Under existing California law, if an employee who is eligible for a meal period is denied that meal period or gets interrupted during that meal period, then that employee is entitled to one hour of premium pay at the employee’s then-existing “regular rate of pay.”
The same is true for rest periods. If an employee is eligible for a rest period, but then is denied that rest period or gets interrupted during that rest period, then that employee is similarly entitled to one hour of premium pay at the employee’s then-existing “regular rate of pay.”
So, how does an employer calculate the employee’s “regular rate of pay”? Isn’t it just the employee’s hourly wage – in other words, if the employee is paid $15/hour, isn’t that the employee’s “regular rate of pay”?
If only it could be that simple and easy…but, alas, this is California. Nothing is simple or easy for employers in California.
The “Regular Rate of Pay” Now Includes All Non-Discretionary Pay Too
On July 15, 2021, the California Supreme Court unanimously ruled in Ferra v. Loews Hollywood Hotel, LLC that, for purposes of calculating meal and rest period premium pay, an employee’s “regular rate of pay” is not the same as the employee’s hourly wage. The “regular rate of pay,” the Court ruled, includes the hourly wage as well as “all other non-discretionary payments for work performed by the employee.”
So, if the employee makes $15/hour but also receives attendance bonuses, incentive payments, or other non-discretionary payments from the employer, those amounts must be added to the employee’s $15/hour wage to arrive at the employee’s “regular rate of pay.” This will make meal and rest period violations far more expensive in California than they were previously. Consider this example:
Assume an employee is paid $20/hour as her regular hourly wage. During the workweek, the employee worked 40 regular hours but missed 2 meal periods. The employee also received an attendance bonus of $100 during that workweek. Her “regular rate of pay” is $20/hour plus $100/40, or $5.00/hour, for a total of $25/hour. The employee would therefore be entitled to meal period premium pay in the amount of 2 times $25/hour, or $50.
The Decision Applies Retroactively
In addition, the Court also ruled that its decision applied retroactively. This means that California employers can be held liable for past wrongful calculations that occurred BEFORE the ruling in Ferra v. Loews Hollywood Hotel, LLC. Given that California imposes either a 3- or 4-year statute of limitations for the recovery of meal or rest period premium pay, this means that California employers should go back 3 or 4 years and review all meal period premium pay calculations. If any historical calculations were not paid consistent with the new standard announced in Ferra v. Loews Hollywood Hotel, LLC employers would be wise to correct those payments promptly.
You can read the California Supreme Court’s opinion in Ferra v. Loews Hollywood Hotel, LLC here.
You can read more from California’s Labor Commissioner about calculating the “regular rate of pay” here.
If you have a meal or rest break dispute at work, contact us.
