232 | 2024 Cal-Peculiarities ©2024 Seyfarth Shaw LLP www.seyfarth.com “premium wage.”307 Murphy justified its result with repeated references to the California rule that “statutes governing conditions of employment are to be construed broadly in favor of protecting employees,” even though the relevant provision, a statute of limitations, appears not in the Labor Code but in the Code of Civil Procedure.308 7.10.2 Potential implications of treating meal payments as wages Murphy’s decision to characterize the extra hour of pay as a wage implicated several issues: The limitations period for a wage claim is three years (for violation of a statutory obligation to pay wages) instead of the one-year period for a penalty claim. Murphy held that the limitations period for a meal-pay claim under the Labor Code was three years. (And the period could be four years when plaintiffs sue, as they typically do, under the Unfair Competition Law as well.) Restitution for unpaid wages is available under California’s Unfair Competition Law,309 with its four-year statute of limitations.310 Is the extra hour of pay subject to recovery as restitution? One might think the correct answer is ”no,” as the extra hour of pay is a wage earned through labor. But the Supreme Court in 2022 held that meal premiums—due because of meal-period violations—indeed are “earned wages.”311 Tax withholding and employer taxes would be required on payments of wages. Does the extra hour of pay amount to wages for tax purposes? (The IRS has suggested that the answer is yes.)312 Attorney fees are recoverable for a wage claim.313 Would a claim for the extra hour of pay entitle the prevailing party to attorney fees? California does have a Labor Code provision authorizing the award of attorney fees in a case claiming unpaid wages, but the California Supreme Court, in a case where the employer won and sought attorney fees, held that a claim for meal pay is not a claim for wages and that therefore the employer could not recover its attorney fees. (See § 5.12.) Prejudgment interest is recoverable on a wage claim at the rate of ten percent per annum, under Labor Code section 218.6.314 Is the extra hour of pay subject to prejudgment interest? The answer is “yes,” but the interest rate is the constitutionally provided rate of seven percent instead of the ten percent rate that section 218.6 provides.315 All earned wages are due upon discharge of employment.316 Is the extra hour of pay a wage that must be paid by the time employment terminates? Though multiple Court of Appeal decisions have said ”no,” the Supreme Court in a 2022 decision said ”yes.” (See § 7.5.3.) Additional civil penalties might apply under PAGA (see § 5.15). Is the extra hour of pay itself a civil penalty or does PAGA create a civil penalty on top of the extra hour of pay? Some plaintiffs, as if to prove the axiom that “no good deed goes unpunished,” have sought PAGA penalties as to each meal premium an employer has paid, on a theory that the payments reflect employer admissions that the employer had failed to provide a meal period. Courts have disagreed on whether the extra hour of pay itself functions as a “civil penalty” such that PAGA would not create an additional civil penalty.317 But even if an extra PAGA penalty applies with respect to unprovided meal or rest or recovery periods, an employer’s administrative practice of automatically paying premium pay for each short, late, interrupted, or missed meal period would not be an admission that the employer had failed to provide a meal period.
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