On May 23, the California Supreme Court issued an opinion that will drastically increase the potential exposure for employers facing meal and rest break class actions. The court, in Naranjo v. Spectrum Security Services, Inc., ruled that employees who are entitled to meal or rest period premiums for denial of compliant meal or rest breaks may now recover derivative waiting time penalties and wage statement penalties previously reserved for nonpayment of traditional wages, such as minimum wage or overtime wages. Here are the key takeaways from the court’s decision:
- Meal and rest break premiums are “wages” that must be reported on statutorily required wage statements during employment and paid within statutory deadlines governing payment of final wages at the end of employment.
- Employees may now recover wage statement penalties under Labor Code § 226 for any unpaid meal or rest break premiums that should have been paid during employment.
- Former employees may now recover waiting time penalties under Labor Code § 203 for not being paid all meal or rest break premiums immediately upon discharge or within 72 hours of resignation.
The court’s decision does not alter the employer’s obligation, under existing law, to pay one additional hour of premium pay, at the employee’s regular rate of pay, for each day a compliant meal or rest break is not provided. It does, however, increase the employer’s potential exposure in meal and rest break litigation for failure to pay meal or rest break premiums. Under the California Labor Code, the maximum statutory penalty for wage statement violations is $4,000 for each employee, and the maximum penalty for waiting time violations is 30 days of wage continuation at the employee’s daily rate of pay. For an employee working 8 hours per day at the 2022 California minimum wage of $15 per hour, the maximum amount for waiting time penalties he or she may recover is $3,600. Again, these penalties are now available to a single employee who is owed meal or rest break premiums.
Given the availability of these additional penalties, California employers should examine their wage and hour practices immediately to avoid such additional penalties in litigation. Employers should implement and enforce their meal and rest period policies to ensure prompt detection and investigation of noncompliant breaks, timely payment of meal and rest break premiums at the employee’s regular rate of pay, and accurate itemization of any premium payments on the employees’ wage statements. In particular, since California law does not require employers to maintain time records for rest breaks, employers should periodically remind employees of the procedures for reporting occasions where a compliant rest break is not available because of work requirements, to ensure prompt payment and documentation of rest break premiums.
This decision is the latest in a series of recent decisions from the California Supreme Court that will further increase the price tag of meal and rest break litigation. It should serve as another reminder for employers to remain vigilant in this area to minimize the increasing costs of class litigation.