The California Court of Appeal recently issued an opinion that brings good news to employers in connection with California's draconian penalties for late payment of final wages. In Naranjo v. Spectrum Security Services, Inc. ("Naranjo"), a California appellate court found that if a "good faith dispute" exists as to whether wages are due to an employee, an employee cannot recover and the employer is not liable for late pay penalties (known as "waiting time penalties") in connection with an employer's payment of final wages.
Naranjo has a long history, dating back to 2007. This latest iteration of the case stems from a May 2022 California Supreme Court decision (Naranjo v. Spectrum Security Services, Inc., 13 Cal.5th 93 (2022)) finding that penalties paid for missed meal breaks constitute "wages" and, therefore, must be reported on the employee's wage statements (Labor Code Section 226) and paid within a certain time upon the employee's discharge or resignation (Labor Code Section 203).
The Supreme Court noted that Sections 203 and 226 allow the employee to sue for statutory penalties if the employer fails to comply with these requirements. Section 203(a) imposes penalties of up to 30 days if an employer "willfully" fails to pay any wages owed at the end of employment. Section 226 imposes penalties if an employer's failure to report certain categories of information, including missed-break premium wages, on an employee's wage statements is "knowing and intentional." Section...
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