A battle over how much liability employers bear when they violate state laws governing employees' breaks may have to be decided by the California Supreme Court.
On Friday, the 2nd District Court of Appeal agreed with Bed, Bath & Beyond that payments it may owe current and former employees for missed meal and rest periods constitute penalties, rather than wages.
"We read §226.7 [of the state Labor Code] as imposing a penalty on employers who fail to ensure mandated break periods are provided to their employees," wrote 2nd District Justice Orville Armstrong for a unanimous panel in Mills v. Superior Court (Bed, Bath & Beyond). Justices Paul Turner and Richard Mosk concurred.
"It's a huge victory for employers in our wage-and-hour class action world," said Thelen Reid & Priest partner David Buffington, who represented Bed, Bath & Beyond. "It effectively limits potential liability in these enormous class actions by 75 percent."
Not so fast, say plaintiffs lawyers.
The 4th District on Jan. 20 issued a contradictory opinion in National Steel and Shipbuilding v. Superior Court (Godinez). In that case, the appeal court said the payments were wages, not penalties.
That means violations could be subject to a longer statute of limitations. If the missed meal breaks are wages, then employees can seek restitution under Business & Professions Code §17200 going back four years, among other things. If they're penalties, the limit is one year.
Last month, San Francisco's 1st District decided in Murphy v. Kenneth Cole Productions (modified here) that the payments were penalties.
"What has happened is that you have a split of authority and you have a clear conflict between the appellate courts of our state," says Jessica Grant, a partner at The Furth Firm who recently won a $172 million verdict against Wal-Mart in a meal break class action. "It makes the petition for review more likely to be granted by the California Supreme Court in the Murphy v. Kenneth Cole case."