Naranjo v. Spectrum Security Services, Inc.

IN THE SUPREME COURT OF
CALIFORNIA
GUSTAVO NARANJO et al.,
Plaintiffs and Appellants,
v.
SPECTRUM SECURITY SERVICES, INC.,
Defendant and Appellant.
S258966
Second Appellate District, Division Four
B256232
Los Angeles County Superior Court
BC372146
May 23, 2022
Justice Kruger authored the opinion of the Court, in which
Chief Justice Cantil-Sakauye and Justices Corrigan, Liu,
Groban, Jenkins, and O’Leary* concurred.
*
Presiding Justice of the Court of Appeal, Fourth Appellate
District, Division Three, assigned by the Chief Justice pursuant
to article VI, section 6 of the California Constitution.
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
S258966
Opinion of the Court by Kruger, J.
California law requires employers to provide daily meal
and rest breaks to most unsalaried employees. If an employer
unlawfully makes an employee work during all or part of a meal
or rest period, the employer must pay the employee an
additional hour of pay. (Lab. Code, § 226.7, subd. (c); Industrial
Welf. Com. wage order No. 4-2001, §§ 11(B), 12(B).) The
primary issue before us is whether this extra pay for missed
breaks constitutes “wages” that must be reported on statutorily
required wage statements during employment (Lab. Code,
§ 226) and paid within statutory deadlines when an employee
leaves the job (id., § 203). We conclude, contrary to the Court of
Appeal, that the answer is yes. Although the extra pay is
designed to compensate for the unlawful deprivation of a
guaranteed break, it also compensates for the work the
employee performed during the break period. (See Murphy v.
Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1104.)
The extra pay thus constitutes wages subject to the same timing
and reporting rules as other forms of compensation for work.
We also resolve a dispute over the rate of prejudgment
interest that applies to amounts due for failure to provide meal
and rest breaks. Here, we agree with the Court of Appeal that
the 7 percent default rate set by the state Constitution applies.
(See Cal. Const., art. XV, § 1.)
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
I.
Defendant Spectrum Security Services, Inc., (Spectrum)
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. (Naranjo v. Spectrum Security
Services, Inc. (2009) 172 Cal.App.4th 654, 660 (Naranjo I).)
Plaintiff 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 v. Spectrum Security Services, Inc. (2019) 40
Cal.App.5th 444, 453–454 (Naranjo II).)
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.1 (Lab. Code,
§ 226.7; IWC wage order No. 4-2001, § 11.)2 The complaint
1
IWC wage order No. 4-2001 regulates professional,
technical, clerical, mechanical, and similar employment,
including security guard service, and so covers the class
members here.
2
Naranjo also alleged that Spectrum violated state rest
break requirements. (Lab. Code, § 226.7; IWC wage order No. 4-
2001, § 12.) The trial court denied class certification on
Naranjo’s rest break claims because of purported variations in
the putative class members’ claims. The Court of Appeal
reversed that decision and directed the trial court on remand to
certify a class challenging Spectrum’s alleged companywide
policy of denying off-duty rest breaks. (Naranjo II, supra, 40
Cal.App.5th at pp. 476–481.) Spectrum has not sought review
of that ruling, and we do not address it.
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NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
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. (See Lab.
Code, § 226.7, subd. (c); IWC wage order No. 4-2001, §§ 11(B),
12(B).)
Naranjo’s complaint also alleged two Labor Code
violations related to Spectrum’s premium pay obligations.
According to the complaint, Spectrum was required to report the
premium pay on employees’ wage statements (Lab. Code, § 226)
and timely provide the pay to employees upon their discharge or
resignation (id., §§ 201, 202, 203), but had done neither. The
complaint sought the damages and penalties prescribed by those
statutes (id., §§ 203, subd. (a), 226, subd. (e)(1)) as well as
prejudgment interest.
The trial court initially granted summary judgment in
favor of Spectrum on federal law grounds not relevant here, but
the Court of Appeal reversed. (Naranjo I, supra, 172
Cal.App.4th at pp. 663–669.) On remand, 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 court first considered Spectrum’s liability for meal
break violations. Under the governing IWC wage order, an
employer ordinarily must provide covered employees an off-duty
meal period on shifts lasting longer than five hours. (IWC wage
order No. 4-2001, § 11(A); see Brinker Restaurant Corp. v.
Superior Court (2012) 53 Cal.4th 1004, 1034–1035.) An
exception to this requirement allows for “ ‘on duty’ ” meal
periods if “the nature of the work prevents an employee from
being relieved of all duty,” but only when “by written agreement
between the parties an on-the-job paid meal period is agreed to.”
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NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
(IWC wage order No. 4-2001, § 11(A); see Brinker Restaurant
Corp., at p. 1035.) Naranjo did not dispute that Spectrum had
always required on-duty meal periods as company policy
because of the nature of its guards’ work but argued that
Spectrum did not have a valid written on-duty meal break
agreement with its employees. Agreeing with Naranjo that
Spectrum had no valid agreement for part of the class period,
the court directed a verdict for the plaintiff class on the meal
break claim for the period from June 2004 to September 2007.
A jury found Spectrum not liable for the period beginning on
October 1, 2007, after Spectrum had circulated and obtained
written consent to its on-duty meal break policy.
The court then considered the related wage statement and
timely payment claims. The court concluded that the obligation
to supply meal break premium pay also carried with it reporting
and timing obligations. Whether Spectrum was monetarily
liable for failure to abide by those obligations depended on its
state of mind: The wage statement statute authorizes damages
and penalties only for “knowing and intentional” violations and
excuses “isolated and unintentional payroll error due to a
clerical or inadvertent mistake” (Lab. Code, § 226, subd. (e)(1),
(3)), while the timely payment statutes impose penalties only for
“willful[]” failures to make payment (id., § 203). The trial court
concluded Spectrum’s wage statement omissions were
intentional and awarded Labor Code section 226 penalties, but
the failure to make timely payment was not willful and so
Spectrum was not liable for section 203 penalties. 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.
4
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
Both sides appealed. The Court of Appeal affirmed in part
and reversed in part. As relevant here, it affirmed the trial
court’s determination that Spectrum had violated the meal
break laws during the period from June 2004 to September 2007
(Naranjo II, supra, 40 Cal.App.5th at pp. 457–463) 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 (id. at pp. 463–475). It also ordered the rate
of prejudgment interest reduced from 10 to 7 percent. (Id. at
pp. 475–476.)
As the Court of Appeal explained, whether the wage
statement and timely payment statutes apply to missed-break
premium pay is a question that has generated confusion in the
Courts of Appeal as well as in federal courts. (Naranjo II, supra,
40 Cal.App.5th at pp. 467–471.) We granted review to consider
the issue.
II.
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 regulating
terms and conditions of employment in various industries and
occupations. (Murphy v. Kenneth Cole Productions, Inc., supra,40 Cal.4th at p. 1105 (Murphy); see Brinker Restaurant Corp. v.
Superior Court, supra, 53 Cal.4th at p. 1017.) For most of the
century following the promulgation of the break requirements,
however, the law offered limited tools for enforcement: “The
only remedy available to employees . . . was injunctive relief
aimed at preventing future abuse.” (Murphy, at p. 1105.)
In 2000, concerned that the injunctive remedy had not
given employers enough incentive to comply with the law, the
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NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
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.” (IWC wage order
No. 4-2001, §§ 11(B), 12(B); see Ferra v. Loews Hollywood Hotel,
LLC (2021) 11 Cal.5th 858, 870; Murphy, supra, 40 Cal.4th at
pp. 1105–1106, 1110.) The Legislature followed suit the same
year by enacting Labor Code section 226.7 (Stats. 2000, ch. 876,
§ 7, p. 6509), providing that employers who unlawfully denied
their employees a meal or rest period on any given day must pay
the employees an “additional hour of pay” at their “regular rate”
(Lab. Code, § 226.7, subd. (c) (section 226.7); see Ferra, at
pp. 869–872).
The primary questions in this case concern the
relationship between the premium pay provision of section
226.7, subdivision (c), and the provisions of the Labor Code
governing the reporting of wages and timely payment of wages
upon discharge or resignation. Spectrum did not seek review of
the lower courts’ determination that it violated state meal break
requirements, so we take as settled that the class members are
entitled to premium pay. It is likewise undisputed that
Spectrum neither paid that premium pay nor reported it as
earned on employee wage statements. When an employer
unlawfully denies an employee a meal or rest period and thus
becomes obligated to pay an extra hour’s pay, can the employer
be held liable under Labor Code section 203 if it fails to pay any
unpaid missed break amounts within statutorily mandated
deadlines? And can it be held liable under Labor Code section
226 if it fails to report that premium pay on a statutorily
required wage statement? Spectrum argues the answer to each
question is no. We address its contentions in turn, beginning
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NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
with an employer’s prompt payment responsibilities. (See Lab.
Code, §§ 201–203.)
III.
A.
When an employment relationship comes to an end, the
Labor Code requires employers to promptly pay any unpaid
wages to the departing employee. The law establishes different
payment deadlines depending on the manner of departure.
Labor Code section 201 establishes a baseline statutory deadline
for paying employees who are discharged from their
employment: upon termination, “wages earned and unpaid at
the time of discharge are due and payable immediately.” (Lab.
Code, § 201, subd. (a).) Labor Code section 202 specifies the
default deadline for paying employees who instead resign:
immediately at the time of quitting, if the employee has given
sufficient advance notice, and within 72 hours if the employee
has not. (Id., § 202, subd. (a).)3 To enforce these deadlines,
Labor Code section 203 prescribes a sanction for employers who
“willfully fail[] to pay” the full amounts due: absent timely
payment of “any wages of an employee who is discharged or who
quits, the wages of the employee shall continue as a penalty
from the due date thereof at the same rate until paid or until an
action therefor is commenced; but the wages shall not continue
for more than 30 days.” (Id., § 203, subd. (a).) Section 203
3
Other adjacent statutes supply more specific rules for
employees in particular industries. (See Lab. Code, §§ 201.3
[temporary employees], 201.5 [motion picture employees], 201.6
[photo shoot employees], 201.7 [oil drilling employees], 201.8
[pro baseball venue employees], 201.9 [concert event
employees].)
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NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
penalties for willful delays in the payment of end-of-employment
wages are commonly referred to as “waiting time penalties.”
(Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73,
82.)
Naranjo’s class claim alleges that: (1) under section 226.7
and the applicable wage order, Spectrum was obligated to pay
premium pay for noncompliant meal periods (i.e., meal periods
during which employees were required to work without a valid
on-duty meal agreement in place); (2) Spectrum was obligated
to make these payments in a timely manner upon discharge or
quitting (see Lab. Code, §§ 201–202), but did not do so; and
(3) this dereliction was willful, warranting imposition of waiting
time penalties under Labor Code section 203. As noted, the trial
court agreed with Naranjo that Spectrum owed premium pay
and that untimely payments could trigger penalties but found
none owed here because Spectrum’s delay was not willful. The
Court of Appeal affirmed, but on very different grounds; it
concluded that even a willful failure to pay amounts owed under
section 226.7 can never trigger section 203 waiting time
penalties. (Naranjo II, supra, 40 Cal.App.5th at p. 474.)
The Court of Appeal began by observing that Labor Code
section 203 imposes a penalty for the willful failure to timely pay
“any wages.” (Lab. Code, § 203, subd. (a), italics added.) The
Labor Code defines the term “wages” to include “all amounts for
labor performed by employees of every description, whether the
amount is fixed or ascertained by the standard of time, task,
piece, commission basis, or other method of calculation.” (Lab.
Code, § 200, subd. (a).) The Court of Appeal reasoned that
payment under section 226.7 is unambiguously beyond the
reach of the wages definition because it is a legal remedy, not
payment for labor: The premium pay is due employees not for
8
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
work they performed but as a sanction on account of “the
employer’s recalcitrance” regarding meal breaks. (Naranjo II,
supra, 40 Cal.App.5th at p. 473.) We now hold this was error.
The Court of Appeal was correct that premium pay is a
statutory remedy for a legal violation. But the court’s further
conclusion that premium pay cannot constitute wages rests on a
false dichotomy: that a payment must be either a legal remedy
or wages. For these purposes, section 226.7 is both. That is
because under the relevant statute and wage order, an employee
becomes entitled to premium pay for missed or noncompliant
meal and rest breaks precisely because she was required to work
when she should have been relieved of duty: required to work
too long into a shift without a meal break; required in whole or
part to work through a break; or, as was the case here, required
to remain on duty without an appropriate agreement in place
authorizing on-duty meal breaks.4 (IWC wage order No. 4-2001,
§ 11(A), (B); see § 226.7, subd. (c); Donohue v. AMN Services,
LLC (2021) 11 Cal.5th 58, 62.)
The premium pay due for the deprivation is certainly
designed to compensate employees for hardships the Legislature
concluded employees should not be made to suffer. But when
those hardships include rendering work, the pay owed can
equally be viewed as wages. As noted, the Labor Code defines
4
By law, remaining on duty for the benefit of one’s employer
is compensable work. (See IWC wage order No. 4-2001, § 11(A)
[if an employee is required to remain on duty, “the meal period
shall be considered an ‘on duty’ meal period and counted as time
worked”]; Augustus v. ABM Security Services, Inc. (2016) 2
Cal.5th 257, 265–266 [if an employer “require[s] employees to
remain on duty during breaks,” that time “plainly require[s]
payment of wages”].)
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NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
the term broadly, to encompass “amounts for labor performed
. . . of every description.” (Lab. Code, § 200, subd. (a).) 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. Take overtime premium pay, for example: An
employer who requires an employee to work more hours than
the Legislature has determined is generally desirable must pay
extra for the privilege, both to compensate the employee for the
hardship incident to such work and to deter the employer from
routinely imposing such obligations. (See Murphy, supra, 40
Cal.4th at p. 1109 [“while [overtime pay’s] central purpose is to
compensate employees for their time, it also serves a secondary
function of shaping employer conduct”]; id. at p. 1110 [missed-
break premium pay is intended “to compensate employees,
while also acting as an incentive for employers to comply with
labor standards”].) And precisely because it compensates the
employee for work, overtime premium pay has always also been
understood as wages for purposes of Labor Code section 200 and
related statutes. (Murphy, at p. 1109 [“overtime pay is
considered a wage”]; see, e.g., Ghory v. Al-Lahham (1989) 209
Cal.App.3d 1487, 1492 [applying Lab. Code, § 203 to
nonpayment of overtime wages]; Takacs v. A.G. Edwards and
Sons, Inc. (S.D.Cal. 2006) 444 F.Supp.2d 1100, 1125 [plain
language of Lab. Code, § 200 reaches overtime wages].)
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NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
True, the hour of premium pay here, unlike overtime, is
payable as a lump sum for a missed break of any duration; it is
not paid pro rata. But premium pay is not unique in this
respect; the law treats as wages many types of compensation for
labor where the amount of money in question lacks a perfect
one-to-one correlation with the amount of time worked. Take,
for example, reporting-time pay: An employee who reports for
duty but is given less than half a day’s work is generally
guaranteed no less than two hours or a half-day’s pay as a
reporting time premium, without regard to the precise number
of hours worked. (IWC wage order No. 4-2001, § 5(A); see Shine
v. Williams-Sonoma, Inc. (2018) 23 Cal.App.5th 1070, 1077
[“reporting-time pay is a form of wages”].) Or split-shift pay: An
employee who works a split shift is entitled to an additional hour
of pay over and above the minimum wage for that day, again
without a pro rata relation to the number of hours worked. (IWC
wage order No. 4-2001, § 4(C); see Caliber Bodyworks, Inc. v.
Superior Court (2005) 134 Cal.App.4th 365, 386 [split-shift
premium is wages].) The manner in which the pay accrues does
not in itself determine whether it is designed to compensate for
labor.
Section 226.7 missed-break premium pay does differ from
these examples in that it aims to remedy a legal violation. The
law permits an employer to allow an employee to work overtime
hours, or to work a split shift, provided the employee is paid
extra for it, but the law generally does not permit an employer
to deprive an employee of a meal or rest break. But why should
this difference matter? That missed-break premium pay serves
as a remedy for a legal violation does not change the fact that
the premium pay also compensates for labor performed under
conditions of hardship. One need not exclude the other. The
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NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
Legislature is free, if it so chooses, to establish a remedy for the
violation that takes the form of a requirement to pay additional
compensation for services provided under such disfavored
conditions. That is what it has done in section 226.7. (See Kim
v. Reins International California, Inc., supra, 9 Cal.5th at p. 84
[“additional hour of wages” is the prescribed “remedy for failing
to provide meal and rest breaks”].)
These are not new observations. We made essentially the
same points in Murphy, supra, 40 Cal.4th 1094, where we
considered the applicable statute of limitations for claims that
an employee had been denied meal or rest breaks. Because Code
of Civil Procedure section 340 prescribes one period for penalty
claims, and Code of Civil Procedure section 338 provides another
for statutory liabilities that are not penalties, we needed to
determine whether the remedy for a missed break is an ordinary
statutory liability or a penalty. We concluded the Legislature
intended for the section 226.7 payment to constitute wage
compensation and not a penalty. (Murphy, at pp. 1099, 1103.)
We explained there, as we have here, that the “ ‘additional
hour of pay’ ” provided by section 226.7 can be understood as “a
wage to compensate employees for the work” they performed
during a meal or rest period (Murphy, supra, 40 Cal.4th at
p. 1104), much as overtime pay is considered wages to
compensate employees for work performed in excess of the
number of hours the Legislature deems desirable (id. at
p. 1109). Indeed, we noted that the IWC commissioners who
first decided to adopt the “ ‘hour of pay’ remedy” for meal and
rest break violations had made this very same comparison.
(Ibid.; see id. at pp. 1109–1110.) We also noted that during the
drafting process, the Legislature “eliminated the requirement
that an employee file an enforcement action, instead creating an
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NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
affirmative obligation on the employer to pay the employee one
hour of pay,” an obligation that makes the employee entitled to
missed-break premium pay “immediately upon being forced to
miss a rest or meal period.” (Id. at p. 1108.) “In that way,” we
said, “a payment owed pursuant to section 226.7 is akin to an
employee’s immediate entitlement to payment of wages or for
overtime.” (Ibid.) We observed that “the amount of the payment
is linked to an employee’s rate of compensation, rather than a
prescribed fixed amount,” a method of calculation that “further
supports the position that section 226.7 payments are a form of
wages.” (Id. at p. 1114.) Finally, we explained that, as a
functional matter, neither any ancillary impact in shaping
employer behavior, nor the fact premium pay is not calculated
based on the amount of rest lost, precludes a determination that
“the ‘additional hour of pay’ ” provided for by section 226.7 “is a
premium wage intended to compensate employees, not a
penalty.” (Murphy, at p. 1114.)
Notwithstanding Murphy’s unambiguous pronouncement
that section 226.7 premium pay is indeed a wage designed to
compensate employees for work, Spectrum argues that Murphy
somehow hurts the case for treating premium pay as wages
rather than helping it. In support of this rather curious
argument, Spectrum fixates on language describing missed-
break premium pay, like overtime pay or split shift pay, as
“compensat[ing] the employee for events other than time spent
working” (Murphy, supra, 40 Cal.4th at p. 1113, italics added;
accord, Ferra v. Loews Hollywood Hotel, LLC, supra, 11 Cal.5th
at p. 876), which Spectrum understands to mean that premium
pay is not actually compensation for work. Of course, Spectrum
reads the language out of context and so misunderstands it. The
passage responded to an argument that premium pay must be a
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NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
penalty because “it is imposed without reference to actual
damage, since an hour of pay is owed whether the employee has
missed an unpaid 30-minute meal period, two paid 10-minute
rest periods, or some combination thereof.” (Murphy, at
p. 1112.) The court explained that while it is true the amount
of premium pay is not calibrated to compensate the employee
according to the specific amount of time spent working, the same
is true of other forms of wage compensation, such as split-shift
pay, that also compensate for particular hardships
accompanying the work performed. (Id. at p. 1113.) The
amount of missed-break premium pay owed may be based on
considerations beyond simply the amount of time spent working,
but that does not alter the conclusion that it constitutes
compensation for work, like other forms of wages. (Id. at
p. 1114.)
Spectrum also seeks to limit Murphy on the ground that it
was a case about the statute of limitations, not any provision of
the Labor Code governing the payment or reporting of wages.
On this point, at least, Spectrum is correct. But nothing in
Murphy’s conclusion that premium pay constitutes wages was
specific to the statute of limitations context; the conclusion
instead rested on consideration of the text of Labor Code
sections 200 and 226.7, as well as the legislative history
underlying section 226.7. Those are the very same provisions at
issue here, and they are equally susceptible to the interpretation
that Murphy gave them, for the reasons Murphy gave, when we
consider how those provisions interact with the Labor Code’s
prompt wage payment requirements.
The interpretation makes sense in this statutory context.
As explained above, the Legislature requires employers to pay
missed-break premium pay on an ongoing, running basis
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Opinion of the Court by Kruger, J.
(Murphy, supra, 40 Cal.4th at p. 1108), just like other forms of
wages (see Lab. Code, § 204). It stands to reason that, just like
other forms of wages, any unpaid premium pay must be paid
promptly once an employee leaves the job. And when an
employer willfully fails to comply with this obligation, making
penalties available serves the purpose underlying Labor Code
section 203: to incentivize employers to pay end-of-employment
compensation when it is due, rather than forcing employees to
seek administrative relief or to go to court. (McLean v. State of
California (2016) 1 Cal.5th 615, 626; Pineda v. Bank of America,
N.A. (2010) 50 Cal.4th 1389, 1400; Smith v. Superior Court
(2006) 39 Cal.4th 77, 82.) By incentivizing employers to pay
missed-break premium pay immediately, section 203 also
enhances the effectiveness of the section 226.7 premium itself,
which is designed in part to discourage employers from
depriving employees of breaks in the first place. (Murphy, at
pp. 1110–1111.)
B.
Spectrum offers various additional arguments for why
missed-break premium pay should not be subject to the Labor
Code’s timing requirements for the payment of wages at the end
of employment. The arguments are unpersuasive.
Spectrum’s primary argument is that treating premium
pay as wages is inconsistent with our post-Murphy decision in
Kirby v. Immoos Fire Protection, Inc. (2012) 53 Cal.4th 1244(Kirby). Kirby considered whether an action under section 226.7
was “an ‘action brought for the nonpayment of wages’ ” for
purposes of fee-shifting under Labor Code section 218.5. (Kirby,
at p. 1251.) We explained that it was not: “Section 226.7 is not
aimed at protecting or providing employees’ wages. Instead, the
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Opinion of the Court by Kruger, J.
statute is primarily concerned with ensuring the health and
welfare of employees by requiring that employers provide meal
and rest periods as mandated by the IWC.” (Kirby, at p. 1255.)
Consequently, we concluded, “a section 226.7 action is brought
for the nonprovision of meal and rest periods, not for the
‘nonpayment of wages.’ ” (Kirby, at p. 1255.)
Spectrum reads Kirby as holding that missed-break
premium pay is not a wage for purposes of Labor Code section
218.5 and thus, more generally, is not a wage for all or most
Labor Code purposes — notwithstanding the contrary analysis
in Murphy, supra, 40 Cal.4th 1094. Variations on this theme
appear in the opinions of a number of courts that have likewise
read Kirby to mean that missed-break premium pay is not
generally a wage. The Court of Appeal in this case summarized
the chain of thought: “ ‘[U]nder Kirby, the legal violation
underlying a section 226.7 claim is the nonprovision of meal and
rest periods and the corresponding failure to “ensur[e] the
health and welfare of employees,” not the nonpayment of
wages.’ ” (Naranjo II, supra, 40 Cal.App.5th at pp. 469–470,
quoting Jones v. Spherion Staffing LLC (C.D.Cal., Aug. 7, 2012,
No. LA CV11-06462 JAK (JCx)) 2012 U.S.Dist. LEXIS 112396,
at p. *21.) If a section 226.7 claim is an action for the
deprivation of breaks, not the recovery of wages, then the
payment promised by section 226.7 must not be a wage — but
instead a statutory remedy “ ‘calculated as a wage.’ ”
(Naranjo II, at p. 470, quoting Jones, at p. *21; see id. at
pp. 469–470 [discussing cases].) These courts have
acknowledged that Murphy’s reasoning suggests otherwise but
determined Murphy is not authoritative on the issue because it
decided only whether premium pay was “more akin to a penalty
16
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
or a wage” for the narrow purpose of selecting an applicable
statute of limitations. (Jones, at p. *25.)
These arguments misread Kirby. Kirby did not reject or
limit Murphy’s characterization of section 226.7 premium pay
as compensation for labor. On the contrary, Kirby recited
Murphy’s characterization without any apparent disapproval.
(Kirby, supra, 53 Cal.4th at p. 1257.) Kirby then went on to
distinguish the inquiry in Murphy from the inquiry called for
under Labor Code section 218.5. Kirby explained that our prior
conclusion that premium pay is a wage did not necessarily mean
that an action under section 226.7 is an action for nonpayment
of wages under section 218.5. The characterization of the nature
of an action under section 218.5 turns instead on the nature of
the underlying legal violation the action seeks to remedy, not
the form of relief that might be available to cure that violation.
(Kirby, at pp. 1256–1257.) And “[t]o say that a section 226.7
remedy is a wage,” as we did in Murphy, “is not to say that the
legal violation triggering the remedy is nonpayment of wages,”
as opposed to the deprivation of meal or rest breaks. (Kirby, at
p. 1257.)5
5
To see Kirby’s point, recall that premium pay is but one
available remedy for a violation of section 226.7. Then consider
a situation in which an employer routinely denies meal breaks
but (unlike Spectrum) pays its employees the premium pay due
under section 226.7. An aggrieved employee might seek an
injunction to stop the underlying unlawful practice. No wages
are at stake; the action is simply one to ensure that, going
forward, employees receive the breaks to which they are
lawfully entitled. Such a claim certainly would not be an “action
for the nonpayment of wages.” The holding of Kirby reflects a
conclusion that a case in which premium pay is withheld and
17
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Opinion of the Court by Kruger, J.
In so distinguishing Murphy, Kirby did not repudiate or
narrow that case’s characterization of section 226.7 pay as a
wage. It merely held that the nature of the remedy does not
dictate the proper characterization of the legal violation
triggering the remedy under section 226.7. The reverse is
equally true: Even if the underlying violation is a failure to
provide healthy working conditions by requiring excess work in
place of rest, not failure to pay for labor (as Kirby says), the
Legislature is still free to adopt as a remedy payment of
additional wages for that excess labor (as Murphy said before
it).
As Spectrum notes, Kirby did also distinguish actions
under section 226.7 from actions under Labor Code sections 201
and 202. (Kirby, supra, 53 Cal.4th at pp. 1255–1256.) Unlike
an employee suing under section 226.7, an employee suing for
failure to pay wages by the deadline established in the latter
statutes is suing for nonpayment of wages for purposes of an
attorney fee award under Labor Code section 218.5. (Kirby, at
p. 1256.) But this case does not concern attorney fees under
Labor Code section 218.5, nor does it otherwise turn on the
nature of Naranjo’s action, so that distinction is not meaningful
here.
Spectrum disagrees on this point, arguing that the nature
of a section 226.7 missed-break action is critical to the operation
of Labor Code section 203’s waiting-time penalty provision, just
sought as a remedy should be treated no differently: “whether
or not [premium pay] has been paid is irrelevant to whether
section 226.7 was violated . . . and an employer’s provision of an
additional hour of pay does not excuse a section 226.7 violation.”
(Kirby, supra, 53 Cal.4th at p. 1256.)
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NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
as it is critical to the operation of the attorney fee statute at
issue in Kirby. Spectrum borrows this argument from Ling v.
P.F. Chang’s China Bistro, Inc. (2016) 245 Cal.App.4th 1242(Ling), which in turn focused on the language of Labor Code
section 203, subdivision (b). That provision states: “Suit may
be filed for these penalties at any time before the expiration of
the statute of limitations on an action for the wages from which
the penalties arise.” (Lab. Code, § 203, subd. (b).) The Ling
court reasoned: that this provision makes any claim for
penalties under section 203 derivative of an underlying action
for wages; that under Kirby, a claim for section 226.7 premium
pay is not an action for wages; and thus that no section 203
waiting time penalties can lie based on failure to promptly pay
the extra money owed for missed breaks under section 226.7.
(Ling, at p. 1261.)
The argument reads more into Labor Code section 203,
subdivision (b), than the provision will bear. As already
explained, the conditions for substantive entitlement to waiting
time penalties are defined in subdivision (a) of Labor Code
section 203, which speaks simply of the willful nonpayment of
“any wages of an employee who is discharged or who quits.”
(Lab. Code, § 203, subd. (a).) Subdivision (b) was added in 1939
to extend the statute of limitations for recovering the waiting
time penalties provided for in subdivision (a) to equal that of the
limitations period for recovering the underlying unpaid wages.
(Stats. 1939, ch. 1096, § 1, p. 3026; Pineda v. Bank of America,
N.A., supra, 50 Cal.4th at p. 1400.) In describing the latter
limitations period, subdivision (b) of section 203 does use the
phrase “action for the wages.” But whereas Labor Code section
218.5 focuses on the nature of the legal violation challenged (an
“action brought for the nonpayment of wages,” italics added) to
19
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
limit the scope of its application, the wording of Labor Code
section 203, subdivision (b), evinces no similar concern with
categorizing suits according to the nature of the alleged legal
violation in order to limit its scope. The rest of the statute
illustrates why this would be an unlikely reading: In contrast
to subdivision (a), subdivision (b)’s only function is to extend the
limitations period of a suit to recover waiting time penalties to
match the timing of any suit seeking the recovery of the
underlying unpaid wages. Nothing about that function suggests
the alleged reasons why an employer is obliged to pay the wages
in the first place should matter. We decline to interpret a
limitations provision enacted to extend the reach of a penalty
designed to deter nonpayment (Pineda, at p. 1400) to bar relief
entirely in a class of cases concerning the willful nonpayment of
wages.
Spectrum offers various other textual arguments. It
observes, for example, that the Legislature has amended Labor
Code section 203 on several occasions to specify additional
statutes imposing duties to pay, the violation of which may give
rise to penalties. (See, e.g., Stats. 2008, ch. 169, § 2, pp. 555–
556; Stats. 2014, ch. 210, § 1; Stats. 2019, ch. 253, § 3; Stats.
2019, ch. 700, § 2.5.) The cited amendments added references to
Labor Code sections 201.3, 201.6, 201.8, and 201.9, so that the
first sentence of section 203, subdivision (a), now reads: “If an
employer willfully fails to pay, without abatement or reduction,
in accordance with Sections 201, 201.3, 201.5, 201.6, 201.8,
201.9, 202, and 205.5, any wages of an employee who is
discharged or who quits, the wages of the employee shall
continue as a penalty from the due date thereof at the same rate
until paid or until an action therefor is commenced; but the
wages shall not continue for more than 30 days.” The
20
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
Legislature has not, however, amended the statute to add
reference to section 226.7. From this, Spectrum infers that the
Legislature did not intend Labor Code section 203 to apply to
nonpayment of section 226.7 premium pay.
The inference is unsound. The statutes to which the
Legislature added references share a common feature: They are
all statutes that set particular deadlines for paying employees
in certain industries or occupations. (See, e.g., Lab. Code,
§§ 201.5 [deadline for motion picture employees], 201.6
[deadline for photo shoot employees].) The other statutes listed
in Labor Code section 203 likewise set out the deadlines for
payment in certain situations, including Labor Code section 201
(general deadline for payment on discharge) and Labor Code
section 202 (general deadline for payment on resignation).
Labor Code section 203 says in essence that if an employer fails
to meet the deadlines for payment established in section 201,
section 202, or any of the other statutes establishing specific
deadlines, the employer may be liable for penalties. None of the
listed statutes addresses the question of what amounts,
precisely, the employer must pay by the specified deadlines.
That question is instead answered by Labor Code section 203
itself, which uses the unelaborated phrase “any wages”; by
Labor Code section 200, which defines what “wages” means; and
by a host of other statutes, wage order provisions, collective
bargaining agreements, and individual contracts that spell out
what an employer must pay its employees for their work. That
Labor Code section 203 does not cite section 226.7 by name is no
more remarkable than the fact that the statute does not list any
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NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
of these many other sources defining what an employer must
pay to its employees upon their departure from employment.6
Next, Spectrum emphasizes that the text of section 226.7
uses the term “pay” rather than “wages”: “the employer shall
pay the employee one additional hour of pay at the employee’s
regular rate of compensation.” (§ 226.7, subd. (c), italics added.)
But the difference in wording is not significant. Directly
addressing this point in Murphy, we explained that “the
Legislature has frequently used the words ‘pay’ or
‘compensation’ in the Labor Code as synonyms for ‘wages.’ ”
(Murphy, supra, 40 Cal.4th at p. 1104, fn. 6 [listing examples];
see Ferra v. Loews Hollywood Hotel, LLC, supra, 11 Cal.5th at
pp. 873, 874 [“pay” and “compensation” used “interchangeably”
in § 226.7].)
As a final textual argument, Spectrum observes that
Labor Code section 201 requires immediate payment of any
“wages earned and unpaid at the time of discharge.” (Lab. Code,
§ 201, subd. (a), italics added.) Premium pay, Spectrum reasons,
is not truly “earned” because it is not due on account of an
employee’s labor, but for other reasons. Further, Spectrum
argues, such pay is not earned as of “the time of discharge,” but
6
The Court of Appeal made a different point about the
Legislature’s failure to amend the Labor Code to expressly
account for section 226.7: It observed that the Legislature had
not amended Labor Code section 200 to include missed-break
premium pay in the definition of wages in the wake of Murphy.
(Naranjo II, supra, 40 Cal.App.5th at p. 473.) But no
amendment was needed; as Murphy itself explained, missed-
break premium pay already fit comfortably within the existing
definition of wages. (Murphy, supra, 40 Cal.4th at pp. 1103–
1104.)
22
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
is only due if and when a court determines meal and rest break
violations have occurred. Spectrum is wrong on both points.
For starters, the common meaning of the term “earned” is
not limited to amounts accrued on the basis of particular
increments of time worked; an amount can be “earned”
whenever it is “acquire[d] or deserve[d] as a result of effort or
action.” (American Heritage Dict. (5th ed. 2016) p. 561.) The
employee who remains on duty without a timely break has
“earned” premium pay within any ordinary sense of the word.
And any argument that the Legislature intended the use of
“earned” in a more specialized or restrictive sense runs aground
upon examination of the statutory scheme. Notably, the closely
related Labor Code section 202, governing the timing of
payment upon an employee’s resignation, does not use the word
“earned.” (See Lab. Code, § 202, subd. (a) [establishing timing
for payment of “wages”].) No reason appears why the Labor
Code would impose different requirements for what must be
paid depending on whether an employee has quit or been fired,
and Spectrum offers none. This is because the difference in
wording does not, in fact, create a difference in meaning, and so
premium wages owed for working without a break must be
timely paid upon discharge, just as they must be paid upon
resignation.
As for Spectrum’s second point, we have already explained
why Spectrum is wrong to presume that premium pay is not
owed at the time of discharge, but only once a court compels its
payment. During the drafting process, the Legislature
eliminated the need for employees to file enforcement actions to
obtain missed-break premium pay. Instead, under the law as
enacted, “an employee is entitled to the additional hour of pay
immediately upon being forced to miss a rest or meal period.”
23
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
(Murphy, supra, 40 Cal.4th at p. 1108, italics added.) In other
words, the duty to pay attaches before the time of discharge and
does not depend on a prior court determination.
Spectrum next argues that authorizing Labor Code section
203 waiting time penalties for willful failure to make prompt
payment would contravene a supposed legislative intent to
make the premium pay in section 226.7 a precise and exclusive
remedy for missed breaks. Spectrum observes that the hour of
pay remedy was the product of a lengthy drafting process in
which the specified remedy for denial of meal or rest breaks
went through multiple revisions before the Legislature settled
on the eventual compensation (see Murphy, supra, 40 Cal.4th at
pp. 1106–1108), and that Murphy characterized this remedy as
the “sole compensation” for denial of a meal or rest period (id. at
p. 1107; see id. at p. 1104 [“only compensation”]). According to
Spectrum, to layer waiting time penalties on top would subvert
this carefully calibrated remedial choice.
We disagree. Spectrum’s argument assumes that waiting
time penalties aim at the same conduct as premium pay. They
do not. One is a remedy for the deprivation of required rest or
meal breaks; the other is a remedy for the failure to make
prompt payment of unpaid wages when the employee leaves the
job. One violation does not necessarily imply the other: An
employer might deprive an employee of a break and then
promptly and timely pay that employee the premium pay to
which section 226.7 entitled the employee. (See, e.g., Donohue
v. AMN Services, LLC, supra, 11 Cal.5th at pp. 62–63
[describing employer that did so]; Ferra v. Loews Hollywood
Hotel, LLC, supra, 11 Cal.5th at p. 864 [same].) In that
instance, there is only one statutory violation, and the premium
pay compensates for that violation. When, by contrast, an
24
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
employer both denies the employee a meal break and fails to
provide the employee the premium wages due in a timely
fashion upon the employee’s termination, the failure to make
timely payment is a second, distinct violation, for which there
may be additional remedies available. It in no way upsets the
legislative scheme to conclude that when there is a second,
distinct violation of Labor Code requirements, there will be a
second, distinct remedy for that further breach. 7
Finally, Spectrum urges that the weight of lower court
authority indirectly supports its view: Because the Legislature
has taken no action in response to the existing case law,
Spectrum argues, the Legislature has effectively acquiesced in
its conclusions. Legislative acquiescence arguments of this type
rarely do much to persuade; even when a clear consensus has
emerged in the appellate case law, we have noted that
legislative inaction supplies only a “ ‘ “ ‘ “weak reed upon which
to lean” ’. . . .” ’ ” in inferring legislative intent. (Mendoza v.
Fonseca McElroy Grinding Co., Inc. (2021) 11 Cal.5th 1118,
1139.) Here, there is not even a clear consensus. Only three
7
Drawing on an example posed in Jones v. Spherion
Staffing LLC, supra, 2012 U.S.Dist. LEXIS 112396, at page *9,
Spectrum describes a scenario in which denial of a single meal
period could lead to liability for premium pay under section
226.7, plus waiting time penalties under Labor Code section
203, plus actual damages or statutory penalties under Labor
Code section 226, plus a civil penalty under the Labor Code’s
Private Attorneys General Act of 2004 (Lab. Code, § 2698 et
seq.). But in this hypothetical scenario, an employer could chop
off liability at the root by simply paying an hour of premium pay
in the next pay cycle and recording such pay in the wage
statement. All the additional remedies arise only if an employer
doubles down by not doing so, and then by “willfully” (Lab. Code,
§ 203, subd. (a)) refusing to pay even after termination.
25
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
Courts of Appeal have examined the issue we now consider. All
three cases were decided in the last five years; all contain a page
or less of analysis buried in lengthy opinions focused on other
questions; and two of those three (including the Court of Appeal
decision in this very case) are not even final but are under
review in this court. (See Betancourt v. OS Restaurant Services,
LLC (2020) 49 Cal.App.5th 240, review granted Aug. 19, 2020,
S262866; see also Ling, supra, 245 Cal.App.4th 1242.)
Numerous federal district court decisions have also considered
the question but, as Spectrum acknowledges, these courts are
deeply split over whether unpaid missed-break premium pay
may support a Labor Code section 203 claim, with many
decisions on both sides of the issue. (Stewart v. San Luis
Ambulance, Inc. (9th Cir. 2017) 878 F.3d 883, 887–888 [noting
federal split]; compare, e.g., In re Autozone, Inc. (N.D.Cal., Aug.
10, 2016, No. 3:10-md-02159-CRB) 2016 U.S.Dist. LEXIS
105746, *19–*24 [recovery available under Lab. Code, § 203]
with Jones v. Spherion Staffing LLC, supra, 2012 U.S.Dist.
LEXIS 112396, *21–*26 [no recovery under Lab. Code, § 203].)
That the Legislature has failed to act in the face of these
conflicting authorities tells us exactly nothing about its views.
In short, missed-break premium pay constitutes wages for
purposes of Labor Code section 203, and so waiting time
penalties are available under that statute if the premium pay is
not timely paid. We disapprove Ling v. P.F. Chang’s China
Bistro, Inc., supra, 245 Cal.App.4th 1242, to the extent its
discussion of Labor Code sections 203 and 226.7 is inconsistent
with this opinion.
26
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
IV.
We turn now to the question of wage statements. The
wage statement statute (Lab. Code, § 226) began as a simple
requirement that employers report deductions from pay (see
Stats. 1943, ch. 1027, § 1, p. 2965) but has since expanded to
require a detailed list of information, including hours worked,
wages earned, hourly rates, and employee- and employer-
identifying information (Lab. Code, § 226, subd. (a); Ward v.
United Airlines, Inc. (2020) 9 Cal.5th 732, 744–745 & fn. 3).8 As
particularly relevant here, Labor Code section 226 requires that
an employer report both “gross wages earned” and “net wages
earned.” (Lab. Code, § 226, subd. (a)(1), (5).) To enforce this
provision, the Legislature has provided that employees who are
8
Subdivision (a) requires employers to provide employees
at regular intervals “an accurate itemized statement in writing
showing (1) gross wages earned, (2) total hours worked by the
employee, except as provided in subdivision (j), (3) the number
of piece-rate units earned and any applicable piece rate if the
employee is paid on a piece-rate basis, (4) all deductions,
provided that all deductions made on written orders of the
employee may be aggregated and shown as one item, (5) net
wages earned, (6) the inclusive dates of the period for which the
employee is paid, (7) the name of the employee and only the last
four digits of his or her social security number or an employee
identification number other than a social security number, (8)
the name and address of the legal entity that is the employer
and, if the employer is a farm labor contractor, as defined in
subdivision (b) of Section 1682, the name and address of the
legal entity that secured the services of the employer, and (9) all
applicable hourly rates in effect during the pay period and the
corresponding number of hours worked at each hourly rate by
the employee and, beginning July 1, 2013, if the employer is a
temporary services employer as defined in Section 201.3, the
rate of pay and the total hours worked for each temporary
services assignment.” (Lab. Code, § 226, subd. (a).)
27
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
injured by a “knowing and intentional failure by an employer to
comply with” this requirement may recover “the greater of all
actual damages or fifty dollars ($50) for the initial pay period in
which a violation occurs and one hundred dollars ($100) per
employee for each violation in a subsequent pay period, not to
exceed an aggregate penalty of four thousand dollars ($4,000)”
as well as “costs and reasonable attorney’s fees.” (Id.,
subd. (e)(1).)
We must consider whether the requirement that “wages”
be reported extends to payments under section 226.7 for missed
breaks. We have already explained that premium pay is fairly
understood as falling within the Labor Code’s general definition
of wages. Spectrum makes various additional arguments for
why premium pay should not be treated as reportable wages
under Labor Code section 226, but those arguments fail to
persuade.
As an initial matter, Spectrum observes that Labor Code
section 226 lists many categories of information that must be
reported but contains no separate requirement that missed-
break premium pay be reported. This is true, but it is not
meaningful; the statute likewise contains no provision expressly
calling out any other specific sorts of pay, such as overtime pay
under Labor Code section 510, that compensate employees for
their work and therefore must be reported. (See, e.g., General
Atomics v. Superior Court (2021) 64 Cal.App.5th 987, 991 [wage
statement that shows overtime hours worked and overtime
premiums complies with Lab. Code, § 226].)
Spectrum also emphasizes that Labor Code section 226
requires the reporting of “wages earned” (Lab. Code, § 226, subd.
(a), italics added) and argues that even if missed-break premium
28
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
pay is a wage, it is not “earned” because it is not pay for time
spent working. We have discussed and rejected this same
argument in connection with Labor Code section 203, and it has
no greater force here. (See ante, pp. 22–23.)
It is true, as Spectrum says, that the requirement to report
“wages earned” predates the enactment of section 226.7 and the
creation of a premium pay remedy. But nothing in the text of
Labor Code section 226 suggests that the reporting requirement
is limited to categories of compensation that were known at the
time the reporting requirement was enacted. And Naranjo’s
broader understanding of the scope of section 226’s obligation to
report wages earned fits better with the “core purpose” behind
requiring an employer to “ ‘ “document[] the basis of the
employee compensation payments” ’ ” — to enable employees to
verify they have been compensated properly, without
shortchanging or improper deduction. (Ward v. United Airlines,
Inc., supra, 9 Cal.5th at p. 752; see id. at pp. 752–753, 755.)9
This purpose would not be served by reading into the choice of
the word “earned” a distinction between different kinds of wages
presently owed, depending on how the employee became entitled
to them — whether because of missed breaks or otherwise.
9
The requirement that both “gross wages earned” and “net
wages earned” be listed was added to section 226 in 1976.
(Stats. 1976, ch. 832, § 1, pp. 1899–1900.) The Assembly
Committee on Labor Relations described the purpose of the
added detail as “insur[ing] that employees are adequately
informed of compensation received and are not shortchanged by
their employers.” (Assem. Com. on Lab. Rel., analysis of Assem.
Bill No. 3731 (1975–1976 Reg. Sess.) as amended May 12, 1976,
p. 1; accord, Assem. 3d reading analysis of Assem. Bill No. 3731
(1975–1976 Reg. Sess.) as amended May 21, 1976, p. 1.)
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NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
Spectrum next argues it cannot be liable for violating
Labor Code section 226 based on failure to report missed-break
premium pay on employee wage statements because these
amounts were not actually paid, but were instead (illegally)
withheld, and nothing in the statute requires that an employer
report amounts not paid during a pay period.
This argument ignores the statutory text. Labor Code
section 226 does not require employers to report only those
amounts it deigns to pay; rather, it requires an employer to
accompany “each payment of wages” with “an accurate itemized
statement” specifying, among other details, the “gross wages
earned” and “net wages earned” — in other words, all amounts
earned and now owing, not just those amounts actually paid.
(Lab. Code, § 226, subd. (a).) A statement that conceals
amounts earned, on the ground that they also were not paid, is
not an accurate statement, and it does not comply with the
statute.10
Spectrum looks to case law to support its unlikely reading
of Labor Code section 226 but finds no help there. Though the
Court of Appeal in this case agreed with Spectrum —
incorrectly — that missed-break premium pay cannot constitute
wages, the court still recognized that an itemized wage
statement that “omits gross and net ‘wages earned’ ” would run
afoul of Labor Code section 226’s requirements. (Naranjo II,
supra, 40 Cal.App.5th at p. 474.) The same is true of Maldonado
10
Permitting employers to conceal underpayments —
including owed but unpaid missed-break premium pay — would
also impede employees’ ability to verify they have been paid
properly and, as amicus curiae the Division of Labor Standards
Enforcement observes, would undermine administrative
enforcement of wage and hour protections.
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NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
v. Epsilon Plastics, Inc. (2018) 22 Cal.App.5th 1308(Maldonado), which Spectrum reads as establishing that only
paid amounts need be reported. In Maldonado, the Court of
Appeal addressed a claim that the employer had misreported
overtime hours as regular hours and failed to report the
corresponding overtime premiums as wages. Contrary to
Spectrum’s view, the court in Maldonado, too, recognized that
“[w]age statements should include the hours worked at each
rate and the wages earned” — not just wages actually paid. (Id.
at p. 1336.) The court denied recovery under Labor Code section
226 not because employers are permitted to omit earned but
unpaid wages but because the plaintiff employees could not
show they were injured, under section 226’s specific definition of
injury, by the particular wage statement inaccuracies there at
issue. (Maldonado, at pp. 1334–1337; see Lab. Code, § 226,
subd. (e).)
Leaving aside whether Maldonado, supra, 22 Cal.App.5th
1308 correctly determined that no injury could be shown on the
facts before it, no similar shortcoming is present here. The trial
court found that Spectrum’s employees had “clearly suffered an
injury since they could not determine from the wage statements
the correct wages to which they were entitled.” A brief review
of the statute shows why that conclusion was correct: Labor
Code section 226, subdivision (e)(2) deems injury has occurred
whenever the employee cannot easily determine certain
required information, including rates of pay and all “hours
worked” (id., subd. (a)(9)) at each rate, that would allow the
employee to ascertain whether the payment is correct (see id.,subd. (e)(2)(B)(i)). Section 226.7 requires an employer to pay
“one additional hour of pay” for each day in which a lawful break
is not provided. (§ 226.7, subd. (c).) In that situation, both that
31
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
additional credited hour of work and the corresponding
premium pay owed must be reported on the wage statement.
Failure to do so deprives the employee of information needed to
evaluate whether the payment is correct, and in so doing results
in injury under the terms of the statute. (See Lab. Code, § 226,
subd. (e)(2)(B).)
The other case Spectrum relies on, Soto v. Motel 6
Operating, L.P. (2016) 4 Cal.App.5th 385, is similarly unhelpful
to its argument. Soto involved an employee’s claim that wage
statements should report vacation pay. Under the Labor Code,
vacation pay is considered a deferred wage that accrues and
vests as employment continues but does not actually become a
quantifiable wage until the end of employment, when unused
vacation time converts into an owed wage. (Id. at pp. 391–392;
see Lab. Code, § 227.3.) Soto rejected the claim that vacation
pay must be reported on an ongoing basis, explaining that under
Labor Code section 226 a statement need only “document the
paid wages” during a pay period. (Soto, at p. 392.) Spectrum
seizes on the italicized language. But read in context, Soto was
only clarifying that the wage statement need not reflect
compensation vesting but not owed and due during the given
pay period — such as the monetary value of an employee’s
accrued vacation balance. Soto did not purport to hold wage
statements need not reflect amounts that are owed and due
during a pay period, like missed-break premium pay (see
Murphy, supra, 40 Cal.4th at p. 1108 [premium pay is due
“immediately”]), whenever an employer chooses not to pay them.
Finally, Spectrum again argues that the Legislature’s
inaction in the face of court rulings agreeing with its position on
the reporting of missed-break premium pay demonstrates the
Legislature’s acquiescence to that position. But even more so
32
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
than for Labor Code section 203, there is no clear body of
precedent to which the Legislature might be thought to have
acquiesced. The Court of Appeal in this case is the only
appellate court to have squarely addressed the Labor Code
section 226 issue; the Court of Appeal’s later opinion in
Betancourt v. OS Restaurant Services, LLC, supra, 49
Cal.App.5th 240, review granted, simply agrees with the Court
of Appeal in this case without offering any independent analysis
of its own. And even Spectrum acknowledges that a split of
authority has developed among the many federal district court
cases to consider the question.
In sum, we hold that an employer’s obligation under Labor
Code section 226 to report wages earned includes an obligation
to report premium pay for missed breaks. This means that,
provided the conditions specified in the statute are otherwise
met, failure to report premium pay for missed breaks can
support monetary liability under section 226 for failure to
supply an accurate itemized statement reflecting an employee’s
gross wages earned, net wages earned, and credited hours
worked.
V.
We now turn to a question concerning the calculation of
prejudgment interest. The trial court awarded Naranjo 10
percent prejudgment interest on his meal break claim. The
Court of Appeal reversed with instructions to recalculate the
award based on a 7 percent rate. (Naranjo II, supra, 40
Cal.App.5th at pp. 475–476.) The Court of Appeal was correct
to identify 7 percent as the applicable rate.
The state Constitution establishes a default interest rate
of 7 percent “upon the loan or forbearance of any money, goods,
33
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
or things in action, or on accounts after demand.” (Cal. Const.,
art. XV, § 1.) Prevailing civil parties are entitled to this interest
rate in the calculation of prejudgment interest absent a statute
specifying a higher rate. (E.g., Brown v. California
Unemployment Ins. Appeals Bd. (2018) 20 Cal.App.5th 1107,
1116; Bullock v. Philip Morris USA, Inc. (2011) 198 Cal.App.4th
543, 573; see also Civ. Code, § 1916.1.)
No statute specifies the rate of prejudgment interest for
most tort or other noncontract claims, so, in such cases, the
default constitutional rate of 7 percent typically applies. (See,
e.g., Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1585
[applying 7 percent rate to fraud claim]; cf. Civ. Code, § 3291
[specifying 10 percent rate in personal injury action when a
defendant rejects a settlement offer less favorable than the final
judgment].) For many years, the same was true of contract
claims. But in 1985, the Legislature enacted a special default
rule governing such claims: “If a contract entered into after
January 1, 1986, does not stipulate a legal rate of interest, the
obligation shall bear interest at a rate of 10 percent per annum
after a breach.” (Civ. Code, § 3289, subd. (b), as amended by
Stats. 1985, ch. 663, § 1, p. 2251, and Stats. 1986, ch. 176, § 1,
p. 406.) Then, in 2000, as part of the same legislation that
enacted section 226.7, the Legislature extended the higher
contract claim interest rate to wage nonpayment actions. (Stats.
2000, ch. 876, § 5, p. 6508.) Labor Code section 218.6 provides:
“In any action brought for the nonpayment of wages, the court
shall award interest on all due and unpaid wages at the rate of
interest specified in subdivision (b) of Section 3289 of the Civil
Code” — i.e., 10 percent per annum.
The trial court in this case awarded prejudgment interest
at this 10 percent rate. Although the trial court did not specify
34
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
the statutory authority for the award, the Court of Appeal
assumed it was based on Labor Code section 218.6 and held this
was error. (Naranjo II, supra, 40 Cal.App.5th at p. 475.)
We agree section 218.6 is indeed inapplicable here. As
explained above, in Kirby, supra, 53 Cal.4th 1244, we concluded
that the neighboring attorney fee-shifting statute, Labor Code
section 218.5, was inapplicable to a section 226.7 suit because
such an action “is brought for the nonprovision of meal and rest
periods, not for the ‘nonpayment of wages.’ ” (Kirby, at p. 1255,
italics omitted.) It follows that for purposes of prejudgment
interest under Labor Code section 218.6, a section 226.7 suit is
also not an “action brought for the nonpayment of wages,” as
section 218.6 requires, and so does not qualify for that statute’s
higher rate.
Naranjo contends, however, that the trial court’s award of
prejudgment interest should be upheld on other grounds.
Specifically, he argues the trial court’s use of a 10 percent
prejudgment interest rate is supported not by Labor Code
section 218.6 but directly by the contract-rate statute, Civil
Code section 3289, subdivision (b). The complaint alleges a
violation of a statutory and regulatory requirement, not a
breach of any term of Spectrum’s agreements with its
employees; at no point has Naranjo asserted claims for breach
of contract based on the meal break violations. But Naranjo
argues that section 3289, subdivision (b) nonetheless applies
because every contract of employment implicitly incorporates
mandatory statutory duties, including here the duty to pay
premium pay if an employee is unlawfully deprived of a meal or
rest break, so that a violation of statute is also a breach of
contract.
35
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
Naranjo relies for this argument on Bell v. Farmers Ins.
Exchange (2006) 135 Cal.App.4th 1138 (Bell), which considered
the prejudgment interest rate applicable to claims for unpaid
overtime wages accruing both before and after Labor Code
section 218.6 took effect. For claims accruing after section
218.6’s effective date, the statute specified the interest rate was
10 percent. Even for claims accruing before section 218.6 took
effect, however, the Court of Appeal applied the same rate. Any
objection to that rate had been waived by the defendant, and in
any event the language of section 218.6 supported retroactive
application to wage claims accruing before enactment. (Bell, at
pp. 1145–1146.) The court went on to conclude, as a third basis
for its decision, that the Legislature might also have thought
Labor Code section 218.6 did not change existing law, because
Civil Code section 3289, subdivision (b) already applied to
claims of wage nonpayment, and merely intended the enactment
as a clarification. Bell cited the common law principle that
contracts, including employment contracts, must ordinarily “ ‘be
held to have been made in the light of, and to have incorporated,
the provisions of existing law.’ ” (Bell, at p. 1147, quoting
Lockheed Aircraft Corp. v. Superior Court (1946) 28 Cal.2d 481,
486.) The Bell court acknowledged other cases treating suits for
unpaid statutory wages as claims to enforce statutory
obligations rather than contractual ones. (Bell, at p. 1148.) But
the court deemed “more persuasive” case law implying that
statutory duties like the duty to pay overtime could be
incorporated into contracts. (Id. at p. 1149.) “At the very least,”
the court concluded, “the argument for the application of the
breach-of-contract prejudgment interest rate of Civil Code
section 3289 carries sufficient logic to support the assumption”
that the legislative choice to extend this default breach-of-
36
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
contract rate to wage nonpayment actions in Labor Code section
218.6 was intended merely as a clarification of existing law.
(Bell, at p. 1149.)
The Court of Appeal in this case dismissed Bell as
inapposite, reasoning that Bell is relevant only to wage suits
covered by Labor Code section 218.6. (Naranjo II, supra, 40
Cal.App.5th at p. 475.) The court did not address Naranjo’s
argument that Bell could support a 10 percent rate in this case
under Civil Code section 3289. But we nonetheless agree with
the Court of Appeal that if Labor Code section 218.6 does not
establish a 10 percent interest rate for missed-break premium
pay awards, then Bell and Civil Code section 3289 do not justify
that rate either.
As an initial matter, Bell itself was a case about the reach
of Labor Code section 218.6. Bell arrived at no definitive
conclusions about whether the 10 percent contract rate would
have applied in wage nonpayment actions had section 218.6
never been enacted. The court in Bell recognized there was no
pre-section 218.6 precedent adopting or applying the contract
rate in wage nonpayment cases. (Bell, supra, 135 Cal.App.4th
at p. 1147.) The court also recognized that there were conflicting
authorities on the proper characterization of such wage
nonpayment actions: for statute of limitations purposes, for
example, courts have held that the three-year statute governing
actions for statutory liabilities applies rather than the two-year
statute for unwritten contracts. (Id. at p. 1148.) And treating a
statutory claim for wage underpayment as a contract claim for
interest purposes, even when no statute directs that treatment,
would allow parties to have their cake and eat it too. A party to
an oral contract could recover an extra year of premium pay
because the liability is created by statute, not contract (Code
37
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
Civ. Proc., §§ 338, 339; see Murphy, supra, 40 Cal.4th at
pp. 1099, 1102 [applying three-year period to missed break pay];
Aubry v. Goldhor (1988) 201 Cal.App.3d 399, 404–406 [applying
three-year period to unpaid overtime]) — while simultaneously
receiving prejudgment interest at the higher 10 percent rate on
the theory that the liability is created by contract and not simply
by statute (Civ. Code, § 3289, subd. (b)). The court in Bell did
not resolve this seeming inconsistency. And in the end, the court
did not definitively hold that the statutory contract rate would
have applied in overtime suits even if Labor Code section 218.6
had never been enacted — it said only that the Legislature
might well have thought so. (Bell, at pp. 1146, 1149.)
Whatever the merits of Bell’s reasoning with regard to
overtime pay, that reasoning cannot be extended to nonpayment
of section 226.7 premium pay, because the available evidence
indicates the Legislature has not understood the failure to pay
missed-break premium pay as a breach of contract subject to
contract-rate interest. In the very legislation that enacted
section 226.7, Assembly Bill No. 2509 (1999–2000 Reg. Sess.),
the Legislature elected to adjust the prejudgment interest rate
for certain wage and hour claims by incorporating Civil Code
section 3289, subdivision (b)’s 10 percent rate. One provision
enacted Labor Code section 218.6 (Stats. 2000, ch. 876, § 5,
p. 6508), which, as discussed, is by its terms too narrow to reach
missed-break premium-pay claims. Another provision amended
an existing statute governing administrative claims for unpaid
wages, Labor Code section 98.1, substituting the default
contract rate for a repealed statutory rate for purposes of
administrative awards of unpaid wages. (Stats. 2000, ch. 876,
§ 1, p. 6505; see Bell, supra, 135 Cal.App.4th at pp. 1149–1150.)
Yet, when drafting and enacting a new remedy for the denial of
38
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
proper meal and rest breaks, the Legislature included no similar
extension of Civil Code section 3289, subdivision (b). (See Stats.
2000, ch. 876, § 7, p. 6509.)
The result is a statutory scheme that expressly applies
contract rates of prejudgment interest to claims for the
nonpayment of wages but excludes claims seeking statutory
remedies for violation of working condition requirements under
section 226.7. (See Lab. Code, § 218.6; Kirby, supra, 53 Cal.4th
at p. 1255.) This disparate specification of which particular
statutes or types of actions are subject to Civil Code section
3289, subdivision (b)’s interest rate implies the Legislature did
not understand or intend all statutory wage and hour
obligations to automatically be governed by the contract rate —
and, in particular, that the Legislature intended a difference in
treatment for section 226.7 claims versus other claims
concerning the payment or nonpayment of wages in accordance
with the basic employment bargain.11 Naranjo offers no
11
Aside from the express statutory scheme, the legislative
history makes clear that the Legislature understood different
wage claims might be subject to different interest regimes.
Commenting on changes wrought by the amendment of Labor
Code section 218.5 and the enactment of Labor Code section
218.6, the Senate Industrial Relations Committee observed that
“[t]his bill would clarify two overlapping sections of the law,
specifying that an employee, separate from other wage cases, is
eligible to be awarded interest, in addition to wages due and
attorney’s fees and costs.” (Sen. Com. on Industrial Relations,
Analysis of Assem. Bill No. 2509 (1999–2000 Reg. Sess.) as
amended June 26, 2000, p. 3, italics added.) In short, the
Legislature did not understand the new section 218.6, and its 10
percent interest rate, to apply to all wage claims, but only to a
subset — a subset that, as our discussion in Kirby, supra, 53
Cal.4th at page 1255 makes clear, does not include missed-
break premium pay claims.
39
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
persuasive reason for us to read a common law contract
interpretation doctrine as overriding the choices the Legislature
has made.
Naranjo also argues that principles of parity require the
same treatment for civil claims under section 226.7 as for
administrative unpaid wage claims under Labor Code section
98.1. The argument for parity founders on the disparate
statutory language. As discussed, in 2000, the Legislature
amended section 98.1 to expressly provide that unpaid wages
recovered through administrative proceedings should be subject
to Civil Code section 3289, subdivision (b)’s 10 percent
prejudgment interest rate. (See Lab. Code, § 98.1, subd. (c).)
The legislation made no similar provision for heightened
interest on missed-break claim judgments under section 226.7.
We cannot supply what the Legislature chose to omit.
VI.
We emphasize the limits of our holdings concerning Labor
Code sections 203 and 226. The Court of Appeal held that, as a
matter of law, section 226.7 missed-break premium pay is not
“wages” for purposes of Labor Code sections 203 and 226. As
such, the failure to timely pay or report such payments can
never support penalties under either section 203 or 226. We
conclude those holdings were incorrect: Missed-break premium
pay is indeed wages subject to the Labor Code’s timely payment
and reporting requirements, and it can support section 203
waiting time penalties and section 226 wage statement
penalties where the relevant conditions for imposing penalties
are met.
Whether such penalties are available in this particular
case is a matter that has yet to be determined. Because of its
40
NARANJO v. SPECTRUM SECURITY SERVICES, INC.
Opinion of the Court by Kruger, J.
conclusion about the nature of missed-break premium pay, the
Court of Appeal had no occasion to address Naranjo’s argument
that the trial court erred in finding Spectrum had not acted
willfully (which barred recovery under Lab. Code, § 203);
likewise, Spectrum’s argument that its failure to report missed-
break premium pay on wage statements was not knowing and
intentional, as is necessary for recovery under Labor Code
section 226, was not addressed on appeal. Those issues remain
to be resolved on remand.
We reverse in part the judgment of the Court of Appeal,
insofar as it held the failure to timely pay or report section 226.7
premium pay can never support relief under Labor Code
sections 203 and 226, and remand for further proceedings in the
Court of Appeal not inconsistent with this opinion.
KRUGER, J.
We Concur:
CANTIL-SAKAUYE, C. J.
CORRIGAN, J.
LIU, J.
GROBAN, J.
JENKINS, J.
O’LEARY, J.*
*
Presiding Justice of the Court of Appeal, Fourth Appellate
District, Division Three, assigned by the Chief Justice pursuant
to article VI, section 6 of the California Constitution.
41
See next page for addresses and telephone numbers for counsel who
argued in Supreme Court.
Name of Opinion Naranjo v. Spectrum Security Services, Inc.
__________________________________________________________
Procedural Posture (see XX below)
Original Appeal
Original Proceeding
Review Granted (published) XX 40 Cal.App.5th 444Review Granted (unpublished)
Rehearing Granted
__________________________________________________________
Opinion No. S258966
Date Filed: May 23, 2022
__________________________________________________________
Court: Superior
County: Los Angeles
Judge: John A. Kronstadt and Barbara Marie Scheper
__________________________________________________________
Counsel:
Rosen Marsili Rapp; Posner & Rosen, Howard Z. Rosen, Jason C.
Marsili, Brianna Primozic Rapp and Amanda Pitrof for Plaintiffs and
Appellants.
Ehlert Hicks and Allison L. Ehlert for California Employment Lawyers
Association as Amicus Curiae on behalf of Plaintiffs and Appellants.
Cynthia L. Rice, Verónica Meléndez; George Warner, Carole Vigne;
Capstone Law, Ryan H. Wu; Winifred Kao; Jesse Newmark; Miye
Goishi; and Jora Trang for California Rural Legal Assistance
Foundation, Legal Aid at Work, Bet Tzedek, Asian Americans for
Advancing Justice – Asian Law Caucus, Centro Legal de la Raza, UC
Hastings Community Justice Clinics and Worksafe as Amici Curiae on
behalf of Plaintiffs and Appellants.
Arbogast Law, David M. Arbogast; The Bronson Firm and Steven M.
Bronson for Consumer Attorneys of California as Amicus Curiae on
behalf of Plaintiffs and Appellants.
Carothers DiSante & Freudenberger, Dave Carothers, Robin E.
Largent, Steven A. Micheli; Duane Morris and Paul J. Killion for
Defendant and Appellant.
Casey Raymond for Department of Industrial Relations, Division of
Labor Standards Enforcement as Amicus Curiae.
Counsel who argued in Supreme Court (not intended for
publication with opinion):
Paul J. Killion
Duane Morris LLP
Spear Tower
One Market Plaza, Suite 2200
San Francisco, CA 94105-1127
(415) 957-3141
Jason C. Marsili
Rosen Marsili Rapp LLP
11150 West Olympic Boulevard, Suite 990
Los Angeles, CA 90064
(213) 389-6050