Case Details and Video Transcript:

IN THE SUPREME COURT OF

CALIFORNIA

GUSTAVO NARANJO et al.,

Plaintiffs and Appellants,

v.

SPECTRUM SECURITY SERVICES, INC.,

Defendant and Appellant.

S279397

Second Appellate District, Division Four

B256232

Los Angeles County Superior Court

BC372146

May 6, 2024

After holding that missed-break- premium-pay constituted “wages” subject to timely payment and reporting requirements under the California Labor Code in the 2022 case of Naranjo v. Spectrum Security Services, Inc., the California Supreme Court took up a second issue from the same case. Having established that Spectrum should have treated employees’ premium pay for missed breaks as wages, the Court now was tasked to decide whether the conditions were met for Labor Code section 203 and 226 penalties to be imposed on Spectrum for the violations.

Upon review, the California Supreme Court affirmed the Court of Appeal’s holding in favor of Spectrum. With respect to the section 203 waiting time penalty, the Court agreed that the penalty should not be imposed because Spectrum’s failure to timely pay meal period premiums was not “willful” as substantial evidence supported the conclusion that Spectrum had a good faith basis for believing in the legality of its actions. Importantly, at the time of the violations, it had not yet been conclusively established that premium pay for missed breaks constituted “wages.”

As for the section 226 penalty for failure to record the premium pay in wage statements, the Supreme Court agreed with the Court of Appeal’s reasoning that the section 203 “willfulness” requirement and the section 226 “knowing and intentional” requirement were substantially identical, so the same finding of good faith that precluded the section 203 penalty should also preclude the section 226 penalty.

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