Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094

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1094




[No. S140308. Apr. 16, 2007.]

JOHN PAUL MURPHY, Plaintiff and Respondent, v.
KENNETH COLE PRODUCTIONS, INC., Defendant and Appellant.
1095
1096
1097
1098




Counsel

Seyfarth Shaw, Robert W. Tollen and George E. Preonas for Defendant and
Appellant.

Cooley Godward Kronish, Michelle C. Doolin, Lori R. E. Ploeger, Leo P.
Norton and Kelly A. Weber for The Yankee Candle Company, Inc., as Amicus
Curiae on behalf of Defendant and Appellant.

Steven B. Katz for Circuit City Stores, Inc., and Chevron U.S.A., Inc., as
Amici Curiae on behalf of Defendant and Appellant.

Sidley Austin and Jeffrey A. Berman for California Association of Health
Facilities as Amicus Curiae on behalf of Defendant and Appellant.

Law Offices of Steven Drapkin and Steven Drapkin for California
Employment Law Council, Chamber of Commerce of the United States of
America,    California  Chamber    of Commerce,      California  Restaurant
Association, Alliance of Motion Picture & Television Producers, Airline
Industrial Relations Conference and California Lodging Industry Association
as Amici Curiae on behalf of Defendant and Appellant.

Sheppard Mullin Richter & Hampton, Richard J. Simmons and Geoffrey D.
DeBoskey for Employers Group, California Retailers Association, National
Retail Federation and California Hospital Association as Amici Curiae on
behalf of Defendant and Appellant.

Hastings Civil Justice Clinic, Donna M. Ryu, Nancy M. Stuart and Miye A.
Goishi for Plaintiff and Respondent.
                                                                          1099


Weinberg, Roger & Rosenfeld, David A. Rosenfeld, Theodore Franklin,
Suzanne M. Murphy, Patricia M. Gates, Anne I. Yen and Jessica Christensen
for Alameda County Central Labor Council, California Conference of
Machinists, Contra Costa County Central Labor Council, National California
Carpenters Regional Council, SEIU United Healthcare Workers-West, South
Bay Central Labor Council, California Labor Federation, AFL-CIO, and
International Association of Machinists and Aerospace Workers, District
Lodge 725, AFL-CIO, as Amici Curiae on behalf of Plaintiff and Respondent.

Cohelan & Khoury and Michael D. Singer for California Employment
Lawyers Association as Amicus Curiae on behalf of Plaintiff and Respondent.

California Rural Legal Assistance, Inc., Cynthia L. Rice; Legal Aid
Society-Employment Law Center, Matthew Goldberg and Michael Gaitley for
Maria Leticia Banda, Asian Law Caucus, Inc., Asian Pacific American Legal
Center of Southern California, Bet Tzedek Legal Services, Centro Legal de La
Raza, East Bay Community Law Center, Garment Worker Center, Golden
Gate Women’s Employment Rights Clinic, The Impact Fund, Katharine &
George Alexander Community Law Center, Koreatown Immigrant Workers
Alliance, La Raza Centro Legal, Legal Aid Foundation of Los Angeles,
Neighborhood Legal Services of Los Angeles County, Stanford Community
Law Clinic, Sweatshop Watch, Young Workers United and Rocia Zetina as
Amici Curiae on behalf of Plaintiff and Respondent.

Neyhart, Anderson, Flynn & Grosboll, John L. Anderson and Scott M.
DeNardo for California Teamsters Public Affairs Council and California
Conference Board of the Amalgamated Transit Union as Amici Curiae on
behalf of Plaintiff and Respondent.

Roxborough, Pomerance & Nye, Michael B. Adreani and Marina N. Vitek for
Jennifer Augustus as Amicus Curiae on behalf of Plaintiff and Respondent.


Opinion

MORENO, J. This         case presents two issues: first, whether the “one
additional hour of pay” provided for in Labor Code section 226.7 constitutes
a wage or premium pay subject to a three-year statute of limitations (Code Civ.
Proc., § 338) or a penalty subject to a one-year statute of limitations (Code
Civ. Proc., § 340); second, whether a trial court, conducting a de novo trial,
can consider additional wage claims not presented in the administrative
proceeding before the state Labor Commissioner. We conclude that the
remedy provided in Labor Code section 226.7 constitutes a wage or premium
pay and is governed by a three-year statute of limitations and that the trial
1100


court properly considered the additional, but related, wage claims during the
de novo trial. Accordingly, we reverse the contrary judgment of the Court of
Appeal.

                        Facts   and Procedural   History


   As noted by the Court of Appeal, “the controlling historical facts as
established by the trial court [are] largely undisputed.”

   Plaintiff John Paul Murphy worked as a store manager in a Kenneth Cole
Productions (KCP) retail clothing store from June 2000 until June 19, 2002,
during which he was paid a weekly salary. The store was open from 9:30 a.m.
to 8:00 p.m., Monday through Saturday, and 11:00 a.m. to 6:00 p.m. on
Sunday. On a typical day, Murphy and another employee arrived around 8:30
or 9:00 a.m. to open the store. Between 9:30 a.m. and 1:00 p.m., Murphy did
nothing other than make sales, receive or transfer product, process mark-
downs and clean.

  During a usual weekday afternoon, the second shift of either one or two
people arrived at 1:00 p.m. The employee who had opened the store with
Murphy would go to lunch, and Murphy and another employee would begin
carrying merchandise into the stockroom while covering the sales floor. At
some point, Murphy would go to the office to eat as he continued to work. By
2:00 p.m. he was either on the sales floor or working back in the stockroom.
Murphy was scheduled to leave at 6:00 p.m., but he often would have
customers on the sales floor, or would do some human resources paperwork.

   Murphy’s duties when he worked the closing shift from noon until 8:00
p.m. were essentially the same as when he worked the opening shift. On most
days, he was on the sales floor or in the stockroom from 12:30 to 4:30 p.m.
At 4:30 p.m. he would try to eat lunch while he checked KCP company voice
mail and e-mail in the office, and then worked on the sales floor until closing
time. After the store was closed, Murphy and a sales associate would verify
the bank deposit, clean up the store, put shoes away, vacuum and empty the
garbage. Typically, they would finish cleaning around 8:45 or 9:00 p.m.

  Murphy regularly worked nine- to 10-hour days, during which he was only
able to take an uninterrupted, duty-free meal period approximately once every
two weeks. He rarely, if ever, had the opportunity to take a rest period and,
on occasion, was unable to go to the restroom.

  Murphy resigned on June 19, 2002. A friend told him that KCP had not
been paying him correctly. On October 16, 2002, Murphy filed a wage claim
with the Labor Commissioner. Murphy used the check-the-box form to raise
                                                                                        1101


claims for unpaid overtime and waiting time penalties, but did not know he
could make a claim for rest and meal period and itemized pay statement
violations.1 Even had he sought to file a claim for itemized pay statement
violations, it is the policy of the Labor Commissioner to deny requests to file
such claims.

   On June 24, 2003, more than eight months after the initial filing of the
wage claim, the Labor Commissioner conducted a hearing. The Labor
Commissioner issued a decision in Murphy’s favor on July 14, 2003, finding
that KCP failed to establish that Murphy was an exempt employee and
awarding unpaid overtime, interest, and waiting time penalties.

   On August 6, 2003, KCP filed a notice for de novo review, which vested
jurisdiction in the San Francisco Superior Court. On October 24, 2003, the
Hastings College of the Law Civil Justice Clinic (Civil Justice Clinic) filed
 and served a notice of association of counsel to represent Murphy along with
the Division of Labor Standards Enforcement (DLSE). On November 10,
2003, the Civil Justice Clinic and the DLSE filed a “Notice of Claims and
Issues at De Novo Trial of Wage Claim.” In addition to unpaid overtime,
interest, and waiting time penalties, Murphy asserted claims for meal and rest
period and itemized pay statement violations. KCP objected to the introduc-
tion of new claims, but the trial court, after requesting briefing from the
parties on the matter, overruled the objections and considered the additional
claims. The trial court reasoned that hearing the new claims served the
interests of judicial economy, preserving the rights of the parties, and
discouraging appeals by subjecting employers who appeal to additional
liability.

   In May 2004, the trial court filed its statement of decision and a judgment
awarding Murphy unpaid overtime, payments for missed meal and rest
periods, penalties for failing to furnish itemized pay statements, waiting time
penalties and prejudgment interest. The court, applying the three-year statute
of limitations in Code of Civil Procedure section 338, awarded payments for
meal and rest period violations dating from October 2000. The court subse-
quently granted Murphy’s motion for attorney fees and costs.

   KCP appealed from the judgment of the trial court, arguing that the court
erred in addressing claims for meal and rest period and itemized pay
statement violations that had not been previously raised before the Labor
   1 Labor Code section 226, subdivision (a), lists the information that an employer must
include on nonexempt employees’ pay statements. Section 226, subdivision (e), entitles
employees “suffering injury as a result of a knowing and intentional failure by an employer to
comply” to recover the greater of actual damages or $50 for an initial violation and $100 for
subsequent violations, plus costs and reasonable attorney fees.
1102


Commissioner. KCP also contended that the payments ordered for the meal
and rest period violations were penalties, and thus subject to the one-year
statute of limitations in Code of Civil Procedure section 340.2

   The Court of Appeal affirmed in part and reversed in part, holding that
Labor Code section 226.V3 payments assessed for meal and rest period
violations are penalties subject to a one-year statute of limitations and that
claims may not be raised for the first time on de novo appeal from an
administrative hearing in front of the Labor Commissioner. We granted
plaintiff’s petition for review.

                                         Discussion

       A. Section 226.7’s “Additional Hour of Pay” Constitutes Wages

   Section 226.7, subdivision (a) provides, “No employer shall require any
employee to work during any meal or rest period mandated by an applicable
order of the Industrial Welfare Commission.”4 Subdivision (b) of section 226.7
further provides that, “If an employer fails to provide an employee a meal
period or rest period in accordance with an applicable order of the Industrial
Welfare Commission, the employer shall pay the employee one additional
hour of pay at the employee’s regular rate of compensation for each work
day that the meal or rest period is not provided.” (Italics added.) The trial
court concluded that KCP did not provide Murphy the required meal or rest
periods and accordingly awarded Murphy an “additional hour of pay” for
each day Murphy was forced to work through a meal or rest period.

         In deciding what statute of limitations governed Murphy’s claims, the
trial court considered whether the “additional hour of pay” provided for by
section 226.7 constitutes a wage or a penalty. A three-year statute of
limitations applies to the former (Code Civ. Proc., § 338, subd. (a) [“An
action upon a liability created by statute, other than a penalty or forfeiture”]),
while a one-year statute of limitations governs claims for penalties (Code Civ.
Proc., § 340, subd. (a) [“An action upon a statute for a penalty or forfei-
ture”]). The trial court, analyzing the statutory language and finding that the
   2
     KCP also appealed the trial court’s determination that Murphy was a nonexempt employee.
The Court of Appeal concluded KCP’s argument “ha[d] no merit” and affirmed the judgment
of the trial court. KCP asked this court to review the Court of Appeal’s decision regarding
Murphy’s nonexempt status. We declined to do so.
  3 Unless otherwise stated,
                              all further unlabeled statutory references are to the Labor Code.
  4 The
          Industrial Welfare Commission (IWC) is the state agency empowered to formulate
wage orders governing employment in California. (Tidewater Marine Western, Inc. v. Bradshaw
(1996) 14 Cal.4th 557, 561 [59 Cal.Rptr.2d 186, 927 P.2d 296].) The Legislature defunded the
IWC in 2004, however its wage orders remain in effect. (Huntington Memorial Hospital v.
Superior Court (2005) 131 Cal.App.4th 893, 902, fn. 2 [32 Cal.Rptr.3d 373].)
                                                                                  1103


“hour of pay” primarily compensated employees for working through meal
and rest periods, concluded that the pay provided for in the statute constitutes
wages and is governed by the three-year statute of limitations. The trial court
awarded payments for violations starting in October 2000.5 The Court of
Appeal reversed without analyzing the statutory language.

        1. Statutory Language Suggests Section 226.7 Payment is a Wage

         In determining whether the Legislature intended for the section 226.7
payment to constitute wages or a penalty, it is well settled that we must look
first to the words of the statute, “because they generally provide the most
reliable indicator of legislative intent.” (Hsu v. Abbara (1995) 9 Cal.4th 863,
871 [39 Cal.Rptr.2d 824, 891 P.2d 804].) If the statutory language is clear and
unambiguous our inquiry ends. “If there is no ambiguity in the language, we
presume the Legislature meant what it said and the plain meaning of the
statute governs.” (People v. Snook (1997) 16 Cal.4th 1210, 1215 [69
Cal.Rptr.2d 615, 947 P.2d 808]; see Diamond Multimedia Systems, Inc. v.
Superior Court (1999) 19 Cal.4th 1036, 1047 [80 Cal.Rptr.2d 828, 968 P.2d
539].) In reading statutes, we are mindful that words are to be given their
plain and commonsense meaning. (Lungren v. Deukmejian (1988) 45 Cal.3d
727, 735 [248 Cal.Rptr. 115, 755 P.2d 299].) We have also recognized that
statutes governing conditions of employment are to be construed broadly in
favor of protecting employees. (Sav-On Drug Stores, Inc. v. Superior Court
(2004) 34 Cal.4th 319, 340 [17 Cal.Rptr.3d 906, 96 P.3d 194]; Ramirez v.
Yosemite Water Co. (1999) 20 Cal.4th 785, 794 [85 Cal.Rptr.2d 844, 978 P.2d
2] (Ramirez); Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976, 985 [4
Cal.Rptr.2d 837, 824 P.2d 643].) Only when the statute’s language is ambigu-
ous or susceptible of more than one reasonable interpretation, may the court
turn to extrinsic aids to assist in interpretation. (People v. Jefferson (1999) 21
Cal.4th 86, 94 [86 Cal.Rptr.2d 893, 980 P.2d 441].)

         The Labor Code defines “wages” as “all amounts for labor performed
by employees of every description, whether the amount is fixed or ascertained
by the standard of time, task, piece, commission basis, or other method of
calculation.” (§ 200, subd. (a).) Courts have recognized that “wages” also
include those benefits to which an employee is entitled as a part of his or her
compensation, including money, room, board, clothing, vacation pay, and sick
pay. (E.g., Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, 780 [183
Cal.Rptr. 846, 647 P.2d 122]; Department of Industrial Relations v. UI Video
Stores, Inc. (1997) 55 Cal.App.4th 1084, 1091 [64 Cal.Rptr.2d 457].)
  5 Murphy was employed by KCP from June 2000 to June 2002. From October through
December 2000, remedies for meal and rest period violations were set out in an IWC wage
order. Section 226.7 became effective on January 1, 2001.
 1104


      A “penalty,” on the other hand, is that “which an individual is allowed
to recover against a wrong-doer, as a satisfaction for the wrong or injury
suffered, and without reference to the actual damage sustained . . . .” (County
of Los Angeles v. Ballerino (1893) 99 Cal. 593, 596 [34 P. 329] (Ballerino);
see also County of San Diego v. Milotz (1956) 46 Cal.2d 761, 766 [300 P.2d 1]
(Milotz).) Penalties provide for “ ‘recovery of damages additional to actual
losses incurred, such as double or treble damages ....’”    (Prudential Home
Mortgage Co. v. Superior Court (1998) 66 Cal.App.4th 1236, 1242 [78
Cal.Rptr.2d 566].)

         Section 226.7, subdivision (b) requires that employees be paid “one
additional hour of pay” for each workday that they are required to work
through a meal or rest period. “Pay” is defined as “money [given] in return
for goods or services rendered.” (American Heritage Dict. (4th ed. 2000)
p. 1291.) This definition is in keeping with the Labor Code definition of
“wages.”6 Pursuant to IWC wage orders, employees are entitled to an unpaid
30-minute, duty-free meal period after working for five hours and a paid
 10-minute rest period per four hours of work. (Cal. Code Regs., tit. 8, § 11070,
subds. 11, 12.) If denied two paid rest periods in an eight-hour workday, an
employee essentially performs 20 minutes of “free” work, i.e., the employee
receives the same amount of compensation for working through the rest
periods that the employee would have received had he or she been permitted
to take the rest periods. An employee forced to forgo his or her meal period
similarly loses a benefit to which the law entitles him or her. While the
employee is paid for the 30 minutes of work, the employee has been deprived
of the right to be free of the employer’s control during the meal period.
(Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 586 [94 Cal.Rptr.2d 3,
995 P.2d 139] [uncompensated time is time employees can effectively use
“
  ‘for [their] own purposes’ ”]; Bono Enterprises, Inc. v. Bradshaw (1995) 32
Cal.App.4th 968, 975 [38 Cal.Rptr.2d 549], disapproved on other grounds in
Tidewater Marine Western v. Bradshaw, supra, 14 Cal.4th at p. 574.) Section
226.7 provides the only compensation for these injuries.

   While the language of section 226.7, which is to be interpreted broadly in
favor of protecting employees (Ramirez, supra, 20 Cal.4th at p. 794), appears
to indicate the “additional hour of pay” provided for in subdivision (b) is a
wage to compensate employees for the work described in subdivision (a), the
language is also reasonably susceptible of an interpretation that the hour of
pay is a penalty intended to punish the employer for denying employees their
   6 Indeed, the Legislature
                             has frequently used the words “pay” or “compensation” in the
Labor Code as synonyms for “wages.” (E.g., §§ 96, subd. (h) [“vacation pay” and “severance
pay”], 511 [“overtime compensation”], 1043 [“time off with pay”].) The same is true of the
IWC wage orders. (E.g., Cal. Code Regs., tit. 8, § 11070, subds. 3 [“regular rate of pay” and
“overtime compensation”], 5 [“reporting time pay”].)
                                                                                            1105


meal and rest periods. As a result we look to extrinsic sources, such as the
ostensible objectives to be achieved by the statute, the evils to be remedied,
the legislative history, public policy, contemporaneous    administrative con-
struction and the statutory scheme of which the statute is a part. (People v.
Jefferson, supra, 21 Cal.4th at p. 94; People v. Coronado (1995) 12 Cal.4th
145, 151 [48 Cal.Rptr.2d 77, 906 P.2d 1232].)


          2.   Administrative and Legislative History Demonstrates Intent to
               Establish a Premium Wage to Compensate Employees

   We begin with the administrative and legislative history of the remedy for
missed meal and rest periods.7 Meal and rest periods have long been viewed
as part of the remedial worker protection framework. (Industrial Welfare
Com. v. Superior Court (1980) 27 Cal.3d 690, 724 [166 Cal.Rptr. 331,
613 P.2d 579]; Bono Enterprises, Inc. v. Bradshaw, supra, 32 Cal.App.4th at
p. 975.) Concerned with the health and welfare of employees, the IWC issued
wage orders mandating the provision of meal and rest periods in 1916 and
1932, respectively. (California Manufacturers Assn. v. Industrial Welfare Com.
(1980) 109 Cal.App.3d 95, 114-115 [167 Cal.Rptr. 203].) The wage orders
required meal and rest periods after specified hours of work. The only remedy
available to employees, however, was injunctive relief aimed at preventing
future abuse. In 2000, due to a lack of employer compliance, the IWC added
a pay remedy to the wage orders, providing that employers who fail to
   7 The court notes that the DLSE’s interpretation of section 226.7 has not been consistent.
When enacted, section 226.7 was generally interpreted as constituting “premium pay” or
“wages.” (E.g., DLSE Opn. Letter No. 2001.09.17, pp. 2-3 [“premium pay”]; DLSE Opn.
Letter No. 2003.06.11, pp. 1—4[“premium wage, not a penalty”] [withdrawn Dec. 20, 2004];
DLSE Opn. Letter 2003.10.17, p. 6 [“premium pay”]; but see DLSE Opn. Letter 2001.04.02,
p. 4, fn. 2 [“penalty pay”] [withdrawn Dec. 20, 2004].) Indeed, the DLSE represented Murphy
as cocounsel before the trial court, taking the position that section 226.7 pay constitutes wages
and submitting the June 11, 2003 opinion letter to the trial court.
   However, as the DLSE has acknowledged, the issue became highly politicized and, in
December 2004, the DLSE withdrew four opinion letters discussing section 226.7. The DLSE
then issued proposed regulations and a precedent decision interpreting the remedy as a penalty
(Hartwig v. Orchard Commercial, Inc. (DLSE Precedent Dec. No. 2005-001, May 11, 2005);
Gov. Code § 11425.60, subd. (b)), a “180 degree turn from its prior interpretations of that
statute.” (Sweeney, Filling in the Gaps: The Scope of Administrative Agencies’ Power to Enact
Regulations (2006) 27 Whittier L.Rev. 621, 662; Cornn et al. v. United Parcel Service, Inc.
(N.D.Cal. Mar. 14, 2005, CV No. 03-2001) 2005 WL 588431, p. *4 [“DLSE’s position has
changed”].)
   While the DLSE’s construction of a statute is entitled to consideration and respect, it is not
binding and it is ultimately for the judiciary to interpret this statute. (Yamaha Corp. of
America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 7-8 [78 Cal.Rptr.2d 1, 960 P.2d
1031].) Additionally, when an agency’s construction “ ‘flatly contradicts’ ” its original interpre-
tation, it is not entitled to “significant deference.” (Henning v.Industrial Welfare Com. (1988) 46
Cal.3d 1262, 1278 [252 Cal.Rptr. 278, 762 P.2d 442].)
 1106


provide a meal or rest period “shall pay the employee one (1) hour of pay at
the employee’s regular rate of compensation for each work day” that the
period is not provided.8 (Cal. Code Regs., tit. 8, § 11070, subds. 11(D),
12(B).)9

    At the same time that the IWC was adding the pay remedy, Assemblymem-
 ber Darrell Steinberg introduced Assembly Bill No. 2509 (1999-2000 Reg.
 Sess.) (Bill No. 2509) to codify a pay remedy via proposed section 226.7.
 (Bill No. 2509, § 12, as introduced Feb. 24, 2000.) In its original iteration,
Bill No. 2509 proposed a dual strategy to address the problem of employees
being forced to work through their meal and rest periods: (1) an explicit
penalty provision, and (2) a separate payment to employees. (Bill No. 2509,
 § 12, as introduced Feb. 24, 2000.) The penalty provision provided that
employers who failed to provide meal or rest periods would be subject to “A
civil penalty of fifty dollars ($50) per employee per violation.”10 (Bill
No. 2509, § 12, as introduced Feb. 24, 2000.) The employee payment
provision in the original bill was similar to the one ultimately enacted
(§ 226.7, subd. (b)). Employees who did not receive the mandated meal or
rest periods would be paid an “amount equal to twice [the employee’s]
average hourly rate of compensation for the full length of the meal or rest
periods during which the employee was required to perform any work.” (Bill
No. 2509, § 12, as introduced Feb. 24, 2000.) Although the original version
of Bill No. 2509 provided for both a penalty and a payment to the employee,
it limited the employees’ recovery to the payment, leaving collection of the
penalty to the Labor Commissioner, as had been the typical practice. (Ibid.;
e.g., Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365,
370 [36 Cal.Rptr.3d 31] [Labor Commissioner assesses and collects civil
penalties]; e.g., § 210.)-11
   That the authors of Bill No. 2509 believed that the payment to the
employee contained in the original version was independent of (and different
from) its penalty provision is apparent both from the plain language of the
   8 The IWC added the remedy
                                    to sections 11 and 12 of the wage order, rather than section 20,
which deals with penalties.
   9 The trial court
                       determined that the wage order regulating wages, hours, and working
conditions in the mercantile industry governed Murphy’s employment. (Cal. Code Regs., tit. 8,
§ 11070.)
   10 This provision is akin
                                to the penalties described in cases cited by the Court of Appeal,
which involved awards of “an arbitrary sum in addition to, and unrelated to, actual dam-
ages . . . .” (E.g., Prudential Home Mortgage Co. v. Superior Court, supra, 66 Cal.App.4th at
p. 1243; see also Ballerino, supra, 99 Cal. at p. 596; Milotz, supra, 46 Cal.2d at p. 766.)
   11 The Legislature
                         later adopted the Labor Code Private Attorneys General Act of 2004
(§ 2698 et seq.) permitting, as an alternative, an aggrieved employee to initiate a private civil
action to recover civil penalties if the Labor Commissioner does not do so. The penalties
collected in these private civil actions are to be distributed 75 percent to the state and 25
percent to the aggrieved employee.
                                                                           1107


proposed statute and from comments in the Legislative Counsel’s Digest and
legislative committee reports. The Legislative Counsel’s Digest for Bill
No. 2509, in describing the effect of the proposed section 226.7, stated that it
would subject employers both to a “penalty of $50 per violation and
liability] to the employee for twice the employee’s average hourly . . . pay.”
(Legis. Counsel’s Dig., Assem. Bill No. 2509 (1999-2000 Reg. Sess.) p. 4, as
introduced Feb. 24, 2000, italics added.) Legislative committees underscored
that the payment to the employee was not considered a penalty by use of the
disjunctive, describing remedies available under Bill No. 2509 as “damages
or penalties.” (Assem. Com. on Lab. & Employment, Rep. on Assem. Bill
No. 2509 (1999-2000 Reg. Sess.) Apr. 12, 2000, p. 3; Assem. Com. on
Appropriations, Rep. on Assem. Bill No. 2509 (1999-2000 Reg. Sess.) May
10, 2000, p. 1, italics added.)

         The Senate later amended Bill No. 2509, deleting the penalty provi-
sion. (Sen. Amend, to Assem. Bill No. 2509 (1999-2000 Reg. Sess.) Aug. 25,
2000, pp. 20-23.) This deletion, far from supporting KCP’s position, is
further evidence against it. “The rejection of a specific provision contained in
an act as originally introduced is ‘most persuasive’ that the act should not be
interpreted to include what was left out.” (Wilson v. City of Laguna Beach
(1992) 6 Cal.App.4th 543, 555 [7 Cal.Rptr.2d 848].) Indeed, the Legislature
certainly knows how to impose a penalty when it wants to, having established
penalties in many Labor Code statutes by using the word “penalty.” In the
vast majority of those statutes, the Legislature chose a fixed, arbitrary amount
for the penalty. (E.g., §§ 226.3 [$250 for first violation, $1000 for subsequent
violations], 1197.1 [$100 for initial violation, $250 for subsequent viola-
tions].) Other penalties took the form of double or treble damages. (E.g.,
§ 230.8 [three times lost wages and benefits]; former § 2140.8 [double health
insurance coverage fee].) These penalties are imposed in addition to any
compensation for damages. (E.g., §§ 230.8 [penalty is in addition to recovery
of lost wages], 1197.1 [penalty is in addition to recovery of unpaid wages].)
All of these penalties are unlike the remedy contained in section 226.7, which
provides the sole compensation for the employee’s injuries, is measured by
the employee’s rate of pay rather than an arbitrary amount, and is not labeled
a penalty.

   The amendment to Bill No. 2509 made several other critical modifications.
It changed the amount to be paid from twice the employee’s rate of hourly
compensation to “one additional hour of pay at the employee’s regular rate of
compensation . . . .” (Sen. Amend, to Assem. Bill No. 2509 (1999-2000 Reg.
Sess.) Aug. 25, 2000, p. 23.) In discussing the amended version of section
226.7, which ultimately was signed into law, the Senate Rules Committee
explained that the changes were intended to track the existing provisions of
the IWC wage orders regarding meal and rest periods. (Sen. Rules Com., Off.
of Sen. Floor Analyses, 3d reading analysis of Bill. No. 2509, as amended
1108


Aug. 25, 2000, p. 4.) The committee further stated that “[f]ailure to provide
such meal and rest periods would subject an employer to paying the worker
one hour of wages for each work day when rest periods were not offered”
(ibid., italics added), thereby indicating that it considered the “additional hour
of pay” a wage rather than a penalty.

   The Senate amendments also eliminated the requirement that an employee
file an enforcement action, instead creating an affirmative obligation on the
employer to pay the employee one hour of pay. (§ 226.7, subd. (b).) Under
the amended version of section 226.7, an employee is entitled to the
additional hour of pay immediately upon being forced to miss a rest or meal
period. In that way, a payment owed pursuant to section 226.7 is akin to an
employee’s immediate entitlement to payment of wages or for overtime. (See
Kerr’s Catering Service v. Department of Industrial Relations (1962) 57
Cal.2d 319, 326 [19 Cal.Rptr. 492, 369 P.2d 20].) By contrast, Labor Code
provisions imposing penalties state that employers are “subject to” penalties
and the employee or Labor Commissioner must first take some action to
enforce them. The right to a penalty, unlike section 226.7 pay, does not vest
until someone has taken action to enforce it. (People v. Durbin (1966) 64
Cal.2d 474, 479 [50 Cal.Rptr. 657, 413 P.2d 433].)

   This version of Bill No. 2509 was ultimately passed by the Legislature and
chaptered on September 29, 2000. The Legislature’s decision not to label the
section 226.7 payment a penalty is particularly instructive because it simulta-
neously established penalties explicitly labeled as such in provisions of Bill
No. 2509 related to sections 203.1 and 226. (Assem. Bill No. 2509
(1999-2000 Reg. Sess.) approved by Governor, Sept. 28, 2000, §§ 3, 6.) In
section 203.1, the Legislature imposed a penalty on employers who pay an
employee with a check, draft, or voucher that subsequently is refused for
insufficient funds. (§ 203.1 [wages continue as a penalty].) In section 226, the
Legislature imposed a penalty on employers who fail to provide itemized
wage statements that comply with the Labor Code. (§ 226, subd. (e) [$50 for
initial violation, $100 for subsequent violations].) That the Legislature chose
to eliminate penalty language in section 226.7 while retaining the use of the
word in other provisions of Bill No. 2509 is further evidence that the
Legislature did not intend section 226.7 to constitute a penalty. (Penasquitos,
Inc. v. Superior Court (1991) 53 Cal.3d 1180, 1188-1189 [283 Cal.Rptr. 135,
812 P.2d 154].)

   In addition, the Legislature indicated in section 203 that it was aware it
could, if it so desired, trigger a one-year statute of limitations by labeling a
remedy a penalty. When an employer fails to pay an employee who has quit
or been discharged, section 203 establishes that the unpaid wages continue to
accrue as a “penalty” for up to 30 days. Knowing that remedies constituting
                                                                          1109


penalties are typically governed by a one-year statute of limitations, the
Legislature expressly provided that a suit seeking to enforce the section 203
penalty would be subject to the same three-year statute of limitations as an
action to recover wages. (§ 203.) It can be inferred from this that, had the
Legislature intended section 226.7 to be governed by a one-year statute of
limitations, the Legislature knew it could have so indicated by unambigu-
ously labeling it a “penalty.”

   The Court of Appeal correctly notes that, while the word “penalty” was
removed from section 226.7, the word appears at various times in both the
legislative history of section 226.7 as well as the transcripts of IWC hearings
at which the pay remedy was discussed. (Off. of Assem. Floor Analyses,
analysis of Assem. Bill No. 2509 (1999-2000 Reg. Sess.) as amended Aug.
25, 2000, p. 2; transcript, IWC Public Hearing (June 30, 2000) p. 30,
available online at <http://www.dir.ca.gov/IWC/PUBHRG6302000.pdf> [as
of Apr. 16, 2007].) However, as explained below, statements made by IWC
commissioners during hearings discussing the “hour of pay” remedy for meal
and rest period violations leave no doubt that the remedy was being adopted
as a “penalty” in the same way that overtime pay is a “penalty,” although it is
clear that overtime pay is considered a wage and governed by a three-year
statute of limitations. (Cortez v. Purolator Air Filtration Products Co. (2000)
23 Cal.4th 163, 167 [96 Cal.Rptr.2d 518, 999 P.2d 706] (Cortez).)

   As has been recognized, in providing for overtime pay, the Legislature
simultaneously created a premium pay to compensate employees for working
in excess of eight hours while also creating a device “for enforcing limitation
on the maximum number of hours of work . . . , to wit, it is a maximum hour
enforcement device . . . .” (California Manufacturers Assn. v. Industrial
Welfare Com., supra, 109 Cal.App.3d at p. I11, citation omitted.) Indeed, as
the Court of Appeal acknowledges, courts have often referred to overtime
wages as “premium or penalty pay.” (E.g., Industrial Welfare Com. v. Superior
Court, supra, 27 Cal.3d at p. 713 [“ ‘premium or penalty pay for overtime
work’ ”]; Skyline Homes, Inc. v. Department of Industrial Relations (1985)
                                                              “ ‘ “premium or
165 Cal.App.3d 239, 249 [211 Cal.Rptr. 792] [overtime is
         ’
penalty” ”].) Describing overtime pay as both a “penalty” and as “premium
pay” acknowledges that, while its central purpose is to compensate employ-
ees for their time, it also serves a secondary function of shaping employer
conduct. However, neither the behavior-shaping aspect of overtime pay nor
the fact that courts have referred to the remedy as a “penalty” transforms
overtime wages into a “penalty” for the purpose of statute of limitations.
(Cortez, supra, 23 Cal.4th at p. 167.)

   It is in this same sense that the IWC used the word “penalty” to describe
the meal and rest period remedy. For example, in the June 30, 2000 hearing at
1110


which the IWC adopted the “hour of pay” remedy, IWC Commissioner Barry
Broad described the remedy as a “penalty,” explaining that it was needed to
help force employers to provide meal and rest periods. (Transcript, IWC
Public Hearing (June 30, 2000), pp. 25-26, 30, available online at
<http://www.dir.ca.gov/IWC/PUBHRG6302000.pdf> [as of Apr. 16, 2007].)
“This [meal and rest pay provision applies to] an employer who says, ‘You
do not get lunch today, you do not get your rest break, you must work now.’
That is—that is the intent. . . . And, of course, the courts have long construed
overtime as a penalty, in effect, on employers for working people more than
full—you know, that is how it’s been construed, as more than the—the daily
normal workday. It is viewed as a penalty and a disincentive in order to
encourage employers not to. So, it is in the same authority that we provide
overtime pay that we provide this extra hour of pay.” (Id. at p. 30, italics
added.)

   The IWC intended that, like overtime pay provisions, payment for missed
meal and rest periods be enacted as a premium wage to compensate employ-
ees, while also acting as an incentive for employers to comply with labor
standards. The manner in which the IWC used the word “penalty” under-
mines the Court of Appeal’s reliance on the use of the word in the legislative
history. The Court of Appeal points to a statement contained in the Assembly
Floor analysis of the amended version of Bill No. 2509, which provided that
the Senate’s removal of the explicit penalty provision from section 226.7
“[d]elete[d] the provisions related to penalties for an employer who fails to
provide a meal or rest period, and instead codif[ied] the lower penalty
amounts adopted by the Industrial Welfare Commission (IWC).” (Off. of
Assem. Floor Analyses, Assem. Bill No. 2509 (1999-2000 Reg. Sess.) as
amended Aug. 25, 2000, p. 2.) However, the legislative history of Bill
No. 2509 establishes that the Legislature was fully aware of the IWC’s wage
orders in enacting section 226.7. It follows that the Legislature’s occasional
description of the meal and rest period remedy as a “penalty” in the
legislative history should be informed by the way in which the IWC was
using the word; namely, that like overtime pay, the meal and rest period
remedy has a corollary disincentive aspect in addition to its central compen-
satory purpose.12

        We conclude that the administrative and legislative history of the
statute indicates that, whatever incidental behavior-shaping purpose section
   12 Assemblymember      Steinberg wrote a letter urging Governor Gray Davis to sign Bill
No. 2509. (Assemblymember Steinberg, letter to Governor Davis, Sept. 8, 2000.) Steinberg
wrote that “the bill codifies the actions of the IWC establishing a penalty . . . .” (Id. at p. 2.)
The use of the word “penalty” must be similarly read in light of the IWC’s use of the word to
                                                                   “
describe the pay remedy. Additionally, we do not consider the ‘motives or understandings of
individual legislators,’ ” including the bill’s author. (California Teachers Assn. v. San Diego
Community College Dist. (1981) 28 Cal.3d 692, 699-700 [170 Cal.Rptr. 817, 621 P.2d 856].)
                                                                                         1111


226.7 serves, the Legislature intended section 226.7 first and foremost to
compensate employees for their injuries. This conclusion is consistent with
our prior holdings that statutes regulating conditions of employment are to be
liberally construed with an eye to protecting employees. (Sav-On Drug Stores,
Inc. v. Superior Court, supra, 34 Cal.4th at p. 340; Ramirez, supra, 20 Cal.4th
at p. 794; Lusardi Construction Co. v. Aubry, supra, 1 Cal.4th at p. 985.)

          3.   “Functional” Analysis Does Not Undermine Conclusion
                          That Payment Constitutes a Wage

   In concluding that the payment to the employee at issue here is a penalty,
the Court of Appeal relied on what KCP describes as a “functional” analysis
of the payment’s effect.13 The Court of Appeal reasoned that its conclusion is
supported first by the remedy’s purpose of shaping employer behavior and
second by the fact that the “additional hour of pay” is imposed without regard
to the actual loss suffered. Neither rationale is persuasive.

   The first argument need not detain us long. As already discussed, the fact
that section 226.7 seeks to shape employer behavior in addition to compen-
sating the employee does not automatically render the remedy a penalty.
Overtime pay is only one such example of a dual-purpose remedy that is
primarily intended to compensate employees, but also has a corollary purpose
of shaping employer conduct. Reporting-time and split-shift pay serve a
similar dual function. (See Huntington Memorial Hospital v. Superior Court,
supra, 131 Cal.App.4th at pp. 909-910.) For example, under IWC wage
orders, when an employee is required to report for work and does report, but
is not put to work or is given less than half the scheduled work, “the
employee shall be paid for half the usual or scheduled day’s work, but in no
event for less than two (2) hours nor more than four (4) hours, at the
employee’s regular rate of pay . . . .” (Cal. Code Regs., tit. 8, § 11070,
subd. 5(A).) When an employee is required to work a “split shift” (is
scheduled for two nonconsecutive shifts in the same day), the employer must
pay the employee one additional hour of wages. (Cal. Code Regs., tit. 8,
§ 11070, subd. 4(C); see Caliber Bodyworks, Inc. v. Superior Court, supra,
134 Cal.App.4th at p. 381.)

   In addition to compensating employees, reporting-time and split-shift pay
provisions “encourag[e] proper notice and scheduling . . . [and are] an
appropriate device for enforcing proper scheduling consistent with maximum
   13 None of the cases on which the Court of Appeal and KCP rely for their “functional”
analysis involve the construction of Labor Code provisions, which are to be interpreted broadly
in favor of the employee. (Ramirez, supra, 20 Cal.4th at p. 794.) Additionally, almost without
exception, the statutes construed are part of schemes providing separate compensatory and
punitive remedies, unlike section 226.7.
1112


hours and minimum pay requirements.” (California Manufacturers Assn. v.
Industrial Welfare Com., supra, 109 Cal.App.3d at p. 112.) As with overtime,
reporting-time and split-shift pay provisions do not become penalties for
statute of limitations purposes simply because they seek to shape employer
conduct in addition to compensating employees. (See Caliber Bodyworks,
Inc. v. Superior Court, supra, 134 Cal.App.4th at pp. 377, 381 [split-shift pay
is wages]; Huntington Memorial Hospital v. Superior Court, supra, 131
Cal.App.4th at pp. 909-910 [reporting-time pay is compensation].)

   The Court of Appeal sought to distinguish overtime and other forms of
wages from payments under section 226.7, arguing that because section 226.7
mandates that employers provide meal and rest periods, the pay provided for
must constitute a penalty. But the Court of Appeal’s underlying assumption,
that payments made pursuant to statutory liability must constitute a penalty, is
incorrect. For example, an employer’s “[f]ailure to promptly pay [overtime
wages is] unlawful.” (Cortez, supra, 23 Cal.4th at p. 168.) Yet, the money
recovered under Business and Professions Code section 17203 for an unlaw-
ful business practice is for disgorgement of the overtime wages and does not
constitute a penalty. (23 Cal.4th at pp. 173-179.) Similarly, the Labor Code
mandates the payment of a minimum wage and makes the payment of a
lesser amount “unlawful.” (§ 1197.) Nonetheless, this prohibition does not
convert the remedy of recovering the unpaid balance of the full amount of the
minimum wage (§ 1194, subd. (a)) into something other than a wage subject
to a three-year statute of limitations.

         KCP’s second argument is that the “additional hour of pay” is a
penalty because it is imposed without reference to actual damage, since an
hour of pay is owed whether the employee has missed an unpaid 30-minute
meal period, two paid 10-minute rest periods, or some combination thereof.
We disagree. Section 226.7 pay is not transformed into a penalty merely
because a one-to-one ratio does not exist between the economic injury caused
by meal and rest period violations on the one hand and the remedy selected
by the Legislature on the other hand. The Legislature has assigned different
amounts to compensate employees for certain kinds of labor or scheduling
resulting in a detriment to the employee. Courts have long recognized that the
monetary value of harm to employees can be difficult to ascertain. (See, e.g.,
California State Council of Carpenters v. Superior Court (1970) 11
Cal.App.3d 144, 162 [89 Cal.Rptr. 625] [finding liquidated damages provi-
sion to be compensatory].) Where damages are obscure and difficult to prove,
the Legislature may select a set amount of compensation without converting
that remedy into a penalty. (Overnight Motor Co. v. Missel (1942) 316 U.S.
572, 583-584 [86 L.Ed. 1682, 62 S.Ct. 1216].)

  For example, employees are paid one and one-half times their regular rate
of pay for each hour of labor over eight hours. (§ 510, subd. (a).) Employees
                                                                          1113


are paid twice their regular rate of pay for hours worked in excess of 12
hours in a single day. {Ibid.) In the context of reporting-time pay, an
employer must pay up to four hours of wages even if the employee
performed no work. (Cal Code Regs., tit. 8, § 11070, subd. 5.) When working
a split shift, employees are entitled to an additional hour of wages, even
though the employee is already compensated for the hours he or she actually
works. (Id., subd. 4(C).)

   Each of these forms of compensation, like the section 226.7 payment, uses
the employee’s rate of compensation as the measure of pay and compensates
the employee for events other than time spent working. An employee working
nine hours already receives his or her normal wage for that ninth hour. The
Legislature has directed, however, that employers pay a premium wage of 50
percent more for the ninth through twelfth hour and a 100 percent premium
for the hours in excess of 12. Employees receive reporting-time and split-shift
compensation, even though they are already paid for the time they actually
spend working.
   The Court of Appeal’s focus on the apparent lack of a perfect correlation
between the section 226.7 remedy and the employee’s economic injury also
ignores the noneconomic injuries employees suffer from being forced to work
through rest and meal periods. Employees denied their rest and meal periods
face greater risk of work-related accidents and increased stress, especially
low-wage workers who often perform manual labor. (See, e.g., Tucker et al.,
Rest Breaks and Accident Risk (Feb. 22, 2003) The Lancet, p. 680; Dababneh
et al., Impact of Added Rest Breaks on the Productivity and Well Being of
Workers (2001) 44 pt. 2 Ergonomics, pp. 164—174;Kenner, Working Time,
Jaeger and the Seven-Year Itch (2004—2005)11 Colum. J. Eur. L. 53, 55.)
Indeed, health and safety considerations (rather than purely economic inju-
ries) are what motivated the IWC to adopt mandatory meal and rest periods
in the first place. (California Manufacturers Assn. v. Industrial Welfare Com.,
supra, 109 Cal.App.3d at pp. 114—115.)Additionally, being forced to forgo
rest and meal periods denies employees time free from employer control that
is often needed to be able to accomplish important personal tasks. (Morillion v.
Royal Packing Co., supra, 22 Cal.4th at p. 586.)
   While it may be difficult to assign a value to these noneconomic injuries
(see California State Council of Carpenters v. Superior Court, supra, 11
Cal.App.3d at p. 162), the Legislature has selected an amount of compensa-
tion it deems appropriate. Indeed, construing the “one additional hour of pay
at the employee’s regular rate of compensation” (§ 226.7, subd. (b)) as a
penalty would illogically result in an employer being “penalized” less or
more, depending on the affected employee’s rate of pay. Employers of the
low-wage workers likeliest to suffer violations of section 226.7 (and, argu-
ably, at greatest risk of injury) would be “penalized” less than employers of
1114


highly paid workers. That the amount of the payment is linked to an
employee’s rate of compensation, rather than a prescribed fixed amount,
further supports the position that section 226.7 payments are a form of wages.
We conclude that neither the behavior-shaping function of section 226.7 nor
the lack of a perfect fit between the pay remedy and the injury compels
classifying the remedy as a penalty.

   Finally, we recognize that the primary purpose of the statutes of limitation
is to prevent plaintiffs from asserting stale claims once evidence is no longer
fresh and witnesses are no longer available. (Davies v. Krasna (1975) 14
Cal.3d 502, 512 [121 Cal.Rptr. 705, 535 P.2d 1161].) Because employers are
required to keep all time records, including records of meal periods, for a
minimum of three years (Cal. Code Regs., tit. 8, § 11070, subd. 7(A)(3), (C)),
employers should have the evidence necessary to defend against plaintiffs’
claims. (See Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949,
961 [35 Cal.Rptr.3d 243].)

         Accordingly, we hold that the Court of Appeal erred in construing
section 226.7 as a penalty and applying a one-year statute of limitations. The
statute’s plain language, the administrative and legislative history, and the
compensatory purpose of the remedy compel the conclusion that the “addi-
tional hour of pay” {ibid.) is a premium wage intended to compensate
employees, not a penalty.

       B. Scope of Section 98.2 De Novo Trial May Include Additional
          Related Wage Claims

   As recounted, Murphy filed a wage claim with the Labor Commissioner,
only raising claims for unpaid overtime and waiting-time penalties, unaware
he could also assert claims for meal and rest period and itemized pay
statement violations. After the Labor Commissioner issued a decision in
Murphy’s favor, KCP filed a notice for de novo review, vesting jurisdiction in
the superior court. Murphy, this time with the assistance of the Civil Justice
Clinic and the DLSE, filed a “Notice of Claims and Issues at De Novo Trial
of Wage Claim,” asserting claims for meal and rest period and itemized pay
statement violations in addition to the claims for unpaid overtime, interest,
and waiting-time penalties. KCP objected to the introduction of the new
claims, but the trial court overruled the objection and ultimately ruled in
Murphy’s favor on each claim. KCP contends the trial court erred in
considering Murphy’s additional claims. We disagree.

                1. Overview of the Berman Hearing Process

        In two recent cases, Smith v. Rae-Venter Law Group (2002) 29
Cal.4th 345 [127 Cal.Rptr.2d 516, 58 P.3d 367] (Smith), and Post v.
                                                                             1115


Palo/Haklar & Associates (2000) 23 Cal.4th 942 [98 Cal.Rptr.2d 671, 4 P.3d
928] (Post), we provided an extensive overview of the administrative wage
claim process (commonly known as the Berman hearing procedure, after the
name of its sponsor), including the de novo review provided for in section
                                                                    “
98.2. (§ 98 et seq.) An employee pursuing a wage-related claim ‘has two
principal options. The employee may seek judicial relief by filing an ordinary
civil action against the employer for breach of contract and/or for the wages
prescribed by statute. [Citation.] Or the employee may seek administrative
relief by filing a wage claim with the [commissioner] pursuant to a special
statutory scheme codified in sections 98 to 98.8 ....’”     (Smith, supra, 29
Cal.4th at p. 350, citing Cuadra v. Millan (1998) 17 Cal.4th 855, 858 [72
Cal.Rptr.2d 687, 952 P.2d 704] (Cuadra), disapproved on another ground in
Samuels v. Mix (1999) 22 Cal.4th 1, 16, fn. 4 [91 Cal.Rptr.2d 273, 989 P.2d
701].)

   The Labor Commissioner “has broad authority to investigate employee
complaints and to conduct hearings in actions ‘to recover wages, penalties,
and other demands for compensation . . . .’ [Citation.]” (Smith, supra, 29
Cal.4th at p. 355.) “Within 30 days of the filing of a complaint, the
commissioner must notify parties as to whether he or she will take further
action. [Citation.] The statute provides for three alternatives; the commis-
sioner may either accept the matter and conduct an administrative hearing
[citation], prosecute a civil action for the collection of wages and other
money payable to employees arising out of an employment relationship
[citation], or take no further action on the complaint. [Citation.]” (Post, supra,
23 Cal.4th at p. 946.) If the commissioner decides to accept the matter and
conduct an administrative hearing, he or she must hold the hearing within 90
days. (Ibid.)

          “Labor Code section 98, subdivision (a), expressly declares the
legislative intent that hearings be conducted ‘in an informal setting preserving
the right of the parties.’ The Berman hearing procedure is designed to provide
a speedy, informal, and affordable method of resolving wage claims. [Cita-
tion.] As we explained in Cuadra, [supra, 17 Cal.4th at page 869] ‘the
purpose of the Berman hearing procedure is to avoid recourse to costly and
time-consuming judicial proceedings in all but the most complex of wage
claims.’ [Citation.] [f] . . . [][]

   “Within 15 days after the Berman hearing is concluded, the commissioner
must file a copy of his or her order, decision, or award and serve notice
thereof on the parties. [Citation.] The order, decision, or award must include a
summary of the hearing and the reasons for the decision, and must advise the
parties of their right to appeal. [Citation.]
1116


          “Within 10 days after service of notice, the parties may seek review
by filing an appeal to the municipal or superior court ‘in accordance with the
appropriate rules of jurisdiction, where the appeal shall be heard de novo.’
 [Citation.] The timely filing of a notice of appeal forestalls the commission-
er’s decision, terminates his or her jurisdiction, and vests jurisdiction to
conduct a hearing de novo in the appropriate court. [Citation.]” (Post, supra,
23 Cal.4th at p. 947.)14 “Although denoted an ‘appeal,’ unlike a conventional
appeal in a civil action, hearing under the Labor Code is de novo. [Citation.]
 ‘ “A hearing de novo
                         [under Labor Code section 98.2] literally means a new
hearing,” that is, a new trial.’ [Citation.] The decision of the commissioner is
‘entitled to no weight whatsoever, and the proceedings are truly “a trial anew
in the fullest sense.” ’ [Citation.] The decision of the trial court, after de novo
hearing, is subject to a conventional appeal to an appropriate appellate court.
[Citation.] Review is of the facts presented to the trial court, which may
include entirely new evidence. [Citations.]” (Post, supra, 23 Cal.4th at
pp. 947-948.)

                2. Trial Courts Have Discretion to Permit Additional
                  Related Wage Claims at Section 98.2 De Novo Trial

   The issue presented here, whether the trial court properly permitted
additional related wage claims in the de novo trial that were not first
considered by the Labor Commissioner, appears to be one of first impression.
Section 98.2, subdivision (a), provides “Within 10 days after service of notice
of an order, decision, or award the parties may seek review by filing an
appeal to the superior court, where the appeal shall be heard de novo.” In
reversing the trial court’s decision to consider the new claims, the Court of
Appeal focused on the word “review,” reasoning that the word limited the
trial court’s jurisdiction to a review of the claims considered by the Labor
Commissioner.

         We have previously held that the section 98.2 proceeding is neither
a conventional appeal nor review of the Labor Commissioner’s decision,
but is rather a de novo trial of the wage dispute. (Pressler v. Donald L.
Bren Co. (1982) 32 Cal.3d 831, 835-836 [187 Cal.Rptr. 449, 654 P.2d
219], citing Collier & Wallis, Ltd. v. Astor (1937) 9 Cal.2d 202, 205 [70
P.2d 171].) The trial court “hears the matter, not as an appellate
  14 Although   section 98 sets forth a maximum period of 145 days from the filing of a
claim to a de novo appeal, we have acknowledged that section 98 authorizes the Labor
Commissioner to “postpone or grant additional time.” (§ 98, subd. (a); Cuadra, supra, 17
Cal.4th at p. 860.) Other procedures have been adopted that may “lengthen!] still further” the
Berman process. (Id. at pp. 860-861.) As a result, the Berman process often takes significantly
longer than 145 days. (Id. at pp. 860, 863.) Indeed, almost 10 months passed between the time
Murphy filed his wage claim and KCP filed its notice of appeal.
                                                                                         1117



court, but as a court of original jurisdiction, with full power to hear and
determine it as if it had never been before the labor commissioner.” (Collier &
Wallis, supra, 9 Cal.2d at p. 205; see Smith, supra, 29 Cal.4th 345, 377
(conc. & dis. opn. of Kennard, J.).) An employee need not administratively
exhaust his claim before filing a civil action. (Smith, supra, 29 Cal.4th at
p. 355.) Our previous decisions suggest that a trial court’s power to hear a
wage dispute extends to the consideration of related issues not reached by the
Labor Commissioner.

   In Post, after conducting a Berman hearing on an employee’s wage claim,
the Labor Commissioner dismissed the claim on the ground that an
employee-employer relationship had not been conclusively established. (Post,
supra, 23 Cal.4th at p. 944.) The employee filed a section 98.2 notice of
appeal and, after a de novo trial, the superior court found that the existence of
an employment relationship had been established. (23 Cal.4th at p. 945.)
Even though the Labor Commissioner had not reached the employee’s claim
for unpaid wages, the trial court proceeded to consider the wage claim and
found in favor of the employee. (Ibid.) The Court of Appeal reversed,
concluding that the trial court lacked jurisdiction to review the Labor
Commissioner’s jurisdictional determination and that the employee’s sole
remedy was to file an original civil action. (Id. at p. 946.) We disagreed,
holding that the section 98.2 de novo hearing constitute a new trial and that
the statute does not restrict a trial court’s authority “to address a disputed
question concerning any issue of law or fact . . . .” (23 Cal.4th at
pp. 949-950.)

   The Court of Appeal here distinguished Post, stating that there, the issue
considered by the trial court and Labor Commissioner was identical, i.e.,
whether an employee-employer relationship existed. However, this character-
ization of Post ignores the fact that the trial court went beyond the scope of
what the Labor Commissioner reached and considered the employee’s claim
for unpaid wages. Here, the trial court analogously exercised its discretion to
consider wage claims that, while not previously considered by the Labor
Commissioner, legally and factually flowed from the same underlying wage
dispute—KCP’s misclassification of Murphy as an exempt employee.15

   Permitting trial courts to exercise jurisdiction over the entire wage dispute,
including related wage claims not raised in front of the Labor Commissioner,
is consistent with trial courts’ broad discretion in adjudicating claims at trial.
   15Murphy concedes that he could not have raised a non-wage-related claim such as a
defamation or personal injury claim in the de novo trial. Indeed, a trial court exercising its
discretion could determine that claims were not sufficiently related to allow their addition to
the de novo trial. (Sales Dimensions v. Superior Court (1979) 90 Cal.App.3d 757, 764 [153
Cal.Rptr. 690] (Sales Dimensions).)
1118


(Rutherford v. Owens-Illinois, Inc. (1997) 16 Cal.4th 953, 967 [67 Cal.Rptr.2d
16, 941 P.2d 1203].) In Sales Dimensions, the Court of Appeal considered
whether a trial court could deny discovery in a section 98.2 de novo trial and
deny a motion to consolidate a pending civil action with the de novo trial.
(Sales Dimensions, supra, 90 Cal.App.3d at p. 759.) The Court of Appeal
held that both issues were properly left to the discretion of the trial court, an
approach “consistent with the power of the courts ‘to adopt any suitable
method of practice, both in ordinary actions and special proceedings, if the
procedure is not specified by statute or by rules adopted by the Judicial
Council.’ [Citations.]” (Id. at p. 763.) The Court of Appeal noted that while
section 98.2 vests the superior court with jurisdiction to hear the appeal
de novo, “no procedures for exercising that jurisdiction are specified.” (Sales
Dimensions, supra, 90 Cal.App.3d at p. 764.) Similarly, whether an employee
should be permitted to raise additional claims in the de novo proceeding is
best left to the sound discretion of trial courts. Trial courts are equipped to
weigh the various considerations, e.g., whether the claims are sufficiently
related, whether the interests of judicial economy will be served, and whether
the employer will be prejudiced.

   As the Court of Appeal here acknowledged, Murphy could have filed a
separate civil complaint raising the additional wage claims, at which point the
trial court could have consolidated the civil action with the de novo proceed-
ing and considered all of the claims together.16 (Sales Dimensions, supra, 90
Cal.App.3d at p. 764.) However, forcing Murphy to file an original civil
action to raise the additional claims “would appear inconsistent with the
legislative purpose under Labor Code section 98 of providing an expeditious
resolution of wage claims . . . .” (Post, supra, 23 Cal.4th at p. 951.) It is
unclear what interest would be served by allowing trial courts to consolidate
claims contained in a civil action with those at issue in a de novo trial, but
prohibiting trial courts from exercising their discretion to permit employees to
raise additional wage-related claims at the de novo trial.

  Furthermore, the Court of Appeal’s conclusion that the trial court erred in
considering the additional wage claims undermines the legislative policy of
encouraging employees to use the Berman process. For example, Murphy
could not have raised his claims for itemized pay statements (§ 226) in the
Berman process. Murphy submits the declaration of the Senior Deputy Labor
Commissioner from the San Francisco DLSE District Office to the trial court,
which averred that the Labor Commissioner “does not process claims for
  16 The trial
                court ruled that Murphy’s claims for meal and rest period and itemized wage
statement violations related back to the date of the original wage claim in October 2002. (See
Cuadra, supra, 17 Cal.4th at pp. 869-870.) Murphy’s claim for itemized wage statement
violations, although undisputedly governed by a one-year statute of limitations, was accord-
ingly timely. KCP did not appeal, nor did the Court of Appeal disturb, that aspect of the trial
court’s ruling.
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record-keeping violations pursuant to California Labor Code 226(e). An
individual who wanted to pursue such a claim before our office would be told
that the claim could not be brought in our office, and would have to be filed
in court.”

   If, as the Court of Appeal concluded, employees could not raise claims for
itemized pay statement violations for the first time in a de novo hearing, three
options would remain. An employee could: (1) file a civil complaint for the
itemized pay statement violations and a separate wage claim before the Labor
Commissioner for other wage claims and simultaneously pursue both av-
enues; (2) forgo the right to penalties for itemized pay statement violations,
since by the time the Labor Commissioner issues a decision and a party files
an appeal, the one-year statute of limitations governing penalties for itemized
pay statement violations will almost certainly have run; or (3) forgo pursuing
the Berman process and instead pursue civil litigation.

   Each of these options discourages use of the Berman process and increases
pressure to pursue civil litigation, a result at odds with the notion of a
legislatively-favored administrative alternative to the judicial process. (See
Smith, supra, 29 Cal.4th 345, 378-379 (conc. & dis. opn. of Kennard, J.).)
The Legislature could not have intended to force employees to choose
between effectively waiving claims and pursuing the Berman process. The
Court of Appeal’s interpretation of section 98.2 would put an employee using
the Berman process in a worse position than an employee proceeding directly
to court. (See Smith, supra, 29 Cal.4th at pp. 378-379 (conc. & dis. opn. of
Kennard, J.); Cuadra, supra, 17 Cal.4th at p. 870.)

   Finally, allowing trial courts to exercise their discretion in deciding
whether to permit employees to raise additional related wage claims is
consistent with the Legislature’s intent “to discourage frivolous and unmeri-
torious appeals from the commissioner’s awards.” (See Smith, supra, 29
Cal.4th at p. 361 [discussing section 98.2’s fee-shifting provision, under
which parties who file a section 98.2 appeal and lose are obliged to pay
the fees of the other parties].) A party who appeals a Labor Commissioner
award does so at its own peril. If the employer appeals, and the employee
obtains representation, it is likely that the employee’s attorneys will uncover
additional, related facts and claims not thoroughly examined at the adminis-
trative level when the claimant was unrepresented. Just as an employer is not
bound by the defenses it raised in the Berman process, but rather is entitled
to abandon, change, or add defenses not brought before the Labor
Commissioner (see Jones v. Basich (1986) 176 Cal.App.3d 513, 518-519 [222
Cal.Rptr. 26]), so may an employee raise additional wage-related claims in
the de novo trial.
1120


   Accordingly, we hold that the Court of Appeal erred in construing section
98.2 to preclude the trial court from permitting Murphy to raise additional
related wage claims in the de novo trial. The trial court properly exercised its
discretion.

                                    Disposition


   We hold that section 226.7’s plain language, the administrative and legisla-
tive history, and the compensatory purpose of the remedy compel the
conclusion that the “additional hour of pay” is a premium wage, not a
penalty. We further hold that the trial court properly exercised its discretion in
deciding to consider the additional, but related, wage claims during the
de novo trial. The contrary judgment of the Court of Appeal is reversed.

  George, C. J., Kennard, J., Baxter, J., Werdegar, J., Chin, J., and Corrigan, J.,
concurred.