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Employers Must Treat Labor Code Section 226.7 Premiums as ‘Wages’

by Jennifer Shaw | | May 23, 2022

Happy Monday!

California law requires employers to provide meal and rest periods to most non-exempt employees.  If an employer does not provide eligible employees with the opportunity to take those meal and rest periods, then Labor Code section 226.7 requires the employer to pay an additional hour of pay as a “premium” (up to two hours per day—one hour for rest period violations, and one hour for meal period violations).  So far, so good, right?

Courts have gone back and forth in terms of whether to treat 226.7 premiums as a wage or a penalty.  This distinction is important for many reasons, including because “wages” must be reported on wage statements and paid within statutory deadlines when an employee leaves the job (i.e., for Labor Code section 203 waiting time penalties).

We now have an answer. The California Supreme Court decided this month in Naranjo v. Spectrum Security Services, Inc. that although 226.7 premiums are designed to compensate for the unlawful deprivation of a required break, they also compensate for the work the employee performed during the missed break.  (Notably, the Supreme Court overruled the California Court of Appeal on this issue.)

You can read the case here.

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