In Brewer v. Premier Golf Properties, the California Court of Appeal reversed a jury verdict which awarded $195,000 in punitive damages to a former employee who sued for various violations of the Labor Code.

The plaintiff, a longtime waitress at a golf course, sued her former employer for a number of claims including failure to pay minimum wage for all hours worked, inaccurate pay stubs, and meal and rest period violations.  The jury found in favor of the plaintiff as to each of these claims and awarded her wages and penalties totaling over $26,000.  The jury further found that the employer had engaged in malice with respect to the Labor Code violations and awarded $195,000 in punitive damages.

On appeal, the court reversed the award of punitive damages.  The court reached its conclusion on two separate grounds.

The court of appeal first explained that where a statute creates a new right which did not previously exist under common law, the statutory remedy is the exclusive remedy available for a violation of the statute.  The court found that minimum wages, accurate pay stubs, and meal and rest periods were all new rights created by statute.  Therefore, the court concluded that the plaintiff was limited to the remedies provided by the Labor Code which did not include punitive damages.

Alternatively, the court explained that ordinarily punitive damages are not available for the breach of an obligation arising from a contract.  The court found that Labor Code provisions governing meal and rest breaks, minimum wages, and accurate pay stubs constitute statutory obligations imposed only when the parties have entered into an employment contract.  The court therefore reasoned that the company’s failure to comply with the Labor Code provisions was in essence a breach of an obligation arising from the employment contract and thus punitive damages could not be recovered.

Whether in the context of single plaintiff cases or class actions, it has become an increasingly common practice for plaintiffs in wage and hour cases to allege a right to punitive damages based upon violations of the Labor Code.  The threat of punitive damages, particularly in light of the expansive range of statutory remedies already available in the Labor Code, can prove daunting and is often used successfully as leverage in settlement discussions.  This decision goes a long way toward ending this practice, particularly since its reasoning should apply to a broad range of Labor Code provisions beyond those specifically identified in the decision.