Caroline Powell Donelan and Howard M. Knee
California is infamous for its hostility towards employers. On May 23, the California Supreme Court continued on its unwavering mission to solidify that well-earned reputation by issuing a 45-page decision in Naranjo et al. v. Spectrum Security Services, Inc., a case we have been closely monitoring at Blank Rome.
For context, the failure to pay wages in California triggers not only an award of those unpaid wages, but potentially steep and costly statutory and civil penalties as well, including so-called: (1) “waiting time penalties”—up to 30 days’ wages for former employees; and (2) “wage statement penalties” when the unpaid wages render the employee’s pay stub inaccurate. Wage statement penalties start at $50 for the first violation and rise to $100 for subsequent violations. When claims are brought on a classwide basis, these penalties can become astronomical, as they are all assessed on a per-employee, per-pay-period basis.
California is also unique in that it requires employers to provide employees timely and completely duty-free meal periods and rest breaks. The failure to do so also triggers a penalty—called a meal period or rest break “premium.” Legally speaking, these break premiums have not been considered “wages” for all purposes under California law and, therefore, employers argued they did not trigger the additional penalties cited above.
That all changed on May 23, when the California Supreme Court—reversing in part the court of appeal—ruled that these break premium payments actually do constitute “wages” (not penalties) for purposes of both waiting time penalties and wage statement penalties thereby triggering the additional penalties discussed above. This holding is compounded by the fact that just last year, the California Supreme Court again switched course against employers, holding in Ferra v. Loews Hollywood Hotel, LLC, that the rate of pay for meal period and rest break premiums is no longer the base rate, but rather the “regular rate of pay,” which includes all non-discretionary compensation in the same manner that the overtime pay rate is calculated. Not to mention, whenever the time records show that the employee failed to take a timely and complete meal period, there is a rebuttable presumption that the employer failed to provide it. Donohue v. AMN Services, LLC.
So, how does this translate into real life? If you have an employee earning $15.00 per hour who fails to record a compliant meal period, regardless of whether the break was actually provided, you could theoretically be on the hook for: (1) a $15.00 meal period premium; (2) wage statement penalties ranging from $50–100; (3) waiting time penalties up to $3,600; (4) civil penalties ranging from $100–200 per pay period; and (6) attorneys’ fees and costs.
They say perfection is a moving target, so well is California wage and hour compliance in 2022.