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Rare Win for Employers -- Knowing and Intentional Wage Statement Defense

Barsamian & Moody

May 10, 2024

On May 6, the California Supreme Court gave a rare win to employers when it issued its most recent Opinion in the ongoing fight in Naranjo v. Spectrum Security Services, Inc. The name may sound familiar to you because in 2022 the California Supreme Court issued a decision in the same case, finding that the one hour of premium pay due to employees who are deprived of their timely and full length off-duty meal or rest periods constitutes wages subject to the same payment timeframes and wage statement reporting rules as other forms of compensation.

This year the Court was asked whether an employer can argue that it acted reasonably and in good faith to defend against allegations of a “knowing and intentional” failure to include such premium payment on the wage statement which is subject to the statutory penalties up to $4,000 or the employee’s actual damages, should the employee’s damages exceed the statutory penalties. The Court held that yes, “if an employer reasonably and in good faith believed it was providing a complete and accurate wage statement in compliance with the requirements of section 226, then it has not knowingly and intentionally failed to comply with the wage statement law.”

What This Means for Employers: Nearly every wage and hour class action filed in California contains a claim for failure to provide meal and rest periods and includes derivative wage statement violations and waiting time penalties based on the alleged meal and rest period violations. The result has been that an alleged denial of a single meal period could lead to liability for premium pay under Labor Code section 226.7, waiting time penalties under Labor Code section 203, interest on the unpaid premium pay, a civil penalty under the Labor Code’s Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) and actual damages or statutory penalties up to $4,000 per employee under Labor Code section 226.

This ruling provides employers with some significant leverage in negotiating with plaintiffs firms because an employer may be able to limit, or eliminate, a significant amount of potential liability if it can establish that it had a good faith belief it was providing complete and accurate wage statements to its employees, even if it ultimately was wrong.

The goal of this article is to provide employers with current labor and employment law information. The contents should neither be interpreted as, nor construed as legal advice or opinion. The reader should consult with Barsamian & Moody at (559) 248-2360 for individual responses to questions or concerns regarding any given situation.