Murphy v. Kenneth Cole Productions, Inc., 2007 WL 1111233 (Cal. S. Ct. 2007)

Former store manager John Paul Murphy sued Kenneth Cole Productions, Inc. (KCP), a small, upscale retail clothing store, for violations of the wage and hour law, asserting that he was improperly classified as an exempt employee. After resigning his employment, Murphy filed a complaint with the Labor Commissioner. The Labor Commissioner awarded Murphy unpaid overtime, interest and a waiting time penalty. After KCP appealed, Murphy (by then represented by the Hastings College of the Law Civil Justice Clinic) filed a “notice of claims,” adding claims for unpaid meal and rest periods, pay-stub violations and interest and attorney’s fees. The trial court awarded Murphy unpaid overtime, payments for missed meal and rest periods and pay stub violations, waiting time penalties and prejudgment interest plus attorney’s fees. The Court of Appeal affirmed the lower court’s judgment that Murphy was a non-exempt employee (and, thus, entitled to overtime) in that he spent “far less than half of his time engaged in managerial duties.” However, the Court of Appeal reversed the judgment to the extent it included an award for missed meal and rest periods and for pay-stub violations since such claims were not raised before the Labor Commissioner. Further, the Court of Appeal held that the payment for a meal/rest period violation is a penalty not a wage and, therefore, is subject to a one-year statute of limitations. The California Supreme Court reversed the Court of Appeal, holding that the additional hour of pay provided for in Labor Code § 226.7 constitutes a wage or premium payment, which is subject to a three-year statute of limitations, and not a penalty. The Supreme Court further held that a trial court conducting a de novo trial can consider additional wage claims that were not presented to the Labor Commissioner. Cf. On-Line Power, Inc. v. Mazur, 2007 WL 1128874 (Cal. Ct. App. 2007) (salaried employee with employment contract was entitled to recover attorney’s fees under Labor Code § 218.5).