Spectrum Security Services, Inc., provides secure custodial services to federal agencies. The company transports and guards prisoners and detainees who require outside medical attention or have other appointments outside custodial facilities.

Gustavo Naranjo was a guard for Spectrum. 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 filed a putative class action on behalf of Spectrum employees, alleging that Spectrum had violated state meal break requirements under the Labor Code and the applicable Industrial Welfare Commission (IWC) wage order. (Lab. Code, § 226.7; IWC wage order No. 4-2001, § 11.) The complaint 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.

According to the complaint, Spectrum was required to report the premium pay on employees’ wage statements and timely provide the pay to employees upon their discharge or resignation, but had done neither. The complaint sought the damages and penalties prescribed by those statutes as well as prejudgment interest.

After a remand from the Court of Appeal (Naranjo I v. Spectrum Security Services, Inc. (2009) 172 Cal.App.4th 654) on several issues, the trial court certified a class for the meal break and related timely payment and wage statement claims and then held a trial in stages. The trial court entered judgment for the plaintiff class on the meal break and wage statement claims and awarded attorney fees and prejudgment interest at a rate of 10 percent.

Both sides appealed. The Court of Appeal affirmed the trial court’s determination that Spectrum had violated the meal break laws but reversed the court’s holding that a failure to pay meal break premiums could support claims under the wage statement and timely payment statutes. It also ordered the rate of prejudgment interest reduced from 10 to 7 percent. (Naranjo II v. Spectrum Security Services, Inc. (2019) 40 Cal.App.5th 444).

The California Supreme Court disagreed with the Court of Appeal, decision in Naranjo II, and concluded that the extra pay constitutes wages subject to the same timing and reporting rules as other forms of compensation for work, but agreed that the 7 percent default rate set by the state Constitution applies. (See Cal. Const., art. XV, § 1.) in its opinion in Naranjo III v Spectrum Security Services Inc. (2022) S258966.

California’s meal and rest break requirements date back to 1916 and 1932, respectively, when the newly created IWC included the requirements in a series of wage orders. For most of the century following the promulgation of the break requirements, the law offered limited tools for enforcement: “The only remedy available to employees . . . was injunctive relief aimed at preventing future abuse.”

In 2000, concerned that the injunctive remedy had not given employers enough incentive to comply with the law, the IWC added a new monetary remedy. Employees denied a meal or rest break on a given day would be due “one (1) hour of pay at the employee’s regular rate of compensation.” The Legislature followed suit the same year by enacting Labor Code section 226.7 providing essentially the same remedy.

An employee who remains on duty during lunch is providing the employer services; so too the employee who works without relief past the point when permission to stop to eat or rest was legally required. Section 226.7 reflects a determination that work in such circumstances is worth more – or should cost the employer more – than other work, and so requires payment of a premium. In this respect, missed-break premium pay is comparable to other forms of payment for working under conditions of hardship.

The extra pay thus constitutes wages subject to the same timing and reporting rules as other forms of compensation for work. When an employment relationship comes to an end, the Labor Code requires employers to promptly pay any unpaid wages to the departing employee.

Supreme Court – Missed-Break Premiums Are “Wages” With Penalties