While perhaps overlooked in favor of other high-profile rulings (we’re looking at you, Viking River Cruises), the California Supreme Court’s decision in Naranjo v. Spectrum Security Services, Inc., No. S258966 (Cal. May. 23, 2022) may turn out to be one of the most significant cases of the year for California employers. As we previously reported, Naranjo held that meal and rest period premiums may be characterized as “wages” under the California Labor Code, triggering derivative wage statement penalties under Labor Code section 226 and waiting time penalties under Labor Code section 203 if meal and rest period premiums go unpaid. The full consequences of that ruling are still unfolding, as evidenced by the Court of Appeal’s recent decision in Betancourt v. OS Restaurant Services, LLC, 83 Cal. App. 5th 132 (2022). Betancourt holds that because meal and rest period premiums are now understood to be “wages,” an employee who successfully sues for recovery of those premiums will now be entitled to attorneys’ fees as well. In yet another distressing ruling for employers, Betancourt may increase risk and litigation costs for employers by allowing plaintiffs’ lawyers to recoup potentially large fee awards, even where the recovery for the employee is small.

The plaintiff in Betancourt sued her former employer for a variety of claims, including (1) meal and rest break violations, (2) wage statement violations, (3) waiting time violations, (4) wrongful termination, and (5) retaliation. After discovery, the parties agreed to dismiss the wrongful termination and retaliation claims, and settled the remaining wage and hour claims for a (relatively) modest sum of approximately $15,000. But the plaintiff wasn’t done. She then filed a motion pursuant to California Labor Code section 218.5(a) seeking attorneys’ fees and costs of more than $580,000. (Section 218.5(a) allows plaintiffs who prevail on their wage claims to recover their attorneys’ fees.) Reducing that amount, the trial court awarded plaintiff nearly $290,000 in fees and costs – roughly 18 times what the plaintiff had actually settled her wage claims for. The employer appealed, contending that the award of attorneys’ fees should be reversed.

After Naranjo, the legal issue for the Second District Court of Appeal to decide was, according to the Court, relatively straightforward: does Section 218.5(a) permit an employee to recover attorneys’ fees if she obtains a favorable result on a claim for meal and rest break premiums, or on derivative claims for waiting time or wage statement penalties? The court said yes, based on what it called the “clear” holding of Naranjo that “extra pay for missed breaks constitutes wages.” In light of that holding, the attorneys’ fee award under Section 218.5(a) was essentially automatic for the prevailing plaintiff.

Plaintiffs often have everything to gain and little to lose when it comes to seeking attorneys’ fees under Section 218.5 (a). While plaintiffs are entitled to fees every time they win, employers can recover fees “only if the court finds that the employee brought the court action in bad faith.” And as Betancourt itself demonstrates, there is no proportionality requirement for fees: even a single unpaid meal or rest break premium places an employer on the hook for a potentially gigantic fee award. After Naranjo and Betancourt, meal and rest break claims pose high financial risks to California employers.

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Photo of Timothy Long Timothy Long

Timothy Long, Co-Managing Shareholder of the Sacramento office, has deep experience litigating complex labor and employment issues, having served as lead counsel in multiple class, collective, and representative actions and advising on dozens more. Tim splits his time between GT’s Los Angeles and…

Timothy Long, Co-Managing Shareholder of the Sacramento office, has deep experience litigating complex labor and employment issues, having served as lead counsel in multiple class, collective, and representative actions and advising on dozens more. Tim splits his time between GT’s Los Angeles and Sacramento offices, and is Practice Group Leader of the Sacramento office’s Labor & Employment Practice. Tim’s clients have included a variety of financial institutions and entities, health care-related entities, airlines, retailers, high-tech companies, and transportation and logistics companies. Tim also advises private investment funds and their partners in disputes concerning the management of funds, removal of non-performing members, and disputes involving portfolio companies.

Tim has litigated virtually every wage-and-hour issue there is, including exemption, incentive compensation, independent contractor, off-the-clock, meal and rest, pay practice, and PAGA claims. He also has defeated class and collective certification (including at Stage One) in exemption, off-the-clock, and pay practice cases, and has defeated PAGA claims short of trial. Tim has also litigated a wide variety of discrimination, harassment, and retaliation claims, as well as wrongful termination, defamation, Anti-SLAPP, fraud, emotional distress, breach of contract, and other employment-related claims. Tim has both prosecuted and defended employers in trade secret and unfair business practices litigation. He has also resisted competitor efforts to enjoin the lawful practices of his clients.

Photo of Samuel S. Hyde Samuel S. Hyde

Samuel S. Hyde is a member of the Labor & Employment and Litigation practices in Greenberg Traurig’s Sacramento office. He assists clients with general labor & employment and general litigation matters.

Prior to joining the firm, Samuel served as a law clerk for…

Samuel S. Hyde is a member of the Labor & Employment and Litigation practices in Greenberg Traurig’s Sacramento office. He assists clients with general labor & employment and general litigation matters.

Prior to joining the firm, Samuel served as a law clerk for the Honorable Dale A. Drozd for the U.S. District Court for the Eastern District of California, where he worked on a variety of civil cases including trade secret matters, employment disputes, property disputes, breaches of contract, civil rights, and habeas.

Sam has also acted as Special Counsel to the General Counsel for the National Security Agency (NSA). He provided legal and policy advice in direct support to NSA’s General Counsel. He drafted formal and informal legal briefings, defending the Agency’s positions in the interagency process, to Congress, and to the public. Through his work at NSA, Sam obtained a top-secret security clearance with access to sensitive compartmented information.