On July 15, 2021, the Supreme Court of California published an employment law opinion answering a hotly contested wage and hour issue regarding the correct calculations for premium payments made to California employees. In Ferra v. Loews Hollywood Hotel, LLC, 11 Cal. 5th 858 (2021), a bartender filed suit seeking to recover unpaid premium pay stemming from the employer’s refusal to include nondiscretionary pay when calculating premium pay for missed meal, rest, and recovery breaks.  After the employee failed to prevail at the trial court or the Court of Appeal, the Supreme Court of California granted review.

In reviewing the matter, the California Supreme Court considered whether the California Legislature intended, “regular rate of compensation” under Labor Code § 226.7(c) to have the same meaning as “regular rate of pay” under Labor Code § 510(a), such that the calculation of premium pay for a noncompliant meal, rest, or recovery break, like the calculation of overtime pay, must encompass not only hourly wages but also other nondiscretionary payments for work performed by the employee?

After extensively reviewing the Fair Labor Standard Act and Labor Code legislative histories, the California Supreme Court concluded that Labor Code section 226.7(c)’s “regular rate of compensation,” has the same meaning as, “regular rate of pay,” in Labor Code section 510(a).  This means that premium pay for noncompliant meal, rest, or recovery breaks includes not only hourly wages, but also all nondiscretionary payments.

In light of Ferra, a California employee’s premium pay can change each pay period.  This is because premium pay is no longer simply tied to straight time rate after also including nondiscretionary wages.  While mandatory once promised, nondiscretionary wages are subject to change.  Examples of nondiscretionary wages include, but are not limited to, hiring bonuses, attendance bonuses, individual or group production bonuses, and incentive bonuses.

 

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Notably, the California Supreme Court held that the decision applies retroactively.  So, many California employees are owed additional premium pay in light of the decision.  California employees should consider contacting their employers, in writing, requesting restitution for prior premium payments made at the base rent, rather than the regular rate of pay.  If the employer ignores or denies the request, contact Astanehe Law for your consultation.