The underlying action, Naranjo v. Spectrum Security Services, was a class action brought by former and current employees, alleging violations of meal period violations. The plaintiffs sought not only premium wages for the violations but also waiting time penalties and penalties for failure to provide accurate wage statements. The results of the trial court decision were mixed and appealed.

The California Court of Appeal case discussed several issues including whether unpaid premium wages for meal and rest period violations entitled an employee to recover waiting time penalties under Labor Code section 203 and wage statement violations under Labor Code 226. The Court of Appeal deemed premium pay for missed meal and rest periods not “wages” thus not entitling employees to waiting time or wage statement violation penalties.

On appeal the California Supreme Court considered the following questions:

1. Does a violation of Labor Code section 226.7, which requires payment of premium wages for meal and rest period violations, give rise to claims for waiting time penalties or violations of wage statement requirements when the employer does not include the premium wages in the employee’s wage statements but does include the wages earned for meal breaks?

2. If so, what is the applicable prejudgment interest rate for unpaid premium wages owed under Labor Code section 226.7?

For the first question, the California Supreme Court held contrary to the prior Court of Appeal decision, stating that the extra pay for missed meal and rest periods constitutes “wages” and therefore must be reported on statutorily required wage statements pursuant to Labor Code section 226 and paid within statutory deadlines when an employee separates from employment pursuant to Labor Code section 203.

The ruling by the California Supreme Court means that if an employer fails to pay premium pay for missed meal and rest periods, additional penalties for failure to provide an accurate wage statement and waiting time penalties may also be recoverable by plaintiffs.

As to the second question, the Court held that the rate of prejudgment interest that applies to amounts due for failure to provide meal and rest periods is the 7 percent default rate set by the state Constitution.