Ferra v. Loews: Defining “Premium” Pay for Missed Meal and Rest Breaks

The California Supreme Court has issued another wage and hour decision that will help workers recover hard-earned wages wrongfully withheld by their employers.  In Ferra v. Loews Hollywood Hotel, LLC, the Court confirmed that an employee’s “regular” rate of pay, which is used to calculate the penalty paid by employers who fail to provide meal, rest, or recovery periods, encompasses all nondiscretionary compensation that the employer would normally use to calculate an employee’s overtime pay.  Previously, employers had argued that this “premium” penalty only included “base” or “straight-time” pay.

Under Labor Code section 226.7(c), an employer who “fails to provide an employee a meal period or rest period … shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each work day that the meal or rest period is not provided.”   The issue presented in Ferra v. Loews was, essentially, the meaning of this phrase “regular rate of compensation.”  The Supreme Court was explicit, just as it was in a prior decision from 2018, Alvarado v. Dart Container Corporation of California, that an employee’s “regular” rate of pay is not the same as an employee’s straight time rate.  Rather, the definition of “regular rate of compensation” for purposes of Labor Code section 226.7(c) should be the amount that employers must use to calculate overtime pay under Section 510.  Therefore, hourly pay, shift differentials, salaries, piece rates, commissions, and nondiscretionary bonuses must all be factored into the calculation.  Note, however, that “regular pay” does not include gifts, payments for vacations, holidays, or illnesses, or certain discretionary bonuses.

Importantly, the Supreme Court also found that this decision will apply retroactively, meaning that employees can sue to recover additional penalties based on past violations of Section 226.7(c).  If you have any questions about the Ferra v. Loews decision, or if you are dealing with an employer who has been paying penalties for missed meal and rest breaks based on the straight time rate only, please contact your labor lawyer.

By Will Hanley | August 25, 2021

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