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An extra hour of pay by any other name is still an extra hour of pay. But if that payment is made because an employer failed to give meal and rest breaks, should it be considered compensation for the employee or punishment for the company? The California Supreme Court grappled with that question in front of a packed courtroom on Wednesday. And if oral arguments were any indication, the vote will be a close one. The ruling in Murphy v. Kenneth Cole Productions, S140308, is highly anticipated by labor and employment lawyers. Since 2000, when lawmakers decided to award one hour of pay for any meal and rest break violation, the statute of limitations for Labor Code � 226.7 has been hotly contested. Its length hinges on whether that money is considered compensation or a penalty under the state’s Labor Code; appellate panels have come up with different conclusions. Workers seeking money for missed breaks have to file complaints with an administrative law judge, as Murphy did, or in superior court. Interpreting the law as compensation rather than a penalty would triple the amount of time an employee has to file � and expand how far back the claims can reach. In Wednesday’s case, Donna Ryu, an attorney at the Civil Justice Clinic at Hastings College of the Law has argued on behalf of former Kenneth Cole employee John Paul Murphy that a three-year statute of limitations must apply. They contend lawmakers clearly intended the extra pay to be compensation because the language of the statute uses the term “pay” but not the word “penalty.” The defense has countered that the clear effect of the law is to punish employers, so a one-year statute of limitations should apply. In court, Justices Joyce Kennard and Carol Corrigan challenged Ryu to more fully explain why the statute should not be seen primarily as a penalty. Just moments after Ryu began her prepared remarks, Kennard challenged her with a hypothetical. The justice described an instance where an employee is required to work through a half-hour lunch break, then noted the Labor Code requires a full hour’s extra payment in that instance. “One can make an argument � at that point it comes across as a penalty,” she said. Later, under a similar line of questioning from Corrigan, Ryu equated the extra hour’s wage to the sort of “premium” employees get for working overtime. “It’s rough justice [for employees],” she conceded, “but it’s close enough. And more importantly, it’s the only compensation.” At moments during Wednesday’s arguments, Justice Carlos Moreno appeared to lean toward the penalty definition. But he asked numerous questions to let Ryu try to persuade him otherwise. For example, he asked how to differentiate � 226.7 from other statutes in the Labor Code that qualify as penalties. Citing one other specific statute, Ryu said it explicitly uses the word “penalty.” She added that other provisions explicitly establish both compensation for employees and penalties for employers, while � 26.7 gives only one remedy. “In this case, [the extra pay] is the only compensation,” Ryu said. Justice Kathryn Werdegar at one point seemed to grow a bit frustrated with Ryu’s refrain that the word “pay” means compensation. “To say it is compensation is conclusive. We have to determine whether it is or it isn’t,” Werdegar said. Even as the justices grilled Ryu, several appeared to be giving her arguments plenty of consideration as they questioned Robert Tollen, a San Francisco partner at Seyfarth Shaw who argued for Kenneth Cole. Justice Marvin Baxter asked Tollen to explain why California’s liberal lawmakers would create a penalty that puts a different price tag on violations for workers on different pay scales. “I can’t see how the Legislature would want to go on record saying that denying a minimum wage employee is less important than denying a higher compensated employee,” Baxter said. The Legislature has already done it, Tollen replied, citing a separate section of the Labor Code. It’s not clear exactly how much money is at stake for Murphy in this case, but his Supreme Court briefs say he logged nearly 900 hours of unpaid breaks over two years as a Kenneth Cole employee. Murphy was classified as a store manager at Kenneth Cole. He sued after leaving in 2002, estimating that he had actually spent about 90 percent of his time performing the tasks of a sales associate, a position entitled to meal and rest breaks.

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