SAN FRANCISCO — A California appeals court recently reversed a trial court’s decision to award an employee damages for unpaid labor instead of issuing a judgement for breach of contract and violations of federal and state labor laws.

The suit stems from an employment contract between plaintiff Ming-Hsiang Kao and his former employer Joy Holiday, a travel company, according to a June 15 decision by the California First District Court of Appeal. 

The defendant allegedly hired Kao in 2009 to work in the United States under a H-1B work visa, live with the owners and eventually become a manager at the company, working at least 20 hours a week to make $2,500 per month.

In March 2009, Kao arrived in California on a tourist visa and started working for the defendant. He was given a salary with rent reduction but not placed on the payroll. Kao and the company allegedly understood that any time worked beyond 20 hours was personal. Kao claims that he worked at least 10 hours a day. 

Kao received his work visa in February 2010 and was put on payroll. However, rather than climb the company ladder, Kao had been demoted by 2011 and received a salary cut of $500. Within months he had been terminated.  

After being fired, Kao filed suit against Joy Holiday, alleging that his monthly salary of $2,000 to $2,500 was below federal and state minimum wage and overtime laws, and that he was entitled to the hourly wage listed on his work visa application.

The defendant argued that Kao was not an employee while his work visa was processing. The defendants also alleged that after he received his visa, he was “an administrative employee” who was exempt from minimum wage and overtime requirement.

During the trial, an accountant valued Kao’s “total compensation package” at $34,304 per year, or $2,858.67 per month. The accountant’s calculation, however, included a $2,500 monthly salary and the value of a company car, cell pone and meals.

The trial court ruled that Kao was a “non-employee ‘guest’” during the 11 months he worked at Joy Holiday before he was granted his visa. The court further held that his “total compensation package” after he received the visa was in compliance with minimum wage and overtime laws, The court added that a visa application is not a work contract, and, therefore, Kao was not entitled to the amount listed on the application.

The trial court, however, also decided that Kao was entitled to compensation for unpaid labor.

Relying on the doctrine of quantum meruit, which is often used to determine compensation when no contract exists or if there is a dispute over the amount due, the trial court awarded $58,284 to Kao for working 50 hours per week, instead of the 20 hours he had allegedly agreed to.

The defendant appealed, arguing that quantum meruit conflicts with the employment agreement. Kao also appealed the trial court’s decision to rule against his statutory wage claims.

The appeals court then reversed the trail court’s decision.

“Kao is entitled to wages and overtime pay for employment from March 2009 to May 2011…” the appeals court said in its opinion. “This determination negates the basis for the court‟s award of quantum meruit, and that award therefore must be vacated.”

The appeals court sent the case back to the trial court for further proceedings in order to determine “unpaid wages and overtime pay, damages for failing to provide itemized wage statements, waiting time penalties, pre-judgment interest, costs of suit and reasonable attorney fees,” according to the decision. 

“We conclude that Kao is entitled to compensation under the wage statutes, making an equitable remedy unnecessary,” the appeals court said in the decision. “We shall reverse the judgment and remand for a calculation of statutory damages.”

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