Velasco v. HSS California, Inc.

Background

Alejandro Velasco filed a putative class action in state court against HSS California, Inc. He alleges that HSS failed to pay non-exempt employees all minimum and overtime wages, automatically deducted meal breaks that were not fully provided, failed to provide required meal and rest periods, issued inaccurate wage statements, failed to pay all wages due when employees left, failed to reimburse necessary cellphone expenses, and violated California's Unfair Competition Law. The complaint asserts eight claims.

HSS removed the case to federal court under the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d). CAFA provides federal jurisdiction over qualifying class actions when the proposed class has at least 100 members, there is minimal diversity between the parties, and the amount in controversy exceeds $5 million, excluding interest and costs. Velasco moved to remand, arguing that HSS had not provided credible support for its amount-in-controversy calculations.

Evidence and arguments

HSS initially relied on a declaration from Bryan Jones, President for HSS Security, LLC, based on his review of payroll records. The declaration identified at least 1,353 non-exempt California employees and 45,080 pay periods during the relevant period. HSS used assumptions about unpaid time, missed meal periods, waiting-time penalties, wage-statement penalties, unreimbursed cellphone expenses, and attorney's fees. Its calculations included $248,503 in alleged unpaid overtime, $331,338 in minimum-wage damages and liquidated damages, $1,998,028 in meal-period premiums, $2,561,328 in waiting-time penalties, $1,074,800 in wage-statement penalties, and $1,553,499 in attorney's fees.

In opposition to the motion, HSS submitted a declaration from Mark Stephens, Senior Vice President for the Tarian Group, LLC, HSS California's parent company. Based on business records, Stephens identified at least 1,704 non-exempt California employees, 20,546 processed paystubs, 1,140 employees who separated from employment, and 409,128 work shifts. HSS used these figures and additional assumptions to estimate unpaid wages, meal- and rest-period premiums, wage-statement and waiting-time penalties, cellphone expenses, and attorney's fees. The estimates varied depending on the assumed violation rates, including more conservative calculations for some categories.

Court's analysis

The court held that it could consider the declarations and the business-record data as summary-judgment-type evidence. Because Velasco challenged the amount in controversy, HSS had to prove by a preponderance of the evidence that the amount exceeded $5 million. The court explained that HSS could use reasonable assumptions and a chain of reasoning; it did not have to prove that Velasco or the class would actually recover those amounts.

The court found HSS's assumptions reasonable. These included six minutes of unpaid minimum-wage time per shift, three minutes of unpaid overtime per day, meal- and rest-period violation rates based on the allegations, the assumption that the alleged violations made wage statements defective, waiting-time calculations based on former employees, and attorney's fees calculated using a 25-percent benchmark. The court also considered HSS's more conservative estimates. It concluded that a conservative calculation of the amount in controversy exceeded CAFA's $5 million jurisdictional threshold.

Disposition

The court denied Velasco's motion to remand. The opinion did not decide whether HSS actually violated California wage-and-hour laws or whether the class should ultimately recover damages. The case therefore remained in federal court based on CAFA jurisdiction.