In April 2007, the California Supreme Court issued a decision that defense and plaintiff ’s lawyers alike have been anxiously awaiting. The issue was the statute of limitations for meal and rest period violations under California state law.

California requires that all non-exempt employees be provided a 30 minute unpaid meal break for every five or six hours worked (depending on certain circumstances) and a 10 minute paid rest break for every four hours (or greater fraction there-of) worked. Failure to do requires the employer to compensate the employee an extra hour of compensation at his regular hourly rate. If that money was considered a wage, there would be a three-year statute of limitations (four years if an unfair competition claim was also alleged), and the employer would also be subject to waiting time penalties for failure to compensate the employees promptly. If that money was considered a penalty, there would be a one-year statute of limitations.

Despite the state enforcement agency’s enforcement position and the greater number of appellate courts finding that the fines were penalties (and therefore subject to a shorter statute of limitations), the California Supreme Court found that these fines were wages. This decision will likely increase the already significant number of claims of meal and rest period violations.

The importance of the decision cannot be ignored. Employers with California operations must ensure that they are in full compliance with California meal and rest period laws either by providing the appropriate meal/rest breaks or paying out the additional hour of wages to avoid this costly litigation.