By

contrast, application of California law to the termination of

employees in Indiana would seriously impair Indiana’s interest in

reliably defining the duties and scope of liability of an

employer doing business within its borders. Indiana supervisors

would be obliged to ignore Indiana law and apply that of a

foreign jurisdiction whenever an employee transferred from

another state. This would undermine the uniformity of Indiana

laws relating to employee termination and final payment of wages

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 15 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

15 California Labor Code section 201 provides in relevant

part that, if an employer discharges an employee, the wages

earned and unpaid at the time of discharge are due and payable

immediately. 

16 California labor Code section 227.3 provides, in

relevant part that “ . . . whenever a contract of employment or

employer policy provides for paid vacations, and an employee is

terminated without having taken off his vested vacation time, all

vested vacation shall be paid to him as wages at his final rate

in accordance with such contract of employment or employer policy

respecting eligibility or time served . . ..”

16

and benefits. As a result, the court concludes that, under

California’s governmental interest test, Indiana law applies to

Drake’s Third through Fifth Claims.

A. Violation of California Labor Code section 203

Drake alleges that he is entitled to waiting time penalties

under California Labor Code section 203 because Lowe’s failed to

pay him his wages and accrued vacation time in violation of

California Labor Code sections 20115 and 227.3,16 on the date of

his termination, February 7, 2003. California Labor Code section

203 provides in relevant part:

If an employer willfully fails to pay . . . any wages

of an employee who is discharged or who quits, the

wages of the employee shall continue as a penalty from

the due date thereof at the same rate until paid or

until an action therefor is commenced; but the wages

shall not continue for more than 30 days. 

Id. (emphasis added). The parties have not identified, nor has

the court found, a comparable Indiana waiting time penalty

statute. 

/////

/////

/////

/////

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 16 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

17 Even under California law, summary judgment of Drake’s

Third Claim is appropriate because Drake failed to submit

evidence to support a jury conclusion that Lowe’s failure to pay

his wages on the date of his termination was wilful. In the

context of California Labor Code section 203, wilful means that

the employer intentionally failed or refused to perform an act

which was required to be done. Barnhill v. Robert Saunders &

Co., 125 Cal. App. 3d 1, 7 (1981). Here, the undisputed evidence

demonstrates that, when Drake was terminated, he was working in

Indiana, and that Lowe’s relied on its Indiana policy and the law

in that state to distribute Drake’s final compensation. (SUF ¶

32.) Drake has submitted no contrary evidence to support a jury

finding that Lowe’s payment of Drake’s accrued vacation time

after his last day of employment was anything other than good

faith reliance on Indiana law. See Road Sprinkler Fitters Local

Union No. 669 v. G & G Fire Sprinklers, Inc., 102 Cal. App. 4th

765, 783 (2002)(mistaken belief regarding whether wages are owed

may negate a finding of willfulness). 

18 Even under California law, Drake has failed to

establish a triable issue on his wrongful discharge claim. In

order to sustain a claim of wrongful discharge in violation of

fundamental public policy under California law, Drake must prove

that his dismissal violated a policy that is (1) fundamental, (2)

beneficial for the public, and (3) embodied in a statute or

constitutional provision. Turner v. Anheuser-Busch, Inc., 7 Cal.

(continued...)

17

To the contrary, Indiana permits an employer to pay an employee

their final wages at the next regularly schedule pay date. See

Indiana Code § 22-2-9-2. Thus, under Indiana law, Drake’s

waiting time penalty claim fails.17 

C. Tortious Discharge in Violation of Public Policy

 Drake alleges that his discharge violated California Labor

Code section 227.3 in that he was discharged for the purpose of

denying him vacation pay to which he was entitled. 

This claim does not fall within the narrow parameters of a

claim for tortious discharge under Indiana law. Such a claim

must be based on an employee’s discharge for filing a workmen’s

compensation claim or refusing to commit an illegal act. Orr,

689 N.E.2d at 718.18

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 17 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

18(...continued)

4th 1238, 1256 (1994) (citing Gantt v. Sentry Insurance, 1 Cal.

4th 1083, 1095 (1992)). Here, Drake cannot satisfy an essential

element of his wrongful discharge claim, violation of Labor Code

section 227.3, because the undisputed evidence establishes that

Drake was not deprived of any vacation time. To the contrary,

Lowe’s paid him in full for all unused, accrued vacation time,

including the $1,502.00 he had cashed out in California. Drake’s

argument, that he was “terminated because he exercised his

statutory right to be paid” by taking a cash payout from the

Vacaville store, is illogical. Drake has submitted no evidence

or legal support for the proposition that he had a right to cash

out his vacation time upon his transfer to Indiana. To the

contrary, it appears Drake’s vacation time transferred with him

to Indiana and was paid to him after his termination on February

7, 2003. (SUF ¶ 20.) Thus, his termination for taking a cash

withdrawal from the safe at the Vacaville store did not violate

public policy.

18

C. Unfair Competition Claim

Obviously, California’s unfair competition law is

inapplicable in Indiana. Moreover, it does not appear that

Indiana has any comparable statute. Thus, under Indiana law,

Drake’s unfair competition claim fails.

CONCLUSION

For the foregoing reasons, Lowe’s motion for summary

judgment is GRANTED. The clerk is directed to close this file.

IT IS SO ORDERED

Dated: July 22, 2005

/s/ Frank C. Damrell Jr. 

FRANK C. DAMRELL, Jr.

UNITED STATES DISTRICT JUDGE

Case 2:04-cv-00142-FCD-JFM Document 48 Filed 07/22/05 Page 18 of 18