Last week, the California Supreme Court clarified a previously ambiguous aspect of Labor Code Section 226.7, which requires an employer to pay an employee one additional hour of pay at the regular rate of compensation when the employer fails to provide a legally compliant meal period or rest break. While it was previously assumed this premium compensation is considered a “penalty,” the Supreme Court decided in Naranjo v. Spectrum Security Services, Inc. that it is a wage. Importantly, this means that such compensation is subject to additional compliance requirements and could result in additional derivative penalties if employers fail to comply with such requirements.
Heightened Requirements for Payment of Wages
Because the Court held that premium pay obligations under Labor Code Section 226.7 are categorized as wages, these payments are required to be reported on wage statements. Further, the Court determined that these payments, like all wages, are subject to “waiting time penalties” under Labor Code Section 203, which apply if the employer fails to timely pay all wages upon an employee’s separation from employment. Thus, the Court’s ruling expanded the penalties available to employees who seek remedies for an employer’s failure to compensate an employee for a missed meal period or rest break. Although these additional penalties are derivative of an employer’s failure to pay meal or rest break premiums, there are defenses available to employers to avoid the accumulation of these penalties.
Advice for Employers
To carry a claim for the above-described derivative penalties, an employee must initially prove that the employer failed to provide a meal period or rest break, giving rise to the employer’s obligation to provide premium compensation under Labor Code Section 226.7. Even if an employee can establish that a premium is owed, the employee must show that an employer’s failure to report premium compensation on wage statements is knowing and intentional. Moreover, to collect penalties for failure to timely pay all premium compensation upon termination, the employee must show that such failure is willful on the part of the employer. These intent requirements are often difficult to prove for the employee and thus are often the lynchpin of the employer’s defense to a claim that these penalties should be imposed. Regardless, employers should remain especially attentive to compliance with meal period and rest break requirements. Going forward, any premium payments for missed breaks should be properly reflected on wage statements.
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This material is provided for informational purposes only. It is not intended to constitute legal advice, nor does it create a client-lawyer relationship between MNK Law and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material.