In California, an employer cannot have a non-exempt employee work for a period of more than five hours without providing an unpaid, off-duty meal period of at least thirty minutes and cannot have an employee work for a period of more than four hours without providing a ten-minute paid rest break. If an employee missed their required meal period and/or rest break, then the employee was entitled to be paid one hour at their regular rate of compensation, which is referred to as a “premium pay.” Up and until July 15, 2021, employers and employment attorneys understood that an employee’s regular rate of compensation (“premium pay”) meant an employee’s base hourly rate of pay. Now, that is no longer the case.
On July 15, 2021, the California Supreme Court in Ferra v. Loews Hollywood Hotel, LLC held that paying the required “premium” for a missed meal period or rest break cannot simply be the employee’s base hourly rate. Instead, an employee’s premium payment must include the hourly value of any non-discretionary earnings (such as a nondiscretionary bonus). More importantly though, the California Court held that this decision applies retroactively to payment made before July 15, 2021. What does that mean for you though? It means that if you, as an employer, were tracking your employees’ time strictly and paying out premiums when required, but only basing that premium on your employee’s base hourly rate, then all those premiums could potentially be incorrect as a result of this new Supreme Court ruling, as you may have failed to include non-discretionary earnings (like overtime).
As such, every employer should contact the Employer Lawyers at Chauvel & Glatt take steps to review and update their time tracking methods, meal period and rest break policies and/or put those policies to writing if they have not already done so. Employers should also audit their time tracking systems to make sure their employees are properly recording their time. This is such a highly litigated area of employment law, so make sure you are doing things right with your business.
This material in this article, provided by Chauvel & Glatt, is designed to provide informative and current information as of the date of the post. It should not be considered, nor is it intended to constitute legal advice. For information on your particular circumstances, please contact Chauvel & Glatt at 650-573-9500. (photo credit: 123rf.com)