Naranjo v. Spectrum Sec. Servs., Inc.

• Citation: 253 Cal.Rptr.3d 248,40 Cal.App.5th 444
• Decision Date: 26 September 2019
• Docket Number: B256232
• Parties: Gustavo NARANJO et al., Plaintiffs and Appellants, v. SPECTRUM SECURITY SERVICES, INC., Defendant and Appellant.
• Court: California Court of Appeals

40 Cal.App.5th 444

253 Cal.Rptr.3d 248

Gustavo NARANJO et al., Plaintiffs and Appellants,

v.SPECTRUM SECURITY SERVICES, INC., Defendant and Appellant.

B256232

Court of Appeal, Second District, Division 4, California.

Filed September 26, 2019

As Modified on Denial of Rehearing October 10, 2019

Marsili Rapp, Howard Z. Rosen, Brianna M. Primozic and Jason C. Marsili, Los Angeles, for Plaintiffs and Appellants.

Carothers DiSante & Freudenberger, Dave Carothers and Steven A. Micheli, San Diego, for Defendant and Appellant.

DUNNING, J.^*

INTRODUCTION

Named plaintiff and class representative Gustavo Naranjo and a certified class of former and current employees took their lawsuit against defendant Spectrum Security Services, Inc. (Spectrum) to trial. They alleged Labor Code section 226.7¹ meal break violations and sought premium wages, derivative remedies pursuant to sections 203 (waiting time penalties) and 226 (itemized wage statement penalties), and attorney fees. The results were mixed, and both sides appeal.

We hold: (1) at-will, on-call, hourly, nonexempt employees who are paid for on-duty meal periods are also entitled to premium wages if the employer does not have a written agreement that includes an on-duty meal period revocation clause ( § 226.7 ); (2) unpaid premium wages for meal break violations accrue prejudgment interest at seven percent; (3) unpaid premium wages for meal break violations do not entitle employees to additional remedies pursuant to sections 203 and 226 if their pay or pay statements during the course of the violations include the wages earned for on-duty meal breaks, but not the unpaid premium wages; (4) without section 226 penalties, attorney fees pursuant to section 226, subdivision (e) may not be awarded; and (5) the trial court prejudicially erred in denying certification of a rest break class.

FACTUAL AND PROCEDURAL BACKGROUND

Spectrum contracts exclusively with federal agencies. Its officers take temporary custody of federal prisoners and ICE (Immigration and Customs Enforcement) detainees who must travel offsite for medical treatment or other appointments, and they provide continuous supervision until the individuals are returned to their custodial locations. Spectrum officers also guard witnesses awaiting court appearances. In Spectrum parlance, the individuals they transport and guard are referred to as "posts"; i.e., a post is a person, not a location.

Spectrum's officers are at-will, on-call, hourly, nonexempt employees. Spectrum's company policy has always required on-duty meal periods, for which the employees are paid at their regular rate. Although Spectrum typically assigns two officers or an officer and supervisor to each post, Spectrum officers cannot leave the room or building where their post is located. On occasion, they can coordinate with other Spectrum officers and go nearby to eat or pick up food for themselves and colleagues, but they must remain on-call and within radio range.

For the relevant time period before October 1, 2007, Spectrum had two different employee manuals. The first was the Standing Operational Procedures (SOP) manual. The SOP was replaced in 2006 with the SOPP (Standing Operational Procedures and Policies) manual. The "Work Breaks" sections in both manuals contained the following introductory language: "This job does not allow for breaks other than using the hallway bathrooms for a few minutes." The SOP and SOPP included similar meal break policy language, with a short list of "do's" and a longer list of "don'ts." Neither the SOP nor the SOPP included a written advisement that employees could revoke, in writing, the on-duty meal break policy agreement at any time.

Employees did not sign the SOP or SOPP. They did sign a separate document acknowledging their receipt and careful examination of the SOP or SOPP, as well as a variety of other Spectrum documents.

"Memorandum 33" was issued on October 1, 2007, after this lawsuit was filed. This one-page document addressed only meal and rest breaks. Unlike the SOP and SOPP, Memorandum 33 advised, "Meal and rest periods must be taken." It reaffirmed Spectrum's longstanding policy that meal and rest periods were "on duty." Memorandum 33 included the following paragraph above the employee signature line: "I agree to accept ‘paid On-Duty’ meal periods during my employment with [Spectrum]. I understand that this agreement may be revoked in writing at any time. However, I also understand that due to the nature of work performed by Spectrum, agreeing to ‘On-Duty’ meal periods is a condition of continued employment. I further understand that this agreement does not create a guarantee for continued employment and does not change my at-will employment status with Spectrum."

Naranjo began working for Spectrum in December 2006. He was terminated in May 2007 after he left his post for a meal break.

Naranjo filed this lawsuit as a putative class action the following month, alleging Spectrum failed to provide its security personnel with meal and rest breaks, as required by section 226.7 and Industrial Wage Commission (IWC) Wage Order No. 4-2001 ( Cal. Code Regs., tit. 8, § 11040 (Wage Order 4).) Before Naranjo filed his motion for class certification, Spectrum was granted summary judgment on the basis that all causes of action were preempted by the McNamara-O'Hara Service Contract Act of 1965 ( 41 U.S.C. § 351 et seq. ). This court rejected Spectrum's federal preemption/lack of jurisdiction arguments based on the Service Contract Act, reversed as to the causes of action based on alleged Labor Code violations ( §§ 203, 226, and 226.7 ), and otherwise affirmed. ( Naranjo v. Spectrum Security Services, Inc. (2009) 172 Cal.App.4th 654, 667-668, 91 Cal.Rptr.3d 393 ( Naranjo I ).)

Naranjo's class certification motion was heard before the Supreme Court issued its decision in Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 139 Cal.Rptr.3d 315, 273 P.3d 513 ( Brinker ). The trial judge granted the motion in part and denied it in part. A class of " ‘all non-exempt detention officers and security officers employed by Spectrum in California during the Class Period of June 4, 2004 to the present’ " was certified as to the first cause of action (meal period violations ( § 226.7 )), third cause of action (waiting time penalties ( § 203 )), and fourth cause of action (itemized wage statements ( § 226 )). The trial court qualified Naranjo as the class representative and the law firm of Posner & Rosen as class counsel.

The trial court declined to include the second cause of action for alleged rest break violations in the class certification order. The trial court acknowledged Spectrum's companywide policy not to permit duty-free rest breaks; but nevertheless found that common questions did not predominate, which meant Naranjo's claims were not typical and the class action format was not the superior means to resolve the rest break claim. The trial court was persuaded that common fact issues did not predominate because "some of the declarants on [Spectrum's] side assert that [Spectrum] did permit duty-free rest breaks." The following year, post- Brinker , the new trial judge declined to revisit the denial of Naranjo's motion to certify a rest break class.

The parties stipulated to try the lawsuit in three phrases.² The first phase was a bench trial involving several Spectrum affirmative defenses. Spectrum lost. As the phase one rulings are not implicated in this appeal, we forgo a discussion of them.

Next, the meal break class cause of action was tried to a jury. The meal break class spanned the period from June 4, 2004 through the time of trial and consisted of two subclasses. The "pre-Memorandum 33" subclass included employees who worked through September 30, 2007; the "Memorandum 33" subclass included employees who signed that agreement, effective October 1, 2007.

The pre-Memorandum 33 subclass, insisting its members worked without a legally compliant meal break policy, filed a series of motions in limine. At the trial court's invitation, Spectrum made an offer of proof. The trial court considered the arguments and documents and excluded the proffered evidence.

At the close of testimony, the trial court granted a directed verdict in favor of the pre-Memorandum 33 meal break subclass: "Spectrum failed to comply with the requirements of the wage order since it had no written agreement with its employees by which employees agreed to the on-duty meal period and were advised that their agreement could be revoked in writing. Spectrum argued that its written policy and procedure manuals consistently advised employees that meal periods would be on duty. In addition, according to Spectrum, employees could in effect revoke their agreement to the on-duty meal period by declining to accept an assignment on any given day or to request not to be scheduled for a particular day. Although the [trial] court does not disagree that the foregoing facts were proven by Spectrum, ... [t]he combination of policies and procedures along with the on-call status of employees is not a substitute for the mandated written agreement."

With this ruling, and based on Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 56 Cal.Rptr.3d 880, 155 P.3d 284 ( Murphy ), the parties stipulated the pre-Memorandum 33 meal break subclass was owed $1,393,314 in premium pay for the period from June 4, 2004 until September 30, 2007. The jury returned a verdict in Spectrum's favor against the Memorandum 33 subclass.

The third phase, again a bench trial, concerned only the pre-Memorandum 33 meal break subclass and the two Labor Code derivative causes of action-section 203's waiting time penalties and section 226 's itemized wage statement penalties.

Relying again on Murphy's holding that premium pay awarded to employees for noncompliant meal break policies is a wage and not a penalty for statute of limitations purposes, the trial court determined sections 203 and 22...