A California Supreme Court ruling has established different requirements for calculating the payment amount for noncompliant meal and rest breaks, finding that the state Labor Code should be interpreted as applying the rate paid for overtime and not the base rate of pay.
The high court ruling, which was issued July 15, states that the designation for regular rate of compensation and regular rate of pay are synonymous.
“Employers will need to review their pay structures and ensure that they include bonuses and other forms of nondiscretionary compensation in calculating the rate of pay for violations of meal and rest period break requirements,” Leticia M. Saucedo, Martin Luther King, Jr. professor of law at the UC Davis School of Law, told the Northern California Record by email.
The ruling overturned earlier court decisions that found in favor of the defendants in Ferra v. Loews Hollywood Hotel, LLC.
“Lower courts allowed employers to use base rate (without other forms of compensation) to calculate the rate of pay for meal and rest break violations,” Saucedo said. “This ruling is in keeping with the interpretation of federal wage and hour law, and is a common-sense approach to the meaning of regular rate of pay. If bonuses are a form of compensation, they should be included in determining the regular rate of someone’s pay.”
The defendants had argued that applying the decision retroactively would penalize California employers who thought they had been in compliance.
“This ruling has a great impact on workers’ rights. It opens the door to future litigation for retroactive violations of the meal/rest break requirements for employers who underpaid their workers for meal/rest break violations,” Saucedo said.
“This is important because this case follows earlier Supreme Court rulings that clarified how meal and rest breaks are to be calculated. From the employers’ perspective the number of workers with nondiscretionary bonuses is relatively small, so even though they have to make adjustments – and make them retroactively – once they adjust their practice to conform to this ruling, the increased payments will not be substantial overall. For the individual workers who will benefit from this ruling, however, the increased pay will be significant.”
Justice Goodwin H. Liu authored the high court’s unanimous decision.
“Employers should review their practices and consider affirmatively paying their workers for retroactive underpayment of meal/rest premiums,” Saucedo said.