In bringing meal and rest period claims on behalf of their clients, the plaintiffs’ bar has long argued that merely because there was an alleged meal or rest period violation, there were also “derivative” statutory violations entitling their clients to additional penalties. By arguing that an employer is also on the hook for such penalties, plaintiffs’ attorneys argue that the potential exposure is greater. And with greater potential exposure, employers will be more inclined to settle – or so the rationale goes.
These purported “derivative” violations have come in at least two forms. One type of “derivative” violation the plaintiffs’ bar has advanced is the theory that, because an employee was allegedly denied a meal or rest period, and because the employee would thus be owed an hour of “premium” pay for such a violation, the employee’s wage statement was not accurate because it did not show the premium pay the employee allegedly should have been paid, but was not. That theory has been nonsensical from the get-go because it ignored the primary purpose of California’s wage statement law – that employees be provided a statement showing a calculation of the wages that they were actually paid. Nevertheless, the plaintiffs’ bar continued to push this theory. Understandably so – the maximum statutory penalty for wage statement violations is $4,000. And that would be for just one employee.
Another type of “derivative” violation promoted by the plaintiffs’ bar is similar to the above – that is, where an employee would be owed an hour of “premium” pay for an alleged meal or rest period violation, and the employee resigned or was involuntarily terminated and not paid that premium pay with their final wages, that “waiting time” penalties are also owed. But more than seven years ago, the California Supreme Court confirmed that a meal or rest period claim is not a claim brought for the nonpayment of wages. So even if a meal or rest period premium constituted a “wage” for some purposes, a failure to pay such a premium would not constitute a failure to pay wages due at the end of employment. Still, the plaintiffs’ bar continued to push this theory. And again, understandably so – the maximum statutory penalty for waiting time violations is 30 days’ worth of pay at the employee’s daily rate of pay. For an employee working 8 hours per day at $20 per hour, that would be $4,800. Again, that would be for just one employee.
These issues have been frequently litigated over the years, with federal district courts coming out on either side, surely leading some employers to settle for greater amounts than they should have. But on September 26, 2019 in Naranjo v. Spectrum Security Services, Inc., the California Court of Appeal may have put an end to these disputes. The Court expressly held that a failure to pay meal or rest period premiums cannot support a claim for derivative wage statement penalties or waiting time penalties. That is significant because employers now have sufficient ammunition to push back on these theories that have been pursued by plaintiffs’ attorneys to drive up settlement costs.
Whether the plaintiff seeks review from the California Supreme Court, and whether the California Supreme Court reverses Naranjo, is uncertain. For now, at least, Naranjo should provide California employers with ammunition to dispose of certain claims and to resolve cases more reasonably.