Los Angeles, Calif. (October 11, 2019) - In California, all non-exempt employees are generally allowed to take an uninterrupted thirty minute meal period and two rest periods during an eight hour shift. If an employee is unable to take a compliant meal or rest period, then California law requires the employer to pay the employee a premium of one hour's wages at the "regular rate of compensation". (Cal. Lab. Code § 226.7.)
Employers must pay the premium, but may be at a loss as to what is included in this premium payment. Does "regular rate of compensation" for calculating meal or rest period premiums mean the same thing as "regular rate of pay" for calculating overtime premiums?
Ferra v. Loews Hollywood Hotel, LLC
On October 9, 2019, the California Court of Appeal answered this question in Ferra v. Loews Hollywood Hotel, LLC (Cal. App. 2019) B283218. The court held that meal and rest period premiums may be paid at straight time hourly wages. This means that incentive programs that are normally included in the regular rate of pay for overtime purposes – such as non-discretionary bonuses – are not included in the calculation of meal and rest period premiums.
The plaintiff in Ferra was a bartender for Loews Hollywood Hotel who alleged that her meal and rest period premiums were improperly calculated because incentive pay was not factored into the meal and rest premiums. The crux of the case came down to whether the legislature intended "regular rate of compensation," used for meal premiums under Labor Code section 226.7, and "regular rate of pay," used for overtime premiums under Labor Code section 510, to mean the same thing. Ultimately, the court decided different terms have different meanings, and thus meal and rest period premiums can indeed be paid with straight time wages.
Recommendations
Plaintiffs' attorneys have for several years been seizing upon the ambiguity of the "regular rate of compensation" language in Labor Code section 226.7 and filing class actions against employers, alleging that employers must calculate meal and rest period premiums the same way overtime rates are calculated. This decision is a huge victory for California employers, who will see some relief in cases where meal and rest period premiums are at issue, although we anticipate that this issue will ultimately be decided by the California Supreme Court.
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