Murphy v. Kenneth Cole Productions, Inc.

56 Cal.Rptr.3d 880

40 Cal.4th 1094

155 P.3d 284

John Paul MURPHY, Plaintiff and Respondent, v. KENNETH COLE PRODUCTIONS, INC., Defendant and Appellant.

No. S140308.

Supreme Court of California.

April 16, 2007.

Seyfarth Shaw, Robert W. Tollen, San Francisco, and George E. Preonas, Los Angeles, for Defendant and Appellant.

Cooley Godward Kronish, Michelle C. Doolin, Lori R.E. Ploeger, Leo P. Norton and Kelly A. Weber, San Diego, for The Yankee Candle Company, Inc., as Amicus Curiae on behalf of Defendant and Appellant.

Steven B. Katz, Los Angeles, for Circuit City Stores, Inc., and Chevron U.S.A., Inc., as Amici Curiae on behalf of Defendant and Appellant.

Sidley Austin and Jeffrey A. Berman, Los Angeles, for California Association of Health Facilities as Amicus Curiae on behalf of Defendant and Appellant.

Law Offices of Steven Drapkin and Steven Drapkin, Los Angeles, for California Employment Law Council, Chamber of Commerce of the United States of America, California Chamber of Commerce, California Restaurant Association, Alliance of Motion Picture & Television Producers, Airline Industrial Relations Conference

and California Lodging Industry Association as Amici Curiae on behalf of Defendant and Appellant.

Sheppard Mullin Richter & Hampton, Richard J. Simmons and Geofrey D. De-Boskey, Los Angeles, for Employers Group, California Retailers Association, National Retail Federation and California Hospital Association as Amici Curiae on behalf of Defendant and Appellant.

Weinberg, Roger & Rosenfeld, David A. Rosenfeld, Theodore Franklin, Suzanne M. Murphy, Patricia M. Gates, Anne I. Yen, Alameda, and Jessica Christensen, for Alameda County Central Labor Council, California Conference of Machinists, Contra Costa County Central Labor Council, National California Carpenters Regional Council, SEIU United Healthcare Workers-West, South Bay Central Labor Council, California Labor Federation, AFLCIO, and International Association of Machinists and Aerospace Workers, District Lodge 725, AFL-CIO, as Amici Curiae on behalf of Plaintiff and Respondent.

Cohelan & Khoury, San Diego, and Michael D. Singer, for California Employment Lawyers Association as Amicus Curiae on behalf of Plaintiff and Respondent.

California Rural Legal Assistance, Inc., Cynthia L. Rice; Legal Aid Society-Employment Law Center, Matthew Goldberg and Michael Gaitley for Maria Leticia Banda, Asian Law Caucus, Inc., Asian Pacific American Legal Center of Southern California, Bet Tzedek Legal Services, Centro Legal de La Raza, East Bay Community Law Center, Garment Worker Center, Golden Gate Women's Employment Rights Clinic, The Impact Fund, Katharine & George Alexander Community Law Center, Koreatown Immigrant Workers Alliance, La Raza Centro Legal, Legal Aid Foundation of Los Angeles, Neighborhood Legal Services of Los Angeles County, Stanford Community Law Clinic, Sweatshop Watch, Young Workers United and Rocia Zetina as Amici Curiae on behalf of Plaintiff and Respondent.

Neyhart, Anderson, Flynn & Grosboll, John L. Anderson and Scott M. DeNardo, San Francisco, for California Teamsters Public Affairs Council and California Conference Board of the Amalgamated Transit Union as Amici Curiae on behalf of Plaintiff and Respondent.

Roxborough, Pomerance & Nye, Michael B. Adreani, Woodland Hills, and Marina N. Vitek, for Jennifer Augustus as Amicus Curiae on behalf of Plaintiff and Respondent.

MORENO, J.

This case presents two issues: first, whether the "one additional hour of pay" provided for in Labor Code section 226.7 constitutes a wage or premium pay subject to a three-year statute of limitations (Code Civ. Proc., § 338) or a penalty subject to a one-year statute of limitations (Code Civ. Proc., § 340); second, whether a trial court, conducting a de novo trial, can consider additional wage claims not presented in the administrative proceeding before the state Labor Commissioner. We conclude that the remedy provided in Labor Code section 226.7 constitutes a wage or premium pay and is governed by a three-year statute of limitations and that the trial court properly considered the additional, but related, wage claims during the de novo trial. Accordingly, we reverse the contrary judgment of the Court of Appeal.

Facts and Procedural History

As noted by the Court of Appeal, "the controlling historical facts as established by the trial court [are] largely undisputed."

Plaintiff John Paul Murphy worked as a store manager in a Kenneth Cole Productions (KCP) retail clothing store from June 2000 until June 19, 2002, during which he was paid a weekly salary. The store was open from 9:30 a.m. to 8:00 p.m., Monday through Saturday, and 11:00 a.m. to 6:00 p.m. on Sunday. On a typical day, Murphy and another employee arrived around 8:30 or 9:00 a.m. to open the store. Between 9:30 a.m. and 1:00 p.m., Murphy did nothing other than make sales, receive or transfer product, process markdowns and clean.

During a usual weekday afternoon, the second shift of either one or two people arrived at 1:00 p.m The employee who had opened the store with Murphy would go to lunch, and Murphy and another employee would begin carrying merchandise into the stockroom while covering the sales floor. At some point, Murphy would go to the office to eat as he continued to work. By 2:00 p.m. he was either on the sales floor or working back in the stockroom. Murphy was scheduled to leave at 6:00 p.m., but he often would have customers on the sales floor, or would do some human resources paperwork.

Murphy's duties when he worked the closing shift from noon until 8:00 p.m. were essentially the same as when he worked the opening shift. On most days, he was on the sales floor or in the stockroom from 12:30 to 4:30 p.m. At 4:30 p.m. he would try to eat lunch while he checked KCP company voice mail and e-mail in the office, and then worked on the sales floor until closing time. After the store was closed, Murphy and a sales associate would verify the bank deposit, clean up the store, put shoes away, vacuum and empty the garbage. Typically, they would finish cleaning around 8:45 or 9:00 p.m.

Murphy regularly worked 9- to 10-hour days, during which he was only able to take an uninterrupted, duty-free meal period approximately once every two weeks. He rarely, if ever, had the opportunity to take a rest period and, on occasion, was unable to go to the restroom.

Murphy resigned on June 19, 2002. A friend told him that KCP had not been paying him correctly. On October 16, 2002, Murphy filed a wage claim with the Labor Commissioner. Murphy used the check-the-box form to raise claims for unpaid overtime and waiting time penalties, but did not know he could make a claim for rest and meal period and itemized pay statement violations.¹ Even had he sought to file a claim for itemized pay statement violations, it is the policy of the Labor Commissioner to deny requests to file such claims.

On June 24, 2003, more than eight months after the initial filing of the wage claim, the Labor Commissioner conducted a hearing. The Labor Commissioner issued a decision in Murphy's favor on July 14, 2003, finding that KCP failed to establish that Murphy was an exempt employee and awarding unpaid overtime, interest, and waiting time penalties.

On August 6, 2003, KCP filed a notice for de novo review, which vested jurisdiction in the San Francisco Superior Court. On October 24, 2003, the Hastings College of the Law Civil Justice Clinic (Civil Justice Clinic) filed and served a notice of association of counsel to represent Murphy along with the Division of Labor Standards Enforcement (DLSE). On November 10, 2003, the Civil Justice Clinic and the DLSE filed a "Notice of Claims and Issues at De Novo Trial of Wage Claim." In addition to unpaid overtime, interest, and waiting time penalties, Murphy asserted claims for meal and rest period and itemized pay statement violations. KCP objected to the introduction of new claims, but the trial court, after requesting briefing from the parties on the matter, overruled the objections and considered the additional claims. The trial court reasoned that hearing the new claims served the interests of judicial economy, preserving the rights of the parties, and discouraging appeals by subjecting employers who appeal to additional liability.

In May 2004, the trial court filed its statement of decision and a judgment awarding Murphy unpaid overtime, payments for missed meal and rest periods, penalties for failing to furnish itemized pay statements, waiting time penalties and prejudgment interest. The court, applying the three-year statute of limitations in Code of Civil Procedure section 338, awarded payments for meal and rest period violations dating from October 2000. The court subsequently granted Murphy's motion for attorney fees and costs.

KCP appealed from the judgment of the trial court, arguing that the court erred in addressing claims for meal and rest period and itemized pay statement violations that had not been previously raised before the Labor Commissioner. KCP also contended that the payments ordered for the meal and rest period violations were penalties, and thus subject to the one-year statute of limitations in Code of Civil Procedure section 340.²

The Court of Appeal affirmed in part and reversed in part, holding that Labor Code section 226.7:³ payments assessed for meal and rest period violations are penalties subject to a one-year statute of limitations and that claims may not be raised for the first time on de novo appeal from an administrative hearing in front of the Labor Commissioner. We granted plaintiffs petition for review.

Discussion

A. Section 226.7's "Additional Hour of Pay" Constitutes Wages

[1,2J Section 226.7, subdivision (a) provides, "No employer shall require any employee to work during any meal or rest period mandated by an applicable order of the Industrial Welfare Commission."⁴ Subdivision (b) of section 226.7 further provides...