This article is Part 2 of a two-part series regarding recent California Supreme Court decisions in employment law.

Kirby v. Immoos Fire Protection, Inc. – April 30, 2012

In this case, the plaintiffs/employees sued Immoos Fire Protection (“IFP”) for various California wage and hour violations, including failure to provide rest breaks under Labor Code section 226.7. Section 226.7 provides that if an employer fails to provide required rest breaks and meal periods, the employer must pay affected employees one hour’s pay at their regular rate of compensation, in additional to all other wages owed. At some point in the litigation, the plaintiffs dismissed their rest break claim. IFP then moved to recover its attorneys’ fees under Labor Code section 218.5. Under that section, the court should “shall” award attorney’s fees and costs to the “prevailing party” in any “action brought for the nonpayment of wages.”

The trial court granted IFP’s request for fees and costs, and the California Court of Appeal affirmed that decision. However, the California Supreme Court disagreed, holding that section 218.5 does not apply to claims under section 226.7. The Court decided that claims under section 226.7 are not “action[s] brought for the nonpayment of wages” within the meaning of section 218.5. Rather, in the Court’s view, section 226.7 is “primarily concerned with ensuring the health and welfare of employees by requiring that employers provide meal and rest periods as mandated by the [Industrial Welfare Commission].” Thus, an action brought under section 226.7 is for the “nonprovision of meal and rest periods, not for the ‘nonpayment of wages.'”

The Court’s ruling is particularly interesting when considered in light of its prior decision in Murphy v. Kenneth Cole Productions., 40 Cal. 4th 1094 (2007). In that case, the Court ruled that the remedy available under section 226.7 (i.e., one hour of pay at the employee’s regular rate of compensation) should be treated as a wage and not a penalty. (That is a critical distinction when determining the applicable statute of limitations-three years for “wage” claims and one year for “penalty” claims.) Under the Murphy rationale, then, section 281.5 should have applied.

However, the Court in Kirby avoided this issue by reasoning that “[n]onpayment of wages is not the gravamen of a section 226.7 violation.” In the Court’s view, it is the failure to provide a meal or rest break, and not the failure to pay an additional hour of pay, that “triggers” a section 226.7 violation. Accordingly, attorney’s fees and costs are not available under section 218.5 for violations of section 226.

Pending Cases

There are also several important employment-related cases currently pending before the Court:

Duran v. U.S. National Bank Association: The Court will address what is required to properly certify wage and hour class actions and the appropriate use of representative testimony and statistical evidence at trial.

Harris v. City of Santa Monica: The Court will determine whether the “mixed-motive” defense applies to employment discrimination cases under California’s Fair Employment and Housing Act, where an employee claimed she lost her job because of poor performance (a legal reason) and because she was pregnant (an illegal reason).

Ralphs Grocery Co. v. United Food & Commercial Workers Union Local 8: The Court will decide whether the parking area and walkway in front of a grocery store is a public forum where employees may picket during labor disputes.

Sanchez v. Valencia Holding Co. LLC: The Court will determine whether the Federal Arbitration Act, as interpreted in by the United States Supreme Court in AT&T Mobility LLC v. Concepcion, preempts state law rules invalidating mandatory arbitration provisions in a consumer contract.

Salas v. Sierra Chemical Co.: The Court will decide whether a court may properly dismiss an employee’s claims under the Fair Employment and Housing because the employee used false documentation to obtain employment.

Sonic äóñ Calabasas v. Moreno: In 2011, the Court held that requiring employees to waive their right to an administrative hearing before the California Labor Commissioner (a “Berman” hearing) was against public policy and therefore unconscionable. However, the United States Supreme Court vacated the Court’s decision and remanded it for reconsideration in light of the U.S. Supreme Court’s ruling in AT&T Mobility LLC v. Concepcion. In Concepcion, the U.S. Supreme Court ruled that the Federal Arbitration Act preempts California case law prohibiting arbitration agreements that exclude class actions.

Wisdom v. Accentcare, Inc.: The Court will address whether an employment application stating, “I agree to submit to binding arbitration all disputes and claims arising out of the submission of this application,” creates a mutual agreement to arbitrate all employment disputes.

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The California Supreme Court continues to be active in deciding matters of significance to California employers. Thus, employers must remain aware of these new legal developments and modify existing employment policies and practices accordingly.