Implications of CA Supreme Court’s Decision on Meal and Rest Breaks
Article

Implications of CA Supreme Court’s Decision on Meal and Rest Breaks

November 05, 2021

Following a July 15, 2021, California Supreme Court decision (Ferra v. Loews Hollywood Hotel, LLC), employers could face large penalties for employees who miss meal and rest periods. California has strict wage and hour requirements, and in light of this recent ruling, it is important for employers to fully understand these requirements and train managers to comply.

Background

A Loews employee (Ferra) filed a class action lawsuit on behalf of herself and three classes of hourly employees, alleging that:

  • Loews didn’t provide mandatory meal and rest periods and didn’t calculate the meal premium payment correctly since they didn’t include her nondiscretionary bonuses.
  • Loews didn’t pay full payment of hours due to rounding/shaving time from worked hours.

Ultimately, the case brought into question whether there is a difference in calculating the “regular rate of pay” versus calculating the “regular rate of compensation.” The California Supreme Court ruled that:

  • “Regular rate of pay” and “regular rate of compensation” are interchangeable, and they are synonymous. (This is especially interesting since the trial court and Court of Appeal felt that the two terms were not synonymous.) The calculation of premium pay for a noncompliant meal, rest or recovery period, like the calculation of overtime pay, must account for not only hourly wages but also other nondiscretionary payments for work performed by the employee.
  • The decision applies retroactively. (Remember, the statute of limitations for meal and rest break liability is up to four years. Employers who have not paid the regular rate of pay correctly should consult with legal counsel and figure out steps to rectify the situation.)

Key Takeaways for Employers

Make sure your hourly staff are taking their meal and rest breaks. If an employee waives their meal or rest break, get it in writing. The table below details the number of breaks required per number of hours worked.

Hours on the Clock Rest Breaks Hours on the Clock Meal Breaks
0 – 3:29 hrs 0 0-5 hrs 0
3:30 – 6 hrs 1 5:01 – 10 hrs 1
6:01 – 10 hrs 2 10:01 – 15 hrs 2
10:01 – 14 hrs 3 15:01 – 20 hours 3
14:01 + 4 20:01 + 4

Do not round hours, ever. Pay employees for all time worked, even unauthorized/unapproved overtime.

Consider other types of compensation when determining the regular rate of pay. For example, this includes nondiscretionary bonuses, commissions and the like.

Know what the “regular rate of pay” is as well as “weighted overtime.” Make sure your payroll staff know how to calculate it. It would be a good idea to provide an additional training session so your staff gets a refresher on this topic.

In closing, training will always be key to compliance. We encourage employers to provide training to managers so they are aware of meal and rest break noncompliance and the implications. It’s also recommended that employers implement policies that require employees to take their assigned meal and rest breaks via schedules that outline break requirements based on hours worked.

For questions or assistance, contact our HR Services experts.

Stay In Touch

Sign up to stay up-to-date with the latest accounting regulations, best practices, industry news and technology insights to run your business.

Resources
Related News & Insights
Federal DOL Withdraws Independent Contractor Rule
Article
It’s important to know if the state where you have workers has its own worker classification ruling.

November 09, 2021
Vaccine Mandates in the Workplace: 4 Key Considerations for Employers
Artcile
Employers should consider the impact on their operations and ways to offer reasonable accommodations to retain talent.

October 26, 2021
Regulatory and Industry News Alerts from Armanino
Article
Employers with 20+ employees must act now to identify and notify eligible individuals.

April 02, 2021