17 Feb

Two Recent Court Decisions May Negatively Impact California Employers and Retailers

by , on Articles

Court of Appeal Holds that Employers Can be Liable for up to
Two Meal/Rest Premiums Per Day for Missed Meal & Rest Periods

 On February 16, 2011, the California Court of Appeal considered the issue of whether, under Labor Code § 226.7, an employer can be held liable for one or two premium payments per day related to missed meal and rest periods. (UPS v. Superior Ct., 2/16/11 CA2/8). Unfortunately, it did so at UPS’ and California employers’ expense.
Labor Code section 226.7 requires an employer who fails to provide an employee with a meal or rest period to pay that employee one additional hour of pay (a “premium payment”) “for each work day that the meal or rest period is not provided.”  The Court construed the Legislature’s use of the disjunctive, “meal or rest period,” in section 226.7 as permitting a premium payment equal to one additional hour of pay for each type of break period that is not provided in a given work day. In turn, the Court held that, given the legislative history and principle that the courts are to construe the Labor Code broadly to protect employees, an employer can indeed be held liable for up to two additional hours of pay per day – one for missed meal periods, one for missed rest periods.
In light of the UPS decision, California employers should review their business practices to ensure they are affording compliant meal and rest periods to their non-exempt employees. Otherwise, they could face liability for up to two hours of additional pay per day to affected employees for missed or non-compliant meal and rest periods, instead of liability for only one hour of premium pay per day.
Supreme Court Rules that Retailers Face Liability for Recording Consumer ZIP Codes

Two weeks ago, the California Supreme Court, in Pineda v. Williams Sonoma Stores, Inc. 2011 LEXIS 1355 (Cal. Feb. 10, 2011), ruled that a retailer’s practice of obtaining ZIP codes from consumers violates the provisions of California Civil Code §1747.08 (also known as the Song-Beverly Credit Card Act or the “Credit Card Act”). A failure to comply with the Credit Card Act can subject retailers to penalties of up to $250 for a first violation and $1,000 for subsequent violations. This ruling will prove particularly problematic for retailers who seek to collect their customers’ ZIP codes for promotions, marketing research and campaigns.
In Pineda, the Court held –  in light of the Act’s plain language and protective purpose – that a consumer’s ZIP code is part of his/her personal identification information, which retailers are prohibited from collecting during standard credit card transactions due to privacy concerns. There remain a few exceptions, however, that enable retailers to collect consumer information during certain types of credit card transactions, including: during deposit or cash advance transactions, pursuant to federal laws, contractual obligation, or for incidental but transaction-related purposes such as shipping or delivery. Notably, the Court also rejected William Sonoma’s effort to prevent the Court’s decision from applying retroactively. As such, retailers may be found liable for violations of the Credit Card Act which predate the Pineda ruling, but which remain within the one year statute of limitation.
Given the Pineda ruling, businesses run a high risk of incurring liability if they collect or seek to collect ZIP code or other personal identification information from customers during credit card transactions which are not otherwise exempted by the terms of the Act. Further, because the Pineda decision reinforces privacy rights for California consumers at retailers’ expense, it will likely have the effect of bringing life to several class action lawsuits that were previously filed against various retailers who collected and recorded customer ZIP codes. The decision will also likely spur more future lawsuits, given its consumer-friendly content and the potentially significant penalties that can be assessed for violations of the Credit Card Act. In fact, the two days following the Pineda decision, seven consumer class actions alleging Song-Beverly violations were filed in San Diego County alone. Accordingly, businesses are encouraged to review their credit card transaction policies and procedures, and seek legal advice if necessary.
Mike O’Connor is a partner at Andrews Lagasse Branch + Bell LLP. He can be reached at (858)345-5080 and by email at moconnor@albblaw.com.  Andrews Lagasse Branch + Bell LLP advises and represents employers and businesses throughout California and Nevada.