Wages and Penalties Update

In Caliber Bodyworks Inc. v. Superior Court, (2005) 134 Cal. App. 4th 365, in a footnote, the 2nd District Court of Appeal characterized Labor Code § 226.7 remedies as penalties:

Under Labor Code § 226.7 an employer failing to provide an employee a meal period or rest period in accordance with the applicable IWC wage order is liable to the employee for one additional hour of pay at the employee's regular rate of compensation for each day's violation. Although section 226.7 does not expressly label this payment a "penalty," it is in the nature of a statutory penalty because it requires the employer to pay more than the value of the missed meal or rest period. The section 226.7 payment does not compensate the employee for any extra time worked but rather punishes the employer for its failure to provide the meal or rest period mandated by the IWC. (See Hartwig v. Orchard Commercial, Inc. (2005) (Cal. Div. Labor Stds. Enforcement, May 11, 2005, No. 12-56901RB) [as of November 21, 2005] [designated a Precedent Decision of Division of Labor Standards Enforcement and finding section 226.7 payment a penalty because its purpose is to enforce the meal and rest period requirements and deter noncompliance rather than to compensate the employee].)

The time for seeking Supreme Court review expires soon, and we do not know if the plaintiff's lawyer, Anthony Luti, is seeking review. If he does not, a remittitur will issue on January 23, 2006.

The more interesting opinion is the December 2, 2005 Murphy v. Kenneth Cole Productions case. The full opinion can be read here. After a lengthy discussion of the arguments raised by both sides, the court stated:

"We conclude that the payment imposed for impermissibly failing to provide a meal or rest break is a penalty. As a penalty, it had to be raised within one year of the last date that the claim accrued."

Oddly enough, because of the procedural holdings of the court (that Murphy was not entitled to bring a new claim under section 226.7 in the de novo appeal from the ODA) arguably the "penalty" ruling is dicta. Nonetheless, the court discussed it at length and if the decision stands, it will become the guiding authority for every trial court in the state. Right now, the decision is prompting more motions in our caseload than any decision we have ever seen. Here, too, the time for seeking Supreme Court review expires soon, but we are all but certain that the plaintiff's lawyers will be filing a petition for review.

In Mills v. Superior Court, we were expecting an opinion (and one construing the remedies as a penalty) by January 3, 2006. So far, however, there is no decision.

In Norm's Restaurants, Inc. v. Superior Court, the 4th District, Division 3 has not yet ruled upon the employer's writ petition or requested further briefing.

In National Steel and Shipbuilding Company v. Godinez, the issue was argued on December 16, 2005, and an opinion is expected by March 2006.

And finally, in Banda v. Richard Bagdasarian, Inc., the case has been fully briefed since March 2005, but there is no argument set or tentative ruling yet issued.

If you know of any other appeals pending regarding the wage/penalty issue under Labor Code § 226.7, please let us know.

Comments

[Lawyer Attorney]

Great Legal Resources accident personal injury attorneys.

[Lawyer Attorney]

Great Legal Resources accident personal injury attorneys.

[greedy associate]

I also disagree that Murphy's statue of limitations discussion is dicta. We had a plaintiff's lawyer argue that in a recent motion, and the court agreed with us, that the penalty language is an alternate holding, not dicta.

[dogfacegeorge]

I think the Caliber Bodyworks footnote is dicta. The court defined the term "civil penalty" found in LC 2699 as a penalty paid to the labor law agencies (at least pre-LC 2699). According to the court, neither "wages" nor "statutory penalties" -- defined by the court as penalties paid to the employee -- are included within the term "civil penalty."

So all the court had to decide was whether the LC 226.7(b) remedy was previously paid to the labor law agencies or to the employee. If it was paid to the employee, which of course it was, then it could not be a "civil penalty." The court had no reason to go further and decide WHY the remedy was paid to the employee, that is, whether it was paid because it was a "wage" or because it was a "statutory penalty."

By the way, as far as I can tell the court created its definition of "statutory penalty" out of whole cloth. I find it amusing that a "civil penalty" created by statute is not a "statutory penalty." If the adjective "statutory" in this sense does not mean "created by statute," then I for one have no idea what, exactly, it does mean.

[michael walsh]

Dicta is the part of a judicial opinion which is merely editorializing, extraneous material which is merely informative or explanatory. If the discussion is not a necessary part of the legal reasoning needed to reach the decision in a case, it is dicta. And here is why I think the penalty analysis is dicta, rather than an alternate basis for the decision:

"Footnote 16: The trial court stated that Murphy's new claims could be raised for the first time in the superior court and, once raised, the claims “relate[d] back” to the date of the original wage claim in October of 2002. (See, e.g., Cuadra v. Millan (1998) 17 Cal.4th 855, 867, 870 [filing of administrative wage complaint fixes date on which action is commenced for purposes of statute of limitations].) Although KCP has not challenged the court's decision to relate the appellate claim back to the date of filing the original claim, our holding that Murphy cannot add new penalty claims on appeal makes it unnecessary to discuss the doctrine of relation back."

The court deliberately chose not to address the relation back doctrine. If the one year statute was an alternate ground for reversal, the relation back doctrine was a necessary part of the analysis. It was not discussed. Why? Because the holding was founded entirely upon the procedural issue of whether new issues could be added by a plaintiff in a de novo appeal. And, in fact, if the claims did relate back (a matter which the appellant did not challenge), then even a one-year penalty statute did not bar the claims, as the original complaint was filed well within one year.