Is Your Employer Paying You Properly for Missed Meal and Rest Breaks? Only If it Includes Nondiscretionary Pay in Your Regular Rate of Compensation.

The California Supreme Court has clarified that employers must include both hourly wages and all nondiscretionary payments when calculating the regular rate of pay for the purposes of compensating employees for missed meal and rest periods. See Ferra v. Loews Hollywood Hotel, LLC (2021) 11 Cal.5th 858. The Court further held that this decision applies retroactively. Read on to see whether your employer might have been paying you the wrong rate for your missed meal and rest periods.

In Ferra, the issue was whether the defendant had properly calculated the amount of pay that was owed to employees who did not receive proper meal or rest periods. Under California law, when an employer does not provide an employee with a meal or rest period, as required by law, the employer must pay the employee one additional hour of pay “at the employee’s regular rate of compensation.” See Cal Lab. Code § 226.7(c). Loews Hollywood Hotel interpreted that phrase narrowly, and paid its employees for missed meal and rest periods according to their base hourly rate. It did not include any “nondiscretionary pay” in that calculation.

On review, the California Supreme Court noted that “nondiscretionary pay” included pay that was owed to an employee pursuant to a contract, agreement, or promise, so long as it was not determined at the sole discretion of the employer. In other words, where certain types of pay must be made in a certain amount if the employee accomplishes certain things, they are nondiscretionary under the law. Typically, nondiscretionary pay includes payments for meeting certain goals, such as attendance, timeliness, or productivity.

The Court then considered the history of Section 226.7, and concluded that “regular rate of pay” in that statute had the same meaning as the term “regular rate of pay” in Section 510(a). Accordingly, it includes not only hourly pay but also any nondiscretionary payments for work performed by the employee. This is consistent with the general proposition that California’s labor laws are to be liberally construed in favor of workers. See, e.g., Alvarado v. Dart Container Corp. (2018) 4 Cal.5th 542. 562.

Do you receive any type of nondiscretionary payments above and beyond your hourly rate, such as attendance or productivity bonuses? If so, your employer may be failing to pay you properly for your missed meal and rest periods. Please feel free to call the experienced attorneys at Hunter Pyle Law to find out if you may have a case. We can be reached at (510) 444-4400 or at inquire@hunterpylelaw.com.