At the end of May, the California Supreme Court issued a notable ruling regarding compensation, as part of the decision made from Naranjo v. Spectrum Security Services Inc. To provide some background on the case, a security guard was suspended and then fired as a result of the individual leaving their post to take a meal break. The Company found the individual to be in violation of a company policy that required guards to remain on duty during all meal breaks. As a result, the individual filed suit claiming that the employer failed to provide the state-mandated meal break period premiums for each day the Company failed to provide a meal break. Naranjo also argued that the Company should report the meal premium on the employee wage statement as well as follow the “waiting time” penalties implemented when an employee separates.
Under California Labor Code Section 226.7 (Sect. 226.7), employers are required to provide meal and rest breaks to non-exempt employees, and if an employer fails to provide eligible employees with the ability to take said break periods, the employer is required to pay an additional hour of compensation as a premium payment. However, it was never established whether California Labor Code Sections 226 (Sect. 226) and 203 (Sect. 203), would also be applicable to the missed break period premium payments, until now.
According to Section 226, California employers must furnish a wage statement that provides a breakdown of the following information:
- Gross wages earned;
- Total hours worked by the employee, except for any employee whose compensation is solely based on a salary and who is exempt from payment of overtime under subdivision (a) of Section 515 or any applicable order of the industrial welfare commission;
- The number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis;
- All deductions, provided that all deductions made on written orders of the employee may be aggregated and shown as one item;
- Net wages earned;
- The inclusive dates of the period for which the employee is paid;
- The name of the employee and only the last four digits of the employee’s social security number or an employee identification number other than a social security number;
- The name and address of the legal entity that is the employer and, if the employer is a farm labor contractor, as defined in subdivision (b) of section 1682, the name and address of the legal entity that secured the services of the employer; and
- All applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee and, beginning July 1, 2013, if the employer is a temporary services employer as defined in Section 201.3, the rate of pay and the total hours worked for each temporary services assignment.
The deductions made from payment of wages shall be recorded in ink or other indelible form, properly dated, showing the month, day, and year, and a copy of the statement and the record of the deductions shall be kept on file by the employer for at least three years at the place of employment or at a central location within the state of California. For purposes of this subdivision, “copy” includes a duplicate of the itemized statement provided to an employee or a computer-generated record that accurately shows all of the information required by this subdivision.
Additionally, Section 203 requires that employers follow specific timeframe requirements for providing final compensation to an individual who is discharged or resigns. Otherwise, a “waiting time” penalty will apply. The penalty would be calculated from the final pay due date, at the employee’s rate of pay, until paid, but not to exceed 30 days.
The California Department of Industrial Relations had previously determined that the premium pay provided as a result of a missed break period was simply a penalty, and not considered wages. However, the ruling brought forth through Naranjo v. Spectrum Security Services Inc., completely shifted how employers will need to handle meal break premiums moving forward.
Next Steps for Employers
It is recommended that employers review their current pay practices surrounding meal and break period premiums as a result of the Court’s ruling. Employers will also want to review their current policies regarding meal and break periods to ensure employees are properly taking and tracking their mandated breaks. And, in those events in which an employee fails to take their required meal and rest breaks employers will need to be mindful of properly compensating employees.
As always, employers are encouraged to speak with the legal counsel regarding any specific situations that may arise.