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California Meal and Rest Period Premium Payments Are Wages; How Does This Impact your Retirement Plan?

Under California law, employers who fail to provide the legally mandated meal or rest periods are required to pay nonexempt employees a meal and rest period “premium” payment equal to one hour of wages at the employee’s regular rate of pay. A number of lower court decisions in California were split as to whether such meal and rest period premium payments constituted a penalty payment or wages. In Naranjo v. Spectrum Security Services, Inc., the California Supreme Court settled the issue by holding that meal and rest period premium payments do constitute wages. As such, meal and rest period premium payments may also be covered under an employer’s retirement plan’s definition of compensation, meaning, among other things, that the meal and rest period premium payments may be subject to participant 401(k) deferrals and employer matching contributions. In light of this decision, any plan sponsor with employees in California should review… Continue Reading

June 2022
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