Ralphs Grocery Co. v. Superior Court, 112 Cal. App. 4th 1090 (2003)

David Swanson, a former store manager at a Ralphs grocery store, filed a class action against Ralphs for alleged violations of the California Labor Code and the Unfair Competition Law (Business and Professions Code Section 17200). Swanson alleged that Ralphs had violated the law by making unlawful deductions from its employees’ bonuses for cash and merchandise shortages and workers’ compensation claims. Ralphs argued unsuccessfully that “calculation of an incentive bonus based on profitability by taking into account not only revenues but also store expenses in accordance with standard accounting principles differs markedly from reducing (or recapturing) wages through prohibited deductions.” The trial court overruled Ralphs’ demurrer, and the Court of Appeal affirmed the trial court, holding that Swanson had stated claims based on the alleged unlawful deduction from employees’ bonuses of workers’ compensation costs and expenses. As for Swanson’s claims concerning Ralphs’ deductions for cash and merchandise shortages, the Court held that Swanson could assert claims only on behalf of non-exempt employees, since “there is nothing unfair in basing a part of the compensation for [exempt] employees on a formula that rewards them for effective supervision that . . . controls expenses, including reduced cash and merchandise shortages.”