Following remand from the California Supreme Court, a state appellate panel has said that evidence of good faith practice would override workplace litigation brought under certain parts of the state’s Labor Code, opening up new defense options for employers hit with potentially big class action lawsuits over claims they failed to follow California law when paying or firing certain workers.
The Naranjo v. Spectrum Security Services decision helps brings clarity to a segment of wage and hour lawsuits, San Francisco partner Robert D. Eassa of Duane Morris said in an email response to questions from the Northern California Record.
The plaintiff, who was a private security guard employed by Spectrum Security at a federal prison, was fired after allegedly leaving his post while on duty for a meal break, even though the company's policy required all guards to remain on duty with pay. His attorneys later filed a class action lawsuit arguing the company had violated the California Labor Code by not paying him a "meal premium" for that time.
Robert Eassa
| Duane Morris
After the state Supreme Court ruled in Naranjo last year, the Second Appellate District was tasked with determining whether the company’s break policy represented a willful violation of California law by Spectrum.
“The court held that a good faith belief that the employer was following the law defeats a claim under Labor code sections 203 [waiting time penalties] and 226 [wage statement penalties], eliminating the penalties associated with those codes,” Eassa said.
The practical implications, Eassa noted, are that employers now have a defense they never had before.
“Plaintiff’s counsels used to deem payment of the penalties under these two code sections to be owed under the doctrine of strict liability,” Eassa said. “They now have to deal with a substantive defense to such claims.”
The unanimous ruling from a three-justice panel at California's Second Appellate District Court was authored by Justice Brian Currey with justices Audrey Collins and Luis Lavin concurring: “After receiving supplemental briefing following remand, we conclude as follows: (1) substantial evidence supports the trial court’s finding that Spectrum presented defenses at trial—in good faith—for its failure to pay meal premiums to departing employees and therefore, Spectrum’s failure to pay meal premiums was not 'willful' under section 203; and (2) because an employer’s good faith belief that it is in compliance with section 226 precludes a finding of a knowing and intentional violation of that statute, the trial court erred by awarding penalties, and the associated attorneys’ fees, under section 226.”
The appellate panel’s decision was published on Feb. 27.
Eassa described it as favorable to the business community.
“They no longer need to automatically pay for errors they make in the law under these two labor code sections,” Eassa said. “It’s important for everybody: for employees, so they do not bring bad claims; and for employers so they know their rights and that they have a strong defense to these claims now.”