On July 15, 2021, the California Supreme Court, in Ferra v. Loews Hollywood Hotel, LLC, Case No. S259172 (Cal. S. Ct., July 15, 2021), held 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. Thus, 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.
Plaintiff, a hotel bartender, 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.’
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). Thus, employers paying meal and rest period premiums must include non-discretionary payments, meaning those that are paid ‘pursuant to [a] prior contract, agreement, or promise . . . .’
Importantly, the California Supreme Court also ruled that its holding applies retroactively.
Employers should review and update payroll policies and procedures pertaining to meal and rest period premiums and confirm premium payments are paid at the regular rate of pay.
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