Ca Meal and Rest Period Penalties
A recent California Supreme Court ruling has defined the method that must be used to calculate non-exempt wages for meal and rest period penalties. On July 15, 2021, under Ferra v. Loews Hollywood Hotel, LLC, the California Supreme Court overturned earlier decisions and ruled that employers must use the regular rate of pay to calculate meal and rest period penalties.
The case that went before the California Supreme Court involved a bartender at the Loews Hollywood Hotel, who alleged that her employer had failed to include non-discretionary wages in her meal and rest period penalties.
In California, non-exempt employees are entitled to a paid 10-minute rest period for every four hours worked, and a 30-minute meal period for every five hours worked. Employees that miss these meal and rest periods are entitled to a one-hour penalty at the “regular rate of compensation” under Labor Code Section 226.7(c). Prior to the July 15, 2021 ruling, many California employers considered the “regular rate of compensation” to be equivalent to the employee’s hourly wage rate. Employers must now use the regular rate of pay for meal and rest penalty wage calculations.
The regular rate of pay is considered the wages normally earned, so it can include more than the hourly rate. Some typical additional wages that must be considered in the regular rate of pay include shift differentials, commissions, piece rate, non-discretionary bonuses, and other factors. The regular rate is used to calculate over time, vacation, and paid sick leave. From now on, employers must also use this rate for meal and break penalty calculations.
It’s important for California employers to also remember that meal and rest periods must be completely duty free. This means that employees must be totally free to take a break without any work-related interruption. Work related interruptions could include taking a work related phone call or monitoring a work issued two-way radio. Employers cannot require employees to stay on the premises during meal periods and rest breaks, regardless of how impractical it may be to leave and return with-in the meal of rest period time frame.
Shawn Miller is a principal at Morrison working primarily in our People Solutions practice. To get in touch with Shawn, please find contact information for Morrison here.