In a California lawsuit for unpaid wages, the court must add interest. Labor Code section 218.6 says “the court shall award interest on all due and unpaid wages” at the rate in Civil Code section 3289(b), which is 10 percent a year, running “from the date that the wages were due and payable.” Meal and rest break premiums are different: the Supreme Court of California has held they carry the 7 percent constitutional rate. On an older claim, interest can be a significant part of the exposure.
What does section 218.6 require?
Mandatory interest at 10 percent. Section 218.6 applies “In any action brought for the nonpayment of wages.” It uses “shall,” so the court doesn’t have discretion to deny it. The rate comes from Civil Code section 3289(b), which sets “a rate of 10 percent per annum after a breach.”
Interest runs from each payday on which wages went unpaid, not from the date of the lawsuit. Unpaid overtime from four years ago carries roughly four years of interest. In class actions, the calculation runs pay period by pay period for each worker.
Do meal and rest premiums carry the same rate?
No. In Naranjo v. Spectrum Security Services, Inc. (2022) 13 Cal.5th 93, the Supreme Court of California addressed “the rate of prejudgment interest that applies to amounts due for failure to provide meal and rest breaks.” The court said “we agree with the Court of Appeal that the 7 percent default rate set by the state Constitution applies.”
The same opinion held that premium pay counts as wages for the wage statement and timely payment statutes, which expanded exposure in other ways. On interest alone, though, the difference between 7 and 10 percent is real money on a multiyear class claim, and plaintiffs’ damages models sometimes apply 10 percent across the board.
What about Labor Commissioner awards?
The same 10 percent rate applies. Labor Code section 98.1(c) says awards after a Labor Commissioner hearing “shall accrue interest on all due and unpaid wages at the same rate as prescribed by subdivision (b) of Section 3289 of the Civil Code.” Interest accrues “until the wages are paid from the date that the wages were due and payable.”
That matters when deciding whether to appeal an award to superior court. Interest keeps running while the appeal is pending.
How do liquidated damages fit in?
They can double the minimum wage portion. Labor Code section 1194.2(a) entitles an employee paid less than minimum wage to “liquidated damages in an amount equal to the wages unlawfully unpaid and interest thereon.” The same subdivision says it doesn’t authorize “the recovery of liquidated damages for failure to pay overtime compensation.”
There’s a good-faith defense. Under subdivision (b), if the employer shows “the act or omission giving rise to the action was in good faith and that the employer had reasonable grounds for believing” it wasn’t a violation, the court or Labor Commissioner may reduce or deny liquidated damages. Documented legal advice and reasonable payroll practices support that showing.
How can an employer limit interest?
Mainly by paying. Interest under section 218.6 accrues on wages that are “due and unpaid.” Once an employer identifies wages it clearly owes, paying them promptly stops interest on that amount, and it may also matter for penalties and for the PAGA cure rules.
Accuracy matters too. Challenge damages models that use the wrong rate, start interest on the wrong date, or add interest to penalties that aren’t wages. Those corrections can move a settlement number.
Interest and related remedies at a glance
| Item | Rate or rule | Source |
|---|---|---|
| Unpaid wages in court | 10 percent from each due date | Lab. Code 218.6; Civ. Code 3289(b) |
| Meal and rest premiums | 7 percent constitutional rate | Naranjo (2022) 13 Cal.5th 93 |
| Labor Commissioner awards | 10 percent until paid | Lab. Code 98.1(c) |
| Minimum wage liquidated damages | Equal to unpaid wages plus interest, with good-faith defense | Lab. Code 1194.2 |
When valuing a wage claim
- Preserve payroll and timekeeping data for the full claim period, with the pay dates for each period.
- Calendar the response deadline on the complaint, Labor Commissioner claim, or PAGA notice, and check for an arbitration agreement and EPLI wage-and-hour coverage.
- Identify the payroll staff and managers who can explain how pay was calculated, and make sure no one treats the claimant differently.
- Pull any legal advice, audits, or policies that support a good-faith defense to liquidated damages.
- Have counsel build an interest calculation that separates wages from premiums and penalties before responding to a demand.
The firm’s page on wage claim defense in California explains how it handles wage and hour claims for employers.
Wage interest questions from employers
Does interest apply to waiting time penalties?
Section 218.6 covers “due and unpaid wages.” Waiting time penalties under section 203 are penalties, not wages. Whether any interest attaches to them is a separate question, and damages models that add 10 percent to penalties deserve scrutiny.
Is interest compounded?
Section 218.6 adopts the Civil Code 3289(b) rate. Prejudgment interest in California is generally calculated as simple interest unless a statute or contract provides otherwise. Check any calculation for compounding.
Does paying back wages stop the lawsuit?
It stops interest on what’s paid, but it may not end the case. Penalties, fees, and other claims may remain. Payments should be structured with counsel so they count toward the claims and don’t create new disputes.
Does interest apply in arbitration?
Section 218.6 speaks of “any action brought for the nonpayment of wages.” Arbitrators generally apply the same substantive remedies a court would. Expect interest to be part of an arbitration award as well.
If your company is facing a wage claim with large interest exposure
If your company has received a wage lawsuit, class action, or Labor Commissioner claim covering several years, the interest calculation is often a meaningful part of the demand and worth testing early. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving unpaid wages and meal and rest premiums. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The statutes are Labor Code sections 98.1, 218.6, and 1194.2, and Civil Code section 3289. The opinion is Naranjo v. Spectrum Security Services, Inc. (2022) 13 Cal.5th 93.
This post is general information about California and federal employment law as of November 7, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Employment statutes, regulations, and court decisions change often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.