Linda Scheid, individually and on behalf of all those similarly situated v. Pnc Bank, N.a.

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
LINDA SCHEID, individually and on behalf
of all those similarly situated,
Plaintiff-Appellee,
v.
PNC BANK, N.A.,
Defendant-Appellant.
No. 21-15988
D.C. No. 3:18-cv-04810-JCS
MEMORANDUM*
Appeal from the United States District Court
for the Northern District of California
Joseph C. Spero, Magistrate Judge, Presiding
Argued and Submitted November 14, 2022
San Francisco, California
Before: GOULD and PAEZ, Circuit Judges, and MOLLOY,** District Judge.
Defendant-Appellant PNC Bank (“PNC”) appeals the district court’s grant
of summary judgment to Plaintiff-Appellee Linda Scheid (“Scheid”), who
represents a class of mortgage loan officers (“MLOs”) employed by PNC. Scheid
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
** The Honorable Donald W. Molloy, United States District Judge for
the District of Montana, sitting by designation.
FILED
DEC 6 2022
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

-- 1 of 6 --

2
alleges that PNC’s Mortgage Originations Incentive Plan (“Incentive Plan”), under
which all MLOs are paid, violates California Labor Code section 226.7 by failing
to properly compensate MLOs for rest periods. Section 226.7 requires that rest
periods “be counted as hours worked, for which there shall be no deduction from
wages.” Cal. Lab. Code § 226.7(d).
Under the Incentive Plan, MLOs receive either “Regular Pay,” which PNC
also calls a salary, or receive “Incentive Pay,” which is tied to the MLOs’ loan
sales. MLOs only receive Incentive Pay if they meet a certain monthly threshold
in sales. Rest period pay is understood to be included in Regular Pay. In
calculating the threshold for Incentive Pay, however, PNC deducts Regular Pay—
and thus the included rest period pay—from the MLO’s earned incentive credits
(essentially, commissions for loan sales). Moreover, if an MLO does not meet the
threshold because her incentive credits do not exceed her Regular Pay, the
resulting deficit is usually carried forward to the next month and added into the
threshold calculation, such that the MLO must make up the deficit before earning
Incentive Pay.
The district court granted summary judgment to Scheid, concluding that the
Incentive Plan violated section 226.7. By deducting Regular Pay from incentive
credits to determine Incentive Pay, and by carrying forward deficits when MLOs
only received Regular Pay, the district court reasoned that PNC was not

-- 2 of 6 --

3
compensating MLOs for their rest periods.
In so holding, the district court relied on Vaquero v. Stoneledge Furniture
LLC, 9 Cal. App. 5th 98 (2017), a California appellate court case that considered
rest period pay under a compensation plan structured similarly to PNC’s. PNC
argued that Vaquero was significantly narrowed by a later California Supreme
Court case, Oman v. Delta Air Lines, Inc., 466 P.3d 325 (Cal. 2020). The district
court held that Oman, which concerned wage-borrowing and minimum wage
requirements, did not limit Vaquero and was not relevant to the issues in this case.
Subsequently, the district court certified under 28 U.S.C. § 1292(b) to this court the
issue of whether PNC’s Incentive Plan violates section 226.7 under California law.
A motions panel granted review. See Scheid v. PNC Bank, No. 21-80039 (9th Cir.
June 9, 2021) (Dkt. No. 3).
As discussed below, we have jurisdiction under 28 U.S.C. § 1292(b). We
review de novo a district court’s summary judgment ruling and its interpretation of
state law. Reynaga v. Roseburg Forest Prods., 847 F.3d 678, 685 (9th Cir. 2017);
Trishan Air, Inc. v. Fed. Ins. Co., 635 F.3d 422, 426-27 (9th Cir. 2011). We
affirm.
1. Jurisdiction. For jurisdiction to exist under 28 U.S.C. § 1292(b), we must
conclude “(1) that there [is] a controlling question of law, (2) that there [is]
substantial grounds for difference of opinion, and (3) that an immediate appeal

-- 3 of 6 --

4
may materially advance the ultimate termination of the litigation.” In re Cement
Antitrust Litig., 673 F.2d 1020, 1026 (9th Cir. 1981). Scheid argues that the first
factor is not met because no controlling question of law exists. The question in
this case, however, is whether the district court correctly determined that Oman did
not limit Vaquero in order to grant summary judgment based on undisputed facts.
This is a pure question of law. The other two factors are easily met. We thus
conclude that we have jurisdiction over this interlocutory appeal. 28 U.S.C.
§ 1292(b); see also Scheid, No. 21-80039 (Dkt. No. 3) (order granting PNC
permission to appeal).
2. Grant of Summary Judgment. The district court correctly interpreted
California law to conclude that PNC’s Incentive Plan violates section 226.7.
PNC’s plan is nearly identical to the plan at issue in Vaquero. In Vaquero, sales
associates would receive the higher of “Minimum Pay” of $12.01 per hour or their
commissions. 9 Cal. App. 5th at 103. If they received only Minimum Pay, that
amount would operate as a draw against their commissions the following month.
Id. As here, sales associates recorded their time and did not clock out for rest
periods, so any rest break pay was included in hourly pay. Id. Although PNC
argues its Incentive Plan is distinguishable because it paid a salary based on a
forty-hour workweek that exceeded minimum wage and did not operate as a draw,
these arguments fail. PNC’s “salary” (or Regular Pay) is no different than

-- 4 of 6 --

5
Minimum Pay in Vaquero. And by counting Regular Pay as a deficit against future
Incentive Pay, PNC’s Incentive Plan also “deduct[ed] from future paychecks . . .
wages advanced to compensate employees for hours worked, including rest
periods.” Vaquero, 9 Cal. App. 5th at 115.
Because it is effectively indistinguishable from the plan in Vaquero, PNC’s
Incentive Plan violates section 226.7(d) unless the Oman court limited the decision
in Vaquero.1 We agree with the district court that the California Supreme Court
did not do so. The Oman court never once negatively discussed Vaquero. The
Oman court also did not address rest periods or statutorily mandated rest period
pay. Rather, the issue in Oman concerned minimum wage requirements and the
“wage borrowing” rule, which means that “an employer who promises to
compensate particular hours worked at a particular rate cannot borrow some of that
compensation and apply it to other compensable hours for which no compensation
is provided.” Oman, 466 P.3d at 335-36. Rather than contradict Vaquero, the
Oman court noted it “agree[d]” with the no wage-borrowing rule developed in
Vaquero and related cases. Id. at 336. Simply put, Oman is not on point. Oman
1 “When interpreting state law, federal courts are bound by decisions of the state’s
highest court.” In re Bartoni-Corsi Produce, Inc., 130 F.3d 857, 861 (9th Cir.
1997) (quoting Lewis v. Tel. Emps. Credit Union, 87 F.3d 1537, 1545 (9th Cir.
19996)). If there is no relevant decision by the state’s highest court, federal courts
are “obligated to follow the decisions of the state’s intermediate appellate courts”
unless there is “convincing evidence that the state supreme court would decide
differently.” Id.

-- 5 of 6 --

6
concerns minimum wage requirements, and Scheid makes no minimum wage
claim here.
As in Vaquero, “[t]he problem with [PNC’s] compensation system . . . is that
the formula it used for determining commissions did not include any component
that directly compensated [MLOs] for rest periods.” Vaquero, 9 Cal. App. 5th at
114. If a compensation system involves a formula, employers must ensure rest
period pay is never “deduct[ed] from wages.” See Cal. Lab. Code § 226.7(d).
Because Oman did not limit Vaquero, and PNC’s Incentive Plan failed to
properly compensate MLOs for their rest breaks, we affirm the district court’s
grant of summary judgment.
AFFIRMED.

-- 6 of 6 --