LOS ANGELES (Legal Newsline) - Businesses have received a measure of relief from the California Supreme Court, which has rejected a call for penalties against a company that thought it was complying with state law.
The class action case of Gustavo Naranjo was decided May 6 in a ruling from Justice Leondra Kruger, writing for a unanimous court in a lawsuit against Spectrum Security Services.
The company was found to have needed to include compensation for rest breaks on employees' wage statements. It had not but thought its wage statements were legal.
Lawyers moved for statutory damages of up to $4,000 per employee or his or her actual damages, plus attorneys fees. But the Labor Code requires a "knowing and intentional failure... to comply."
The Second Appellate District ruled in February 2023 that Spectrum's failure to include the rest break compensation on employees' wage statements was not willful. The Supreme Court agreed, striking a nearly $400,000 penalty from a Los Angeles trial court.
The high court had previously ruled in this same case that rest break compensation needed to be included on wage statements.
"Before our 2022 decision, it was uncertain whether had violated section 226," Kruger wrote. "The question whether wage statements must include premium pay for missed meal breaks, even if unpaid, was complex and debatable."
So, it was not unreasonable for Spectrum to believe it was complying with state law.
"Imposing liability under these circumstances would penalize Spectrum not for failing to apprise itself of its obligations, but for failing to predict how unsettled legal issues would be resolved many years down the line," Kruger wrote.
Naranjo was a security guard for the company, which transports and guards prisoners. He was suspended and fired for leaving his post to take a meal break, leading him to sue his employer.
He said he was owed premium pay for days on which Spectrum failed to provide employees a meal break. He also alleged Spectrum failed to report premium pay on wage statements.