California Supreme Court rules in favor of company in meal break penalty case

The state Supreme Court ruled Monday that a company that failed to pay employees extra money for missed meal breaks cannot be penalized if its error in following the California Labor Code was not "knowing and intentional."

The ruling is the second one by the court in a class action against Spectrum Security Services Inc., which ruled in May 2022 that the security guard plaintiffs are entitled to "premium pay" for missed or noncompliant meal or rest breaks.

The question in Monday's decision is whether Spectrum Security is liable for penalties if it had a "good faith belief" that it complied with the Labor Code, precluding plaintiffs from recovering penalties.

Resolving a question that has divided federal and state appellate courts, Justice Leondra R. Kruger - an appointee of Gov. Jerry Brown who wrote for a unanimous court - ruled for the company.

"We now conclude that if an employer reasonably and in good faith believed it was providing a complete and accurate wage statement in compliance with the requirements of [Labor Code] section 226, then it has not knowingly and intentionally failed to comply with the wage statement law," Kruger wrote. Naranjo et al. v. Spectrum Security Services, 2024 DJDAR 3799 (Cal. S. Ct., filed April 7, 2023).

The decision in the long-running class action, a rare wage-and-hour class action that was tried to a jury verdict and has been on appeal for more than a decade, represents an increasingly rare victory for employers in the state high court.

"There haven't been a lot of wins before the California Supreme Court for employers," said Duane Morris LLP partner Paul J. Killion, who represents the company, which operates as a federal contractor, transporting prisoners and detainees to court hearings and hospitals.

The class won a $4.2 million verdict due to the court's 2022 decision, but plaintiffs' attorney Jason C. Marsili - a partner with Rosen Marsili Rapp LLP - was seeking an additional $400,000 in penalties. "Our position is that ignorance of the law is never a viable defense," he said in a phone interview.

But Killion countered that the law was "unclear and unsettled," noting a host of appellate rulings that reached different conclusions, leaving his client uncertain about what it should do.

"Courts were coming out both ways," he said in a phone interview.

Kruger sided with him, ruling that the Labor Code is "best read to allow for a defense based on good faith belief in compliance. ... An employer that believes reasonably and in good faith, albeit mistakenly, that it has complied with wage statement requirements does not fail to comply with those requirements knowingly and intentionally."

The long-running case, which dates to wage disputes going back to 2007, is still not over, Marsili said, as part of claims concerning rest breaks has not yet been resolved and will be returned to Los Angeles County Superior Court.

Spectrum Security Services attracted amicus briefs from the California Employment Lawyers Association, in support of Naranjo, and several employer groups, including the U.S. and California Chamber of Commerce.