PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 633 West Fifth Street, Suite 4400 Los Angeles, California 90071
MEMORANDUM
TO: Priya Nandakumar, General Counsel, Vantage Mobility Systems Corp.
FROM: Renata Vasquez, Responsible Partner, Labor & Employment Practice Group
DATE: August 18, 2025
RE: Preliminary Case Assessment — Gloria Reyes, individually and on behalf of all others similarly situated, and on behalf of the State of California v. Vantage Mobility Systems Corp., Case No. CIVSB-2025-04781, Superior Court of California, County of San Bernardino
C&H MATTER NO.: 1007-00004
PRIVILEGE NOTICE: This memorandum is a privileged and confidential attorney-client communication prepared for the sole purpose of providing legal advice to Vantage Mobility Systems Corp. It also constitutes attorney work product prepared in anticipation of litigation within the meaning of California Code of Civil Procedure § 2018.030 and Federal Rule of Civil Procedure 26(b)(3). This memorandum reflects the mental impressions, conclusions, opinions, and legal theories of counsel. It is not intended for disclosure to any third party without the prior written approval of Calderwood & Harkness LLP. Inadvertent disclosure does not constitute a waiver of any applicable privilege or protection. If you have received this memorandum in error, please notify Calderwood & Harkness LLP immediately and destroy all copies.
Right-click to update Table of Contents
I. EXECUTIVE SUMMARY
Calderwood & Harkness LLP ("C&H" or "the Firm") has been engaged to defend Vantage Mobility Systems Corp. ("Vantage," "VMS," or "the Company") in a putative wage-and-hour class action and representative action under the Private Attorneys General Act ("PAGA") filed on August 1, 2025, in the Superior Court of California, County of San Bernardino. The matter is captioned Gloria Reyes, individually and on behalf of all others similarly situated, and on behalf of the State of California v. Vantage Mobility Systems Corp., Case No. CIVSB-2025-04781.
The named plaintiff, Gloria Reyes, is a former Production Associate assigned to Trim Line B at Vantage's Fontana, California manufacturing facility (the "Fontana Plant"), located at 11780 Cherry Avenue, Fontana, California 92337. Ms. Reyes alleges that Vantage systematically failed to provide compliant meal and rest break periods to its non-exempt hourly production workforce. The putative class encompasses approximately 1,450 current non-exempt hourly employees and approximately 2,100 former employees who worked at the Fontana Plant during the proposed four-year class period beginning August 4, 2021, for a total of approximately 3,550 putative class members.
The complaint was filed by Nakamura Lozano & Pratt LLP, a well-regarded plaintiff-side employment class action firm based in Los Angeles, with lead attorney Victor Lozano and associate Michelle Tran handling the matter. The complaint asserts seven causes of action: (1) meal period violations under California Labor Code §§ 226.7 and 512; (2) rest period violations under California Labor Code § 226.7; (3) unpaid wages under California Labor Code §§ 204 and 1194; (4) inaccurate wage statements under California Labor Code § 226; (5) waiting time penalties under California Labor Code § 203; (6) unfair business practices under the Unfair Competition Law ("UCL"), California Business & Professions Code § 17200 et seq.; and (7) civil penalties under PAGA, California Labor Code § 2698 et seq.
The central liability driver in this case is Vantage's automatic 30-minute meal period deduction in the ApexTime 6.2 timekeeping system, which was configured to automatically deduct 30 minutes from an employee's recorded hours for a meal period if the employee did not clock out and back in for the break. This auto-deduction feature was in effect from January 2020 through March 15, 2024, when it was deactivated following an internal compliance audit. The complaint also challenges Vantage's time-rounding policy, which rounds clock-in and clock-out punches to the nearest 6-minute (0.1-hour) increment.
Based on our preliminary analysis, the maximum theoretical aggregate exposure in this matter is approximately $65 million. However, applying appropriate discounts for certification risk, merits defenses, individualized issues, statutory caps, and overlap among damages categories, we estimate a realistic settlement range of $8.5 million to $18.7 million, with a midpoint of approximately $13.6 million. This range is sensitive to several variables, most significantly the outcome of class certification proceedings and the degree to which the auto-deduction policy is treated as establishing a class-wide violation.
This memorandum provides a comprehensive preliminary assessment of each cause of action, a detailed exposure analysis, an evaluation of class certification risks and defenses, identification and discussion of affirmative defenses, and preliminary strategic recommendations for the defense of this matter. A separate removal analysis memorandum and insurance coverage analysis memorandum will follow.
II. BACKGROUND
A. The Client
Vantage Mobility Systems Corp. is a Delaware corporation registered to do business in California and Michigan. The Company is headquartered at 4200 Industrial Parkway, Auburn Hills, Michigan 48326. Vantage operates in the automotive manufacturing industry, specializing in specialty vehicle modifications, including wheelchair-accessible van conversions and fleet vehicle upfitting for commercial and government customers.
Vantage is a wholly owned portfolio company of Ashgrove Equity Partners Industrial Partners, LP ("Ashgrove Equity Partners"), a Michigan-based private equity fund. Ashgrove Equity Partners acquired VMS in 2019 for approximately $510 million. The key Ashgrove Equity Partners principals involved in VMS oversight include Managing Partner Douglas Fielding and Operating Partner / Board Representative Catherine Hsu.
For the fiscal year ended December 31, 2024, Vantage reported annual revenue of approximately $640 million. The Fontana Plant, which is the sole facility at issue in this litigation, accounts for approximately $185 million in annual revenue, or approximately 28.9% of the Company's total revenue. The Fontana Plant is one of Vantage's primary production facilities and is critical to the Company's West Coast operations and its ability to serve customers in the western United States.
Key personnel relevant to this matter include:
• Priya Nandakumar, General Counsel, Vantage Mobility Systems Corp.
• Sandra Olsen, Vice President of Human Resources, Vantage Mobility Systems Corp.
• Marcus Gutierrez, Plant Manager, Fontana Plant.
B. The Fontana Plant Workforce
The Fontana Plant is located at 11780 Cherry Avenue, Fontana, California 92337. It is a large-scale manufacturing facility that operates on two production shifts:
• First Shift: 5:00 AM – 1:30 PM, with a 30-minute unpaid meal period scheduled at 9:00 AM.
• Second Shift: 2:00 PM – 10:30 PM, with a 30-minute unpaid meal period scheduled at 6:00 PM.
The facility operates six production lines: Body Line A, Body Line B, Trim Line A, Trim Line B, Paint, and Final Assembly/QC. Each production line has its own supervisory structure, workflow, and production cadence.
During the proposed class period, the Fontana Plant employed approximately 1,450 non-exempt hourly production employees at any given time, along with approximately 120 exempt salaried and management employees. The non-exempt hourly employees — the population at issue in this litigation — perform range manufacturing tasks including vehicle disassembly, body modification, trim installation, painting, reassembly, and quality control inspection.
The Fontana Plant has experienced a relatively high annual turnover rate of approximately 38% during the class period, which is consistent with industry norms for manufacturing facilities in the Inland Empire region. As a result of this turnover, the total number of unique individuals employed at the Fontana Plant in non-exempt hourly positions during the four-year class period is approximately 3,550. This figure encompasses both current employees (approximately 1,450) and former employees (approximately 2,100) and represents the approximate scope of the putative class.
Significantly, the Fontana Plant frequently operates overtime and surge production shifts, particularly during periods of elevated customer demand. During surge periods, shifts are commonly extended to 12 hours: the first shift extends from 5:00 AM to 5:30 PM, and the second shift extends from 2:00 PM to 2:30 AM. Under California law, shifts exceeding 10 hours trigger a requirement for a second 30-minute meal period (absent a valid waiver), and shifts of this length entitle employees to three paid 10-minute rest breaks. The frequency and duration of surge production periods are significant factors in the liability analysis, particularly for claims relating to second meal periods and third rest breaks.
C. The Named Plaintiff
The named plaintiff, Gloria Reyes, is a former Production Associate who was assigned to Trim Line B on the second shift (2:00 PM – 10:30 PM) at the Fontana Plant. Ms. Reyes was employed by Vantage from March 12, 2021 through January 19, 2025, a period of approximately three years and ten months. At the time of her separation from employment, her hourly wage was $22.75 per hour. Ms. Reyes is a resident of Rancho Cucamonga, California.
In her complaint, Ms. Reyes alleges that she was routinely required to remain at her workstation during scheduled meal periods due to production quotas and line speed requirements. She further alleges that her rest breaks were shortened or denied entirely during surge production periods, and that supervisors on Trim Line B pressured employees to return to the production line before the full 10-minute rest break had elapsed. Ms. Reyes alleges that the ApexTime 6.2 system automatically deducted 30 minutes from her timesheets for meal periods regardless of whether she actually received an off-duty, uninterrupted meal break, resulting in uncompensated work time.
Ms. Reyes's employment history — limited to a single production line (Trim Line B) and a single shift (second shift) — presents potential typicality and adequacy vulnerabilities that we will exploit in opposing class certification, as discussed in greater detail in Section VII below.
D. Plaintiff's Counsel
The complaint was filed by Nakamura Lozano & Pratt LLP, located at 350 South Grand Avenue, Suite 2800, Los Angeles, California 90071. The lead attorney on the matter is Victor Lozano, a named partner at the firm, with associate Michelle Tran serving as co-counsel.
Nakamura Lozano & Pratt is a prominent California plaintiff-side employment class action firm with a well-established track record of litigating and settling meal-and-rest-break class actions against large manufacturing and logistics companies. The firm has obtained multiple eight-figure settlements in comparable cases, including reported settlements in excess of $20 million in cases involving automatic meal period deductions in manufacturing settings. Based on the firm's reputation and prior litigation history, we anticipate aggressive and well-resourced discovery practices, an early motion for class certification (likely in Q1 2026), and high initial settlement demands. Plaintiff's counsel's familiarity with the applicable law and their experience in obtaining class certification in similar cases should not be underestimated.
E. Procedural History
The procedural history of this matter is as follows:
• May 22, 2025: Plaintiff's counsel served a PAGA notice on the California Labor and Workforce Development Agency ("LWDA") (Notice No. LWDA-CM-2025-831447) and on Vantage, as required by California Labor Code § 2699.3(a). The notice identified the alleged Labor Code violations and stated plaintiff's intent to bring a PAGA representative action.
• July 26, 2025: The LWDA's 65-day investigation/cure period expired without the agency commencing an investigation or otherwise responding to the PAGA notice, thereby exhausting the administrative prerequisite for filing a PAGA claim. See Cal. Lab. Code § 2699.3(a)(2)(A).
• August 1, 2025: The complaint was filed in the Superior Court of California, County of San Bernardino, and assigned Case No. CIVSB-2025-04781.
• August 4, 2025: Calderwood & Harkness LLP opened this matter and commenced a preliminary review of the complaint and available client records.
• August 5, 2025: A comprehensive litigation hold notice was issued to Vantage through Priya Nandakumar, General Counsel, with instructions for distribution to Sandra Olsen (VP of Human Resources) and Marcus Gutierrez (Fontana Plant Manager), as well as to all IT and records management personnel responsible for the preservation of electronic and paper records relevant to the claims. The litigation hold is discussed further in Section IX.B below.
• August 12, 2025: Vantage was served with the summons and complaint through its registered agent for service of process, CT Agents, Inc., at 818 West Seventh Street, Suite 930, Sacramento, California 95814.
• September 11, 2025: Responsive pleading deadline (30 days from date of service). C&H intends to file a demurrer and motion to strike, as well as a verified answer with affirmative defenses, on or before this date. See Section XII.A below.
• Late October 2025 (TBD): Anticipated initial Case Management Conference, at which the court will set a discovery schedule, class certification briefing schedule, and trial date.
• Q1 2026 (TBD): Anticipated filing of plaintiff's motion for class certification.
F. Proposed Class Definition
The complaint proposes the following class definition:
"All current and former non-exempt hourly employees of Vantage Mobility Systems Corp. who worked at the Fontana Plant at any time from August 4, 2021 through the date of trial."
The estimated class size, based on Vantage's HR and payroll records, is approximately 3,550 putative members, consisting of approximately 1,450 current employees and approximately 2,100 former employees who were employed at the Fontana Plant in non-exempt hourly positions at some point during the proposed class period.
The proposed class period commences on August 4, 2021, which corresponds to the four-year statute of limitations applicable to the UCL claim (California Business & Professions Code § 17208), running backward from the August 1, 2025 filing date. For direct Labor Code claims, the applicable statute of limitations is three years (California Code of Civil Procedure § 338(a)), which would narrow the class period to August 1, 2022 forward. For PAGA penalties, the applicable lookback period is one year from the date of the PAGA notice, i.e., May 22, 2024 forward. These varying limitations periods create overlapping but distinct sub-classes, which will be relevant to both the exposure analysis and the class certification strategy.
III. CLAIM-BY-CLAIM ASSESSMENT
A. First Cause of Action: Meal Period Violations (Cal. Lab. Code §§ 226.7, 512)
1. Statutory Framework
California Labor Code § 512(a) provides that an employer may not employ an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than 30 minutes. If the employee's total work period for the day does not exceed six hours, the meal period may be waived by mutual consent. For work periods exceeding 10 hours, a second meal period of not less than 30 minutes is required, although this second meal period may be waived by mutual consent if the total hours worked do not exceed 12 hours and the first meal period was not waived.
Under California Labor Code § 226.7(c), if an employer fails to provide an employee a meal period in accordance with an applicable statute or order of the Industrial Welfare Commission, the employer must pay the employee one additional hour of pay at the employee's regular rate of compensation for each workday that the meal period is not provided. The California Supreme Court, in Donohue v. AMN Services, LLC (2021) 11 Cal.5th 58, confirmed that the employer's obligation is to "provide" a compliant meal period, meaning the employer must relieve the employee of all duty and relinquish control over the employee's activities during the meal period, but need not ensure that no work is performed during the break.
2. Plaintiff's Theory
Plaintiff alleges that Vantage systematically failed to provide off-duty, uninterrupted 30-minute meal periods to its non-exempt hourly employees at the Fontana Plant. The core of this claim rests on two factual predicates.
First, the auto-deduction feature in the ApexTime 6.2 timekeeping system automatically deducted 30 minutes from an employee's recorded hours for a meal period whenever the employee did not clock out and clock back in for the break. This means that employees who worked through their meal periods — whether voluntarily or because of production pressures — received neither the meal period itself nor compensation for the time actually worked, and received no meal period premium pay. The auto-deduction feature was in effect from January 2020 through March 15, 2024.
Second, plaintiff alleges that during 12-hour surge production shifts, employees were routinely denied second meal periods entirely, and that no mechanism existed for requesting or documenting a waiver of the second meal period in compliance with the statutory requirements.
3. Key Evidence — The Auto-Deduction Policy
The auto-deduction feature in ApexTime 6.2 is the single most significant piece of evidence in this case. From January 2020 through March 15, 2024, the system was configured so that if an employee's time record for a shift did not show a separate clock-out and clock-in for a meal period, the system would automatically deduct 30 minutes from the employee's total recorded hours. This configuration was standard across all non-exempt hourly employees at the Fontana Plant, regardless of production line, shift assignment, or job classification.
The critical internal documents relating to the auto-deduction are as follows:
• February 8, 2024 Internal HR Audit Memorandum: Authored by Sandra Olsen, Vice President of Human Resources, this memorandum identified the auto-deduction feature as a compliance risk under California meal period law. The memorandum noted that the auto-deduction created a risk that employees who worked through meal periods would not be compensated for the time worked and would not receive meal period premium pay. The memorandum recommended that the auto-deduction feature be discontinued and replaced with a manual clock-out/clock-in requirement.
• March 10, 2024 Corrective Action Memorandum: Issued in response to the HR audit memorandum, this memorandum directed the discontinuation of the auto-deduction feature and the implementation of a manual clock-out/clock-in procedure for all meal periods at the Fontana Plant. The memorandum was distributed to all production line supervisors and to Apex Workforce Solutions, Inc. (the ApexTime vendor) for system reconfiguration.
• March 15, 2024 System Change: On this date, the auto-deduction feature was deactivated in ApexTime 6.2. From this date forward, employees were required to manually clock out at the beginning of their meal period and clock back in at the end. If an employee failed to clock out for a meal period, the system no longer automatically deducted 30 minutes; instead, the absence of a clock-out record would be flagged for supervisory review.
4. Assessment of Liability Risk
Overall Risk: HIGH.
The auto-deduction policy is the most significant liability driver in this case. California courts have consistently held that automatic meal period deductions, without a mechanism for employees to report missed or interrupted breaks and receive premium pay, create a strong inference of systematic meal period violations. In Donohue v. AMN Services, LLC (2021) 11 Cal.5th 58, the California Supreme Court specifically addressed the interaction between timekeeping practices and meal period compliance, holding that rounding of meal period time punches is impermissible and that employers must record actual meal period start and stop times. While Donohue addressed rounding rather than auto-deductions, its reasoning underscores the importance of accurate timekeeping and the risks associated with policies that obscure whether employees actually received compliant meal breaks.
The February 8, 2024 internal HR audit memorandum is particularly damaging because it demonstrates Vantage's own recognition of the compliance risk associated with the auto-deduction feature. Plaintiff will argue that this memorandum constitutes an admission by the Company that the auto-deduction practice violated California law. While the memorandum technically identifies a "compliance risk" rather than a conceded violation, the distinction is unlikely to be meaningful to a jury or, more importantly, to a judge evaluating class certification.
For the period from January 2020 (or August 4, 2021, the beginning of the class period) through March 15, 2024 (Sub-Period 1), the defense against the meal period claims will be extremely difficult to sustain on a class-wide basis. The auto-deduction policy was uniform, applied to all non-exempt hourly employees, and created a systemic risk that employees who worked through meal periods would receive neither the break nor compensation for the time worked.
For the period after March 15, 2024 (Sub-Period 2), the meal period claims are materially weaker. With the implementation of the manual clock-out/clock-in procedure, Vantage can argue that it "provided" meal periods by relieving employees of all duty and creating a mechanism for employees to record their actual meal period times. Employees who failed to take their meal periods during this sub-period would need to demonstrate that they were prevented from doing so or that the Company's policies were inadequate, which introduces individualized inquiries that may defeat class treatment.
5. Estimated Exposure
The estimated exposure for meal period premium pay is calculated as follows:
3,550 putative class members × approximately 480 workdays (average per employee during the class period) × estimated 65% violation rate × $21.40 average hourly rate × 1 hour premium = $23,819,760.
The 65% violation rate is a blended estimate that accounts for the higher likelihood of violations during Sub-Period 1 (auto-deduction era) and the lower likelihood during Sub-Period 2 (manual clock-out/clock-in era). The $21.40 average hourly rate is based on payroll data provided by the Company. The 480-workday figure reflects an average employment duration of approximately two years within the class period, which is consistent with the approximately 38% annual turnover rate.
B. Second Cause of Action: Rest Period Violations (Cal. Lab. Code § 226.7)
1. Statutory Framework
Under California Labor Code § 226.7 and the applicable Industrial Welfare Commission Wage Order No. 1 (manufacturing), employers must authorize and permit employees to take a net 10-minute paid rest break for every four hours worked, or major fraction thereof. For a standard 8-hour shift, this translates to two rest breaks. For a 12-hour surge shift, employees are entitled to three rest breaks. The employer's obligation is to "authorize and permit" rest breaks — the employer need not ensure that the employee actually takes the break, but must make the break available and must not impede or discourage the employee from taking it.
If an employer fails to provide a rest period in accordance with the applicable wage order, the employer must pay the employee one additional hour of pay at the employee's regular rate of compensation for each workday that the rest period is not provided. Cal. Lab. Code § 226.7(c).
2. Plaintiff's Theory
Plaintiff alleges that rest breaks at the Fontana Plant were routinely shortened or denied during surge production periods. According to the complaint, supervisors on various production lines pressured employees to return to the production line before their 10-minute rest breaks had elapsed or instructed employees to skip rest breaks entirely in order to meet production quotas and line speed targets. The complaint does not identify a specific written policy of denying rest breaks; rather, it alleges a pattern and practice driven by production pressures and supervisory culture.
3. Assessment of Liability Risk
Overall Risk: MODERATE.
Unlike the meal period claims, the rest period claims do not benefit from the auto-deduction evidence. There is no electronic timekeeping data for rest breaks because employees do not clock out for paid rest breaks — rest breaks are paid time and are not separately recorded in ApexTime. As a result, plaintiff will need to rely on testimonial evidence, declarations from current and former employees, and circumstantial evidence (such as production line schedules, line speed data, and supervisor communications) to establish a pattern of rest break violations.
The absence of a uniform policy of denying rest breaks is a significant weakness in plaintiff's case. Unlike the auto-deduction for meal periods, which was a Company-wide system configuration applied uniformly to all non-exempt employees, the alleged rest break violations are based on supervisory conduct that varied by production line, shift, and time period. This introduces individualized inquiries that may undermine class certification for the rest period claims.
However, several factors mitigate this assessment. Production line schedules and logs may reveal periods during which the operational tempo made it impracticable for employees to take full 10-minute rest breaks. Supervisor testimony may corroborate allegations that production quotas took priority over break compliance during surge periods. And plaintiff's counsel, given their experience, can be expected to obtain declarations from multiple current and former employees across different production lines and shifts to establish a pattern of curtailed rest breaks.
4. Key Defense Arguments
The defense against rest period claims will emphasize the following:
• Rest break compliance is inherently individualized and depends on the specific supervisor, the specific production line, the specific shift, and whether surge production was in effect at the time. No uniform policy of denying rest breaks exists.
• The Fontana Plant Employee Handbook, Section 4.3 (revised June 2022), expressly authorizes and permits rest breaks in compliance with California law. The written policy, on its face, satisfies the employer's obligation to "authorize and permit" rest breaks.
• Supervisor training materials on meal and rest break compliance were distributed and updated as recently as September 2023. These materials instructed supervisors to ensure that employees received their full authorized rest breaks.
• Variability across the six production lines, two shifts, and fluctuating surge schedules means that any alleged pattern of rest break denials cannot be established through common proof.
5. Estimated Exposure
3,550 putative class members × approximately 480 workdays × estimated 30% violation rate × $21.40 average hourly rate × 1 hour premium = $10,993,440.
The 30% violation rate for rest period claims is significantly lower than the 65% rate estimated for meal period claims, reflecting the absence of a uniform auto-deduction policy and the more individualized nature of the alleged violations.
C. Third Cause of Action: Unpaid Wages (Cal. Lab. Code §§ 204, 1194)
1. Statutory Framework
California Labor Code § 204 requires the timely payment of wages earned by employees. Section 1194 provides a private right of action for the recovery of unpaid wages, including unpaid minimum wages and overtime compensation. Under § 1194, an employee who has been paid less than the applicable minimum wage or the overtime rate is entitled to recover the unpaid balance, plus interest, reasonable attorney's fees, and costs.
2. Plaintiff's Theory
Plaintiff advances two sub-theories in support of the unpaid wages claim:
Sub-Theory 1 — Auto-Deduction Off-the-Clock Work: The automatic deduction of 30 minutes for meal periods during which employees were actually working resulted in uncompensated work time. This is essentially the flip side of the meal period premium claim: in addition to the one-hour premium for failing to provide a meal period, plaintiff seeks recovery of the actual wages lost during the 30 minutes of work that was deducted from the employee's recorded hours.
Sub-Theory 2 — Time Rounding: The rounding policy in ApexTime 6.2, which rounds clock-in and clock-out punches to the nearest 6-minute (0.1-hour) increment, allegedly systematically shaves compensable time from employees' recorded hours. Plaintiff contends that the rounding policy, in practice, operates to the employer's benefit by systematically rounding down clock-in times (resulting in late start times) and rounding down clock-out times (resulting in early end times), thereby reducing total compensable hours.
3. Assessment of Liability Risk
Auto-Deduction Sub-Theory: MODERATE-HIGH. This claim is largely derivative of the meal period claim discussed in Section III.A above. If the auto-deduction resulted in employees not being paid for time actually worked during meal periods, the unpaid wages claim follows directly. The exposure for this sub-theory overlaps substantially with the meal period premium exposure.
Rounding Sub-Theory: LOWER. California law permits neutral rounding policies where, over time, rounding does not systematically favor the employer. The leading authority is See's Candy Shops, Inc. v. Superior Court (2012) 210 Cal.App.4th 889, which held that a rounding policy is lawful if it is facially neutral and, when applied over a period of time, does not result in a failure to compensate employees for all time actually worked. If the rounding policy is truly neutral — that is, it results in approximately equal amounts of rounding up and rounding down — it is defensible.
The defense strategy for the rounding claim is to retain Dr. Kenneth Proulx of Veltrano Analytics LLC to perform a comprehensive statistical analysis of time-punch data from ApexTime to demonstrate that the rounding policy is facially neutral and that, in aggregate and for individual employees, the rounding did not result in a net underpayment. If the statistical analysis confirms neutrality, this sub-theory is unlikely to survive summary judgment or, at a minimum, will significantly weaken plaintiff's case on this issue.
4. Estimated Exposure
The exposure for the unpaid wages claim is largely overlapping with the meal period premium exposure calculated in Section III.A.5 above. The auto-deduction sub-theory, if proven, would add the actual unpaid wages (30 minutes × the employee's hourly rate for each day a meal period was worked through) on top of the one-hour meal period premium. However, in practice, settlement calculations typically incorporate both the premium and the underlying unpaid wages within a single damages model.
The additional exposure attributable solely to the rounding claim is more limited and will depend on the results of the statistical analysis by Dr. Proulx. If the analysis demonstrates net neutrality, the rounding-related exposure is minimal. If the analysis reveals a systematic bias in favor of the employer, the exposure could be significant but is difficult to quantify without the data analysis.
D. Fourth Cause of Action: Inaccurate Wage Statements (Cal. Lab. Code § 226)
1. Statutory Framework
California Labor Code § 226(a) requires employers to furnish each employee with an accurate itemized wage statement at the time wages are paid. The wage statement must include, among other things, the total hours worked, all applicable hourly rates, the corresponding number of hours worked at each hourly rate, and the name and address of the legal entity that is the employer. Under § 226(e), an employee suffering injury as a result of a knowing and intentional failure to comply with § 226(a) is entitled to recover the greater of all actual damages or a statutory penalty of fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) for each subsequent pay period in which a violation occurs, up to an aggregate penalty of four thousand dollars ($4,000) per employee.
2. Plaintiff's Theory
Plaintiff alleges that, because of the auto-deduction and rounding policies, Vantage's wage statements inaccurately reflected the total hours worked and wages earned by non-exempt hourly employees. Specifically, the wage statements understated total hours worked by the amount of the auto-deducted meal period time (where employees actually worked through meal periods) and by the amount of time lost to the rounding policy.
3. Assessment of Liability Risk
Overall Risk: MODERATE.
This claim is derivative of the meal period and unpaid wages claims. If the underlying wage violations are established — i.e., if the auto-deduction resulted in employees not being paid for time actually worked — then the wage statements necessarily fail to accurately reflect total hours worked and wages earned, and the § 226 claim follows.
However, the "knowing and intentional" element of § 226(e) presents a meaningful defense. Vantage can argue that any inaccuracies in wage statements were not knowing and intentional but rather resulted from a timekeeping system configuration that was believed to be compliant. This argument has some force prior to the February 8, 2024 internal HR audit memorandum but is substantially weakened after that date, when Vantage had documented internal recognition of the compliance risk.
Additionally, the "injury" requirement under § 226(e) — which requires the employee to demonstrate that they suffered injury as a result of the wage statement violations — adds another hurdle for class certification. The California Supreme Court's decision in Hernandez v. Mendoza (2023) has clarified that the injury requirement demands more than a mere technical violation; the employee must show that they could not promptly and easily determine the information the wage statement was required to contain. This is a fact-intensive inquiry that may vary across individual class members.
4. Estimated Exposure
3,550 class members × blended $50/$100 per pay period × approximately 20 pay periods (average per employee) = approximately $7,100,000. The statutory cap of $4,000 per employee yields a maximum aggregate exposure of $14,200,000.
The actual exposure will depend on the number of pay periods in which violations occurred, the application of the "initial" versus "subsequent" penalty rates, and the per-employee statutory cap.
E. Fifth Cause of Action: Waiting Time Penalties (Cal. Lab. Code § 203)
1. Statutory Framework
California Labor Code § 203 provides that if an employer willfully fails to pay any wages due to an employee at the time of the employee's discharge or resignation, the employee's wages 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. The penalty is calculated at the employee's daily rate of pay (based on the employee's regular hourly rate multiplied by eight hours) for each day wages remain unpaid, up to a maximum of 30 days.
2. Plaintiff's Theory
Plaintiff alleges that former employees who separated from employment during the class period were not paid meal period and rest break premium wages that were owed at the time of separation. Because these premiums were not included in final paychecks, plaintiff contends that waiting time penalties were triggered under § 203.
3. Assessment of Liability Risk
Overall Risk: MODERATE.
The waiting time penalty claim is entirely derivative — it depends on establishing that meal period and/or rest break premiums were owed and unpaid at the time of separation. If the underlying premium claims fail, the waiting time penalty claim fails as well.
The key defense to the waiting time penalty claim is the "willfulness" element. Under California law, the term "willful" in § 203 means the employer intentionally failed to pay wages that it knew were due. A good-faith dispute about whether wages are owed negates willfulness. See Barnhill v. Robert Saunders & Co. (1981) 125 Cal.App.3d 1. Vantage can argue that its failure to pay meal and rest break premiums was based on a good-faith belief that its timekeeping and break policies were compliant with California law, and that any dispute about the adequacy of its meal and rest break practices constitutes a good-faith dispute negating willfulness.
However, the existence of the February 8, 2024 internal HR audit memorandum significantly weakens the good-faith argument for the period following that memorandum. Once Vantage's own VP of Human Resources identified the auto-deduction as a compliance risk, it becomes difficult to argue that the continued failure to pay meal period premiums (until the system was changed on March 15, 2024) was based on a good-faith belief in compliance. For employees who separated before the February 8, 2024 memorandum, the good-faith defense is stronger. For employees who separated after that date but before the March 15, 2024 remedial action, the defense is weakest.
4. Estimated Exposure
Approximately 2,100 former employees × 30 days × 8 hours per day × $21.40 average hourly rate = $10,814,400.
This figure represents the maximum exposure assuming all former employees are found to have been owed meal or rest break premiums at separation. In practice, the actual exposure will be discounted by the percentage of former employees for whom no underlying violation occurred and by the application of the good-faith defense to some portion of the class.
F. Sixth Cause of Action: Unfair Competition Law (Cal. Bus. & Prof. Code § 17200)
1. Statutory Framework
California's Unfair Competition Law, Business & Professions Code § 17200 et seq., defines unfair competition as any "unlawful, unfair, or fraudulent business act or practice." The UCL provides for equitable relief, including restitution of money or property acquired by means of the unfair competition and injunctive relief to prevent future violations. The UCL has a four-year statute of limitations under Business & Professions Code § 17208, which is one year longer than the three-year limitations period applicable to direct Labor Code claims under Code of Civil Procedure § 338(a).
2. Plaintiff's Theory
Plaintiff alleges that Vantage's meal and rest break violations constitute "unlawful" business practices within the meaning of the UCL because they violate the California Labor Code. Plaintiff seeks restitution of all wages and premium pay lost as a result of the alleged violations, as well as injunctive relief requiring Vantage to bring its meal and rest break practices into compliance with California law.
3. Assessment of Liability Risk
Overall Risk: LOW-MODERATE (independently).
The UCL claim is largely derivative of the underlying Labor Code claims. The restitutionary relief available under the UCL overlaps with and is largely duplicative of the meal and rest break premium pay, unpaid wages, and other monetary relief available under the direct Labor Code provisions. If the underlying Labor Code claims are established, the UCL claim adds little in the way of independent recovery.
The primary significance of the UCL claim is procedural: it extends the applicable class period by one year (four years instead of three years), reaching back to August 4, 2021 rather than August 1, 2022. This one-year extension captures additional former employees and additional pay periods within the class, thereby increasing the aggregate exposure.
Additionally, the UCL provides for injunctive relief, which the direct Labor Code claims generally do not. While injunctive relief is of limited monetary value, it can impose ongoing compliance obligations on the Company and may be used by plaintiff as leverage in settlement negotiations.
4. Demurrer Opportunity
C&H will argue in the demurrer that the UCL claim, as pled, fails to allege facts sufficient to establish the "unfair" or "unlawful" prong of the UCL independent of the underlying Labor Code violations. If the underlying Labor Code claims fail on the merits or on class certification grounds, the UCL claim should fall with them. The demurrer will also argue that the UCL does not provide for the recovery of penalties (which are available only under the Labor Code and PAGA), and that plaintiff's request for restitution under the UCL is duplicative of the damages sought under the direct Labor Code claims.
5. Estimated Exposure
The exposure attributable to the UCL claim is largely duplicative of the premium pay and unpaid wages exposure calculated for the meal and rest period claims. The primary incremental risk is the extended statute of limitations, which captures an additional year of alleged violations and corresponding damages.
G. Seventh Cause of Action: PAGA Penalties (Cal. Lab. Code § 2698 et seq.)
1. Statutory Framework
The Private Attorneys General Act of 2004 ("PAGA"), codified at California Labor Code § 2698 et seq., authorizes an "aggrieved employee" to bring a civil action on behalf of the employee and other current and former employees for Labor Code violations that would otherwise be enforced through citations issued by the LWDA. The PAGA essentially deputizes private plaintiffs to act as private attorneys general enforcing the Labor Code.
PAGA penalties are assessed at a rate of $100 per employee per pay period for the initial violation and $200 per employee per pay period for each subsequent violation. Cal. Lab. Code § 2699(f)(2). Of any penalties recovered, 75% is distributed to the LWDA and 25% is distributed to the aggrieved employees. Cal. Lab. Code § 2699(i). PAGA claims are subject to a one-year statute of limitations, measured from the date of the PAGA notice to the LWDA. In this case, the PAGA notice was served on May 22, 2025, so the PAGA lookback period extends to May 22, 2024.
Critically, PAGA claims are not subject to class certification requirements. The PAGA representative action is a "law enforcement action" on behalf of the State of California, and the court cannot deny representative standing based on the predominance of individualized issues or other class certification criteria. See Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348. PAGA claims are also not subject to removal to federal court under the Class Action Fairness Act ("CAFA") because they are not "class actions" within the meaning of that statute.
2. Procedural Compliance
Plaintiff's counsel served the required PAGA notice on the LWDA (Notice No. LWDA-CM-2025-831447) and on Vantage on May 22, 2025. The 65-day cure/investigation period expired on July 26, 2025 without the LWDA commencing an investigation or otherwise acting on the notice. Plaintiff has therefore exhausted the administrative prerequisite for filing a PAGA claim under California Labor Code § 2699.3(a)(2)(A). We have reviewed the PAGA notice and confirmed that it identifies the specific Labor Code provisions allegedly violated and provides a factual description of the alleged violations. Based on our review, the notice appears to satisfy the statutory requirements.
3. Assessment of Liability Risk
Overall Risk: MODERATE-HIGH.
PAGA claims present several unique risks that distinguish them from the class action claims:
First, because PAGA claims do not require class certification, the court cannot deny plaintiff's representative standing based on the predominance of individualized issues, lack of typicality, or other class certification defenses. This means that even if the class action claims are not certified, the PAGA claims proceed as a representative action.
Second, PAGA penalties are calculated on a per-employee, per-pay-period basis, which creates large aggregate exposure even for a relatively short lookback period (one year). With approximately 1,450 current employees and an estimated number of employees who worked during the one-year PAGA period, the aggregate penalty exposure is substantial.
Third, PAGA claims are not removable to federal court under CAFA, which means they will remain in state court regardless of any removal strategy for the class action claims.
Fourth, PAGA penalties are treated as civil penalties payable to the State of California, and as such, they are likely uninsurable under California law and public policy. This means that the PAGA penalty exposure may be excluded from coverage under the Ridgeway National EPL Policy, as discussed in Section X below.
4. Standing Challenge
C&H will challenge Gloria Reyes's standing to assert PAGA claims for violation types that she did not personally experience. Under Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, a plaintiff must be an "aggrieved employee" — i.e., must have personally suffered at least one Labor Code violation — to bring a PAGA claim. However, the scope of the PAGA standing inquiry remains an area of evolving law. C&H will argue that Reyes lacks standing to assert PAGA claims for violations she did not personally experience, such as second meal period violations during shifts she did not work (e.g., first shift), or violations on production lines where she was not assigned (e.g., Body Line A, Body Line B, Trim Line A, Paint, Final Assembly/QC).
While the prospects for this standing challenge are uncertain, it may succeed in narrowing the scope of the PAGA representative action, particularly as to violation types that are factually distinct from those Reyes experienced on Trim Line B, second shift.
5. Estimated Exposure
Estimated PAGA penalty exposure: approximately $5,500,000.
This estimate is based on the $100/$200 per-pay-period penalty rate, applied to the estimated number of employees and pay periods within the one-year PAGA lookback period (May 22, 2024 through present), with adjustments for the 75%/25% LWDA/employee split and the court's discretion to reduce penalties under Labor Code § 2699(e)(2).
6. Insurance Note
PAGA penalties are civil penalties payable to the State of California and are likely uninsurable under California public policy. The Ridgeway National EPL Policy (discussed in Section X below) may exclude PAGA penalties from coverage, either explicitly or under the policy's "intentional acts" or "penalties and fines" exclusion. This means that the approximately $5.5 million in estimated PAGA penalty exposure may fall entirely outside the scope of insurance coverage and will be borne by Vantage directly. A separate, detailed insurance coverage analysis memorandum will address this issue.
IV. THE AUTO-DEDUCTION POLICY — CENTRAL LIABILITY ANALYSIS
Given the central role of the auto-deduction policy in plaintiff's case, this section provides a more detailed analysis of the policy, its implications for the defense, and the strategic considerations it raises.
A. Description of the Auto-Deduction Feature
From January 2020 through March 15, 2024, the ApexTime 6.2 timekeeping system — provided and maintained by Apex Workforce Solutions, Inc. (8500 Shoal Creek Boulevard, Suite 200, Austin, Texas 78757) — was configured at the Fontana Plant to automatically deduct 30 minutes from a non-exempt hourly employee's recorded hours for a meal period if the employee did not separately clock out and clock back in for the meal break.
In practical terms, this meant that if an employee worked an 8-hour shift (e.g., 5:00 AM to 1:30 PM) and did not clock out at 9:00 AM for the scheduled meal period, the ApexTime system would record 8.5 hours of elapsed time but then automatically deduct 30 minutes, resulting in 8.0 hours of compensable time. The same deduction occurred regardless of whether the employee actually took a meal break, worked through the meal break at the direction of a supervisor, or voluntarily chose to work through the break.
The auto-deduction applied to the first meal period on all standard 8-hour shifts and to both the first and second meal periods on extended 12-hour surge shifts. No mechanism existed within the ApexTime system for employees to report that they had worked through a meal period and to request either compensation for the time worked or meal period premium pay.
The auto-deduction feature was a system-level configuration, not an individual employee setting. It was applied uniformly to all non-exempt hourly employees at the Fontana Plant during the period it was in effect. This uniformity is the key factor that distinguishes the meal period claims from the more individualized rest period claims and is the primary basis on which plaintiff will seek class certification.
B. Internal discovery of the Compliance Risk
The auto-deduction feature remained in effect without challenge or review for approximately four years (January 2020 through March 2024). The compliance risk was identified internally through the following sequence of events:
On February 8, 2024, Sandra Olsen, Vice President of Human Resources, authored an internal HR audit memorandum that identified the auto-deduction feature as a compliance risk under California meal period law. The memorandum was prompted by a broader review of Fontana Plant HR practices conducted in late 2023 and early 2024. The memorandum specifically noted that the auto-deduction created a risk that employees who were unable to take compliant meal periods — whether due to production pressures, supervisor direction, or other circumstances — would not be compensated for the time actually worked and would not receive the meal period premium pay required by California Labor Code § 226.7. The memorandum recommended immediate discontinuation of the auto-deduction feature and implementation of a manual clock-out/clock-in requirement for all meal periods.
On March 10, 2024, a corrective action memorandum was issued directing the discontinuation of the auto-deduction feature. The memorandum was distributed to all Fontana Plant production line supervisors and to the IT and payroll departments. A request was submitted to Apex Workforce Solutions, Inc. for reconfiguration of the ApexTime 6.2 system.
On March 15, 2024, the auto-deduction feature was deactivated in ApexTime 6.2. From this date forward, employees were required to manually clock out at the beginning of their meal period and clock back in at the end. The system was reconfigured so that the absence of a clock-out record during a shift would be flagged for supervisory review rather than triggering an automatic deduction.
C. Implications for Defense
The auto-deduction policy bifurcates the class period into two distinct sub-periods that present materially different liability profiles:
Sub-Period 1: August 4, 2021 – March 15, 2024 (approximately 2.6 years). During this sub-period, the auto-deduction was in effect. This is the period of greatest liability exposure. The uniform, system-wide auto-deduction policy provides a strong basis for class certification and creates a presumption of systematic meal period violations that will be difficult to overcome. Plaintiff's strongest evidence — the ApexTime configuration records and the February 8, 2024 HR audit memorandum — relate directly to this sub-period. The defense during this sub-period will be limited to arguing that individual employees voluntarily chose not to take meal breaks (which is not a defense under California law unless the employer "provided" the break by relieving the employee of all duty) and that some employees actually took compliant breaks despite the auto-deduction (which may limit damages but does not eliminate liability for those who did not).
Sub-Period 2: March 16, 2024 – Present (approximately 1.4 years). During this sub-period, the auto-deduction was no longer in effect, and employees were required to manually clock out and back in for meal periods. The defense position during this sub-period is substantially stronger. Vantage can argue that it "provided" compliant meal periods by relieving employees of all duty and requiring them to clock out for their breaks, and that any employees who failed to take meal periods during this sub-period did so voluntarily or for reasons that require individualized inquiry. The absence of the auto-deduction removes the primary mechanism by which plaintiff can establish class-wide violations, shifting the analysis from a uniform policy challenge to an individualized inquiry.
The February 8, 2024 internal HR audit memorandum is a double-edged sword:
On the positive side, the memorandum demonstrates that Vantage identified the compliance risk, took it seriously, and promptly implemented corrective measures. This narrative supports the defense in several ways: it undermines plaintiff's argument that Vantage acted with willful disregard for the law (relevant to waiting time penalties under § 203); it demonstrates a good-faith effort to comply with California law (relevant to the good-faith compliance defense); and it establishes that the post-March 2024 timekeeping practices were specifically designed to comply with meal period requirements.
On the negative side, the memorandum establishes corporate knowledge of the compliance risk as of February 8, 2024. This is damaging for several reasons: it undermines the "good faith dispute" defense for the period after February 8, 2024 (making it difficult to argue that Vantage did not know the auto-deduction was problematic); it supports plaintiff's argument that the failure to pay meal period premiums was "knowing and intentional" under § 226 (wage statement claim); and it supports plaintiff's argument that the failure to pay premiums at separation was "willful" under § 203 (waiting time penalties). Plaintiff will also argue that the memorandum constitutes an implicit admission that the auto-deduction practice violated California law.
The electronic time records from ApexTime will be the primary dataset for class-wide analysis of meal period compliance. These records, which are maintained by Apex Workforce Solutions, Inc., contain clock-in and clock-out times for all non-exempt hourly employees at the Fontana Plant throughout the class period. During Sub-Period 1, the records will show automatic 30-minute deductions without corresponding clock-out/clock-in entries for meal periods. During Sub-Period 2, the records will show (or fail to show) manual clock-out/clock-in entries for meal periods. This data will be the foundation for both plaintiff's and defendant's class certification analyses and damages models.
V. THE ROUNDING POLICY — SUBSIDIARY LIABILITY ANALYSIS
In addition to the auto-deduction, plaintiff challenges Vantage's time-rounding policy. The ApexTime 6.2 system rounds clock-in and clock-out punches to the nearest 6-minute (0.1-hour) increment. For example, an employee who clocks in at 4:58 AM would have the clock-in time rounded to 5:00 AM; an employee who clocks in at 5:02 AM would also have the clock-in time rounded to 5:00 AM. Similarly, an employee clocking out at 1:32 PM would have the clock-out time rounded to 1:30 PM, while an employee clocking out at 1:28 PM would also be rounded to 1:30 PM.