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II. JUDICIAL UPDATE In an extremely important decision, the California Court of Appeal for the First Appellate District held that the required payment to an employee of one-hour’s wages for a company’s failure to provide a meal or rest break to the employee is a “penalty” under California law. California Labor Code section 226.7(b) provides that: “If an employer fails to provide an employee a meal period or rest period in accordance with an applicable order of the Industrial Welfare Commission, 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.” In Murphy v. Kenneth Cole Productions, Inc., the court of appeal held that this extra hour pay is a “penalty” and not “wages.” The distinction is important because the statute of limitations for the recovery of “penalties” is one year, whereas the statute of limitations for the recovery of unpaid “wages” is three years (and can be extended to four years with respect to certain claims). The court confirmed that “the settled rule in California is that statutes which provide for recovery of damages additional to actual losses incurred . . . are considered penal in nature, and thus governed by the one-year period of limitations. . . . Payment imposed on the employer due to impermissible conduct is not an employee benefit given for labor performed, but is a sanction or punishment for failure to provide worker accommodations such as adequate meal breaks.” There has been much discussion and debate regarding the proper classification of these one-hour penalties. It is therefore likely that the matter will be appealed to the California Supreme Court. We will keep you updated with regard to this issue.
If you would like to discuss these or any
other employment law matters, please do not hesitate to contact any member
of Klinedinst's Employment Law
Department.
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