California’s High Court Characterizes Meal and Rest Period Premiums As Wages

In California, the failure to make timely payments for meal and rest period premiums can trigger waiting time penalties and wage statement violations. This is so because these premiums are considered to be wages, as has been recently confirmed by the California Supreme Court in Naranjo v. Spectrum Security Services, Inc.

For employers, the state high court decision in Naranjo issued on May 23 is an unfavorable development for California employers and a departure from the intermediate appellate court’s determination that meal and rest period premiums are a “legal remedy” as opposed to a wage for work performed.

A Look at the California Supreme Court’s Reasoning in Naranjo

In rendering its decision, the Court relied heavily upon its previous ruling in Murphy v. Kenneth Cole Productions, Inc., in which it was held that premium pay for meal and rest periods constituted wages for purposes of the statute of limitations. If these are wages under Murphy, the Court reasoned, they must be subject to the same timing and reporting rules as other forms of compensation for work.

Digging a bit deeper, the Court in Naranjo explained that the Court of Appeal’s “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.” Notably, the Court made clear that under the relevant statute and wage order, an employee becomes entitled to premium pay for missed or noncompliant meal and rest breaks precisely because she was required to work when she should have been relieved of duty (for instance, required to work too long into a shift without a meal break; required to work through a break; or, as was the case at bar, required to remain on duty without an appropriate agreement in place authorizing on-duty meal breaks). This dicta may furnish employers with the grounds to factually distinguish from Naranjo where these specified scenarios are arguably inapplicable.

Some Contradictory Precedent

The Naranjo Court then attempted to harmonize its seemingly contradictory holding in Kirby v. Immoos Fire Protection, Inc. that an action for meal period or rest break premiums is not an “action brought for the nonpayment of wages” for purposes of the attorney’s fees provision in Labor Code section 218.5. It did so by stating that the legal violation triggering a claim for meal and rest period premiums is the failure to provide the break and not the failure to provide the premium pay. This, however, raises certain inconsistencies in the Naranjo ruling can potentially be leveraged by employers, including Naranjo’s interpretation of Murphy. Toward that end, we will monitor how California appellate courts interpret the Supreme Court’s labeling exercise in Naranjo.

Naranjo in Light of Ferra v. Lowes Hollywood Hotel, LLC

It is important to understand that the holding in Naranjo does not affect any of the underlying requirements for establishing meal or rest period violations, waiting time penalties or wage statement violations. For example, waiting time penalties are still subject to a willfulness standard. That being said, the impact of Naranjo is not only significant, but also compounded by last year’s California Supreme Court ruling in Ferra, in which it was held that meal and rest premiums must be paid at the employee’s regular rate of compensation, and not just their hourly rate of pay. Now, under Ferra and Naranjo, payment of meal and rest period premiums at employees’ hourly rates of pay will not only subject employers to meal and rest period exposure, but also waiting time penalties and wage statement violations.

The takeaway is this: employers must ensure that meal and rest period premiums are paid at their employees’ regular rates of pay for any missing, late or shortened meal, rest or recovery periods during any given workday. To be sure, Naranjo only furthers the increased vigilance which employers must operate with so that inadvertent errors do not cause disproportionate derivative wage and hour exposure.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.