Waiting-Time Penalties

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No Waiting Time Penalties for Unpaid Meal and Rest Break Premium Pay

Labor Code section 203 imposes a “waiting time” penalty of one day’s wages for each day that former employees are not paid their final wages due when they stop working. For many years, employment lawyers assumed that any unpaid wages would trigger waiting time penalties, including premium wages for missed meal and rest breaks. But in Naranjo v. Spectrum Security Services (September 26, 2019), the Court of Appeal held otherwise.

In Naranjo, a class of security guards won a judgment for unpaid meal period premium pay under Labor Code section 226.7. The trial court also awarded waiting time penalties since these meal premiums were not paid at the time their employment ended. The defendant appealed the award of waiting time penalties and the appellate court reversed:

By statute, “wages” are defined only in terms of “labor performed by employees.” (§ 200, subd. (a).) “Labor,” in turn, means “labor, work, or service . . . if the labor to be paid for is performed personally by the person demanding payment.” (§ 200, subd. (b).) … Section 203 penalizes an employer that willfully fails “to pay . . . any wages” owed to a fired or voluntarily separating employee. … Read this way, an employer’s failure, however willful, to pay section 226.7 statutory remedies does not trigger section 203’s derivative penalty provisions for untimely wage payments.

In other words, meal period premiums are earned by working without the required break – not by an employee’s labor. Accordingly, they are not “wages” under Labor Code section 203.

This is a fairly recent decision and still might be overruled by the state Supreme Court. But if it stands, it will be interesting to see how the reasoning would apply in other contexts. For example, the Labor Commissioner has traditionally applied Section 203 to unpaid overtime premium wages. For now, it remains to be seen whether waiting time penalties will continue to apply for the failure to pay overtime.

What Are Waiting Time Penalties?

When an employee is fired, all of his earned and unpaid wages must be paid immediately at the time of termination. When an employee quits without notice, his wages are due within 72 hours of quitting. However, if he gives more than 72 hours notice of his departure, his wages are due on the last day of employment.

Failure to pay the full amount of wages due when the employee stops working can give rise to “waiting time” penalties under Labor Code section 203, which provides:

If an employer willfully fails to pay, without abatement or reduction… 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.

This means that the regular daily wage of the former employee shall continue as a waiting-time penalty for up to 30 days when the employer fails to pay all wages due at termination or when the employee quits. For a minimum wage employee who works 8 hour days, the waiting time penalty would be $96 per day ($12/ hr x 8), and the maximum penalty for this employee would be $2,880 ($96/day x 30 days). As the employee’s wage increases so too does the amount of the penalty.

Even a small amount of unpaid wages can trigger the penalty. This includes unpaid vacation wages, overtime pay, and premium wages for missed breaks. Often an employee will only have a few hundred dollars in unpaid wages, but when waiting time penalties are added, the claim can exceed $5,000.

In order to recover waiting time penalties, the employee must prove the employer’s failure to pay the wages was “willful.” This means the employer intentionally failed to pay wages that were due. The term “willfully” does not require a showing that the employer knew of its obligation. An employer may act willfully even if it did not know it was required to pay some category of wages. However, a good faith dispute that the wages are due will preclude a finding of willfulness.

If you are facing a wage claim with waiting time penalties, you should have an experienced lawyer protecting your business. I have successfully defended these claims and I can help you avoid paying more than the law requires.