Wage and Hour Damages Significant for Meal Break Violations

June 8, 2022

In Naranjo v. Spectrum Security Services, Inc. 2022 Cal. LEXIS 2878 (May 2022), the Supreme Court clarified nuanced application of wage-and-hour damages provisions where an employer did not have a written on-duty meal period agreement from June 2004 to September 2007.  The employer had been in the business of providing transport and custodial services for prisoners and detainees and required the guards to remain on duty during lunch.  However, there was no written document memorializing that agreement.  The representative plaintiff ultimately left his post for a meal break, was terminated, and instituted a class action lawsuit.

Three Applicable Labor Code Damages Provisions

Labor Code section 512 mandates a meal break every five hours: “(a) An employer shall not employ an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than 30 minutes...”).  The remedy provision is at section 226.7(c), which states that for each violation, “the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest or recovery period is not provided.”  This is typically referred to as “premium pay.” 

Labor Code sections 201 and 202 define when payment is due for separating employees: they require immediate payment of “wages earned and unpaid at time of discharge” or that “wages shall become due and payable not later than 72 hours” after an employee “quits his or her employment.”  The remedy is found at section 203, which generally requires that: “the wages of the employee shall continue as a penalty” up to 30 days until rectified.  These are typically referred to as the “waiting time penalties.” 

Labor Code section 226 requires and defines an “accurate itemized statement” to employees including a provision of “gross wages earned.”   The remedy is at section 226(e), which generally requires payment of “actual damages” or $50 for the initial violation, then $100 for subsequent violations, but capped at $4,000.

Interplay of Damages Provisions in the Context of the Naranjo Holding

While the above principles are straightforward to apply in their own compartments, Naranjo resolved a very common grey area of how to apply these principles in tandem. 

The question posed by Naranjo was two-fold: (1.) whether waiting time remedies under section 203 apply to delayed premium pay under section 226.7(c), and (2.) whether inaccurate pay statement remedies under section 226(e) apply to pay statements which do not identify the premium pay for missed meal periods.

The Court of Appeal determined the waiting time penalties did not apply because the premium pay was not “wages” under section 203 as it was a self-imposed penalty for a missed meal period.  Similarly, the Court of Appeal determined the inaccurate pay statement remedies did not apply, as premium pay did not constitute “wages earned” under section 226 because it was in the nature of a penalty for missed meal periods.

Ultimately, the Supreme Court reversed the Court of Appeal’s decision.  The Supreme Court, as set forth by Justice Leondra P. Kruger, made two relevant wage-and-hour legal clarifications.  First, the Court determined that the premium pay must be paid immediately upon termination or within 72 hours of resignation, or section 203 waiting time penalties will attach.  The Court reasoned that the employees who miss the meal period are required to work and thus those earned premium payments constitute “wages.”  Second, the Court determined that a wage statement must document premium pay additions for missed meal periods, or the section 226(e) inaccurate pay statement remedies will apply.  The Court reasoned that the purpose of the accurate wage statement statute is to allow the employee to audit and verify correct calculations, or “verify they have been compensated properly,” which would be subverted by allowing the employer to administer premium pay principles without a written record of same.

Going forward for employers, it is important to adjust wage-and-hour polices and procedures as needed to embrace the Naranjo findings.  First, pay statements should include payments made for missed meal periods as “wages earned.”  Second, departing employees should be paid their premium pay for missed meal periods either immediately or within 72 hours, depending if terminated or resigning.  As the California legislature continues to add wage-and-hour statutes, further grey areas will arise and the appellate court clarifications will necessarily arise years later after the litigation has matured. 

Gabriel Ullrich is a Senior Associate in the Firm’s Sacramento office. He can be reached at (916) 483-5181 or  gullrich@ericksenarbuthnot.com.