Tuesday, April 17, 2007
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High Court Rules for Workers on Statute of Limitations
By TINA BAY, Staff Writer
Remedial pay to which an employee is entitled for rest and meal period violations constitutes a “wage” rather than “penalty” for statute of limitations purposes, the state Supreme Court ruled yesterday.
The justices unanimously affirmed San Francisco Superior Court Judge Anne E. Bouliane’s decision to apply a three-year statute of limitations to John Paul Murphy’s claim for rest and meal period violations against Kenneth Cole Productions, Inc. The defendant and a number of employer organizations argued that a one-year statute applied.
While a store manager in one of Kenneth Cole Productions’ retail clothing stores from June 2000 to June 19, 2002, Murphy regularly worked nine- to ten-hour days during which he was only able to take an uninterrupted, duty-free meal period about once every two weeks. Paid a weekly salary, he rarely had the opportunity to take a rest period amidst his responsibilities, which included attending to customers, working in the stockroom, cleaning and completing human resources paperwork.
On October 16, 2002, Murphy filed a wage claim with the Labor Commissioner raising claims for unpaid overtime and waiting time penalties. He did not make claims for rest and meal period because he was unaware at the time that he could, he later testified.
Following a hearing, the Labor Commissioner issued a July 14, 2003 decision in Murphy’s favor awarding him unpaid overtime, interest and waiting time penalties. His former employer filed a notice for de novo review of Murphy’s claims.
At the de novo trial, Murphy, represented by the Division of Labor Standards Enforcement and the Hastings College of the Law Civil Justice Clinic, asserted additional claims for meal and rest period and itemized pay statement violations. Bouliane considered the new claims over the defendant’s objection, on the basis of judicial economy.
Murphy’s meal and rest period claim was based on Labor Code Sec. 226.7, which prohibits employers from requiring employees to work during any meal or rest periods mandated by the Industrial Welfare Commission. If an employer violates the meal and rest requirements, it states, “the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each work day that the meal or rest period is not provided.”
Murphy’s belated Sec. 226.7 claim would have been viable only if it were subject to the three-year statute of limitations of Code of Civil Procedure Sec. 338(a)—which applies to “any action upon a liability created by statute, other than a penalty or forfeiture”—instead of the one-year statute of limitations governing claims for penalties. Reasoning that the “one additional hour of pay” Murphy sought was primarily compensation for working through rest and meal periods, not a penalty against his employer, Bouliane concluded the three-year statute applied.
She ultimately awarded him payments for meal and rest period violations beginning in October 2000.
Reversing Bouliane’s ruling as to the Sec. 226.7 claims, Div. One of the First District Court of Appeal held the remedial pay set forth in that section amounted to a penalty rather than a wage because its purpose was to shape employer behavior and it was imposed without regard to the actual loss suffered. The one-year limitations applied to bar Murphy’s claim, the panel said.
Moreover, it concluded, claims may not be raised for the first time on de novo appeal from an administrative hearing in front of the Labor Commissioner.
Writing for the high court, Justice Carlos R. Moreno said the Legislature’s primary intent in enacting Sec. 226.7 was to compensate employees for their injuries.
The original version of the bill proposing Sec. 226.7 contained both a payment and penalty provision, and the remedies were described by legislative committees disjunctively as “damages or penalties” to clarify that payments were not considered penalties, he explained.
The fact that lawmakers later deleted the penalty provision is further evidence courts should not read the Sec. 226.7 remedy as a penalty, Moreno said.
“Indeed, the Legislature certainly knows how to impose a penalty when it wants to, having established penalties in many Labor Code Statutes by using the word ‘penalty,’” the justice wrote, noting that any “behavior-shaping purposes” Sec. 226.7 serves are incidental.
He went on to say:
“Section 226.7 pay is not transformed into a penalty merely because a one-to-one ratio does not exist between the economic injury caused by meal and rest period violations on the one hand and the remedy selected by the Legislature on the other hand. The Legislature has assigned different amounts to compensate employees for certain kinds of labor or scheduling resulting gin a detriment to the employee. Courts have long recognized that the monetary value of harm to employees can be difficult to ascertain.”
Moreno also concluded the trial judge had broad discretion to consider Murphy’s Sec. 226.7 claim at the de novo trial even though he had not raised it before the Labor Commissioner.
Counsel who argued in the Supreme Court were San Francisco attorney Robert W. Tollen, of Seyfarth Shaw, for the defendant, and Donna M. Ryu of the Hastings Civil Justice Clinic for the plaintiff. Los Angeles attorney Steven Drapkin argued for several organizations that filed an amicus brief on behalf of defendant, including the U.S. and California chambers of commerce.
The case is Murphy v. Kenneth Cole Productions, Inc., 07 S.O.S. 1870.
Copyright 2007, Metropolitan News Company