The California Supreme Court has ruled that employers’ calculation of the required one hour premium payment for missed, late or short meal and rest breaks must take into account all nondiscretionary payments, such as certain types of bonuses and shift premiums, and that it applies retroactively, a decision that absent arbitration could result in a greater amount of workplace litigation.
The Supreme Court decision came unexpectedly for businesses that had been paying missed meal or rest breaks at their hourly rate of compensation instead of the regular rate of pay calculation, Tom Manzo, founder and president of the California Business and Industrial Alliance (CABIA), told the Northern California Record.
“Employers who thought they were calculating correctly now find out they may have not,” Manzo said, adding that the decision should sound the alarm to Legislators.
The high court’s decision in Jessica Ferra et al. v. Loews Hollywood Hotel, LLC was issued July 15.
“[T]he words ‘compensation’ and ‘pay’ appear interchangeably in legislative and judicial usage, and we find no indication that the Legislature intended ‘regular rate of pay’ in section 510(a) and ‘regular rate of compensation’ in section 226.7(c) to have different meanings. Specifically, we find no evidence that ‘regular rate of compensation’ means hourly wages only,” Justice Goodwin H. Liu wrote for the court in the unanimous ruling.
The decision represents another hurdle for businesses amid the uncertainty of the Covid-19 pandemic, Manzo said.
“They need to uncomplicate California’s Labor Law digest,” Manzo said. “You’re looking at 1,100 pages of laws already and now this [ruling] has just created way more complexity. And companies, even if they've been doing everything by the book, are going to be way more vulnerable to lawsuits because it’s a retroactive decision.”
The lower courts had agreed that the defendants correctly interpreted the law.
Manzo said the decision hurts small businesses already struggling to recover from the economic downturn. “The unfortunate part of this ruling is it may penalize people who were doing what they thought was right. That’s really frustrating,” Manzo said.