Further Thoughts on Murphy v. Kenneth Cole Productions

We've come up with at least two or three other significant implications of the Murphy decision which we did not mention in our original post regarding the decision.

There were still a few defense firms raising the "no private right of action" argument or the "exhaustion of PAGA remedies" defense. That issue was a likely one to be addressed, yet again, in the Savaglio v. Wal-Mart case (which is summed up in a cool powerpoint slide we found here). Those issues are now dead. Until Murphy, all of the precedent and authority indicated a private right of action and no need to exhaust administrative remedies: from the plain language of Labor Code § 218, to the October 17, 2003 DLSE opinion letter, to the unpublished decision in Banda v. Richard Bagdasarian, Inc., to the published opinions in Caliber Bodyworks v. Superior Court (2005) 134 Cal.App.4th 365 and Dunlap v. Superior Court (2006) 142 Cal.App.4th 330. However, despite the Supreme Court's decisions not to review any of those decisions, defendants continued to argue the points, in the hope of getting the Supreme Court to rule to the contrary. Unfortunately for those advocates, those arguments were premised upon the determination that the hour of pay was a penalty. If it is a wage, there is no question that an employee is entitled under Labor Code § 218 to sue directly for that compensation, and there is no need to raise a complaint with the DLSE or to invoke PAGA.

Secondly, the characterization of such pay as a wage invokes the potential applicability of Labor Code § 206.5, which provides:

No employer shall require the execution of any release of any claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of such wages has been made. Any release required or executed in violation of the provisions of this section shall be null and void as between the employer and the employee and the violation of the provisions of this section shall be a misdemeanor.

Since the hour of pay is a wage, anytime an employer seeks to obtain a waiver and release of liability without actually paying the meal or rest break pay required under section 226.7, section 206.5 might invalidate the releases.

Finally, a few people have wondered whether Murphy now permits employers to force employees to work through meal and rest periods, as long as they pay the extra hour. In Tomlinson v. Indymac Bank, F.S.B. (C.D. Cal. 2005) 359 F.Supp.2d 891, Judge Selna found the hour of pay to be a wage, relying in part upon this comparison to overtime pay:

Just as an understaffed company may make the conscious decision to pay its employees time and a half to work overtime, the same understaffed company also can decide to have its employees forego their meal and rest breaks if it compensates them at a higher rate. In both instances, the employee earns the higher wage by working additional time.

The Court of Appeal decision in Murphy criticized this view:

We disagree with the district court judge's interpretation. While the Labor Code allows employers to require overtime work, albeit at a higher rate of compensation, it does not allow employers to deny meal and rest breaks. [fn.22 "... shall be compensated at the rate of no less than one and one-half times the regular rate of pay ... " with section 512: "An employer may not employ an employee ... without providing the employee with a meal period of not less than 30 minutes ... "]

That criticism (and if we recall correctly, some similar criticism in other opinions superceded by Murphy) is no longer contained in a citeable case. The Supreme Court's opinion in Murphy makes no mention of Tomlinson or anything similar to the views Judge Selna expressed. However, we believe that Section 512's flat prohibition against denying those breaks is not excused by an employer making the payment under Section 226.7, and neither Murphy nor any other California case has hinted, much less held, that an employer can choose to pay the hour and deny their employees breaks without consequence.

Comments

[Carmen]

I noticed the opinion also implies that reporting time and split shift pay are wages, and I assume, also subject to a three year statute of limitation. Is that your reading of it as well? Is that surprising or unremarkable?

[michael walsh]

The opinion reflected prior determinations that split shift pay and reporting time pay were wages. During the oral argument, the plaintiffs made the point that break pay was analogous to split shift pay and reporting time pay, which were wages, and therefore, break pay should be wages, too. So those parts of the opinion are not statements of new law.

[William Becker]

That is a good observation regaridng 206.5. Shortly prior to Murphy, we hashed this issue out at a mediation where I first learned that an employer had strong armed its current employees into releasing meal and rest period claims in exchange for payments of $100. I thought the releases were suspect even in the pre-Murphy environment. Now, they are even more questionable. I anticipate that this will be raised as an issue on class cert motion in the next few months. If the plaintiffs win this issue, I am certain that we will be before the court of appeals. I will follow up as matters develop.