Court Opinion

ID: 9900901
Source: CourtListenerOpinion
Date Created: 2023-11-20 18:02:03.049655+00
Date Added: 2024-06-11T09:21:22.136462
License: Public Domain

Filed 11/20/23 San Diego California Lodge v. Div. of Labor Standards etc. CA4/1
                 NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                 DIVISION ONE

                                         STATE OF CALIFORNIA

SAN DIEGO CALIFORNIA LODGE                                           D080331
LLC,

         Plaintiff and Appellant,
                                                                     (Super. Ct. No.
         v.                                                          37-2020-00003229-CU-WM-
                                                                     CTL)
CALIFORNIA DIVISION OF LABOR
STANDARDS ENFORCEMENT,

         Defendant and Respondent.

         APPEAL from a judgment of the Superior Court of San Diego County,
Timothy B. Taylor, Judge. Affirmed.

         Higgs Fletcher & Mack, John Morris, Rachel M. Garrard and Steven
Brunolli; Douglas G. Nareau for Plaintiff and Appellant.
         Jessica Lynn Fry for Defendant and Respondent.
         Defendant and respondent Division of Labor Standards Enforcement
(DLSE) cited plaintiff and appellant San Diego California Lodge (California
Lodge) for Labor Code1 violations relating to its compensation of its hotel
employees. Following an investigation, DLSE ordered California Lodge to
pay assessments and penalties for the violations. After an unsuccessful
administrative appeal, California Lodge filed a petition for writ of
administrative mandamus under Code of Civil Procedure section 1094.5,
which the superior court denied.
      California Lodge contends: (1) As it paid its housekeepers at least the
minimum wage, all penalties and assessments must be reversed; 2) the
hearing officer inaccurately calculated the penalties and assessments because
he misapplied the statute of limitations; 3) DLSE did not exercise its broad
discretion in deciding whether to charge certain violations and what
penalties and assessments to impose; and (4) the hearing officer violated
California Lodge’s due process rights because after the hearing, he computed
final penalties and assessments based on his appointed independent auditor’s
appraisal, which was not subject to cross-examination. We affirm.
                FACTUAL AND PROCEDURAL SUMMARY
      In May 2018, DLSE mailed a letter to California Lodge formally
notifying it of commencement of investigation for possible Labor Code

1     Undesignated statutory references are to the Labor Code.
                                       2
violations.2 Subsequently, DLSE Deputy Labor Commissioner, Celina
Damian, directed an auditor to audit the wages of California Lodge’s
housekeepers and other employees.
      Following its investigation, DLSE in October 2018 cited California
Lodge for violation of minimum wage laws, overtime provisions, and itemized
wage statements for its housekeepers for the period from May 1, 2015 to
March 28, 2018. DLSE also ordered it to pay certain penalties and
assessments, including waiting time and liquidated damages. In February
2019, DLSE amended the citations to add penalties and assessments for
California Lodge’s failure to pay non-productive rate, and ordered it to pay
$218,550.56 in citation number WA 469620, plus $46,250 in citation number
PA 469621.
      California Lodge appealed the penalties and assessments to the Labor
Commissioner. Following a hearing, the hearing officer affirmed most of the
penalties and assessments in a comprehensive “findings and order.”

2      The notification stated: “This is to inform you that the State Labor
Commissioner’s Bureau of Field Enforcement has commenced an
investigation against [California Lodge] for potential violations of the Labor
Code, applicable wage order . . . or applicable local minimum wage or
overtime law, for the time period of 3 years before the date of this notice until
the conclusion of the investigation. Pursuant to . . . Section 90.6, any
applicable statute of limitations for determining the ‘period of time for which
wages, penalties, damages, or other amounts [which] may be assessed by the
Labor Commissioner’ will be tolled for a period of twelve months from the
date of this notice which is May 1, 2019. [sic] [¶] After expiration of this
twelve-month period, the statute of limitations for any of the potential
violations under investigation will resume running.”
                                        3
The Hearing Officer’s Factual Findings and Conclusions of Law
      California Lodge does not challenge the hearing officer’s factual
findings. It instead concedes his findings and order “includes an extensive
section . . . that summarizes the testimony of each of the witnesses. [¶]
California Lodge acknowledges all of that testimony, and its appeal does not
challenge any of the trial court’s [sic] specific findings of fact.” Accordingly,
we need not set forth the testimony of the different witnesses. Instead, we

summarize the hearing officer’s factual findings and legal conclusions.3
Waiting Time Penalties
      In addressing California Lodge’s claims regarding waiting time

penalties under section 203,4 and its contention it compensated its
housekeepers according to an incentive program, the hearing officer ruled:
“Here the facts indicate that the formula or payment plan was not fully
disclosed to employees, and not clearly reflected in the paystubs. [California
Lodge’s] argument that the workers did not receive piece-rate is not
persuasive.” The hearing officer added: “The itemized wage statement did
not reflect that each housekeeper received a base rate of pay and incentive pay.
The itemized wage statement reflected payment, as ROOM, for total rooms

3     The hearing officer listed DLSE’s witnesses as Deputy Damian, the
auditor, and a California Lodge housekeeper. The witnesses for California
Lodge were two housekeepers , California Lodge’s office manager and Juan
Garza, a former Deputy Labor Commissioner.

4     Section 203 provides: “If an employer willfully fails to pay, without
abatement or reduction, in accordance with [specified Labor Code sections]
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.”
                                         4
cleaned at the applicable room rate. [California Lodge] paid either piece-rate
or minimum wage to a housekeeper based on the daily reconciliation of rooms
cleaned. There was no calculation reflected on the itemized wage statements
that every minute worked was paid at a base rate, and then a separate
compensation for earnings above minimum wage or base rate.” (Italics
added.) The hearing officer concluded: “[California Lodge’s] argument that
housekeepers are not owed wages because they were paid a base rate plus
incentive, not piece-rate, is unsupported by evidence. . . . .[T]he evidence
supports a finding that [California Lodge] paid workers piece-rate. [It] failed
to pay for non-productive time, for rest periods pursuant to [section] 226.2,
and failed to pay the correct overtime premium as required by law. [Its]
argument is not supported by the evidence presented at the hearing, and
thus precludes a finding of a ‘good faith dispute.’ ”
      The hearing officer ruled California Lodge did not compensate the

housekeepers’ non-productive time and rest periods under section 226.25
“The evidence supports a finding that ten (10) minutes of non-productive time
for housekeepers filling carts was a conservative estimate and not incidental

5     Section 226.2 provides: “This section shall apply for employees who are
compensated on a piece-rate basis for any work performed during a pay
period. This section shall not be construed to limit or alter minimum wage or
overtime compensation requirements, or the obligation to compensate
employees for all hours worked under any other statute or local ordinance.
For the purposes of this section, ‘applicable minimum wage’ means the
highest of the federal, state, or local minimum wage that is applicable to the
employment, and ‘other nonproductive time’ means time under the
employer’s control, exclusive of rest and recovery periods, that is not directly
related to the activity being compensated on a piece-rate basis. [¶] (a) For
employees compensated on a piece-rate basis during a pay period, the
following shall apply for that pay period: [¶] (1) Employees shall be
compensated for rest and recovery periods and other nonproductive time
separate from any piece-rate compensation.”
                                        5
to the production of cleaning the rooms. The testimony of the witnesses
supported DLSE’s assumption that housekeepers routinely needed to fill
their carts. . . . The amount of time that a housekeeper spent walking to and
from the housekeeping room to gather supplies each day more than likely
exceeded ten (10) minutes per day. The filling of an empty cart took eight
and a half minutes, and that did not include the time spent walking to and
from the work area. Therefore, the evidence and testimony supports a
finding that housekeepers spent at least (10) minutes per day refilling the
carts and gathering other materials to perform their room cleaning duties.
[¶] Thus, on days where housekeepers earned piece-rate wages, [California
Lodge] failed to compensate housekeepers for the time spent filling carts or
making trips to the housekeeper room or laundry. This is supported by the
finding that [California Lodge] did not pay a base rate for all hours worked,
but paid piece-rate, which does not compensate time not producing, or time
spent not cleaning the rooms. [¶] On days where the housekeeper earned
minimum wage or the base rate, and [California Lodge] paid an hourly rate,
[it] compensated the housekeeper for non-productive time and rest periods.
However, on the days where housekeepers earned piece-rate, or per room
rates, [it] failed to compensate the housekeeper for non-productive time and
rest periods.”
Liquidated Damages
      The hearing officer affirmed DLSE’s imposition of liquidated damages
on California Lodge for its failure to pay the housekeepers overtime

                                       6
compensation under section 1194.2, subdivision (a),6 finding California Lodge
did not act in good faith and with objective reasonableness: “Piece-rate
workers must be compensated for the time not producing. The facts do not
support [California Lodge’s] assertion that these workers did not earn piece-
rate. [California Lodge’s] itemized wage statements do not include all hours
worked at a specific rate. The itemized wage statements indicate that each
housekeeper earned rates per rooms cleaned not an hourly rate plus incentives.
Housekeepers earned wages only when cleaning the room. When a
housekeeper spent time on other duties, or on a rest period, [California
Lodge] paid no wages. [It] invalidly and contrary to the holding of [Armenta
v. Osmose, Inc. (2005) 135 Cal.App.4th 314 (Armenta)] averaged the earnings
from time cleaning the room to compensate for rest periods and non-
producing time. Thus, [California Lodge’s] argument is not grounded in
objective reasonableness, as it is contrary to established case law. [¶]
[California Lodge] failed to establish that housekeepers earned minimum
wage for every hour worked. [It] failed to establish an affirmative defense
based in good faith and objective reasonableness.” (Italics added.)

6     Section 1194.2 provides for liquidated damages: “a) In any action
under [specified Labor Code sections] to recover wages because of the
payment of a wage less than the minimum wage fixed by an order of the
commission or by statute, an employee shall be entitled to recover liquidated
damages in an amount equal to the wages unlawfully unpaid and interest
thereon. . . . .[¶] (b) Notwithstanding subdivision (a), if the employer
demonstrates to the satisfaction of the court or the Labor Commissioner that
the act or omission giving rise to the action was in good faith and that the
employer had reasonable grounds for believing that the act or omission was
not a violation of any provision of the Labor Code relating to minimum wage,
or an order of the commission, the court or the Labor Commissioner may, as a
matter of discretion, refuse to award liquidated damages or award any
amount of liquidated damages not exceeding the amount specified in
subdivision (a).”
                                       7
Itemized Wage Statements
      The hearing officer addressed the claim of violation of itemized wage

statements in section 226.3,7 pointing out California Lodge “requested that
[DLSE] use discretion and dismiss the citation due to compliance with the
statute, or in the alternative due to inadvertence.” The hearing officer
rejected that claim: “The evidence supports a finding that [California Lodge]
failed to issue itemized wage statements that provided the gross wages
earned by each employee. There is no evidence that the failure to issue
accurate itemized wage statements was inadvertent. Additionally, [it] did
not provide any argument that the failure to issue itemized wage statements
in compliance with [section] 226 was inadvertent.”
Statute of Limitations
      The hearing officer applied a one-year statute of limitations to civil
penalties, concluding “DLSE conducted the audit for the civil penalty
assessment for [citation numbers] WA 469620 and PA 469621 for the period

May 2, 2017, through March 28, 2018.8 It applied a three-year statute of

7      Section 226.3 provides: “Any employer who violates subdivision (a) of
Section 226 shall be subject to a civil penalty in the amount of two hundred
fifty dollars ($250) per employee per violation in an initial citation and one
thousand dollars ($1,000) per employee for each violation in a subsequent
citation, for which the employer fails to provide the employee a wage
deduction statement or fails to keep the records required in subdivision (a) of
Section 226. The civil penalties provided for in this section are in addition to
any other penalty provided by law. In enforcing this section, the Labor
Commissioner shall take into consideration whether the violation was
inadvertent, and in his or her discretion, may decide not to penalize an
employer for a first violation when that violation was due to a clerical error or
inadvertent mistake.”

8     Code of Civil Procedure section 340, subdivision (a) provides that a one-
year statute of limitation applies to “[a]n action upon a statute for a penalty.”
                                        8
limitations to wages and damages, concluding the amended citation number

WA 469620 applied to violations from May 1, 2015, through March 31, 2018.9
      The hearing officer addressed California Lodge’s claim the statutory
tolling under section 90.6 “is inapplicable to the instant case due to
insufficient service of process of notice of statutory tolling [and]
that Government Code [section] 11500 et. seq. and California Code of Civil
Procedure [section] 1013 require some sort of proof that the mail has been
delivered or acknowledgement of some type of proof that the party being
served, was served.” The hearing officer pointed out California Lodge
submitted declarations from its accounting administrative assistant and its
agent for service of process, who stated they did not receive DLSE’s
notification of commencement of service.
      The hearing officer ruled that DLSE’s notice of investigation contained
the information required by section 90.6, and DLSE sent it by first class mail.
He also ruled that under Evidence Code section 641, the letter was presumed
to have been received in the ordinary course of mail. Finally, he ruled it was
immaterial whether California Lodge actually received the notification
correspondence because “[section] 90.6 does not contain any requirement that
notice be served in a particular manner. Additionally, there is no
requirement that the employer receive the notice in order for tolling of the
statute of limitations to be effective. There is no consequence to [California
Lodge] whether the notice was received or not. Therefore, the statutory
tolling pursuant to . . . [section] 90.6 is valid.”

9     Code of Civil Procedure section 338, subdivision (a) provides that a
three-year statute of limitation applies to “[a]n action upon a liability created
by statute, other than a penalty.”
                                          9
Minimum Wages
      In addressing minimum wages and overtime premium wages, the
hearing officer’s audit favored California Lodge: “DLSE incorrectly assessed
minimum wages due for employees earning minimum wage and failed to
credit [California Lodge] for paying all minimum wage due pursuant to the
local ordinance. [¶] [M]inimum wage assessments and associated penalties
based solely on the San Diego minimum wage increase are dismissed and are
reflected in the audit summary.”
      However, as to the other minimum wage requirements not based on
San Diego minimum wage increase, the hearing officer concluded: “Multiple
instances of [California Lodge’s] failure to pay minimum wage and overtime
wages when required are found in the payroll journals and the timecards.
Therefore, the findings of the audit based on the time records and payroll
records provided by [California Lodge] support the imposition of civil
penalties for failure to compensate all employees for minimum wage and
overtime premium wages, as required by law.”
The Hearing Officer’s Independent Audit and Ruling
      After the close of evidence, the hearing officer reviewed DLSE’s
amended audit, and “discovered additional issues and directed an
independent audit[, which he] relied upon to support the assessment of
wages, damages and penalties.” The hearing officer reduced the overall
amounts awarded against California Lodge to $195,844.35 as follows: for
citation number WA 469620, $98,844.35 in assessment for unpaid minimum
wages, overtime premium wages, waiting time penalties, and liquidated
damages; $15,800 in penalty assessment (§ 1197.1); $2,300 in penalty
assessment (§ 558, subd. (a)); and $36,150 in penalty assessment regarding

                                      10
itemized wage statement (§ 226, subd. (e)(1)). For citation number PA
469621, he imposed $42,750 in penalty assessment regarding itemized wage
statement (§ 226.3). He attached a copy of his audit summary to his findings
and conclusions.
Writ Proceedings
      California Lodge contended in its amended writ petition that in
calculating and assessing wages and penalties, DLSE and the hearing officer
violated its due process rights in several ways. DLSE failed to provide it
discovery regarding its calculation methodology or an opportunity to
effectively cross-examine or probe that methodology; DLSE failed to provide
it with Deputy Labor Commissioner Damian’s notes regarding her
investigation; Damian failed to discuss with her superiors, or apply, the
relevant case law regarding penalties and wages. California Lodge further
contended DLSE did not exercise its discretion in imposing the penalties;
DLSE relied on underground regulations that were unavailable to California
Lodge; DLSE’s investigative process is set up to “unleash untrained,
inadequately supervised employees on the public without adequate
safeguards . . . resulting in the denial of due process”; and insufficient
evidence supported the hearing officer’s findings, which also were

inconsistent with the applicable case law. (Some formatting omitted.)10
      The court denied the petition. It upheld the hearing officer’s ruling
regarding piece-rate wages, concluding he complied with the California
Supreme Court’s decision in Oman v. Delta Airlines, Inc. (2020) 9 Cal.5th

10    At one point during the proceedings below, the governing law was this
court’s opinion in Certified Tire & Service Centers Wage and Hour Cases
(2018) 28 Cal.App.5th 1. However, after the California Supreme Court
vacated that opinion, we decided Certified Tire & Service Centers Wage and
Hour Cases (2021) 66 Cal.App.5th 190, which was subsequently depublished
and no longer citable.
                                        11
762, 781. The court ruled: “[California Lodge] challenges the finding that it
paid piece-rate wages and engaged in unlawful wage borrowing. [It],
however, has not directed the court to any exhibit in the administrative
record establishing that it agreed to pay its employees by a standard other
than piece-rate. In fact, the court’s review of the record reveals no
employment agreement, employee handbook, or other source of contractually
promised compensation. . . . As such, [California Lodge] has failed to meet
its burden of demonstrating that the administrative record does not contain
substantial evidence to support the hearing officer’s finding that [California
Lodge] paid piece-rate wages. [Citation.] [¶] Moreover, the court finds that
the administrative record discloses a proper evidentiary basis to support the
hearing officer’s conclusion that [California Lodge] paid its housekeeping
employees per type of room cleaned, but failed to compensate them for
nonproductive time spent filling their carts.”
      The court ruled there was no due process violation. It pointed out that
to correct DLSE’s minimum wage assessments, the hearing officer properly
ordered a post-hearing audit that “actually reduced [California Lodge’s]
overall liability.” It also concluded sufficient evidence supported the hearing
officer’s decision regarding tolling of the statute of limitations and other
matters, as his ruling relied on detailed recitations of witness testimony and
several exhibits.
                                 DISCUSSION
        I. California Lodge’s Challenge to Penalties and Assessments
      California Lodge contends the hearing officer found it paid its
employees no less than the minimum wage for all hours worked, and there
were no unpaid wages; therefore all of the penalties assessed against it must
be reversed. It reaches that conclusion by mischaracterizing this statement

                                       12
in the hearing officer’s ruling: “When a housekeeper did not clean enough
rooms to earn a piece-rate wage above minimum wage for all hours worked,
[California Lodge] paid minimum wage to the housekeeper. However, the
fact that sometimes a housekeeper received minimum wage, fails to prove it
was not a piece rate system. This only supports the finding that if an
employee could not produce enough production through piece-rate earnings,
[California Lodge] paid those hours at minimum wage, to meet the minimum
wage obligation as required by law. However, days where the employee
produced enough through piece-rate earnings to exceed minimum wage, the
housekeeper received piece-rate wages.”
A. Standard of Review
      A superior court’s review of an agency’s adjudicatory administrative
decision under Code of Civil Procedure section 1094.5 is subject to two
possible standards depending on the nature of the rights involved. (Mann v.
Department of Motor Vehicles (1999) 76 Cal.App.4th 312, 320.) If the
administrative decision involved or substantially affected a “fundamental
vested right,” the superior court exercises its independent judgment upon the
evidence disclosed in a limited trial de novo in which the court must examine
the administrative record for errors of law and exercise its independent
judgment upon the evidence. (Bixby v. Pierno (1971) 4 Cal.3d 130, 143–144
(Bixby); Code Civ. Proc., § 1094.5, subd. (c).) The theory behind this kind of
review is that abrogation of a fundamental vested right “is too important to
the individual to relegate it to exclusive administrative extinction.” (Bixby,
supra, at p. 144.) Where no fundamental vested right is involved, the
superior court’s review is limited to examining the administrative record to
determine whether the adjudicatory decision and its findings are supported
by substantial evidence in light of the whole record. (Bixby, supra, 4 Cal.3d

                                       13
at pp. 143–144.) Substantial evidence must be “ ‘of ponderable legal
significance,’ ” which is reasonable in nature, credible and of solid value.
(Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627, 1633.)
      “Regardless of the nature of the right involved or the standard of
judicial review applied in the trial court, an appellate court reviewing the
superior court’s administrative mandamus decision always applies a
substantial evidence standard. [Citations.] But depending on whether the
trial court exercised independent judgment or applied the substantial
evidence test, the appellate court will review the record to determine whether
either the trial court’s judgment or the agency’s findings, respectively, are
supported by substantial evidence. [Citation.] If a fundamental vested right
was involved and the trial court therefore exercised independent judgment, it
is the trial court’s judgment that is the subject of appellate court review.
[Citations.] On the other hand, if the superior court properly applied
substantial evidence review because no fundamental vested right was
involved, then the appellate court’s function is identical to that of the trial
court. It reviews the administrative record to determine whether the
agency’s findings were supported by substantial evidence, resolving all
conflicts in the evidence and drawing all inferences in support of them.
[Citations.] [¶] If the administrative findings are supported by substantial
evidence, the next question is one of law—whether those findings support the
agency’s legal conclusions or its ultimate determination. [Citation.] If the
administrative record reveals the theory upon which the agency has arrived
at its ultimate decision, the decision should be upheld so long as the agency
found those facts that as a matter of law are essential to sustain the
decision.” (JKH Enterprises, Inc. v. Department of Industrial Relations (2006)
142 Cal.App.4th 1046, 1056–1059.)

                                        14
B. Applicable Law
      Employers in California may compensate non-exempt employees in a
variety of ways—by, inter alia, the time worked, tasks completed, pieces
produced, or sales made. (§ 200.) However, employers are required to pay at
least minimum wage for all hours worked. (§ 1197.) For employers paying by
piece-rate, this includes separately paying minimum wage for nonproductive
time. (§ 226.2, subd. (a)(1).)
      In Armenta, supra, 135 Cal.App.4th 314, the court held that employers
cannot comply with minimum wage obligations by averaging wages across
multiple pay periods; instead, “[t]he minimum wage standard applies to each
hour worked by [employees] for which they were not paid.” (Id. at p. 324.)
The court addressed a compensation plan that paid employees only for
“productive” time, and not for “nonproductive” time such as time spent
traveling between job sites. It explained that under California wage orders
requiring employers to compensate employees “for all hours worked,”
employers must pay employees for “all hours,” including nonproductive time,
“at the statutory or agreed rate and no part of this rate may be used as a
credit against a minimum wage obligation.” (Id. at p. 323, italics omitted.)
Thus, under California law, the minimum or contracted wage requirement
“applies to each hour worked by [employees] for which they [are] not paid.”
(Id. at p. 324.)
      In Bluford v. Safeway Inc. (2013) 216 Cal.App.4th 864, the court relied
on Armenta, supra, 135 Cal.App.4th 314. Bluford involved truck drivers who
sued their employer for, among other things, failing to provide paid rest
periods. (Bluford, supra, 216 Cal.App.4th at p. 868.) The employer paid the
drivers “based on mileage rates applied according to the number of miles
driven, the time when the trips were made, and the locations where the trips

                                      15
began and ended.” (Id. at p. 872.) The employer asserted it intended to pay
drivers for their rest periods and its compensation system purportedly
subsumed those payments into the mileage rates the employer negotiated in
the drivers’ collective bargaining agreement. (Id. at p. 871.) However, none
of the bases on which the employer paid its drivers directly compensated
them for rest periods. (Id. at p. 872.) The court found the employer’s
compensation system violated California law because the wage order
applicable in that case prohibited employers from “deduct[ing] wages for rest
periods.” (Id. at p. 871.) The court explained “[t]he wage order’s requirement
not to deduct wages for rest periods presumes the drivers are paid for their
rest periods.” (Ibid.) In the context of a piece-rate compensation plan like
the one used by the employer, this requirement means that employers must
separately compensate employees for rest periods. (Id. at p. 872.)
      In Vaquero v. Stoneledge Furniture LLC (2017) 9 Cal.App.5th 98, the
court concluded, “Piece-rate compensation plans do not directly account for
rest periods during which, like the nonproductive hours in Armenta,
employees cannot earn wages.” (Id. at p. 110.) The Vaquero court agreed
with Bluford that employers are required “to separately compensate
employees for rest periods if an employer’s compensation plan does not
already include a minimum hourly wage for such time.” (Ibid.)
      In Oman, supra, 9 Cal.5th at page 762, the California Supreme Court
cited the above line of cases, and stated, “[W]e agree with this consensus:
State law prohibits borrowing compensation contractually owed for one set of
hours or tasks to rectify compensation below the minimum wage for a second
set of hours or tasks, regardless of whether the average of paid and unpaid
(or underpaid) time exceeds the minimum wage. Even if that practice
nominally might be thought to satisfy the requirement to pay at least

                                      16
minimum wage for each hour worked, it does so only at the expense of
reneging on the employer’s contractual commitments, in violation of the
contract provisions of the Labor Code.” (Id. at p. 781.)
      The Oman court described as “wage borrowing” the forbidden practice
described in Armenta of employers “taking compensation contractually due
for one set of hours and spreading it over other, otherwise un- or
undercompensated, hours to satisfy the minimum wage.” (Oman, supra, 9
Cal.5th at p. 779.) It explained how courts assess a compensation plan for
compliance with the minimum wage laws: “Whatever the task or period
promised as a basis for compensation, however, an employer must pay no less
than the minimum wage for all hours worked. [Citations.] The employer
must satisfy this obligation while still keeping any promises it has made to
provide particular amounts of compensation for particular tasks or periods of
work. [Citations.] For all hours worked, employees are entitled to the
greater of the (1) amount guaranteed by contract for the specified task or
period, or (2) the amount guaranteed by the minimum wage. Whether a
particular compensation scheme complies with these [Labor Code] obligations
may be thought of as involving two separate inquiries. First, for each task or
period covered by the contract, is the employee paid at or above the minimum
wage? Second, are there other tasks or periods not covered by the contract,

                                       17
but within the definition of hours worked, for which at least the minimum

wage should have been paid?” (Oman, supra, 9 Cal.5th at p. 782.)11
Analysis
      California Lodge erroneously claims the hearing officer made “the
unchallenged finding that its housekeepers were paid at least minimum wage
for every hour worked.” It further claims that under Oman, it complied “with
the law and any penalties assessed against it for alleged wage violations
should be reversed.” The question we decide is whether substantial evidence
supports the hearing officer’s determination that California Lodge failed to
separately compensate the housekeepers for nonproductive time when they
were paid piece-rate.
.     In the first step of the Oman analysis, we inquire whether, for each
task in the employer’s contractual commitment to its employees, the
“employees are paid at least the minimum wage.” (Oman, supra, 9 Cal.5th at
p. 782.) Here, substantial evidence, in the form of itemized wage statements,
supports the hearing officer’s conclusion that California Lodge’s payment
plan was not clearly reflected in the paystubs. Moreover, the wage
statements support the hearing officer’s finding California Lodge “paid each
housekeeper an amount based on the total rooms cleaned at an applicable
rate per type of room cleaned.”

11     The Oman court also stated: “In Gonzalez [(2013) 215 Cal.App.4th 36],
the court understood the contract at issue to promise pay at a certain rate for
certain tasks completed. The minimum wage floor, which ‘supplement[ed]’
employee pay only when ‘necessary,’ did not alter the nature of that promise.”
(Oman, supra, 9 Cal.5th at p. 788.) The Oman court pointed out the
legislature, in section 226.2, subsequently “endorsed Gonzalez’s overarching
principles and codified for piece rate workers a statutory right to separate
pay, at no less the minimum wage, for otherwise uncompensated
nonproductive time and rest time.” (Oman, supra, 9 Cal.5th at p. 788, fn. 8.)
                                      18
      Contrary to California Lodge’s characterization the hearing officer
concluded California Lodge did not comply with the minimum wage laws on
days when the employee produced enough through piece-rate earnings to
exceed minimum wage, the housekeeper received piece rate wages.”
      . The second step of the Oman analysis requires us to ascertain
whether there are other tasks not covered by the contract within the
definition of hours worked, “for which at least the minimum wage should
have been paid[.]” (Oman, supra, 9 Cal.5th at p. 782.) The hearing officer
answered that question in the affirmative, and concluded: “The evidence
supports a finding that ten minutes of non-productive time for housekeepers
filling carts was a conservative estimate and not incidental to the production
of cleaning the rooms.” And as to that non-productive time, the hearing
officer found that “[o]n days where housekeepers earned piece-rate wages,
[California Lodge] failed to compensate housekeepers for the time spent

filling carts or making trips to the housekeeper room or laundry.”12
      We conclude that California Lodge misinterprets the hearing officer’s
ruling by only focusing on the portion of it favorable to its position under
Oman’s first step. Under Oman’s second step, California Lodge’s
compensation scheme for housekeepers involves impermissible wage
borrowing; that is, it amounts to “taking compensation contractually due for
one set of hours and spreading it over other, otherwise un- or
undercompensated, hours to satisfy the minimum wage.” (Oman, supra, 9
Cal.5th at p. 779.) Sufficient evidence showed California Lodge did not
comply with section 226.2’s requirement that it compensate the housekeepers

12   The hearing officer clarified that California Lodge “is not assessed any
minimum wage violations for non-productive time, or rest periods, for days
where housekeepers were paid an hourly rate.”

                                       19
for nonproductive time spent filling the carts. In effect, the hearing officer
correctly concluded that under Oman, “[California Lodge’s compensation]
practice nominally might be thought to satisfy the requirement to pay at
least minimum wage for each hour worked, it does so only at the expense of
reneging on the employer’s contractual commitments, in violation of the
contract protection provisions of the Labor Code.” (Oman, supra, 9 Cal.5th at
p. 781.) The hearing officer did not err in upholding DLSE’s penalties
imposed on California Lodge.
      California Lodge minimizes its failure to properly compensate its
housekeepers for nonproductive time, claiming that “evidence regarding
supposedly non-productive time was inapposite and ultimately irrelevant to
this case. That is so because there was overwhelming evidence that
California Lodge always had a clear, consistent, and legal payment
policy—clearly communicated to its employees and consistently abided in
practice—to always pay housekeepers at least minimum wage for all hours
worked, including the time housekeepers spent filling their carts.” It
supports that claim by referring to testimony from both a housekeeper and
its office manager. Contrary to California Lodge’s claim, as shown, under
Oman’s second step, its failure to compensate non-productive time was
critical to a finding it violated the labor laws. California Lodge fails to
acknowledge or dispute this factual finding and, under substantial evidence
review, it is an implied concession.
      Moreover, as the court ruled, “the hearing officer was entitled to
disbelieve” the testimony from California Lodge’s employees, and instead
“credit Ms. Damian’s testimony.” We need not expand on the matter because,
“where, as here, our review is limited to examining the whole administrative
record to determine if the [Labor Commissioner’s] findings and order are

                                        20
supported by substantial evidence, it is not our function to reweigh the
evidence or the particular factors cited by the [Labor Commissioner] in
support of [the] decision . . . . Once we conclude, as we have here, that the
[Labor Commissioner’s] findings are indeed supported by substantial
evidence, and that those findings in turn support the . . . legal conclusion or
ultimate determination, our analysis is at an end.” (JKH Enterprises, Inc. v.
Department of Industrial Relations, supra, 142 Cal.App.4th at p. 1066.)
                          II. DLSE’s Notice of Tolling
      California Lodge contends, “DLSE was obliged to serve its notice of
[commencement of] investigation either personally or by certified mail. It did
not do so, and the May 1, [2018] letter is therefore ineffective to toll the
statute of limitations.” (Some capitalization omitted.) It points out its two
employees attested it never received DLSE’s notification letter. Therefore, it
contends the statute of limitations for all civil penalties assessed is only one
year under Code of Civil Procedure section 340, and “the operative date for
calculation of the statute of limitations was not May 1, 2018, but October 24,
2018, when the DLSE first served California Lodge with its [w]age [c]itation.”
      California Lodge supports its contention that DLSE should have served
the notice of requirement personally or by certified mail by relying on various
statutes setting out such a requirement in other contexts (Code of Civ. Proc.,
§ 1013, subd. (a); Ed. Code, §§ 44936, 44941, 44949, 44955; Bus. & Prof. Code,
§ 7099.9) It also cites case law for the proposition that where a statute does
not prescribe the method of notice, the presumption is that personal service
applies. (Hoschler v. Sacramento City Unified School District (2007) 149
Cal.App.4th 248, 266.)
      DLSE responds that sufficient evidence showed DLSE mailed the
notification pursuant to section 90.6; and that statute, unlike the statutes

                                        21
California Lodge relies on, contains no provision mandating actual notice or a
prescribed manner of service, as no fundamental vested right is at issue here.
DLSE adds, “As opposed to the service of a citation—there is no action for the
employer to take for the statutory tolling period to take effect. Because no
service of process is required by . . . section 90.6, neither is actual notice.” It
concludes, “The notice of tolling involves no adjudicatory action, no perceived
deprivation that means due process is not required and neither is “service of
process.”
      We need not decide whether section 90.6 requires actual notice because
even assuming arguendo that it does, California Lodge has not shown how it
was prejudiced by the fact it did not learn about the May 1, 2018 notice of
commencement of the investigation and start of the statutory tolling period
until October 2018, which was approximately five months into the statute’s
one-year tolling period. As stated, the hearing officer specifically ruled
DLSE’s citations related to violations that occurred in the previous three-year
period between May 1, 2015, through March 31, 2018, and for civil penalties
for violations occurring in the one-year between May 2, 2017 and March 28,
2018. The tolling period here did not have any bearing on the penalties
imposed on California Lodge.
                       III. DLSE’s Exercise of Discretion
      California Lodge contends DLSE failed to comply with various Labor
Code provisions requiring it to exercise discretion when considering whether
to charge different violations. It contends that “notwithstanding [its] best
efforts to comply with the law and its cooperation with this investigation,
DLSE simply failed to exercise the discretion with which it was charged. [¶]
That was, itself, an abuse of discretion. The judgment should be reversed in
that respect and the case remanded to the Superior Court for reference back

                                         22
to the DLSE to reexamine the evidence and reassess damages in accordance
with the relatively minor nature of any actual infractions.”
      California Lodge specifically cites to section 226.3 regarding the
payment of wages, which states the Labor Commissioner “in his or her
discretion, may decide not to penalize an employer for a first violation when
that violation was due to a clerical error or inadvertent mistake.” It also cites
to section 1194.2, which permits the Labor Commissioner to, “as a matter of
discretion, refuse to award liquidated damages” “if the employer
demonstrates . . . that the act or omission giving rise to the action was in
good faith and that the employer had reasonable grounds for believing that
the act or omission was not a violation of any” Labor Code provision relating
to minimum wage or order of the commission.
      California Lodge relies on testimony from deputy commissioner
Damian and the DLSE auditor, who stated they did not exercise discretion in
determining the violations to charge or penalties to assess. It also relies on
Garza’s testimony about his experience with DLSE’s practice of routinely
exercising its discretion in that regard.
      Although California Lodge frames this contention as DLSE’s failure to
exercise its discretion, on appeal, we review for substantial evidence the
hearing officer’s findings and conclusions regarding California Lodge’s failure
to demonstrate its conduct warranted an exercise of discretion in its favor.
The hearing officer made his own evaluation of the record and concluded that
as to each violation, California Lodge had failed to show it acted out of
clerical error, inadvertence, or in good faith.
      As a general matter, to the extent California Lodge claims it “was
trying to comply with the law,” and made its “best faith efforts to comply with
the law,” another court rejected a similar line of argument in the context of a

                                        23
challenge to penalties under section 226.3: “The statute does not require the
Labor Commissioner or the court to ‘attempt to divine the employer’s
subjective belief about the law.’ ” (Heritage Residential Care, Inc. v. Division
of Labor Standards Enforcement (2011) 192 Cal.App.4th 75, 87.) “[T]he very
meaning of the word ‘inadvertent’ undercuts appellant's argument. Since the
word denotes the absence of deliberation or intent, logically, no particular
mental state is required. That conclusion is bolstered by the statute’s
companion phrase ‘clerical error.’ [Citation.] Like inadvertence, clerical
error denotes behavior that is accidental, not deliberate.” (Id. at p. 84.)
“ ‘The word “wilful” is used in different statutes with various shades of
meaning.’ [Citations.] In some Labor Code contexts, willfulness simply
denotes an employer’s failure to perform a required act. [Citations.] Even in
penal statutes, willfulness generally requires ‘only that the illegal act or
omission occur “intentionally,” without regard to motive or ignorance of the
act's prohibited character.’ ” (Ibid.)
      Section 226.3 provides for civil penalties for violations of section 226
regarding compensation for rest periods. It states that DLSE may exercise
its discretion and not penalize an employer when a first violation is due to
“clerical error or inadvertent mistake.” In the proceedings, California Lodge
argued it did not owe housekeepers wages for certain nonproductive periods
because it paid them a base rate plus incentive, and not by piece rate. The
hearing officer specifically concluded the housekeepers’ paystubs did not
support that conclusion, “thus precluding a finding of good faith dispute.” On
this record, California Lodge has not shown that it failed to pay those wages
because of clerical error or inadvertence. To the contrary, it postulated its
actions were justified under its incentive plan, for which no evidence was

                                         24
presented. We therefore agree with the hearing officer’s conclusion that
California Lodge has not shown it acted in good faith.
      The hearing officer concluded liquidated damages are mandatory under
section 1194.2, subdivision (a) unless the employer demonstrates it acted in
good faith. He concluded the exception was not met here, as California Lodge
violated established law set forth in Armenta. He specifically found that
“[California Lodge] failed to establish that housekeepers earned minimum
wage for every hour worked. [It] failed to establish an affirmative defense
based in good faith and objective reasonableness.” We conclude the hearing
officer’s ruling on this point is supported by substantial evidence.
      Similarly, in discussing waiting time penalties under section 203, the
hearing officer pointed out that under the applicable regulations, a willful
failure to pay wages occurs when an employer intentionally fails to pay wages
to an employee when they are due, but that a good faith dispute that any
wages are due will preclude imposition of waiting time penalties. He
specifically found California Lodge’s “argument that housekeepers are not
owed wages because they were paid a base rate plus incentive, not piece rate,
is unsupported by the evidence. The paystubs do not provide the hours
worked by the housekeepers to support the assertion that housekeepers
earned a base rate for all hours worked. . . . [California Lodge’s] argument is
not supported by the evidence presented at the hearing, and thus precludes a
finding of a ‘good faith dispute.’ ” Again, the evidence the hearing officer
adduced for his conclusion support a finding no basis existed for DLSE to
exercise discretion to not charge or assess penalties for waiting time
penalties.
      The hearing officer concluded regarding another of California Lodge’s
statutory violations: “There is no evidence that the failure to issue accurate

                                       25
itemized wage statements was inadvertent. Additionally, [California Lodge]
did not provide any argument that the failure to issue itemized wage
statements in compliance with [section] 226 was inadvertent.” Again,
California Lodge points to nothing in the record to dispute the hearing
officer’s finding.
             VI. The Hearing Officer Ordered an Independent Audit
      California Lodge contends the hearing officer denied it due process by
assessing “final penalties based on unknown input from an independent
auditor whose opinions, methodology, and calculations were never explained,
and were not shared with the parties or subject to rigorous cross-
examination.” It claims the hearing officer “did not explain what the
‘additional issues’ he discovered were, how he discerned them, what exactly
he instructed [the independent auditor] to do to address them, or what
evidence [the auditor] relied upon in creating the independent audit. That
was a blatant denial of due process that, by itself, warrants a reversal of the
judgment.”
      Here, as in another case this court decided, “the parties do not on
appeal identify the genesis of the awards under sections [of the different
Labor Code provisions and] we surmise the [hearing officer] entered those
amounts as a matter of law based on the factual determinations by the
[independent auditor] quantifying the number of meal and rest period
violations, the number of minimum wage violations, and the number of
inaccurate itemized wage statements provided by [California Lodge to
DLSE].” (Brewer v. Premier Golf Properties, LP (2008) 168 Cal.App.4th 1243,
1251, fn. 6.)
      To obtain a reversal of the judgment, California Lodge on appeal must
demonstrate how it was prejudiced by the ruling below. It has not done so.

                                       26
In fact, the hearing officer’s independent audit reduced California Lodge’s
total penalties and assessments. Further, the hearing officer attached its
amended audit to its ruling; therefore, if California Lodge takes issue with
any specific item in it, the onus is on it to show us how the hearing officer
erred. “We are not obligated to make arguments for [parties] and may and do
disregard conclusory arguments failing to disclose the reasoning by which
[the parties] reached the conclusions they ask us to adopt.” (KCSFV I, LLC v.
Florin County Water Dist. (2021) 64 Cal.App.5th 1015, 1031.)
                                DISPOSITION
      The judgment is affirmed.

                                                       O’ROURKE, Acting P. J.

WE CONCUR:

DO, J.

KELETY, J.

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