California: Defense Affirmed for Wage Statement Violations


All Employers with Employees in CA


May 6, 2024


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Quick Look

  • Good faith disputes over unpaid wages may shield employers from penalties for wage statement violations.


In Naranjo v. Spectrum Services Inc., the California Supreme Court said that if an employer, in good faith, reasonably believes it is providing accurate wage statements, it may not be liable for associated penalties. Specifically, employers must provide employees with accurate and complete wage statements. Failure to do so may result in an injunction compelling compliance and an award of costs and reasonable attorney’s fees. In the case of a “knowing and intentional failure . . . to comply,” employers may be liable for statutory penalties of up to $4,000 or the employee’s actual damages.


Here, there was a dispute over whether premium pay for missed meal and rest periods constituted wages. In a prior ruling, the California Supreme Court said that the premium payments were wages. The employee alleged that because the premium payments were not identified on the wage statements, the employer intentionally and knowingly violated wage statement requirements by failing to include all wages paid, including the missed meal premiums.


The Court said that “an employer cannot incur civil or criminal penalties for the willful nonpayment of wages when the employer reasonably and in good faith disputes that wages are due.” Moreover, “if an employer reasonably and in good faith believed it was providing a complete and accurate wage statement in compliance with the requirements of [Labor Code] section 226, then it has not knowingly and intentionally failed to comply with the wage statement law.”


Based on the statutory wording, the Court said that the “knowing and intentional” requirement is not satisfied just because a law was violated. More specifically, a “knowing and intentional” violation does not include “a reasonable, good faith mistake about what compliance with the law requires.” (Emphasis added.) This interpretation isn’t meant to excuse ignorance of the law, but allows for reasonable, good-faith interpretations of the law as a defense to further penalties.


In this case, the law was unclear about whether meal premiums were considered wages until the California Supreme Court settled that issue. When the employer disputed the employee’s claim, the Court determined that the dispute was in good faith and omission of meal premiums on the wage statements was not intentional and knowing as intended by the statute.


Action Items

  1. Review wage statements for compliance.


Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2024 ManagEase