California Supreme Court holds that unpaid meal or rest breaks must be paid at a rate that includes non-discretionary bonuses or commissions

2021 case review: Ferra v. Loews Hollywood Hotel LLC

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When an employer fails to provide meal, rest or recovery periods, it is required to provide compensation for same based on the “regular rate of compensation”

In this case, the Plaintiff was a bartender and brought a class action suit claiming that the employer failed to provide pay for missed meals periods, etc., at an hourly rate that was based on complete earnings, which was to say payments including nondiscretionary incentive payments. Specifically, Plaintiff contended that the “regular rate” for the employees included regular overtime pay.

The trial court granted summary adjudication for Defendant, concluding that "regular rate of compensation" is not interchangeable with the term "regular rate of pay" under section 510(a), which governs overtime pay.

While the Appellate Court confirmed the dismissal, the Supreme Court reversed, holding that “regular rate of pay” includes all payments made to the employee.

Employers must pay premium pay when an employee misses a statutory meal or rest or recovery period at the employee’s “regular rate of pay” instead of their base hourly rate, which may be higher than the base hourly rate because the regular rate of pay must include all nondiscretionary incentive payments such as bonuses and commissions. Employers should audit their past pay practices to ensure past compliance, as this ruling is retroactive.