California Supreme Court Requires That All Non-Discretionary Payments Must Be Included in Meal and Rest Period Premiums

Meal and Rest Period Premiums Must Include All “Non-Discretionary Payments” and Not Just Hourly Wages

Michael L. Ludwig

If an employer does not provide an employee with a compliant meal or rest period, Labor Code section 226.7(c) requires the employer to “pay the employee one additional hour of pay at the employee’s regular rate of compensation.” In Ferra v. Loews Hollywood Hotel, LLC, the California Supreme Court held that the “additional hour of pay” for meal or rest period violations must encompass all non-discretionary payments, as well as hourly wages. Thus, if an employer pays an employee non-discretionary incentive pay or bonuses, or commissions, those amounts must be included in determining the “hour of pay” the employer owes to the employee for a meal or rest period violation. (Note: The same rule applies to a “recovery” period, which is less common and refers to a cooldown period afforded an employee to prevent heat illness.)

Many employers have initiated practices of monitoring time records for apparent meal period violations and automatically paying an hour of pay accordingly. If the hour of pay was paid at an employee’s base hourly rate that did not include non-discretionary payments, then additional amounts may now be owed to the employee. Also, given the increased cost to an employer of a meal period premium, employers who provide employees flexibility regarding the scheduling of their meal periods may want to reconsider that flexibility and instead insist on strict meal period scheduling and reporting to avoid potential exposure.

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