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Keeping the Faith: Employer's Good Faith Belief Prevails

Keeping the Faith: Employer's Good Faith Belief Prevails
Summary of California Supreme Court's ruling on the Naranjo case detailing the standards needed to issue penalties under California Labor Code Section 203.

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In a landmark decision, the California Supreme Court ruled unanimously in favor of employers in the case of Naranjo v. Spectrum Sec. Serv., Inc., S279397. The court held that an employer's "objectively reasonable, good faith belief" that it has provided employees with compliant wage statements precludes an award of penalties under section 226(e)(1) of the Labor Code. This decision comes after a 15-year legal battle initiated by Gustavo Naranjo against his former employer Spectrum Security Services. The court's ruling implies that employers can raise objectively reasonable, good faith belief defenses to wage statement claims, which can defeat a claim for section 226 penalties. However, employers are advised to conduct periodic audits of their wage and hour policies and practices to ensure compliance with California's labor laws. This decision is expected to have a significant impact on employers and their legal responsibilities.