On May 23, 2022, in the case Naranjo v. Spectrum Security Services, Inc., the Supreme Court of California held that employers must treat premium pay for noncompliant meal periods and rest breaks like wages. As a result, employers may now face substantial penalties due to derivative violations based the failure to follow wage laws.
In 2000, the California Legislature created a monetary remedy for the failure to provide meal and rest breaks to employees: employees denied a fully-complaint meal or rest break on a given day would be due “one (1) hour of pay at the employee’s regular rate of compensation.” (Cal. Lab. Code, § 226.7 [“Section 226.7”]. See also IWC wage order No. 4-2001, §§ 11(B), 12(B); Ferra v. Loews Hollywood Hotel, LLC (2021) 11 Cal.5th 858, 870; Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1105.)
California law has numerous requirements for the payment of wages. For example, there are timing requirements—employers must promptly pay any unpaid wages to the departing employee when the employment relationship comes to an end. (Cal. Lab. Code, § 203.) Similarly, there are reporting requirements—employers must regularly provide employees with a detailed list of information, including hours worked, wages earned, hourly rates, and employee- and employer-identifying information. (Id., at § 226.) Failure to comply with these various requirements triggers statutory penalties.
The importance of the Naranjo case is that it equates penalties under Section 226.7 with wages.
Factual and Procedural Background
In Naranjo, the plaintiff was a security guard who transported prisoners and detainees for federal agencies. He was required to remain on duty during meal breaks and was fired because he left his post. He filed a class action alleging the company violated California meal break requirements, specifically that Spectrum was required to report the premium pay on employees’ wage statements (Cal. Lab. Code, § 226) and to timely provide the pay to employees upon their discharge or resignation (id., at §§ 201, 202, 203), but had done neither.
The Court’s Decision
In a unanimous decision written by Justice Kruger, the California Supreme Court held in Naranjo that premium pay constitutes a wage subject to the same timing and reporting rules as other forms of compensation for work.
The Court first looked to the history and purpose of the meal and rest break requirements to conclude that, when an employee does not receive a compliant break, “[t]he premium pay due for the deprivation is certainly designed to compensate employees for hardships the Legislature concluded employees should not be made to suffer.” This, the Court held, “reflects a determination that work in such circumstances is worth more — or should cost the employer more — than other work, and so requires payment of a premium.”
In rejecting arguments differentiating between premium pay and wages, the Court drew parallels between premium pay and overtime (where “[a]n employer who requires an employee to work more hours than the Legislature has determined is generally desirable must pay extra for the privilege”) as well as reporting-time and split-shift pay (where the employee receives a specified payment without regard to the amount of time worked).
What This Means to You
The Naranjo decision effectively increases the risk to employers for claimed rest and meal break violations because it means that the failure to pay premiums is now the legal equivalent of the failure to pay owed wages, with accompany consequences.
We have substantial experience defending employers from meal and rest break claims, other wage and hour issues, and assisting in proactively addressing such issues by helping employers audit and update their policies and practices. If you are interested in discussing these issues, or have any questions about this blog, please feel free to contact us.