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On May 23, 2022, the California Supreme Court ruled that premium pay for missed meal and rest periods is considered wages and therefore entitles employees to derivative claims for unpaid wages, including waiting-time penalties and wage statement violations. California law requires that most non-exempt employees are entitled to daily meal and rest breaks. Employers who fail to provide these breaks are generally liable to pay one hour of pay (i.e., “premium pay”) at the employee’s regular rate of pay for a non-compliant meal or rest period.

In Naranjo v. Spectrum Security Services, Inc., the court held that this premium pay is considered wages and not a penalty and must be timely paid and reported on wage statements. The California Court of Appeal had previously held that this premium pay was a penalty, but the state Supreme Court found that this “conclusion that premium pay cannot constitute wages rests on a false dichotomy: that a payment must be either a legal remedy or wages. For these purposes, [Labor Code] section 226.7 is both.” The Supreme Court found that the one hour’s pay for a missed meal or rest break was both a legal remedy because the employee was “required to work when she should have been relieved of duty,” and wages because the employee performed work during what should have been their break.

The court concluded that this premium pay is required to be recorded on the employee’s wage statement and paid timely under Labor Code section 226, and thereby entitles an employee to claim penalties for wage statement violations. Additionally, an employee would be entitled to waiting-time penalties of up to 30 days’ pay under Labor Code section 203 for an employer’s willful failure to pay such premium pay for non-compliant meal or rest breaks.

However, despite ruling that meal and rest premium pay constitutes wages for the purposes of Labor Code sections 203 and 226, the court reaffirmed its decision in Kirby v. Immoos Fire Protection, Inc. (53 Cal.4th 1244,2012) that claims for unpaid meal and rest break premium pay do not constitute claims “brought for the nonpayment of wages” under Labor Code section 218.5 and therefore do not trigger the attorney’s fees provision under that section.

This decision highlights the importance of employers maintaining compliant meal and rest break practices and policies that provide for premium pay if an employee has a non-compliant meal or rest break. Employers who have questions about this decision or their meal or rest break policies can contact the California Legal Services team at CAInfo@employerscouncil.org.