National Steel v. Superior Court

• Decision Date: 20 January 2006
• Docket Number: No. D046692.,D046692.
• Citation: 38 Cal.Rptr.3d 253,135 Cal.App.4th 1072
• Court: California Court of Appeals Court of Appeals
• Parties: NATIONAL STEEL AND SHIPBUILDING COMPANY, Petitioner, v. The SUPERIOR COURT of San Diego County, Respondent; Robert Godinez et al., Real Parties in Interest.

38 Cal.Rptr.3d 253

135 Cal.App.4th 1072

NATIONAL STEEL AND SHIPBUILDING COMPANY, Petitioner, v. The SUPERIOR COURT of San Diego County, Respondent;

Robert Godinez et al., Real Parties in Interest.

No. D046692.

Court of Appeal, Fourth District, Division 1.

January 20, 2006.

O'Melveny & Myers, Gordon E. Krischer, Los Angeles, Larry A. Walraven and Brian A. Selvan, Newport Beach, for Petitioner.

Steven Drapkin, Los Angeles, for Employers Group, California Employment Law Council, California Restaurant Association, Alliance of Motion Picture & Television Producers, Airline Labor Relations Conference and California Lodging Industry Association as Amici Curiae on behalf of Petitioner.

Robert Jones for Division of Labor Standards Enforcement, Department of Industrial Relations, and California State Labor Commissioner as Amici Curiae on behalf of Petitioner.

No appearance for Respondent.

Tosdal, Smith, Steiner & Wax, Thomas Tosdal and Fern M. Steiner, San Diego, for Real Parties in Interest.

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

Weinberg, Roger & Rosenfeld, David A. Rosenfeld, M. Suzanne Murphy and Anne I. Yen, Oakland, for International Association of Machinists and Aerospace Workers; District Lodge 947, AFL-CIO; and International Brotherhood of Electrical Workers, Local 569, AFL-CIO, as Amici Curiae on behalf of Real Parties in Interest.

Cohelan & Khoury and Michael D. Singer for California Employment Lawyers Association as Amicus Curiae on behalf of Real Parties in Interest.

McINTYRE, J.

The Labor Code requires that an employer pay an employee the equivalent of one hour of pay if the employer fails to provide a meal or rest period as required by applicable orders of the Industrial Welfare Commission (IWC). (Lab.Code, § 226.7, subd. (b), all further undesignated statutory references are to this code.) In this case, the primary question presented is what statute of limitations applies to the payment, the one-year statute of limitations for an "action upon a statute for a penalty or forfeiture" (Code Civ. Proc., § 340, subd. (a)), or the three-year statute of limitations for "[a]n action upon a liability created by statute, other than a penalty or forfeiture" (Code Civ. Proc., § 338, subd. (a)). The answer to this question turns on whether the payment is considered primarily a penalty against employers or a wage to employees.

We conclude that a payment under section 226.7 is an obligation created by statute, other than a penalty, subject to a three-year statute of limitations period (Code Civ. Proc., § 338, subd. (a)), and that this remedy will support a claim for restitution under Business and Professions Code section 17203.

FACTUAL AND PROCEDURAL BACKGROUND

Robert Godinez, Indalecio Parra and John Petersen (collectively plaintiffs) sued their employer, National Steel and Shipbuilding Company (NASSCO), in a putative class action alleging that within the last four years NASSCO violated the Labor Code and certain IWC wage orders by requiring them to work in excess of five hours per day without receiving a meal break of at least 30 minutes and not providing them with a 10-minute rest period every four hours. (§§ 226.7, subd. (a), 512, subd. (a); Wage Order 1-2001 (Cal.Code Regs., tit. 8, § 11010, subds. 11(A) & 12(A)).) Plaintiffs assert that these violations constitute unfair competition within the meaning of Business and Professions Code section 17200. They seek: (1) compensation of one hour's pay for each day of violation of the meal or rest period law (§ 226.7, subd. (b)); (2) restitution (Bus. & Prof.Code, § 17203); (3) an injunction enjoining further violations of the meal or rest period laws; and (4) attorney fees and costs.

NASSCO moved to strike any reference in the complaint to a time period more than one year prior to its filing on the ground that the "one additional hour of pay" required by section 226.7, subdivision (b) was a penalty subjecting plaintiffs to a one-year statute of limitations. (Code Civ. Proc., § 340, subd. (a).) It also sought to strike plaintiffs' claim for restitution on the ground the complaint did not support such a cause of action. (Bus. & Prof.Code, § 17203.) Plaintiffs opposed the motion, arguing that the "one additional hour of pay" was a wage, not a penalty, for which they could seek restitution up to four years before the filing of the complaint under the Business and Professions Code. (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 177-179, 96 Cal.Rptr.2d 518, 999 P.2d 706.)

During the proceedings below, both parties requested judicial notice of the legislative and administrative history of section 226.7, and we have considered these documents. We do not consider, however, the unpublished state trial court and federal court decisions and orders submitted by the real parties in interest. (Cal. Rules of Court, rule 977(a), (b); People v. Webster (1991) 54 Cal.3d 411, 428, fn. 4, 285 Cal.Rptr. 31, 814 P.2d 1273.)

The trial court concluded that section 226.7 created a wage and denied the motion to strike all reference to a time period more than one year prior to the filing of the complaint. NASSCO sought writ review of the trial court's order, requesting (1) that the order be vacated and a new and different order be entered granting the motion and (2) an immediate stay of all proceedings. We stayed the proceedings pending our review and issued an order to show cause why the relief sought should not be granted.

DISCUSSION

Issue Presented and Standard of Review

Section 226.7 provides:

"(a) No employer shall require any employee to work during any meal or rest period mandated by an applicable order of the [IWC].

"(b) If an employer fails to provide an employee a meal period or rest period in accordance with an applicable order of the [IWC], the employer shall pay the employee one additional hour of pay at the employee's regular rate of compensation for each work day that the meal or rest period is not provided."

The primary question presented is what statute of limitations applies to the payment referred to in the statute. The answer to this question turns on whether the payment is primarily considered a penalty against employers or a wage to employees and therefore involves statutory interpretation, which presents a question of law subject to de novo review on appeal. (Bialo v. Western Mut. Ins. Co. (2002) 95 Cal.App.4th 68, 76-77, 115 Cal.Rptr.2d 3.) Our goal is to ascertain and carry out the Legislature's intent (Code Civ. Proc., § 1859), looking first to the words of the statute, giving them their usual and ordinary meaning. (People v. Garcia (2002) 28 Cal.4th 1166, 1172, 124 Cal.Rptr.2d 464, 52 P.3d 648.) If the language of the statute is susceptible to more than one reasonable construction, we can look to the legislative history to aid in ascertaining the legislative intent. (Diamond Multimedia Systems, Inc. v. Superior Court (1999) 19 Cal.4th 1036, 1055, 80 Cal.Rptr.2d 828, 968 P.2d 539.) "We are guided by the fundamental rule `that the objective sought to be achieved by a statute as well as the evil to be prevented is of prime consideration in its interpretation.'" (People v. United National Life Ins. Co. (1967) 66 Cal.2d 577, 596, 58 Cal.Rptr. 599, 427 P.2d 199, quoting Rockcreek etc. Dist. v. County of Calaveras (1946) 29 Cal.2d 7, 9, 172 P.2d 863.)

Analysis

A. The Section 226.7 Payment Is Both a Penalty and a Wage

"Wages" are defined as "all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation." (§ 200, subd. (a).) The term includes benefits to which an employee is entitled as a part of his or her compensation; such as, money, room, board, clothing, vacation pay and sick pay. (Department of Industrial Relations v. UI Video Stores, Inc. (1997) 55 Cal.App.4th 1084, 1091, 64 Cal.Rptr.2d 457.) In contrast, a "penalty" is "one which an individual is allowed to recover against a wrong-doer, as a satisfaction for the wrong or injury suffered, and without reference to the actual damage[s] sustained, or one which is given to the individual and the state as a punishment for some act which is in the nature of a public wrong." (County of Los Angeles v. Ballerino (1893) 99 Cal. 593, 596, 32 P. 581 (Ballerino).) Stated differently, a "penalty" compels "a defendant to pay a plaintiff other than what is necessary to compensate him [or her] for a legal damage done [] by the former." (Miller v. Municipal Court (1943) 22 Cal.2d 818, 837, 142 P.2d 297.)

If we turn to the language of the statute, credible arguments exist for interpreting the payment as both a penalty and a wage. If an employer requires an employee to work during a mandated meal or rest period, the "employer shall pay the employee one additional hour of pay at the employee's regular rate of compensation." (§ 226.7, subd. (b).) The payment is in the nature of a penalty because the language of the statute suggests that the payment does not apply if an employee voluntarily chooses to forego a meal or rest period. Similarly, the payment is not related to the amount of time worked because an employee receives a full hour of pay for a missed 10 minute rest period or half-hour lunch period. On the other hand, the requirement that the employer make the payment directly to the employee rather than a regulatory authority suggests that the payment is a wage. Additionally, labeling the remedy as an additional hour of "pay" suggests a wage. Section 226.7 is also part of the Labor Code's division 2 (Employment Regulation and Supervision), part 1 (Compensation), chapter 1 (Payment of Wages), article 1 (General Occupations).

Thus, the...