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California’s Supreme Court Sets Meal and Rest Period Premium Pay At An Employee’s Regular Rate Of Pay, Not The Base Hourly Rate Alone

In Ferra v. Loews Hollywood Hotel, LLC, the California Supreme Court has concluded that an employee’s “regular rate of compensation” for meal and rest period premium pay is synonymous with the employee’s “regular rate of pay” for overtime.  Accordingly, employers paying meal and rest period premiums must pay those,  not at an employee’s base hourly rate alone, but at that rate plus all non-discretionary payments, meaning those that are paid “pursuant to [a] prior contract, agreement, or promise . . . .”

Plaintiff Ferra alleged that Loews improperly calculated her meal and rest period premium payments when it excluded her non-discretionary quarterly incentive bonuses from premium pay calculations.  Loews successfully argued before the trial court and court of appeal that Ferra’s “regular rate of compensation” for meal and rest period premium pay is her base hourly rate of pay and is distinguishable from her overtime “regular rate of pay.”

After a lengthy analysis of legislative history, the California Supreme Court disagreed and reversed the court of appeal.  The Court concluded that the “regular rate of compensation” for meal and rest period premium pay under California Labor Code section 226.7(c) is synonymous with the “regular rate of pay” for overtime as defined under California Labor Code section 501(a).  As a result, when employers pay meal and rest period premiums, they must use the employee’s overtime regular rate of pay, which includes all non-discretionary payments for the work performed.

Moreover, the California Supreme Court rejected Loews’ argument that its decision should only apply prospectively. Following its decision in Vazquez v. Jan-Pro Franchising International, the California Supreme Court held that since it was interpreting a statute, not overruling or disapproving previous case law, its holding applies retroactively.

What should employers do now?

  • Review and update payroll policies and procedures pertaining to meal and rest period premiums.

  • Audit prior meal and rest period premium payments to those employees who receive non-discretionary bonuses or other wages that are included in their regular rate of pay calculations, to ensure those premiums have been paid accurately.

Jackson Lewis P.C. © 2021National Law Review, Volume XI, Number 197
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About this Author

Principal

James P. Carter is a principal in the Orange County, California, office of Jackson Lewis P.C.

He counsels and defends employers in all aspects of employment law, including discrimination, harassment, wrongful termination, retaliation, wage and hour claims, non-compete and trade-secret issues and claims, class action cases, breach of contract claims, disability accommodation, leave of absence, and workers' compensation issues. James represents clients in many industries including financial, bio-tech, restaurant and food, aerospace, high-tech, property management...

949-885-1360
Rassa L. Ahmadi Equal Employment Opportunities Attorney Jackson Lewis Orange County, CA
Associate

Rassa L. Ahmadi is an Associate in the Orange County, California, office of Jackson Lewis P.C. Ms. Ahmadi focuses her practice on equal employment opportunities, including diversity analytics, pay equity, and compliance with regulations promulgated by the Office of Federal Contracts Compliance Programs (OFCCP). 

Ms. Ahmadi’s practice also includes litigation of class and representative actions related to wage and hour, as well as, the defense of claims related to discrimination, harassment, retaliation, and wrongful termination.  Ms. Ahmadi also works with her...

949-885-1360
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