Wage Law

One of the hottest topics being discussed by California wage and hour attorneys -- especially in class action mediations -- is whether the premium pay under Labor Code § 226.7 is a wage or a penalty. If it is a penalty, then the one-year statute of limitations under Code of Civil Procedure § 340(a) applies. If it is a wage, then Code of Civil Procedure § 338(a) applies a three-year statute, and an unfair competition claim under Business & Professions Code § 17200 could reach back four years. Furthermore, if it is a wage, then the prevailing party in an action to recover such pay could recover attorney's fees, and employees could be entitled to additional "waiting time" penalties if the extra hour of pay was not provided.

The DLSE has long considered the pay a wage, but no appellate court has weighed in on the issue in a published opinion. That is likely to change next month. The Fourth District Court of Appeal, Division Two, has issued a tentative ruling and set oral arguments in Orco Block Co., Inc. v. DeGonia et al., case no. E036955, a writ proceeding. The tentative opinion deems such pay a penalty. The matter will be heard on June 7, 2005, even though the petitioner/employer had written a letter to the court asking that the case not be expedited because the parties were in settlement discussions.

Assuming that the opinion is published soon thereafter, the Fourth District will have acted much more swiftly than the First District, which has granted several briefing extensions in the case of Murphy v. Kenneth Cole Productions, Inc., case no. A108346, the other pending case that addresses the same issue. Murphy is a individual misclassification case in which the San Francisco Superior Court, in a bench trial, made legal findings that 226.7 compensation constituted a wage. The case was appealed in July 2004, and the respondent's brief is due June 24, 2005. By then, the Fourth District's opinion may well be published and subject to a petition for review.