Back in October 2019, the Court of Appeal decided that a meal or rest period penalty is calculated as one hour of pay, at the employee’s base rate of pay (exclusive of the value of bonuses, commissions, etc.). Remember? Here’s our original post about Ferra v. Loew’s Hollywood Hotel, LLC. And here is an update: The California Supreme Court voted 7-0 to grant Ferra’s request for review of the case.
Until the high Court issues its decision, Ferra is no longer a precedent on which employers may rely. That means employers are without any binding legal authority regarding whether to pay meal period penalties at the employee’s base rate of pay, or at the “regular rate” of pay used to calculate overtime.
There has been ambiguity regarding this issue of how to calculate the hourly meal / rest period penalty. That is because the Labor Code says that the meal / rest period penalties are based on the “regular rate of compensation.” Wage and hour wonks – like you – likely noticed the term “regular rate of compensation ” sounds a bit like the “regular rate of pay,” which is used to calculate overtime.
Well, are they the same? The Court of Appeal in the Ferra case said “no,” 2-1. But the California Supreme Court is going to decide once and for all, it seems.
Now, the “regular rate” used for overtime calculations seems like a cumbersome way to calculate a meal period penalty. The regular rate may depend on earnings that occur after the penalty is incurred, such as an annual or quarterly bonus. And if the Legislature had meant regular rate used for overtime, it certainly could have said so. On the other hand, “regular rate of compensation” does sound a lot like “regular rate of pay.” And what if an employee is not paid hourly? Also, federal district courts have ruled both ways on this issue, so they’re no help.
We’ll have to see how this turns out in a couple of years. Until then, employers should consult with counsel regarding whether to pay meal / rest period penalties at the employee’s base hourly rate, the “regular rate of pay” or some other rate.