In May 2022, the California Supreme Court in Naranjo v. Spectrum Security Services, Inc. concluded that premium pay for missed meal and rest periods constitutes ‘wages’ that must be reported on statutorily required wage statements during employment and paid within statutory deadlines when an employee leaves the job.i The Court held that the premium pay is not only designed to compensate for the deprivation of the break, but also to compensate for the work the employee performed during the break period.
In Naranjo, plaintiff's complaint sought penalties, costs, and attorney fees under California Labor Code section 226 for failing to include rest break premiums on her itemized wage statements and waiting time penalties under sections 201 through 203 for failure to pay all wages on termination.ii These were claims for nonpayment of wages. Under section 218.5, the court must award the prevailing party reasonable attorney fees and costs brought for the nonpayment of wages, and if any party requested fees and costs at the beginning of the action, as the plaintiff did. iii
Naranjo established a clear legal basis for the award— the settlement agreement permits an award “consistent with applicable law”; and there is evidence of counsel time spent on claims for nonpayment of wages as construed in Naranjo.iv As Naranjo tells us, the extra pay for missed breaks constitutes wages subject to the same timing and reporting rules as other forms of compensation for work.v
The appellate court rejected the restaurant owners’ new argument that there was a lack of evidence for the wage statement claims raised previously and that the employee had abandoned the wage statement claims. The $280,000 in attorneys’ fees were awarded. Following the ruling, the California Supreme Court sent the original Betancourt v. OS Restaurant Services, LLC case back to the lower court for reconsideration.
In September 2022, the lower court in Betancourt applied the Naranjo ruling to its prior holding. Originally, the trial court held that, to the extent plaintiff’s wage statement and waiting penalty claims were derivative of her rest break claims, they could not support an attorneys’ fee award. The trial court justified the award by relying on the plaintiff’s wage statement and waiting penalty claims premised on “timekeeping and payroll schemes,” and thus entitling plaintiff to fees on that basis, but the lower court now found this to be an error and held that “timekeeping and payroll schemes” were not supported by the record. Previously, the focus had been on the timekeeping issue to support the attorneys’ fee award. Now, with Naranjo’s holding that premium pay for missed breaks constitutes wages and must be reported on wage statements and paid within statutory deadlines when an employee is discharged, the attorneys’ fee award was fully justified under section 218.5.vi
Thus, premium pay for missed meal and rest breaks constitutes ‘wages’ that must be reported on required wage statements during employment and paid within deadlines when an employee leaves the job.vii
As the new year begins, it is prudent to conduct an internal audit of all compensation and payroll processes, including the policies, practices, and recordkeeping of minimum wage, meal periods, rest periods, overtime, and related premium payments. For additional guidance and assistance, please reach out to the attorneys at Palmer Kazanjian Wohl Hodson, LLP.
i Naranjo v. Spectrum Security Services, 13 Cal. 5th 93, 102 (2022).
ii Cal. Lab. Code, § 226; see also § 201, § 203.
iii § 218.5, supra. (a)
iv Betancourt v. OS Restaurant Services, LLC.,--- Cal.Rptr.3d ----, 2022 WL 4129682, 2022 Daily Journal D.A.R. 9834.
v Naranjo, supra, 13 Cal.5th at p. 102.
vi Cal. Lab. Code, § 218.5.
vii Id., § 203; see Naranjo, supra, 13 Cal.5th at 102; see also Id. at 112 (“an employee suing for failure to pay wages by the deadline established in (sections 201 and 202) is suing for nonpayment of wages for purposes of an attorney fee award under Labor Code section 218.5”). Id. at 117, (citing Kirby v. Immoos Fire Protection, Inc., 53 Cal. 4th 1244 (2012).; see also Naranjo, 13 Cal.5th at 102, 117, (“missed-break premium pay constitutes wages for purposes of Labor Code section 203, and so waiting time penalties are available under that statute if the premium pay is not timely paid”); Id. at 121, (“failure to report premium pay for missed breaks can support monetary liability under section 226 for failure to supply an accurate itemized statement”).