A California Supreme Court decision establishes new parameters for how premium payments apply for meal and rest period violations, stating such payments need to be reported as wages that must be included on wage statements and final pay obligations.
The high court’s decision in Naranjo et al. v. Spectrum Security Services, Inc., which was issued May 23, has raised concerns about proper compliance under the new Labor Code requirements, Tom Manzo, founder and president of the California Business and Industrial Alliance (CABIA), said in an email response to the Northern California Record.
“This is a disaster. Employers will pay for missed meal breaks, which of course means admitting PAGA (Private Attorneys General Act) liability, which now leads to additional stacking of penalties,” Manzo said. “So, if you are an employer and you are complying by paying the late or missed meal periods, it will not be good enough.”
In the ruling written by Justice Leondra Kruger, the court found that even though the extra pay is meant to cover missed break violations, it also compensates, “for the work the employee performed 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.”
The case was filed for the plaintiff, who provided security services for correctional facilities, after he was fired
“The California Supreme Court tends to side with the employees regardless of the facts or law,” Manzo said. “But this one is a real hit to employers – i.e., by characterizing meal and rest period premiums as wages (without any statutory or wage order support), it now means that failure to pay premiums triggers the right to recover attorneys’ fees, wage statement penalties (Labor Code 226), timely payment of wages penalties (204), waiting time penalties (201-203), and a host of other issues.
“More confusion in the 1,110-plus page labor law digest creating more ‘gotcha’ traps for the trial lawyers to prey on businesses.”
Employees must still show that failure to report premiums is intentional and failure to pay premiums is willful.
But that is unlikely to provide encouragement to small businesses or large corporations that can find a different business climate in other states.
“It definitely makes employers want to leave, if there is confusion in compliance, why do business here?,” Manzo said.