In March a California court awarded more than $105 million to Starbucks baristas due to the company's practice of permitting supervisors to share the tips. The case is significant to all California employers that have tip-sharing arrangements.

In Reynolds v. Bement (2005) 36 Cal.4th 1075, the California Supreme Court held that individual officers, directors and shareholders of a corporation have no personal liability to the corporation’s employees for unpaid overtime. Following Reynolds, the California Court of Appeal recently held in Bradstreet v. Wong (2008) 161 Cal.App.4th 1440, that individual owners, officers and managers of three closely-held corporations could not be held personally liable for the corporation’s failure to pay owed wages to employees or for related California Labor Code violations.

California law sets out basic overtime requirements for non-exempt employees in California. Among other things, the law requires an employer to pay an employee time and one-half of the employee's regular rate of pay for both 1) more than 8 hours of work in one workday, and2) more than 40 hours of work in any workweek. A double time premium is required for hours in excess of 12 in a work day, or in excess of 8 hours on the seventh consecutive day of work in a work week.

Employers sued in California wage and hour class actions are all too familiar with the State’s “multiplier effect.” What is the California “multiplier effect,” you ask? Simply put, it is a small wage payment violation (e.g., for non-payment of overtime hours or off-the-clock work), that can trigger a range of penalties under the California Labor Code far exceeding the value of the original unpaid wage amount. In wage and hour class actions, minor wage violations can cost employers millions.

It is hardly news that class actions over missed or untimely meal breaks are pandemic in California. Employers are anxiously awaiting a conclusive judicial determination of the meaning of Labor Code section 512's mandate that California employers "provide" a 30-minute meal period to employees who work more than five hours in a day. Does it mean that the employer need only provide the employee with the opportunity to take a meal break, or must an employer ensure that the meal break is actually taken. In an unpublished October 2007 opinion in Brinker Restaurant Corp. v. Superior Court (Hohnbaum), a California Court of Appeal reversed a trial court class certification order, stating the class certification order was erroneous and had to be vacated because, among other reasons, "the class certification order rest[ed] on an incorrect assumption with respect to the meal period claims to the extent those claims are based on the theory that [the employer] had a duty to ensure that its hourly employees took the meal periods it provided to them, and thus the court abused its discretion in finding that these claims are amenable to class treatment."

Summer is here (almost) and many teenagers will be hitting the workforce to earn a few extra dollars. California companies who hire teenagers should be aware that California and federal law restricts the use of minors or “child labor.”

Where an employer agrees to pay employees premium pay for holiday work, the employer is not required to pay overtime based on the premium rate if the employees work more than 8 hours in a day or 40 hours in a week, the California Court of Appeal ruled. Advanced-Tech Security Svcs., Inc. v. Superior Court (Roman), No. B205186 (Cal. Ct. App. June 3, 2008). Rather, the employer is entitled to credit the time and one-half premium pay on holidays against otherwise earned overtime. Accordingly, the appellate court directed the trial court to vacate its order denying the employer's motion for summary adjudication on an employee's claim for unpaid overtime and to enter an order granting the employer's motion.

Individual owners, officers, and managers of several closely-held garment manufacturing companies are not personally liable for Labor Code violations arising from the failure to pay employees wages and accrued vacation, a California appeals court has ruled. Bradstreet v. Wong, No. A113760 (Cal. Ct. App. Apr. 16, 2008).The court also held that the defendants could not be held personally liable for restitution under section 17200 of the Business and Professions Code, also known as the California Unfair Competition Law (the "UCL"), because they did not personally benefit from the employees' labor or misappropriated funds that otherwise would have been used to pay the employees.

Effective Jan. 1, 2000, Assembly Bill 60 implemented a number of changes to California's wage and hour laws. Many employers and their lawyers focused on the statutory restoration of daily overtime pay, which the Industrial Welfare Commission previously had abolished in several of its Wage Orders. As it turned out, though, AB 60's sleeper issue was the relatively small section of the law devoted to meal periods. AB 60 codified existing regulations mandating meal periods. However, the Legislature determined that employers were not following the rules because there were no financial consequences. So, AB 60 included a requirement that employers pay one hour's wages to employees who were not given a timely meal period in accordance with the law.

A violation of the California Labor Code can be costly to a corporate employer. The risk of personal liability for owners, officers and managers of a corporation further raises the stakes.

Employers in California are not obligated to offer sick pay to employees. The benefit is entirely optional—for now. Some politicians in Sacramento aim to make sick pay benefits mandatory.

The San Francisco Health Care Security Ordinance ("Ordinance”) requires employers to spend a minimum amount of money on health care expenditures for certain employees who work in San Francisco. The Ordinance became effective as of January 9, 2008 and is being enforced pending final decisions in the courts on its permissibility.

When major customers failed to pay for goods, Wins Corporations, a group of three garment manufacturing companies that had successfully operated for over a decade in the highly competitive sewing business, went into financial crisis. Attempting to push through the crisis, the company urged its employees to continue working without pay until it collected slow-paying accounts receivable and stabilized its finances. As a result, employees were either paid late, underpaid, or not paid at all. When the employees complained, the Division of Labor Standards Enforcement (DLSE) and Department of Labor (DOL) filed suit against Wins and its individual owners and bookkeeper.

How would you like your class action lawsuit served—tall, grande, or vente? An employee class action lawsuit that recently concluded in San Diego against Starbucks serves as a reminder to all restaurants, hotels, and other hospitality businesses: be careful who shares in the tip pool.

In the year since the California Supreme Court decided Murphy v. Kenneth Cole Productions, employers have been hit with a surge of class actions for violations of California’s meal and rest period laws. The California Supreme Court had ruled that payments for violations of the state’s meal and rest period laws were wages, not penalties, and subject to a three-year statute of limitations. Seeking to provide some relief to employers from this wave of litigation, California legislators have introduced various bills intended to change the Court’s decision. The bills are intended to limit the remedies for violations, define what it means to “provide” a meal or rest period, and clarify when meal periods must be given.

Ruling that Starbucks Corporation unlawfully allowed shift supervisors to share in a portion of tips left in tip jars, a California Superior Court judge recently entered judgment in a class action against the company in the amount of $86.7 million, plus interest, for a class made up of baristas, or counter workers, employed in California stores since 2000.

Here is something to ponder as you enjoy your next beverage from Starbucks: How many venti, half-caf-half-soy-no-foam-latte-whips does it take to generate $87 million in tips over a seven-year period? It might take more than one refill for you to do that math. But wait, there's more. Consider that the recent and widely reported $100 million-plus award to about 100,000 Starbucks "baristas" compensates them only for a portion of the total tips customers paid (plus interest). That is, just a fraction of what must have been hundreds of millions in total tips wrongfully distributed to shift supervisors. The award, one of the largest reported employment law verdicts, is striking not only because of its sheer size, but also because it is based on optional "gratuities" that are paid by customers rather than the employer.

In California, unless specifically exempted, an employee is presumed to be non-exempt and subject to the provisions of the applicable Wage Order. Perhaps the most frequently mentioned exemptions are the "white collar" exemptions involving executive, professional, and administrative occupations. A white-collar exemption exempts an employee from entitlements under many sections of the Wage Order, including meal & rest periods, recordkeeping, and the minimum wage and overtime provisions.

In a case for alleged unpaid wages, the California Court of Appeal has held that on-call resident managers of an elderly housing complex are entitled to compensation only for time spent actually performing assigned duties and not for all time spent on call. Isner v. Falkenberg/Gilliam Associates, B195860 (Cal. Ct. App. Mar. 18, 2008). Although the plaintiffs were required to remain on the premises while on call, they were otherwise free to use on-call time as they chose. Following their retirement, the plaintiffs filed a class action on behalf of resident managers to recover wages for all time spent on call. The employer moved for summary judgment, which the trial court granted. The appellate court affirmed.

A San Diego, California Judge just ordered Starbucks to pay $100 million in back tips and interest to coffee baristas who were forced to share their tips with their shift supervisors. While Starbucks vows to appeal the ruling, it brings to light certain lessons that California employers of tipped employees should learn.

Commissions and bonuses are forms of "wages" in California. The Labor Code imposes on employers a number of obligations regarding payment of wages. For example, wages must be paid within a specified time period after they are earned. Employees who quit or are terminated typically must be paid their final wages on their last day of employment or penalties may accrue. Wages must be included in the "regular rate" of pay, which is used to calculate overtime. They also must be detailed on the "wage statement" that is furnished employees with every paycheck.

Following the lead taken by San Francisco just a year ago, the California Legislature has proposed AB 2716, the “Healthy Families, Healthy Workplace Act of 2008.” If passed, this Act would mandate that all employers, regardless of size, provide some form of paid sick leave benefits to all employees who work in California for seven or more days in a calendar year.

On February 20, 2008, the California Assembly introduced legislation aimed at allowing more flexibility in work scheduling. Assembly Bill 2127 would amend California Labor Code Section 511 to permit what is being called the “Small Business Family Scheduling Option.” If passed, this section would permit employers with 25 or fewer employees to approve the written request of an employee to work an alternative work schedule for no longer than 10 hours per day within a 40 hour workweek, without overtime compensation being incurred.

In a victory for California employers, a California Court of Appeal recently rejected the traditional administrative/production dichotomy test for an administrative exempt employee for certain business models. In Combs v. Skyriver Communications, Inc. (2/7/08), the Court of Appeal affirmed the trial court’s decision dismissing the employee’s claims for overtime, unpaid meal period penalties and unpaid rest period penalties because the employee was properly classified as an administrative exempt employee. Importantly, the Court of Appeal relied heavily upon the recent changes to the Industrial Welfare Commission’s Wage Order No. 4-2001 in determining that the employee was an administrative exempt employee and, therefore, not entitled to overtime, meal periods or rest periods.

California's wage and hour laws are more detailed than any other state's. To facilitate education about the myriad requirements, the Legislature has included at least one substantial penalty for each failure to abide. So, employers must be cautious before deviating from the letter of the law.

In the last several weeks, investigators from the California Labor Commissioner’s office have conducted sting operations at retail establishments throughout the state to ensure compliance with California’s payroll record retention requirements. Pursuant to Californian Labor Code Section 226, employers are required to keep payroll records reflecting all applicable deductions for each of its employees “on file . . . for at least three years at the place of employment or at a central location within the State of California.”

California employers are increasingly being challenged on whether they properly compensate and reimburse employees for usage of the employee's money or property in the course and scope of the employee's employment. Courts continuously acknowledge the California Legislature's intent that employers should not pass the cost of doing business onto employees such that the employees bear losses or incur expenses in conjunction with their employment.

San Francisco's Health Care Security Ordinance has been reactivated by a federal appeals court order issued January 9, 2008, and the City of San Francisco may begin enforcement. The Ordinance is a local measure that requires certain San Francisco employers to spend a specified minimum amount to provide health care coverage, from $1.17 to $1.76 per hour paid to each employee working within the City.

In a widely anticipated ruling, a United States District Court Judge sitting in San Francisco granted summary judgment on December 26, 2007, in favor of a local restaurant association that had challenged the employer funding provisions of the San Francisco Health Care Security Ordinance. While recognizing that providing health care coverage to the citizens of San Francisco is a laudable goal, the court nonetheless found the employer funding provisions of the Ordinance to be preempted by ERISA (Employee Retirement Income Security Act) since the Ordinance's provisions have an impermissible connection with employee benefit plans and make unlawful reference to employee benefit plans.

Employers with California employees may unwittingly expose themselves to significant penalties under an obscure California Labor Code statute by paying employees with out-of-state checks.

When a former employee seeks only waiting time penalties under Section 203 of the Labor Code, and not back wages as well, the statute of limitations is one year under Section 340(a) of the California Code of Civil Procedure, a state Court of Appeal has ruled. McCoy v. Superior Court of Orange County (Kimco Staffing Services, Inc.), No. G038589 (Cal. Ct. App. Nov. 27, 2007). The court affirmed the trial court's order striking portions of the plaintiff's complaint which claimed that waiting time penalties were due for a four-year period.

Hard on the heels of San Francisco's paid sick leave law (Proposition F), which became effective February 5, 2007, employers will face another challenge in 2008, when employer health care spending mandates found in the San Francisco Health Care Security Ordinance ("HCSO") go into effect - unless the courts intervene. A decision in a year-old lawsuit by a restaurant employers' association to block the ordinance on ERISA preemption grounds is expected before the end of 2007.

As the New Year approaches, California employers should be mindful of an important change that will take effect on January 1, 2008, relating to information that can be listed on employee pay statements. Under California Labor Code section 226, employers must include certain itemized information on each employee’s pay statement. (This information must be provided separately for each pay period when the wages are paid by personal check or cash.)

California employers are beset with a confusing array of very technical wage hour obligations which must be followed to the letter. The stakes for non-compliance got even higher in 2007 as the California Supreme Court weighed in on a host of wage hour matters. This article discusses how four of these key rulings affect your business. Alternate Link To Article

On November 14, 2007, San Francisco City Mayor Gavin Newsom announced that, on January 1, 2008, the minimum wage for employees within San Francisco will increase from $9.14 per hour to $9.36 per hour. This was done in accordance with the San Francisco Minimum Wage Ordinance, which was passed by the voters in November 2003, and calls for annual rate adjustments based on the previous year’s Consumer Price Index for urban wage earners.

Effective January 1, 2008, California employers are required to provide all employees with written notice of their possible right to an Earned Income Tax Credit on their federal income tax returns. Legislative sponsors felt the measure, Assembly Bill 650, was necessary because "hundreds of millions of federal dollars go unclaimed by the working poor in California" since few eligible employees participate in the federal earned income tax credit program.

In Gattuso v. Harte-Hanks Shoppers, Inc., Case No. S139555 (Nov. 5, 2007), the Supreme Court of California held that employers may reimburse employees for business-related expenses pursuant to Labor Code section 2802 by paying them increased compensation, but cautioned that employers must apportion between compensation for work performed and reimbursement for business-related expenses.

Employers can satisfy their statutory obligation to reimburse employees for business expenses by paying employees a lump sum added to their base compensation to reflect those expenses, the California Supreme Court has ruled.

The California Supreme Court recently held that an employer can meet its obligations to indemnify its employees for expenses by paying employees an enhanced compensation that takes the expenses into account. See Gattuso v. Harte-Hanks Shoppers, Inc. (11/5/07).

Effective January 1, 2008, the California Minimum Wage will increase from $7.50 to $8.00 per hour, a 6.7% increase. This increase will trigger several automatic changes in your minimum-compensation requirements.

Since the dot.com bust, the market for and wage rates of Information Technology (IT) professionals have declined significantly. Many contend that California employers have sought IT help outside of California to avoid overtime costs.

In a well-drafted, yet currently unpublished decision, the California Court of Appeal for the Fourth Appellate District (San Diego County) issued an order that, if published or followed in published decisions, will ease the tremendous burden currently placed on California employers related to meal and rest break claims. In Brinker Restaurant Corporation v. Superior Court of San Diego County (Adam Hohnbaum Real Party in Interest) (October 12, 2007), the appellate court reversed the trial court’s order certifying the class action based on the trial court’s erroneous interpretation of the law.

The California Supreme Court decided earlier this year, in Murphy v. Kenneth Cole Productions, that the one-hour premium employees receive for violation of meal break or rest period laws is a wage and not a penalty. Because the statute of limitations for unpaid wages is three years (or four years under an unfair competition theory), and the statute of limitations for penalties is only one year, Murphy means that multi-million class actions against state-wide employers are potentially three times more lucrative for plaintiffs and their lawyers. As a result, the plaintiffs’ bar continues enthusiastically to file class actions alleging violations of the meal and break laws.

The wildfires in Southern California have taken a significant toll and continue to affect both employers and employees. As many employees remain absent due to evacuations and to care for their displaced loved ones and many employers are forced to remain closed as a result of evacuation orders, employers question their obligation, if any, to pay employees when no work is being performed. The answer depends on the circumstances involved and whether the employee is classified as exempt or non-exempt under California's wage and hour laws.

On October 14, 2007, California Governor Arnold Schwarzenegger rejected a proposed amendment to the California Labor Code that would have allowed temporary staffing agencies to pay employees on a weekly basis, rather than every time a project ends. The Governor supported the weekly pay change, but vetoed the bill because it created additional worker’s compensation liability for staffing clients.

In Prachasaisoradej v. Ralphs Grocery Co., the California Supreme Court ruled by a 4-3 vote that a profit sharing incentive plan based on a net profit calculation, which included deductions for workers compensation costs, cash and merchandise shortages and the costs of third party tort claims, did not violate Labor Code prohibitions against deducting such costs from employee wages.

In Prachasaisoradej v. Ralphs,1 No. S128576 (Cal. Aug. 23, 2007), a narrow majority of the California Supreme Court ruled that employers may lawfully use net-profit based incentive plans to compensate employees. The Ralphs decision presents a balancing point to a line of cases that had concluded that some types of deductions from other, albeit sometimes similar, forms of incentive compensation were invalid. The lawfulness of compensation plans that fall on the continuum at points between these earlier cases and the Ralphs decision is not clear.

One thing is clear about California wage and hour laws: The rules governing law firms (and all businesses) in California are too numerous to be summarized in just one column. The first installment on this topic ran on July 27, 2007 and is available online at www.dailyjournal.com. In that piece, I discussed potential pitfalls, such as mis-classification of employees as independent contractors or "exempt" employees, minimum wage and overtime laws, independent contractor status, exemptions from overtime, payroll practices and deductions from paychecks. If those topics are not complex and confusing enough, there are many others applicable to California employees.

In Harris v. Superior Court, a divided California Court of Appeal panel held that insurance adjusters are not exempt from employees under the administrative exemption to California’s wage orders because their work does not “rise to the level of management policy or general operations” – despite the majority’s acknowledgment of no less than eight contrary rulings by federal courts applying identical regulatory language to insurance claims adjusters and contrary determinations by the U.S. Department of Labor in interpreting its own regulations.

When Shakespeare wrote in Henry IV, "Uneasy lies the head that wears a crown," he could have been describing law firm managing partners. Client development and satisfaction, billable hours, expense control, office leases, hiring and retaining associates and staff, fierce competition, oh, and the practice of law, are just a few of the challenges facing the lawyer who accepts the responsibility of running a law firm or office.

A new ruling by the California Supreme Court has increased the cost to employers of failing to provide non-exempt employees with routine meal and rest breaks as required by statute. California Labor Code section 226.7 provides that if an employer fails to provide its non-exempt employees with meal periods or rest breaks, the employee is entitled to “one hour of pay” for each missed break. For the past several years, it has been hotly contested whether this “one hour of pay” is a “penalty” imposed on the employer (subject to a one year statute of limitations), or whether the pay is a “wage” for time worked (subject to a three year statute of limitations).

California employers must furnish employees with both rest periods, which are paid, and meal periods, which are not paid. These requirements first appeared in the Industrial Welfare Commission's Wage Orders in 1916. But in 2000, the Legislature imposed on employers significant financial consequences for failure to comply with rest and meal period laws.

California’s mandate of an extra hour of pay for missed meal or rest periods provides additional wages, not statutory penalties, the state’s Supreme Court has ruled.

The California Supreme Court has sent a shockwave through the California business community by ruling that premium pay issued to employees under California Labor Code section 226.7, to compensate them for missed meal and rest periods carries a three-year statute of limitations as opposed to a one-year statute of limitations.

Everything you need to know about how the Kenneth Cole decision will cost you.

The California Supreme Court has held that missed-meal pay is wages and claims for failure to provide meal periods are subject to the three-year statute of limitations.

California employers will now have to open their wallets for missed meal claims -- up to three years of back pay liability.

California has a narrow exception to the general rules on overtime pay with regard to alternative workweeks.

The California Supreme Court has finally decided the meal and rest break issue.

It's been difficult for California employers to determine who is and who isn't exempt from overtime and minimum wage requirements; this article helps you sort it all out.

The California Labor Code requires employers to indemnify employees for all expenses incurred in connection with their employment. To clarify this indemnification obligation under section 2802, the California Division of Labor Standards Enforcement has proposed new travel and expense regulations. A public hearing on the proposed regulations was held on February 7, 2007 in San Francisco. Here are some of the highlights of the proposed regulations.

Resulting from a ballot measure passed by voters in November, San Francisco, California has just become the first city in the country requiring all employers to provide paid sick leave to employees. This is the second of a “one-two” punch that impacts San Francisco employers this year. The “one” was when the minimum wage for employees in San Francisco rose to $9.14 per hour starting January 1, 2007.

Workers in San Francisco will begin accruing paid sick leave on February 5, 2007 despite numerous uncertainties raised by the San Francisco Sick Leave Ordinance. Donna Levitt, Division Manager of the Office of Labor Standards Enforcement (OLSE), the administrative agency in charge of enforcing the Ordinance, took time last week to meet with concerned business owners at two public hearings and addressed some of the outstanding issues.

Recently, the California Commissioner of Corporations (the “Commissioner”) proposed to amend the current regulations imposed on securities offered or sold in California pursuant to certain compensatory benefit plans. These rules apply primarily to (i) privately-held companies that offer or sell securities in the state of California (which occurs when either the company is located in California or the recipient is a resident of California), and (ii) public companies not listed on a major stock exchange. The proposed amendment would relax a number of substantive requirements contained in those regulations. Although the proposed amended regulations are expected to become effective in 2007, the Commissioner has also announced that it will consider granting permits for arrangements that comply with the proposed regulations, provided the permit applications are filed no later than February 28, 2007. Companies intending to grant compensatory equity awards to California residents will find the additional flexibility provided by the proposed amendments to be welcomed relief.

This update discusses a new San Francisco municipal ordinance that requires employers to provide paid sick leave benefits to all employees who work in San Francisco County as of February 5, 2007. The update describes the ordinance's requirements and coverage, and outlines steps that employers should take in light of the ordinance's impending effective date.

On November 7, San Francisco voters approved the first law in the nation mandating that employers provide paid sick leave to all employees. The law is effective February 5, 2007. Proposition F provides an important benefit to employees, but poses several vexing and unresolved questions certain to give employers headaches.

On November 7, 2006 more than 61% of San Francisco voters passed Proposition F, mandating extraordinary paid sick leave entitlements for employees working in San Francisco. In fact, with passage of the Paid Sick Leave Ordinance, San Francisco became the first city in the state to require all employers to provide paid sick leave.

California Governor Arnold Schwarzenegger has signed into law a $1.25 increase in the state minimum wage. The increase will take place in two parts. The first increase will raise the minimum wage from the current $6.75 per hour to $7.50 on January 1, 2007. The second increase of $0.50 will raise the minimum wage to $8.00 per hour on January 1, 2008. It is estimated that these increases will directly affect approximately 1.4 million California workers. The $8.00 per hour minimum wage as of January 2008 will, along with Massachusetts, be the highest in the country.

In a policy decision driven as much by election-year politics as by labor economics, Republican California Governor Arnold Schwarzenegger is expected to sign a bill (A.B. 1835) authored by Assemblymember Sally Lieber (D-Mountain View) that will increase in two steps California's minimum wage for the first time since January 1, 2002.

The California Supreme Court has unanimously decided that the state's wage payment law—which requires that earned and unpaid wages be paid to discharged workers "immediately"—applies to employees who leave their jobs after a specific assignment or time duration, as well as to employees who are fired.

In a major decision in Smith v. Superior Court (L'Oreal USA, Inc.), No. S129476 (July 10, 2006), the California Supreme Court considered whether to apply California's statute requiring the immediate payment of final wages to employment relationships that end because of the completion of a specific assignment or period of time for which the employee was hired. The issue before the California Supreme Court was whether such an end of employment constitutes a "discharge," triggering the obligation to pay final wages immediately, or whether a "discharge" only means a firing or layoff. Giving a broad application of the term "discharge," the Supreme Court held that a "discharge" occurs in all of these circumstances.

The California Court of Appeal recently held that the time employees spend on an employer-provided shuttle that transports them from a parking lot to the work site is not compensable. According to the court, since the employer did not require employees to take the shuttle, the time was not compensable travel time.

In its recent decision in Bearden v. U.S. Borax, Inc., No. B182625 (Apr. 7, 2006) the California Court of Appeal in Los Angeles invalidated a provision of an Industrial Welfare Commission (IWC) wage order that exempted certain employees covered by collective bargaining agreements from meal period requirements. The court held that the wage order's exemption exceeded the statutory exceptions to meal period requirements authorized by the California legislature. The decision adds to the uncertainty surrounding California's meal period requirements. Its holding calls into question other provisions of the wage orders that provide relief from meal period requirements beyond the terms in Labor Code section 512.

Underscoring the increasing prominence of wage and hour issues, the California Supreme Court has agreed to decide two major questions. In one case, the Court will decide the statute of limitations applicable to claims for meal and rest period violations. The second case will determine how employers must reimburse employees for expenses.

On February 22, 2006, the California Supreme Court agreed to review one of the most hard-fought issues affecting California employers - are the monies owed to employees for missed meal and rest breaks considered "wages" and governed by a three-year statute of limitations, or are they "penalties" subject to a one-year statute of limitations? The California Supreme Court accepted review of this issue in the case of Murphy v. Kenneth Cole Productions.

On February 22, 2006, the California Supreme Court granted review in Murphy v. Kenneth Cole Productions, Inc., 134 Cal. App. 4th 728, 36 Cal. Rptr. 3d 418 (Cal. App. 1st Dist. 2005).

As many employers have learned the hard way, California Labor Code section 226.7(b) requires non-exempt employees to be paid one hour's pay at their regular rate for each workday they are not provided a meal or rest period that complies with the requirements of the applicable Industrial Welfare Commission wage order.

In National Steel and Shipbuilding Co. (NASSCO) v. Superior Court (Case No. D046692), the Fourth District of the California Court of Appeal held that the meal/rest period violation remedy is a penalty in the form of a wage, therefore subject to a three-year statute of limitations. The decision is at odds with the First District's recent decision in Murphy v. Kenneth Cole Productions, Inc., making California Supreme Court review likely.

On Friday, December 2, 2005, Christmas may have come early for some California employers with the issuance of the First District Court of Appeal's opinion in Murphy v. Kenneth Cole Productions, Inc. (Case No. A107219; A108346), holding that the one-hour-of-pay remedy for meal and rest period violations in the Wage Orders and Labor Code section 226.7 is a penalty, not wages. As such, these claims have a one year, rather than three or four year, statute of limitations.

In the California Supreme Court’s long awaited Reynolds v. Bement opinion, the court concluded that individuals who were either officers or directors of a company and who were shareholders of the company were not liable for the alleged failure to pay overtime to the company’s employees. Though the court’s decision will bring a sigh of relief to individual defendants in some pending matters, individual liability for the failure to pay wages is still a possibility under provisions of the Labor Code that were not at issue in Reynolds, under changes made to the Labor Code after the Reynolds case arose, under general corporate law principles, and under the federal Fair Labor Standards Act (FLSA).

The California Supreme Court has ruled unanimously that the state's labor laws do not impose personal liability on corporate officers and directors for unpaid wages owed by a corporate employer. This includes unpaid overtime pay based on the erroneous classification of workers as exempt employees.

After three public hearings and 4,000 comments, on April 6, 2005, the California Division of Labor Standards Enforcement released proposed modifications to the meal and rest period regulations first issued in December 2004.

The California Supreme Court has agreed to decide whether an employee bonus plan based on a profit figure reduced by the employer's expenses violates state law. At issue is whether employer expenses can include the costs for workers' compensation, as well as for cash and inventory losses.

In apparent response to a significant number of complaints from a vocal opposition, the California Division of Labor Standards Enforcement withdrew its December 10, 2004, proposed emergency regulations clarifying and revising meal-period requirements for California employees.

In January, 2005, The U.S. Supreme Court, with-out comment, declined to review a 2-1 decision of the Ninth Circuit, allowing the City of Berkeley to extend its "living wage" ordinance only to businesses in the City's marina employing at least six workers and having gross annual sales of $350,000.

In apparent response to a significant number of complaints from a vocal opposition, the California Division of Labor Standards Enforcement withdrew its December 10, 2004 proposed emergency regulations clarifying and revising meal period requirements for California employees.

The California agency responsible for enforcing the State's wage-hour laws has proposed emergency regulations seeking to clarify how employers may comply with California's stringent meal period requirements. If approved, regulations proposed on December 10, 2004 could take effect by December 20.

Recent months have seen an increase in what may be the next wave of California wage and hour class actions: claims relating to impermissible deductions from bonus calculations.

In a near unanimous opinion, the court found the trial court did not abuse its discretion in certifying a class of assistant managers and operating managers employed by Sav-On in California.