Immediate Update Required for Calculation of Premiums for Missed Meal and Rest Breaks

Ferra v. Loews Hollywood Hotel, LLC
On July 15, 2021, the California Supreme Court issued a decision in Ferra v. Loews Hollywood Hotel, LLC that further discourages employers from allowing their employees to miss meal, rest, and recovery breaks and potentially opens employers up to significant retroactive liability. Under California law, private employers are obligated to provide their employees certain meal, rest, and recovery breaks. If employees are not provided their required breaks, then their employers are obligated to pay those employees “one additional hour of pay at the employee’s regular rate of compensation.” Before the California Supreme Court’s recent rulings, employers typically used an employee’s base rate of pay when compensating employees for missed breaks as opposed to their “regular rate of pay” (which is higher as it typically includes additional incentive payments like bonuses and commissions and is used to calculate an employee’s overtime rate).

In Ferra v. Loews Hollywood Hotel, LLC, a bar employee argued that her employer should have paid her for her missed rest periods at her regular rate of pay as opposed to her base rate of pay. The Court disagreed with the trial and appeals court and unanimously held that employers must compensate their employees for missed meal, rest, or recovery periods by providing an additional hour of pay at employees’ regular rate of pay, not their base rate of pay. The Court also noted that this ruling applies retroactively. Public entity employers are not required to pay this premium for missed meal periods, rest, and recovery breaks and thus this holding is not applicable to them.

Takeaways for Employers
Going forward private and non-profit employers should immediately update their pay calculations for employees who miss meal periods, rest, and recovery breaks to be sure that they are being compensated at the correct rate. Please contact our firm if you would like to discuss the potential impact of this ruling on your business and for advice on how to minimize your possible risk and exposure.