COMP NEWS – The California Supreme Court has handed down a new interpretation of an old statute concerning the “rate of compensation” for meal and rest periods in California.
In Ferra v. Loews Hollywood Hotel, LLC, the California Supreme Court has concluded 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. Accordingly, employers paying meal and rest period premiums must pay those, not at an employee’s base hourly rate alone, but at that rate plus all non-discretionary payments, meaning those that are paid “pursuant to [a] prior contract, agreement, or promise . . . .”
After a lengthy analysis of legislative history, 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). As a result, 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.
Additionally, the Supreme Court ruled that their decision will apply retroactively, meaning that businesses in California will need to audit prior meal and rest periods for employees in order to ensure that they are in compliance with the new statute’s interpretation.
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