Naranjo v. Spectrum Security Services, Inc., 509 P.3d 956

Spectrum Security required guards to remain on duty during meal periods; Gustavo Naranjo sued after being disciplined for leaving his post to take a meal break.
Naranjo brought a putative class action seeking the §226.7 “one additional hour of pay” premium for missed meal/rest breaks and related claims under the wage-statement (§226) and waiting-time (§203) statutes.
Trial court found Spectrum liable for missed-break premiums for part of the class period, awarded §226 penalties for knowing wage-statement failures, denied §203 waiting-time penalties (no willfulness), and awarded 10% prejudgment interest.
The Court of Appeal affirmed liability for missed breaks but held that §226.7 premium pay is not “wages” for purposes of §§203 and 226, and reduced prejudgment interest to 7%.
The Supreme Court granted review and held that §226.7 premium pay is wages: unpaid premiums can be subject to §203 waiting-time penalties and §226 wage-statement penalties (when statutory elements are met).
The Court also confirmed the 7% constitutional default prejudgment interest rate applies to these awards (10% statutory contract rate inapplicable to §226.7 claims).

Issue	Plaintiff's Argument (Naranjo)	Defendant's Argument (Spectrum)	Held
1) Are §226.7 missed-break premiums “wages” for purposes of Labor Code §203 waiting-time penalties?	Premiums compensate for work performed during missed breaks and thus are wages subject to §203.	Premiums are a statutory remedy/penalty for depriving breaks, not wages for labor, so §203 does not apply.	Held: §226.7 premiums are wages; willful failure to pay them may trigger §203 waiting-time penalties (willfulness remains a fact issue on remand).
2) Must employers report §226.7 premiums on wage statements under Lab. Code §226, exposing them to §226 penalties if omitted?	Premiums are wages earned and must be reported; omission can cause injury under §226(e).	Premiums are unpaid/withheld remedies and need not be shown on itemized wage statements.	Held: §226.7 premiums are reportable as wages; failure to include them can support §226 liability if the statute’s knowing-and-intentional injury elements are met.
3) What prejudgment interest rate applies to missed-break awards? (10% contract rate v. 7% constitutional default)	10% rate should apply (arguing Civil Code §3289(b)/contract rate or Bell reasoning).	7% constitutional rate applies because §218.6 (10%) applies only to actions “for the nonpayment of wages” and §226.7 suits are not those actions for §218.6 purposes.	Held: 7% constitutional default applies; §218.6/10% does not govern §226.7 claims.

Murphy v. Kenneth Cole Productions, Inc., 40 Cal.4th 1094 (Cal. 2007) (holds §226.7 payment is compensatory wage-like remedy and not merely a penalty)
Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004 (Cal. 2012) (framework for meal/rest break obligations under IWC wage orders)
Kirby v. Immoos Fire Protection, Inc., 53 Cal.4th 1244 (Cal. 2012) (distinguishes nature of §226.7 actions from actions "for the nonpayment of wages" under certain statutes)
Donohue v. AMN Services, LLC, 11 Cal.5th 58 (Cal. 2021) (confirms contexts in which on-duty meal periods count as time worked)
Ferra v. Loews Hollywood Hotel, LLC, 11 Cal.5th 858 (Cal. 2021) (discusses §226.7 remedial structure and premium-pay enforcement)
Kim v. Reins Int’l California, Inc., 9 Cal.5th 73 (Cal. 2020) (explains §203 waiting-time penalty purpose and application)
Pineda v. Bank of America, N.A., 50 Cal.4th 1389 (Cal. 2010) (context on waiting-time penalties and limitations)
Augustus v. ABM Security Services, Inc., 2 Cal.5th 257 (Cal. 2016) (on-duty meal periods that require remaining on duty are compensable work)