Naranjo v. Spectrum Security Services, Inc.
40 Cal.App.5th 444
Cal. Ct. App.2019Background:
- Spectrum Security employed at-will, on-call, hourly nonexempt officers who were required to supervise detainees and could not leave their posts; meal and rest periods were typically "on-duty" and paid.
- Before Oct. 1, 2007 (pre-Memorandum 33), Spectrum’s SOP/SOPP did not include a written on-duty meal agreement containing the wage order’s mandatory right-to-revoke language; Memorandum 33 (effective Oct. 1, 2007) added an on-duty meal agreement with a revocation clause.
- Gustavo Naranjo filed a putative class action claiming violations of Lab. Code § 226.7 and related statutes; the case was tried in phases: bench on affirmative defenses, jury on meal-break subclasses (pre-Memo33 and Memo33), and bench on derivative penalties.
- The trial court (directed verdict) found Spectrum liable to the pre-Memorandum 33 meal-break subclass and parties stipulated premium wages of $1,393,314; jury found for Spectrum as to Memorandum 33 subclass.
- The court awarded itemized wage-statement penalties under § 226 and attorney fees under § 226(e), denied § 203 waiting-time penalties, and awarded prej udgment interest at 10%; both sides appealed and Naranjo separately appealed denial of rest-break class certification.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Are paid on-duty meal periods valid absent a written agreement that includes the wage order’s right-to-revoke clause? | Naranjo: No written revocation clause pre-Memo33 → §226.7 premium wages due. | Spectrum: Compliance can be shown by combining multiple documents and practices; employees could decline assignments (implied revocation). | Held: Wage Order 4 requires a written agreement including an express right to revoke; pre-Memo33 policy noncompliant; liability for stipulated premium wages affirmed. |
| 2. Do §226.7 premium wages permit derivative remedies (§§203 waiting-time, 226 itemized-wage penalties) and attorney fees under §226(e) or §218.5? | Naranjo: Murphy treats §226.7 pay as a "wage," so derivative penalties and related fees should apply. | Spectrum: §226.7 remedy is distinct; Kirby holds §226.7 actions are for nonprovision, not nonpayment of wages, so derivative penalties and fees don't follow. | Held: §226.7 claims do not support derivative penalties under §§203 or 226; itemized-wage penalties and §226(e) attorney-fee award reversed. |
| 3. What prejudgment interest rate applies to unpaid §226.7 premium wages? | Naranjo: §218.6 entitles wages to 10% prejudgment interest. | Spectrum: Either no entitlement or different rate; trial court used 10%. | Held: §218.6 (10%) inapplicable because §226.7 actions are not actions for nonpayment of wages; prejudgment interest must be recalculated at 7% (Civ. Code §3287). |
| 4. Should a rest-break class be certified given Spectrum’s policy and varying declarations? | Naranjo: Spectrum maintained a uniform policy denying off-duty rest breaks; common questions predominate, so class treatment is appropriate. | Spectrum: Declarations show many employees received breaks or breaks were on-call; individual issues predominate. | Held: Denial of rest-break class certification was prejudicial error; common policy claims predominate and class certification is appropriate; order reversed and remanded to certify. |
Key Cases Cited
- Murphy v. Kenneth Cole Prods., 40 Cal.4th 1094 (2007) (§226.7 premium pay characterized as a wage for some purposes; employee immediately entitled to additional hour of pay)
- Brinker Rest. Corp. v. Superior Court, 53 Cal.4th 1004 (2012) (framework for meal/rest period obligations and class certification principles)
- Kirby v. Immoos Fire Prot., 53 Cal.4th 1244 (2012) (§226.7 actions are for nonprovision of breaks, not actions for nonpayment of wages; no attorney fees under §§1194/218.5 for §226.7 claims)
- Augustus v. ABM Sec. Servs., 2 Cal.5th 257 (2016) (narrow scope of permissible on-duty meal/rest periods and requirement to relieve employees of duties for rest breaks)
- Mendiola v. CPS Sec. Sols., 60 Cal.4th 833 (2015) (limitations on reading around wage orders; courts should not substitute alternatives for explicit wage-order requirements)
- Lubin v. The Wackenhut Corp., 5 Cal.App.5th 926 (2016) (employer evidence that rest breaks were on-call does not necessarily defeat class certification where a uniform unlawful policy is alleged)