The California Supreme Court, in the case of Jessica Ferra v. Loews Hollywood Hotel, LLC recently clarified the correct way to calculate meal period and rest break premium pay . . . and it’s not how most California businesses were calculating it.
What are Meal Period and Rest Break Premiums?
California Labor Code Section 226.7 requires employers to pay employees “one additional hour of pay at the employee’s regular rate of compensation for each workday” that an employee was not provided with a meal or rest period.
Unfortunately, many employers are not aware of this requirement to pay a meal and rest period premium if employees are not able to take their meal breaks and rest breaks. Before we discuss the correct way to pay the premiums, let’s review the basic meal and rest break rules in California.
What are the Rest Break Rules in California?
In California, the Wage Orders require employers to authorize and permit non-exempt employees to take a 10-minute, uninterrupted, rest period for each four-hour work period or major fraction thereof. The Division of Labor Standards Enforcement (DLSE) considers anything more than two hours to be a “major fraction” of four hours. A rest period is not required for employees whose total daily work time is less than three and one-half hours. Insofar as practicable, the rest period must be taken in the middle of each work period. The number of rest periods an employee should receive each workday is based on the total hours worked daily.
What are the Meal Break Rules in California?
Under California law, as outlined in the Wage Orders and Labor Code Section 512, non-exempt employees must be provided with no less than a thirty-minute uninterrupted meal period when the employee works more than five hours (more than six hours for employees in the motion picture industry covered by IWC Order 12-2001). If the employee works more than 5 hours but less than 6 in the workday, the meal break may be waived by mutual agreement.
If an employee works more than 10 hours per day, the employee must receive a second uninterrupted 30-minute meal break. However, if the employee works more than 10 but less than 12 hours in the workday, the second meal break may be waived by mutual consent, but only if the employee took the first meal break of the day.
What is the Correct Way to Pay the Meal and Rest Break Premium?
Now that we know what the rest break and meal break rules are, let’s talk about premium pay owed to employees for missing their meal and rest breaks.
If an employee is unable to take their meal break and/or rest break, an employer is obligated to pay one hour of pay for the missed meal break and/or one hour of pay for the missed rest break.
Most employers who pay the meal and rest period premium have been interpreting the requirement to pay one hour of the employee’s “regular rate of compensation” as one hour of the non-exempt employee’s base hourly rate. For example, an employee missed a meal break because work was too busy and she was up against a deadline, her employer owes her a meal break premium pay for that missed meal break. We’ll assume that she made $15.00 per hour plus a non-discretionary bonus for making her sales call quota that pay period. Her employer most likely paid her an extra $15.00 (her regular hourly rate) in premium pay, without taking her bonus into consideration, for that missed meal period.
Well, the Supreme Court just said that this practice is not the correct way to calculate meal and rest break premium pay.
Instead, the correct way to calculate the premium pay is the same way that the overtime rate is calculated. That is, the employer must take into account not only hourly wages but also other
nondiscretionary payments (such as this sample employee’s non-discretionary bonus) for work performed by the employee. These include things like non-discretionary bonuses, commissions, and other non-discretionary pay. Thus, an employee’s meal and rest period premium pay could fluctuate between pay periods. The calculations just got a little more complicated for some employers.
PRACTICAL TIP:
The California Supreme Court’s conclusion that its holding applies retroactively means that employers who calculated paid meal and rest break penalties based on an employee’s base hourly rate are exposed to a potential claim.
Employers should audit employees’ time and pay records to ensure that: 1. employees who were unable to take compliant meal and rest breaks are paid a premium, and 2. the regular rate of compensation used to calculate the premium pay includes all non-discretionary wages paid to employees.
Employees who are owed penalties for missed meals and rest breaks should bring the missed penalties to your employer’s attention and direct your employer to the recent Ferra decision on how to properly calculate the premium amount.
Contact us at (949) 529-0007 if you have questions about meal period and rest period requirements in California.