In California, premium pay owed for missed meal and rest breaks constitutes “wages,” giving rise to penalties for failure to pay those wages or include them on employee wage statements

On May 23, 2022, the California Supreme Court (“Court”) ruled that premium pay owed by employers to employees for missed meal or rest breaks is “wages” owed.  Because these premiums constitute wages, under state law employers owe associated waiting time and inaccurate wage statement penalties for the failure to pay those premiums to employees.

In Naranjo v. Spectrum Security Services, Inc. plaintiff security guards alleged that their employer did not provide breaks to them and that, as a result, they were entitled to an additional hour of pay for missed breaks pursuant to Labor Code section 226.7. The trial court awarded penalties under Labor Code section 226 for derivative inaccurate wage statement claims, but denied the security guards’ claims for waiting time penalties arising under Labor Code section 203.

In considering the appeal, the Court considered whether premium pay, i.e. this extra pay for missed breaks, (1) constitutes “wages” that must be reported on statutorily-required wage statements under Labor Code section 226, and (2) must be paid within statutorily-required deadlines under Labor Code section 203 when an employee leaves their job. The penalties under sections 203 and 226 apply only when there is willful failure to pay “wages,” so the Court had to first decide whether the premium pay under section 226.7 is “wages” to determine if such penalties applied.

The Court ultimately found that premium pay under section 226.7 constitutes “wages” because the premium pay is designed to both compensate the employee for hardships and pay for work performed when they should be taking a break. In other words, it was both a legal remedy and a wage.

This decision is a major victory for workers because it makes clear that employers expose themselves to penalties under Labor Code sections 203 and 226 when they deny workers breaks. The state legislature implemented these types of penalties to make up for harm caused to employees who do not receive wages owed, but also to deter employers from such unlawful conduct. The Court reaffirmed the importance of these goals.