Calculating the Premium Wage for Missed Meal/Rest BreaksJul 21, 2021
By Nicholas Grether, Esq., The Maloney Firm, APC
When an employer does not provide an employee a proper meal or rest break, California law requires that “the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation.” Labor Code section 226.7(c). This additional hour is known as a premium wage, but how does an employer calculate the regular rate of compensation? On July 15, 2021, the California Supreme Court in Ferra v. Loews Hollywood Hotel, S259172, explained that the term “regular rate of compensation” for a premium wage has the same meaning as “regular rate of pay” for calculating overtime. What does this mean for employers?
The regular rate of pay/compensation includes hourly earnings, salary, piecework earnings, flat sum bonuses, commissions, and any other non-discretionary income. As an example, if an employer gives a $100 bonus for working on the weekend, that has to be included in the regular rate, because that bonus would be additional wages earned by the employee for their work. These calculations would have to be made for each workweek.
If in the example above, let’s assume the employee works 8 hours per day, 5 days a week, and earns $15.00 per hour. The employee would earn $700 in a given week ($15 x 8 hours per day x 5 days per week = $600 + $100 nondiscretionary bonus). Divide $700 by the number of hours worked in the workweek (40), which results in $17.50 per hour as the regular rate of pay or compensation. If during the workweek, the employee missed one meal break and had one rest break cut shorter than 10 minutes, the employee would be entitled 2 premium wage payments at $17.50 each at the regular rate, not the employee’s base rate of $15.00.
What Can Employers Do?
Given that this method of calculating the premium wage can only increase potential exposure for meal and rest break violations, employers should ensure they have policies and procedures in place to prevent violations and when appropriate pay the appropriate meal or break premium to the employee. The Court found that this ruling should apply retroactively, so employers should audit their payments of premium wages to determine if there is potential liability for underpayment. Of course, providing proper meal and rest breaks to employees ensures that they are properly rested and serves as the best defense to such claims. Employer should also examine their policies and practices for making additional payments beyond base wages to hourly employees. Clear communication about which payments are discretionary or nondiscretionary will assist in calculating premium wages properly and defending against any lawsuits.
About the Author:
Nicholas Grether is an employment attorney in the Employment Law Department at The Maloney Firm, APC. If you have questions regarding this article, contact Nicholas Grether at firstname.lastname@example.org.