California Supreme Court Hands Down Rare Win for California Employers
6.17.24
On May 6, 2024 the California Supreme Court handed down its decision in Naranjo v. Spectrum Security Services, Inc., a rare win for employers in California’s pro-employee legal landscape.
When employees claim they have not been paid all the wages they are owed in a wage and hour lawsuit in California, it is typical that employees will also seek inaccurate wage statement penalties and fees under California Labor Code section 226. These penalties add up and can account for thousands of dollars of the final judgment against an employer. But, the Court’s ruling in Naranjo makes it more difficult for employees to collect penalties from employers for inaccurate wage statements.
California Labor Code section 226 (e)(1) states:
An employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not to exceed an aggregate penalty of four thousand dollars ($4,000), and is entitled to an award of costs and reasonable attorney’s fees.
Cal. Lab. Code §226(e)(1) (emphasis added).
Prior to this decision, employees would argue that the “knowing and intentional” requirement for liabilities under section 226 was almost always satisfied by nature of the employer providing the wage statement. But, the Court in Naranjo has clarified the “knowing and intentional” standard in section 226.
Naranjo arises out of alleged meal break violations. Defendant employer provides secure custodial services to federal agencies. Plaintiff employee worked as a guard for Defendant and was required to remain on duty during all meal breaks. Here, the Plaintiff alleges that they are owed missed meal break premium pay, and as such they may also seek penalties under Cal. Labor Code 226 for inaccurate wage statements since the premium pay was not included in the wage statements issued.
In its opinion, the Court stated, “The question presented is whether an employer has knowingly and intentionally failed to comply with section 226’s requirements when the employer had a good faith, yet erroneous, belief that it was in compliance.” The Court held that “an employer’s objectively reasonable, good faith belief that it has provided employees with adequate wage statements precludes an award of penalties under section 226, subdivision (e)(1). An employer that believes reasonably and in good faith, albeit mistakenly, that it has complied with wage statement requirements does not fail to comply with those requirements knowingly and intentionally.”
If you have any questions about compliance with California labor laws or need assistance in a labor dispute, contact Mikayla Preus, article author, or one of the attorneys at Schwartz Semerdjian Cauley Schena & Bush.