Employer's Liability Under Labor Code Section 226.7 Is Reduced

In a recent published decision, the California Labor Commissioner held that payments provided for under Labor Code section 226.7 for missed meal and rest breaks is a penalty and not a wage. This is a favorable ruling for employers in California which settles a long undecided issue over Section 226.7, which provides that employees are entitled to one additional hour of pay at the employee’s regular rate of pay for each day the employee does not receive a meal or rest period. By holding that the payment provide for under Section 226.7 is a penalty, the Labor Commissioner shortened the time period for which employees can seek Section 226.7 damages from three years to one year. The Code of Civil Procedure section 338 provides for a three year statute of limitations period for the recovery of wages. However, under the Labor Commissioner’s recent holding that Section 226.7 damages are a penalty, employees are limited to a one year statute of limitations period under Code of Civil Procedure section 340. The Labor Commissioner’s holding effectively reduces a Plaintiff’s damages under Section 226.7 by two-thirds.

The case is Hartwig v. Orchard Commercial, Inc., Case No. 12-569901RB. This case has been made public and is binding on any hearing before a Deputy Labor Commissioner or Hearing Officer. To view the Labor Commisioner's ruling, click here.