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California Supreme Court Round Up

by Jennifer Shaw and Melissa Whitehead | The Daily Recorder | October 11, 2022

The California Supreme Court issued several employment law decisions during the past year.  We summarize below the most important of these rulings.

Naranjo v. Spectrum Security Services, Inc.

Under California law, employers who require a non-exempt employee to work during all or part of a meal or rest period must pay that employee an additional hour of pay. In Naranjo, the plaintiff’s employment was terminated when he left his post for a meal break. He subsequently filed a class action lawsuit, alleging meal and rest period violations and that his employer did not pay meal period premiums when it failed to provide compliant meal periods. Naranjo alleged Spectrum failed to report those premiums on employee wage statements and timely provide the premiums to employees upon separation from employment.

The trial court awarded plaintiff (and the class) meal period premiums and wage statement violation penalties, but not waiting time penalties. The appellate court affirmed the award of meal period premiums, but held that meal period violations do not entitle employees to “derivative” waiting time and wage statement penalties. The appellate court reasoned that meal period premiums are legal remedies, not wages, and so penalties for nonpayment of wages do not apply.

The California Supreme Court disagreed, and held that such premiums are “wages,” which must be identified on employees’ wage statements and must be paid within statutory deadlines when an employee leaves the job. The Court reasoned that in addition to compensating for the “unlawful deprivation of a guaranteed break,” the premiums also compensate for work performed during the break period. The Court also held that a seven percent prejudgment interest rate applies to amounts due for failure to provide meal and rest periods.

Grande v. Eisenhower Medical Center

The California Supreme Court issued an important reminder to staffing agencies and the employers who work with them – because there is always a potential joint employer relationship, both parties should be involved in any litigation related to shared employees. In Grande, a staffing agency placed a nurse at Eisenhower Medical Center, where she worked for about one week. The staffing agency and the hospital had a standard agreement, in which the staffing agency retained “total legal responsibility as the employer” of the nurse, including the responsibility to ensure compliance with wage and hour requirements, and agreed to indemnify the hospital for some obligations under the staffing arrangement. The nurse used the hospital’s time and attendance systems and the hospital scheduled her shifts.

The nurse filed a class action lawsuit against the staffing agency, alleging various wage and hour violations. The hospital was not a party in that suit. The nurse and staffing agency reached a stipulated settlement agreement, which barred all class members from prosecuting certain claims against the “Released Parties.” The staffing agency and its “agents” were listed as “Released Parties,” but the hospital was not expressly included.

The nurse then filed another class action lawsuit, this time against the hospital, alleging wage and hour violations on behalf of nonexempt employees placed at the hospital by any staffing agency. The hospital claimed that plaintiff was precluded from pursuing her claims against the hospital because it was entitled to the benefit of the release from the first lawsuit. The trial court, appellate court, and California Supreme Court all agreed that the nurse could pursue her claims against the hospital because the hospital was not included as a releasee in the settlement agreement. The Court also held that the hospital was not “in privity” with the staffing agency and was not bound by the stipulated judgment against the staffing agency.

Lawson v. PPG Architectural Finishes, Inc.

Labor Code section 1102.5 protects employees from retaliation for reporting employers’ violations of federal or state law or regulations to government agencies. Historically, to prevail on a retaliation claim, employees must first prove that the adverse employment action was caused by their protected activity. The employer must then show a legitimate, non-retaliatory business reason for the adverse employment action, which the employee may rebut by proving the claimed legitimate reason was merely pretext.

In Lawson, the Court held that the traditional burden shifting test does not apply to Section 1102.5 claims. Instead, those claims are governed by Section 1102.6, which requires an “employee-whistleblower” to establish by a preponderance of the evidence that retaliation was a contributing factor in the adverse action. The employer then must prove by clear and convincing evidence that it would have taken the same action “for legitimate, independent reasons.”

Future Cases

The Court will decide several consequential employment law cases in the months to come. In Adolph v. Uber Technologies, Inc., the Court is expected to address questions left open in the United States Supreme Court’s decision, Viking River Cruise, Inc. v. Moriana.

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