Meal and Rest Period Premiums are Wages and Must Appear on Pay Stubs

The California Supreme Court made a number of impactful employment law decisions in 2022, but perhaps the most widely applicable was its decision in Naranjo v. Spectrum Security Services, Inc. The decision in that case made clear the potentially costly consequences of an employee’s missed meal or rest breaks without proper reimbursement, and it affects virtually all employers in the state.

California’s meal and rest break laws require employers to provide a thirty-minute uninterrupted meal break before the fifth hour of work and a ten-minute uninterrupted rest break for every four hours worked or a major fraction thereof. In the event an employee is unable to take a complete uninterrupted meal break as required by law, that employee must be provided with an additional hour of pay, otherwise referred to as a “meal period premium.” Likewise, if an employee is unable to take a complete uninterrupted rest break as required by law, that employee must be provided with an additional hour of pay, or a “rest period premium.”

In Naranjo, a class action case involving the payment and reporting of missed meal breaks by security officers, the California Supreme Court established two significant rules. First, the Court held that meal and rest period premiums are deemed “wages” under the law because they compensate for work the employee performed during the missed break. Since the premiums constitute wages, they must also be reported on employee pay stubs. Second, and by extension, all owed premiums must be timely paid in full when an employee departs from a job. If not timely paid at the end of an employee’s employment, unpaid premiums can result in up to thirty (30) days of wages owed to the employee, at the employee’s daily rate of pay, otherwise known as “waiting time penalties.”

California employers should adopt policies and practices to minimize the impact of this ruling. The simplest and most cost-effective approach would be to avoid missed meal and rest breaks altogether. Employers should implement and strictly enforce a comprehensive meal and rest break policy to ensure that employees are receiving all breaks to which they are legally entitled. Employee meal breaks should also be documented with meticulous precision. If an employer can avoid missed meal or rest breaks, it eliminates the need to pay or track meal or rest period premiums.

For some employers, that may not be a viable option, and for those employers, a few steps should be taken to implement the Naranjo rules. First, employers must make efforts to accurately track and timely pay the premiums whenever an employee misses a meal or rest break. Second, pay stubs should immediately be updated to include and itemize meal and rest period premiums. Failure to do so could result in inaccurate wage statements, subjecting the employer to monetary penalties. Third, employers must ensure that departing employees are timely paid all wages, including any unpaid meal or rest break premiums, to avoid any waiting time penalties. Finally, employee handbooks should be updated to include an automatic premium payment provision, so that employees know they are entitled to an extra hour of pay for missed meal or rest breaks.