40 Cal.App.5th 444
Cal. Ct. App.2019Background
- Spectrum Security employed at-will, on-call, hourly nonexempt detention/security officers who were required to remain on duty and within radio range; company manuals required on-duty meal and rest breaks.
- Before October 1, 2007, Spectrum had no written on-duty meal agreement containing the mandatory clause that employees may revoke the agreement in writing; Memorandum 33 (Oct. 1, 2007) later added such language.
- Naranjo sued as class representative alleging violations of Labor Code § 226.7 and IWC Wage Order No. 4 (meal and rest period rules), seeking premium wages, § 203 waiting-time penalties, § 226 itemized-statement penalties, and attorney fees.
- The trial court (1) directed verdict for the pre-Memorandum 33 meal-break subclass and the parties stipulated to $1,393,314 in premium pay, (2) awarded § 226 penalties and fees for wage-statement violations, (3) denied § 203 waiting-time penalties, (4) awarded prejudgment interest at 10%, and (5) denied certification of a rest-break class.
- On appeal the court affirmed liability and the premium-pay award for the pre-Memorandum 33 subclass, reversed the § 226 penalties and related attorney fees, reduced prejudgment interest to 7%, and reversed the denial of certification for the rest-break class.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether on-call, paid on-duty employees lacking a written agreement with a written revocation clause are entitled to § 226.7 premium pay | Naranjo: Wage Order 4 requires a written on-duty agreement with a written revocation clause; absence entitles employees to one hour premium per day | Spectrum: Company manuals, practices and a combination of documents (or declining assignments) show substantial compliance and mutual understanding without a single written revocation document | Held: Affirmed for pre-Memorandum 33 subclass — Wage Order 4 requires the written agreement with revocation language; absence makes employer liable for § 226.7 premium pay (stipulated $1,393,314) |
| Whether § 226.7 premium pay supports derivative remedies under § 203 (waiting-time) and § 226 (itemized-statement) and attendant attorney fees | Naranjo: § 226.7 premiums are wages (Murphy) and thus give rise to derivative § 203/§ 226 penalties and fees | Spectrum: (and others) argued the premiums are wages; court had to decide whether derivative penalties apply; generally employer disputed applicability of those derivative penalties here | Held: Reversed as to § 226 derivative penalties and related § 226(e) attorney fees. Court held § 226.7 actions are for nonprovision of breaks, not actions "brought for the nonpayment of wages," so they do not give rise to § 203 or § 226 derivative penalties (denial of § 203 was affirmed) |
| Proper prejudgment interest rate on unpaid § 226.7 premium wages | Naranjo: 10% under § 218.6 (as an action for wages) | Spectrum: No 10% interest; award of interest should be reduced or eliminated | Held: 10% reversed; prejudgment interest on the liquidated premium-wage award is payable under Civil Code § 3287 at the default rate of 7% (remand to recalculate) |
| Whether denial of class certification for the rest-break claim was proper | Naranjo: Spectrum had a uniform policy denying off-duty rest breaks; common evidence predominates and the claim is suitable for class treatment | Spectrum: Factual variations (some supervisors allowed breaks; officers sometimes took breaks) mean individualized issues predominate | Held: Reversed — trial court abused discretion; common issues predominate on whether Spectrum’s uniform policy violated rest-break requirements, so rest-break class certification must be granted |
| Validity of trial court award of § 226 itemized-statement penalties and related § 226(e) fees | Naranjo/class: Wage statements omitted § 226.7 premium amounts and the omission was knowing and intentional | Spectrum: Challenged liability for § 226 penalties and the award of fees | Held: Reversed — because § 226.7 does not give rise to derivative § 226 penalties here, the § 226 penalties and the § 226(e) attorney-fee award were vacated |
Key Cases Cited
- Murphy v. Kenneth Cole Prods., 40 Cal.4th 1094 (2007) (characterizes § 226.7 premium pay as akin to wages for statute-of-limitations and immediate entitlement purposes)
- Brinker Rest. Corp. v. Superior Court, 53 Cal.4th 1004 (2012) (explains employer obligations for meal and rest periods and options to avoid liability)
- Kirby v. Immoos Fire Prot., 53 Cal.4th 1244 (2012) (holds attorney’s-fee statutes § 1194 and § 218.5 do not authorize fees for prevailing parties in § 226.7 actions)
- ABM Sec. Servs. v. Augustus, 2 Cal.5th 257 (2016) (describes narrow on-duty meal-period exception and need for written agreement)
- Mendiola v. CPS Sec. Sols., 60 Cal.4th 833 (2015) (limits cases finding implied compliance with wage orders; courts should not substitute inference for required written terms)
- Lubin v. The Wackenhut Corp., 5 Cal.App.5th 926 (2016) (supports class treatment for rest-break claims where employer has uniform policy denying off-duty rest breaks)