California Meal and Rest Period Premiums
The California Supreme Court recently issued a unanimous decision in Ferra v. Loews Hollywood Hotel, LLC, that wage premiums owed to employees who do not get a legally compliant meal or rest period must be paid at an employee’s “regular” rate of pay (not their standard hourly rate).
California Labor Code section 226.7(b) states, “If an employer fails to provide an employee a meal period or rest period in accordance with an applicable order of the Industrial Welfare Commission, the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest period is not provided.”
The key to this ruling is that employers must account for all non-discretionary compensation paid to an employee when calculating and paying meal and rest period premiums. Employers should already be doing this when calculating their non-exempt employees’ regular rates of pay for any overtime hours worked. An employee’s regular rate of pay can change from one pay period to another because the rate must include non-hourly compensation, such as non-discretionary bonuses, commissions, various employee benefits and employee housing benefits.
This ruling applies retroactively and will apply to any past practices that took place before this decision was issued. We recommend you do the following:
Be vigilant about complying with rest break and meal period rules going forward.
Monitor payroll reports on a regular basis to ensure proper handling, especially if your payroll system is programmed to automatically pay the premium if a time record displays a short or missing meal period.
Audit your past practices and discuss potential exposure with your legal counsel.