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California Supreme Court: Good Faith Defense on Wage Statement Law

22 May

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Update Applicable to:Effective date
All employersSee details below


What happened?

After 15 years and two Supreme Court appeals, the employer won. The court ruled that reasonable legal misunderstandings due to ambiguities do not constitute “knowing and intentional” violations of Labor Code section 226. The good faith defense applies beyond clerical errors or oversight.


What are the details?

The background

  • The Court of Appeal confirmed the trial court’s decision that Spectrum’s delay in paying meal period premiums was not deliberate, with substantial evidence supporting Spectrum’s good faith.
  • The Court of Appeal disagreed with the trial court’s ruling that Spectrum’s failure to report meal premium pay on wage statements was intentional.
  • If an employer believed it was providing accurate wage statements in good faith, it has not knowingly and intentionally violated California’s wage statement law, even if it was mistaken.

The California Supreme Court Decision

  • The California Supreme Court agreed with the Court of Appeal below and concluded that the good faith defense applies to claims for penalties under Labor Code section 226.
  • To be entitled to penalties, an employee must prove the employer’s failure to comply was both knowing and intentional.
  • Proof of non-willfulness or intent is still required, and the ruling does not guarantee immunity for employers.

Conclusion

  • The good faith defense can protect employers from significant penalties for inaccurate wage statements, but they must prove a reasonable belief of compliance.
  • This ruling does not simplify compliance with the Labor Code and Wage Orders, but it provides some relief for employers defending such claims.
  • The affirmation of the good faith defense may lead to a reevaluation of claim values by employees’ attorneys.


Business Considerations

  • Employers should ensure that their wage statements comply with the law, including accurate reporting of all forms of compensation such as meal premium pay (if applicable). Provide compliant meal breaks to avoid any potential claims.
  • Employers should maintain a good faith belief that they comply with all labor laws. This could potentially protect them from penalties in case of unintentional noncompliance.
  • Employers should keep thorough records of all wage statements and meal breaks provided. This can serve as evidence of their compliance in case of a dispute.
  • Employers should be proactive in addressing any potential wage statement inaccuracies or meal break issues. They should promptly correct any mistakes and communicate with employees about these corrections.


Source References


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This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

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