Paid rest breaks that got started with caffeine in the 1950s and now constitute wages are still subject to California wage and hour lawsuits.
Los Angeles, CAWhile the term “coffee break” didn’t show up until the 1950s, two U.S. companies around the turn of the century offered midmorning and midafternoon breaks but their employees had to provide the coffee and they didn’t get a break time to enjoy it. Fast forward to May 2022: Meal and rest period premiums are now “wages” under California labor law.
Paid rest breaks came about thanks to caffeine, Michael Pollan explains in his book, "This is Your Mind on Plants". The coffee break – free coffee plus paid time to drink it, AKA today’s rest break—was established by a company called Los Wigwam Weavers, as told in the 2020 book "Coffeeland" by historian Augustine Sedgewick. The owner, Phil Greinetz hired older men to operate his looms (younger employees had been lost to the war) but they couldn’t keep up. Greinetz then hired women who had the dexterity necessary to work the looms but lacked endurance to work eight- hour shifts. At a company meeting to discuss this problem, employees requested two 15-minute breaks with coffee. Greinetz discovered that the women produced more than the men, maybe fueled by caffeine, but they were docked 30 minutes of pay each day. That meant employees were making less than minimum wage, which brought the first rest break lawsuit from the U.S. Department of Labor.
Pollan explains that the federal court ruled the breaks were at least “equally beneficial to the employer in that they promote more efficiency and result in a greater output, and this increased production is one of the primary factors…which leads the employer to institute such break periods.” As well, the judge found that coffee breaks had a “close relationship” to work and should therefore be compensated as work.
Rest Breaks are Wages
California's meal and rest break laws have been confusing for employers and if not properly followed, they can lead to costly litigation. Both employers and employees should know that meal and rest period premiums now constitute “wages” under California law.
The law is confusing. Last July, the California Supreme Court held in Ferra v. Loews Hollywood Hotel, LLC that “regular rate of compensation” is the same thing as “regular rate of pay” for purposes of calculating meal and rest break premiums. In other words, premium pay for non-compliant meal and rest breaks must be paid at the “regular rate of pay” rather than the employee’s base hourly rate of pay.
In May 2022, the California Supreme Court in Naranjo v. Spectrum Security Services, Inc. found that meal and rest period premiums constitute “wages” under California law, which means that employers could be liable for failure to properly report and timely pay those premiums. According to court documents:
“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.”
Naranjo v. Spectrum Lawsuit
Spectrum Security Services, Inc. transports and guards prisoners and detainees with appointments outside federal custodial facilities. Gustavo Naranjo was employed by Spectrum as a security guard and non-exempt employee. Spectrum fired him because he left his post to take a meal break, which was in violation of Spectrum’s policy requiring him to remain on-duty due to the nature of the work.
In 2007 Naranjo filed a putative class action on behalf of Spectrum employees, claiming that the company had violated California’s meal break requirements under the Labor Code and the applicable Industrial Welfare Commission (IWC) wage order. Naranjo also alleged that Spectrum failed to report premiums on employee wage statements and failed to timely pay such premiums to nonexempt employees upon discharge or resignation.
Spectrum argued that premium pay is not a wage because it is payable as a lump sum for a missed break of any duration rather than a sum correlated with time worked. The California Supreme Court disagreed with Spectrum, stating that there are other types of compensation that “lack a perfect one-to-one correlation with the amount of time worked,” such as reporting-time pay or split-shift pay, both of which are considered “wages.”
Following the Naranjo ruling, employers now face significantly greater exposure for noncompliant meal and rest break practices. Labor law attorneys urge California employers to audit their break policies, practices and wage statements. They would be wise to train personnel to ensure they understand meal and rest break obligations.
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