Update on California Supreme Court’s Decision on Meal Break Compensation.
On July 15, 2021, the California Supreme Court decided in the Ferra v. Loews Hollywood Hotel case that the calculation of the required one-hour premium payment for missed, late or short meal and rest breaks must take into account all non-discretionary payments, such as certain types of bonuses and shift premiums. This requirement adds to the complexities imposed by California wage and hour laws for paying non-exempt employees, which include overtime for time worked over 8 hours in a day; the precise recording of all daily hours worked, including the beginning and ending of meal periods; and providing required meal and rest periods at specified times.
This means that all current legal claims and class actions lawsuits will need to be adjusted.
5 Key Impacts This Decision Will Have on Employers
#1: Employers Need to Comply with State Laws. The Loews case is one more striking example of the need for employers to fully understand and to comply with various aspects of the different laws of the US states in which they operate.
#2 – The Law Applies Retroactively. The court held that the decision applies retroactively, meaning employers will be held responsible if they calculated premiums incorrectly prior to this decision. This exposes employers to liability, and California employers can expect that new wage and hour class actions will seek civil penalties for failing to include non-discretionary payments in their premium pay calculations.
#3 – Need to Review Past Premium Payments. The impact of treatment of premium penalties for meal and rest periods in the past should be assessed in the context of this new ruling, including a determination of whether to re-calculate past premium payments.
#4 – Updating payroll policies. Employers will need to update payroll policies to ensure compliance with the calculation of the meal and rest period premiums as now enunciated by the California Supreme Court.
#5 – Non-discretionary incentives are included. Employers should be aware that non-discretionary payments, such as nondiscretionary bonuses, are included in the calculation of the regular rate for both overtime and meal and rest premium pay purposes. For simplicity, employers may wish to avoid creating new incentive programs to avoid raising the regular rate of wage payments to non-exempt employees.
If you would like to know how FLORES can further assist, please contact us at 619-588-2411. FLORES has a dedicated HR & Payroll team, and we are committed to assisting our valued clients and ensuring they are in compliance with all changes to the law.