46 Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) Seyfarth Shaw LLP | www.seyfarth.com under the Unfair Competition Law, thereby extending the limitations period for recovery of premium pay to four years?235 And are employers liable for waiting time penalties under Section 203 if they do not pay all meal and rest premium pay at termination, and penalties under Section 226, if they do not list unpaid, but owed, premium pay on wage statements? In 2022, the California Supreme Court in Naranjo v. Spectrum Security Services, Inc.236 dealt a blow to employers by holding that meal and rest period premium payments are, indeed, subject to the final pay timing requirements of Labor Code section 203, as well as the wage statement reporting requirements of Labor Code section 226(e).237 Thus, plaintiffs pursuing meal and rest break claims can also pursue derivative claims seeking waiting time and wage statement penalties, and the settlement value of such claims will increase. However, employers can assert the ”good faith dispute defense” to preclude an award of waiting time and wage statement penalties.238 C. Meaning of “Provide” a Meal Period Following the Supreme Court’s ruling in Murphy v. Kenneth Cole,239 the most hotly debated issue in meal period law was whether the employer complies with its duty to “provide” a meal period by making the meal period available for an employee to take, or whether the employer is liable whenever it fails to require an employee to actually take a timely, uninterrupted thirty-minute meal break. The implications are significant for class actions because it is much more difficult for plaintiffs to argue that common issues predominate in a case if the employer can defend itself merely by establishing that individual employees have had a bona fide opportunity to take a meal break. By contrast, under the “mandatory” interpretations, the employer is very limited in its ability to raise individualized issues as to why the employees failed to take their meal breaks. If compliant meal breaks are not documented in the employer’s records, a jury could determine liability on a class-wide basis based solely on the employer’s records. Aside from the issue of class action liability, a “mandatory” interpretation would also require employers to overhaul oversight of employee meal breaks. In order to comply with the law, employers would have to implement systems 235 This question remains unresolved. Employers can argue that meal and rest premiums should not be recoverable as restitution under the UCL, because the employee did not perform labor to earn the premiums, and thus has no “ownership interest” in the premiums. See Pineda v. Bank of America, 50 Cal. 4th 1389, 1401-02 (2010) (“permitting recovery of [Labor Code] penalties via the UCL would not ‘restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest.’”). 236 Naranjo v. Spectrum Security Services, Inc., 13 Cal. 5th 93 (2022). 237 Id. at 102. 238 Diaz v. Grill Concepts Servs., Inc., 23 Cal. App. 5th 859, 868 (2018) (a good faith dispute exists when there is “(1) uncertainty in the law;” “(2) representations by the . . . authorit[ies] that no further payment was required;” or “(3) the employer’s good faith mistaken belief that wages are not owed.”) (citing Cal. Code Regs. Tit. 8, § 13520); Naranjo v. Spectrum Sec. Servs., Inc., 88 Cal. App. 5th 937, 941 (2023) (holding that “substantial evidence support[ed] 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”). 239 Murphy v. Kenneth Cole Productions, Inc., 40 Cal. 4th 1094 (2007)
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