On May 23, 2022, the California Supreme Court issued a decision in Naranjo v. Spectrum Security Services, Inc., that could result in potential liability for employers throughout California. As the law currently stands, employers are required to pay non-exempt employees a premium of one hour of pay for non-compliant meal or rest periods (“premium pay”). Non-compliant meal and rest periods include those times when an employee is unable to take a meal or rest break or when an employee does not receive a full, uninterrupted break as required by law.

Until recently, Courts have issued conflicting interpretations as to whether premium pay is considered “wages” for purposes of waiting time penalties and for the issuance of wage statement requirements pursuant to California Labor Code sections 203 & 226. A California appellate court found that premium payments did not constitute “wages” and as such, employers could not be penalized for failure to timely pay or report premium pay. However, the California Supreme Court reversed that decision in Naranjo v. Spectrum Security Services, Inc., holding that premium payments for missed meal or rest breaks are to be considered wages earned and as such, employers are liable for both wage statement violations and waiting time penalties.

What Does the Decision in Naranjo Mean for California Employers?

When an employee misses his or her meal or rest break altogether, or when an employee does not receive their full meal or rest break, the employee is entitled to premium pay. Premium pay is calculated based on the employee’s “regular rate of pay” which is often times higher than the base hourly rate paid to an employee. Ultimately, premium pay is determined by dividing an employee’s total workweek compensation, including non-discretionary bonuses/payments and commissions, among other potential non-hourly compensation, by the total hours worked by the employee in that workweek.

After the Supreme Court’s decision in Naranjo, employers must now report premium pay in an employee’s wage statement. Further, employers will be subject to waiting time penalties for failure to report and timely pay an employee premium payments. To limit liability and exposure, California employers are urged to review the California Labor Code and to consult with an attorney regarding compliance.

You may call Jon Webster Law Group, APC to request a free consultation regarding your rights as an employer or as an employee pursuant to premium payments for missed meal and rest periods.