Wage Law

Murphy v. Kenneth Cole Productions, Inc., the pending case that will determined whether meal and rest break pay is a penalty or a wage, has another companion case. The Supreme Court has granted review of a writ petition denial in Dunn v. Superior Court (Kroger Company). Review was granted and the case held pending determination of Murphy:

Application for stay and petition for review GRANTED. Further action in this matter is deferred pending consideration & disposition of a related issue in Gentry v. Superior Court, S119334 and Murphy v. Kenneth Cole Productions, Inc., S140308 (see Cal. Rules of Court, rule 8.512(d)(2)), or pending further order of the court. Submission of additional briefing pursuant to Cal. Rules of Court, rule 8.520, is deferred pending further order of the court Votes: George, C. J., Kennard, Baxter, Werdegar, Chin & Moreno, JJ. Corrigan, J., was absent and did not participate.

The case also awaits determination of Gentry v. Superior Court, which will determine to what extent the Discovery Bank case applies to class action waivers in arbitration agreements that purport to govern wage and hour claims.

We recently had a defendant assert, in a mediation brief, that the majority of federal courts that have addressed the "wage or penalty" issue under under Labor Code § 226.7 have held that the compensation paid under Section 226.7 is properly characterized as a penalty. There are two such decisions. However, there are actually at least four federal decisions characterizing the pay as a wage:

1. Tomlinson v. Indymac Bank, F.S.B. (C.D. Cal. 2005) 359 F. Supp. 2d 89;
2. Cornn v. United Parcel Service, Inc. (N.D. Cal. 2006) 2006 U.S. Dist. LEXIS 20095;
3. Abbe v. City of San Diego (S.D. Cal 2006) 2006 U.S. Dist. LEXIS 79010; and
4. Wang v. Chinese Daily News, Inc. (C.D. Cal., 2006) 435 F. Supp. 2d 1042, 1058-1059, 11 Wage & Hour Cas. 2d (BNA) 998.

Conversely, two cases hold it to be a penalty:

1. Corder v. Houston's Restaurants, Inc. (C.D. Cal 2006) 424 F.Supp 2d 1205, 1209-1210;
2. Pulido v. Coca-Cola Enterprises, Inc. (C.D. Cal May 26, 2006) 2006 WL 1699328.

There is still no argument date set for Murphy. Many state and federal courts have stayed pending class actions while awaiting the outcome of Murphy (See e.g., Filion v. Ethan Allen Retail, Inc., 2006 U.S. Dist. LEXIS 79861 [stayed until May 2007]) or deferred ruling on the issue (e.g., Toll v. Digirad Corp., 2006 U.S. Dist. LEXIS 52757, West v. Circle K Stores, Inc., 2006 U.S. Dist. LEXIS 25164).