© 2022 American Payroll Institute, Inc. California Supreme Court Rules Premium Pay For Missed Meal and Rest Breaks Are Wages The California Supreme Court determined that premium payments made to employees for missed meal and rest breaks are considered wage payments for purposes of pay statement and payment on termination requirements. According to the opinion, the pay compensates the employee for work performed during a meal break period in addition to compensating the employee for the unlawful deprivation of a guaranteed break. This means the extra pay constitutes wages subject to the same timing and reporting rules as other types of compensation paid for work performed [Naranjo v. Spectrum Security Services, Inc., No. S258966 (Calif., 5-23-22)]. Background Gustavo Naranjo was a guard for Spectrum Security Services, Inc. (Spectrum), which transports and guards federal prisoners and detainees who require outside medical attention or have other appointments outside of federal agency custodial facilities. Naranjo was suspended and later fired after leaving his post to take a meal break, in violation of a Spectrum policy that required custodial employees to remain on duty during all meal breaks. Naranjo brought a lawsuit alleging Spectrum violated state meal break requirements under the California Labor Code and the applicable Industrial Welfare Commission (IWC) wage order. He sought an additional hour of pay commonly referred to as “premium pay” for each day on which Spectrum failed to provide employees a legally compliant meal break. He also alleged violations of pay statement and payment on termination requirements and sought the applicable damages and penalties. Although claims in the original lawsuit related to rest breaks were dismissed for procedural reasons, the opinion makes it clear that premium pay for missed rest breaks should be treated the same way as premium pay for missed meal breaks. WHAT THE LAW SAYS Premium pay for missed meal and rest breaks. California law requires employers to provide daily meal and rest breaks to most unsalaried employees. If an employer unlawfully makes an employee work during all or part of a meal or rest period, the employer must pay the employee an additional hour of pay [Cal. Lab. Code, §226.7, subd. (c) IWC Wage Order No. 4-2001, §§11(B), 12(B) see APA’s Guide to State Payroll Laws, §1.2 Overtime and Meal and Rest Period Requirements]. Pay statement requirements. Wages including gross and net wages must be reported on itemized pay statements, which must be furnished semimonthly or at the time of each payment of wages, as a detachable part of the check or as a separate writing [Cal. Lab. Code, §226 see APA’s Guide to State Payroll Laws, §2.2 Wage Payment Methods and Pay Statement Requirements]. Payment on termination requirements. An employee who is discharged must be paid all of his or her wages, including accrued vacation, immediately at the time of termination. An employee who quits must be paid all wages, including accrued vacation, within 72 hours, unless the employee has given 72 hours previous notice of his or her intention to quit, in which case the employee is entitled to his or her wages at the time of quitting [Cal. Lab. Code §§201, 202, 227.3 see APA’s Guide to State Payroll Laws, §2.5 Paying Terminated Employees]. Violations. An employee is entitled to recover the greater of all actual damages or $50 for the initial pay period in which a violation occurs plus $100 per employee for each violation in a subsequent pay period, up to $4,000. The employee also is entitled to an award of costs and reasonable attorneys’ fees [Cal. Lab. Code §226]. Analysis by court According to the court, the primary issue was whether premium pay for missed breaks constitutes “wages” that must be reported on statutorily required wage statements during employment and paid within statutory deadlines when an employee leaves the job. It concluded that the answer to both is yes. Although the extra pay is designed to compensate for the unlawful deprivation of a guaranteed break, it also compensates for the work the employee performs during the break period. The extra pay thus constitutes wages subject to the same timing and reporting rules as other forms of compensation for work. Written agreement for certain exceptions Separately, the opinion provided a good reminder to employers about proper compliance with the exception to the off-duty meal break requirement. Generally, covered employees must be relieved of all duties during required meal breaks. There is an exception to this requirement allowing “on-duty” meal breaks if “the nature of the work” prevents the employee from being relieved of all duty. Transporting federal prisoners seems like a particularly good example of the type of work covered by the exception. However, the exception only applies if the on-duty paid meal period is agreed to by written agreement between the parties. In this case, although Spectrum had a policy requiring on-duty meal breaks based on the nature of the guards’ work, Spectrum did not have a written agreement with Naranjo in place. Because of this, the on-duty meal breaks violated state requirements. June 13, 2022 Volume 24 Issue 12
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