Employer Prevails in Major Case in California: No Monetary Penalties if Reasonable, Good Faith Dispute Over Wages

On May 6, 2024, the California Supreme Court issued a decision in favor of employers. In the case of Naranjo v. Spectrum Sec. Servs., Inc., the state’s top court found that employers are not liable for monetary penalties if there is a reasonable and good faith dispute over whether wages were owed to an employee. Here, our California employment attorney for employers discusses the decision in more detail.

 Case Review: Naranjo v. Spectrum Sec. Servs., Inc. 

Background and Facts 

Gustavo Naranjo was employed as a security guard for Spectrum Security Services, Inc. Mr. Naranjo filed a proposed class action wage and hour lawsuit against his employer for alleged meal and rest break violations under California law. The claim was filed after Mr. Naranjo was allegedly disciplined and eventually terminated for taking a meal break that violated the company’s policies. Mr. Naranjo countered that he had a right to take such a break under California state wage and hour law.

The Legal Issue 

The central legal issue, in this case, revolved around the proper compensation and reporting of meal and rest break premiums. Specifically, the court needed to determine if employers must pay a premium for missed meal and rest breaks and if these payments should be reflected accurately on wage statements. After complicated legal proceedings, the court issue at stake before the California Supreme Court was the following:

• Can an employer be held liable for statutory penalties for inaccurate wage statements under California Labor Code (“LC”) Section 226 if they made a good faith mistake?

 The Decision 

Upon review, the California Supreme Court ruled in favor of the employer on the key question of statutory penalties under California LC 226. The court found that while an employer can be held liable for statutory financial penalties for an LC 226 violation, the court will not impose these financial sanctions if an employer operated under an “objectively reasonable, good faith belief” that it had properly furnished its employees with “adequate wage statements.”

 The Implications for Employers 

California has some of the most employee-friendly labor laws in the entire country. All businesses and organizations in California need to ensure that wages are paid in full and in a timely manner. Employers must provide accurate wage statements to their employees to comply with the requirements of California LC 226. The California Supreme Court has determined that statutory financial penalties will not be imposed against an employer for an LC 226 violation if an error occurred by an employer that was operating with an “objectively reasonable, good faith belief.”

 Get Help From an Employment Lawyer in California

At Sloat Law Group, we are driven to help employers in California effective workplace solutions. If you have any questions or concerns about a labor law matter, please do not hesitate to call us now or contact us online to arrange a confidential initial consultation. Our firm represents employers in Coachella Valley, Riverside County, and throughout California.

Source: 

courts.ca.gov/opinions/documents/S279397.PDF