California Employment Law Refresher: Meal Periods, Rest Periods, and Premiums (Part 3)

This week’s legal update is intended to provide a refresher regarding premium payments for meal and rest (and recovery) periods. Prior legal updates in this three-part series addressed meal period and rest (and recovery) period obligations.

California Labor Code section 226.7(c) requires employers to pay employees “one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest or recovery period is not provided.”

What is the amount of the premium payment and how is it calculated?

The premium payment amounts to one hour of pay at the employee’s “regular rate of compensation.” In 2021, the California Supreme Court held in Ferra v. Loews Hollywood Hotel, LLC (2021) 11 Cal. 5th 858, that “the term ‘regular rate of compensation’ in [Labor Code] section 226.7(c) has the same meaning as “regular rate of pay” in [Labor Code] section 510(a) [relating to overtime] and encompasses not only hourly wages but all nondiscretionary payments for work performed by the employee.” Thus, when calculating the meal and rest (and recovery) period premium, employers cannot simply pay an hour of pay at the employee’s straight time hourly rate. Instead, as they do when calculating the regular rate of pay for overtime compensation, employers must include other nondiscretionary pay (such as bonuses and commissions) to determine the appropriate regular rate of compensation for meal and rest (and recovery) period premiums.

More information about regular rate of pay calculations is set forth in the California Division of Labor Standards Enforcement’s (DLSE) FAQs, located here.

Can an employer be responsible for multiple premium payments to the same employee in a single day?

The DLSE has taken the position that only one premium is imposed each day for each type of violation, meaning an employer is required to pay an employee a single meal period premium for a given day even if the employee was entitled to (but was not provided) multiple meal periods during that day, and a separate single rest period premium for all rest periods that the employer did not authorize and permit the employee to take that day. As the DLSE has explained, “if an employer employed an employee for twelve hours in one day without any meal period, the penalty would be only one hour at the employee’s regular rate of pay” for all meal periods that were not provided that day.

What is the statute of limitations for asserting claims for failure to provide meal, rest, and recovery periods and recovering premium payments?

In 2007, the California Supreme Court issued its ruling in Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, and held that meal and rest period premiums required by Labor Code section 226.7 are governed by Code of Civil Procedure section 338’s three-year statute of limitations rather than Code of civil Procedure section 340’s one-year statute of limitations for penalties. Where a claim for unfair business practices is added pursuant to Business and Professions Code section 17200 et seq., potential liability extends up to a total of four years.

In addition to premium payments, are there other penalties triggered for failing to provide meal, rest, and recovery periods?

In 2022, the California Supreme Court ruled in Naranjo v. Spectrum Sec. Servs., Inc. (2022) 13 Cal. 5th 93, that the premium payment under Labor Code section 226.7 constitutes “wages” that must be paid during employment and documented on wage statements. As a result, an employer’s failure to make timely premium payments and document them on wage statements may trigger waiting time penalties under Labor Code section 203 (for failure to pay all wages due at separation of employment) and wage statement penalties under Labor Code section 226 (for failure to include accurate required information on employee wage statements). In addition, the failure to provide meal and rest (and recovery) periods can trigger penalties under the Private Attorneys General Act (PAGA).

For the reasons outlined here and in previous legal updates in this series, it is important for employers to review their meal and rest (and recovery) period policies and practices for nonexempt employees and audit premium payment compliance.

This legal update and any use of its information does not create an attorney-client relationship. Nothing contained on this website should be considered legal advice for any specific employer or employment situation. Consult legal counsel before taking any action as a result of information contained herein.