Does Premium Pay for Meal and Rest Break Violations Constitute Wages for Purposes of Waiting Time and Wage Statement Penalties?

Does Premium Pay for Meal and Rest Break Violations Constitute Wages for Purposes of Waiting Time and Wage Statement Penalties?

California employers received some unfortunate news when the Supreme Court of California held in Naranjo v. Spectrum Security Services, Inc. premium pay for meal and rest break violations constitutes wages for purposes of Labor Code sections 203 (waiting time) and 226 (wage statement) penalties.[1]  The California Supreme Court based its ruling on these grounds: while premium pay compensates for missed breaks, it also compensates for work the employee performed during the missed break.[2]

Spectrum Security Services, Inc. (“Spectrum”) transports and guards inmates and detainees requiring outside medical attention or have other off-site appointments.[3]  Plaintiff Gustavo Naranjo (“plaintiff”) was a guard for Spectrum who was suspended and later terminated after leaving his post to take a meal break in violation of Spectrum’s on duty meal break policy.[4]  Thereafter, plaintiff filed a putative class action alleging Spectrum violated meal break requirements as well as failed to timely pay all wages due at separation and maintain accurate wage statements.[5]  Plaintiff sought premium pay for the non-compliant meal periods as well as Labor Code 203 and 226 penalties.[6]

Generally, an employer must provide covered employees an off-duty meal period on shifts lasting longer than five hours.[7]  However, there is an exception allowing for on duty meal periods if the nature of the work prevents an employee from being relieved of all duty and the parties agree to on duty meal periods in writing, that is revocable by the employee at any time.[8]  Plaintiff’s complaint alleged Spectrum did not have a valid written agreement with its employees regarding on duty meal periods.[9]

The trial court agreed with plaintiff and directed a verdict for plaintiff on his meal break claim.[10] The trial court also held the obligation to supply meal break premium pay also carried reporting and timing obligations for purposes of waiting time and wage statement penalties.[11]  The trial court found Spectrum liable for Labor Code section 226 penalties but not Labor Code section 203 penalties.[12]  Both sides appealed.

The court of appeal affirmed the trial court’s finding Spectrum violated meal break requirements but reversed the finding premium pay supported derivative claims for waiting time and wage statement penalties.[13]  The court of appeal based its finding upon the grounds the waiting time and wage statement penalties are not wages owed to employees, but penalties paid for the employer’s labor code violation.[14]

The California Supreme Court agreed with the court of appeal: premium pay is a remedy for a legal violation.[15]  However, the Supreme Court argued this does not preclude premium pay from also constituting wages.[16]  The Court reasoned an employee who remains on duty during a break is providing an employer with services and the pay owed for that hardship can be viewed as wages.[17]

Spectrum argued that treating premium pay as wages was inconsistent with the Court’s decision in Kirby v. Immoos Fire Protection, Inc.[18]  In rejecting this argument, the Supreme Court stated Spectrum misread Kirby.[19]  The Court clarified that Kirby did not reject or limit the characterization of section 226.7 premium pay as compensation for labor as found in Murphy v. Kenneth Cole Productions, Inc. Instead, Kirby used Murphy’s characterization without disapproval.[20]  The Supreme Court noted Kirby went on to explain the Court’s conclusion that premium pay is a wage did not necessarily mean an action under Labor Code section 226.7 is an action for nonpayment of wages under Labor Code section 218.5.[21]  The Supreme Court explained that in distinguishing Murphy this way, Kirby did not refute or narrow the characterization of Labor Code section 226.6 pay as a wage.[22]  The Court went on to reject Spectrum’s additional arguments on this point.[23]

The Supreme Court then turned to the question of whether the requirements under Labor Code section 226 (wage statements) extended to payments under Labor Code section 226.7 for missed breaks.[24]  In rejecting Spectrum’s arguments, the Court explained premium wages fall within the Labor Code’s general definition of wages.[25]  The Court also explained that the obligation to report wages earned, including premium wages, fit better with the purpose behind the wage statement requirements-to allow employees to verify they have been properly compensated.[26]

The one silver lining to come out of the Supreme Court’s opinion was it specifically emphasized the limits of its holdings concerning Labor Code sections 203 and 226.[27]  The Court noted whether such penalties were available in this particular case was yet to be determined and remained as issues to be resolved on remand.[28]  Thus, whether these penalties will be actually awarded is still to be determined.

So, what does this mean for California employers?  It means waiting time and wage statement penalties are derivative claims which may be asserted with meal and rest break violations.  This may increase potential exposure on employee wage and hour claims.  Thus, it is imperative employers ensure their meal and rest break policies are compliant with applicable law and IWC Wage Orders and if employees miss or are not provided a compliant rest break, the employee must be properly and timely compensated as well as have the premium pay reported on the respective employee’s wage statement.

If you have any questions or want to discuss your current employment policies, please do not hesitate to contact Tyson & Mendes’ Employment Law Team, who is ready and able to assist with your employment law needs.

 

 

 

 


[1] Naranjo v. Spectrum Security Services, Inc. (2022) 13 Cal.5th 93.

[2] Id. at 102.

[3] Id.

[4] Id.

[5] Id. at 102-103.

[6] Id.

[7] Id. at 103. See also IWC Wage Order No. 4-2001.

[8] Id.

[9] Id.

[10] Id.

[11] Id.

[12] Id. at 104.

[13] Id.

[14] See Naranjo v. Spectrum Security Services, Inc. (2019) 40Cal.App.5th 444, 473-475.

[15] Naranjo v. Spectrum Security Services, Inc., supra, 13 Cal.5th at 106.

[16] Id.

[17] Id. at 107.

[18] Id. at 110-111; Kirby v. Immoos Fire Protection, Inc. (2012) 53 Cal.4th 1244.

[19] Id. at 111; Murphy v. Kenneth Cole Productions, (2007) 40 Cal.4th 1094.

[20] Id.

[21] Id.

[22] Id. at 112.

[23] Id. at 112-117.

[24] Id. at 117-118.

[25] Id. at 118.

[26] Id. at 118-119.

[27] Id. at 125.

[28] Id. at 126.

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