On July 16, 2021, the California Supreme Court ruled if an employer fails to provide a legally compliant meal period or rest break, the wage premium they must pay must be paid at the “regular rate of compensation”. This includes not just hourly wages but all non-discretionary payments for work performed by the employee.
The code regarding meal breaks states, “If an employer does not provide an employee with a compliant meal, rest, or recovery period, [the law] requires the employer to “pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest or recovery period is not provided”. The California Supreme Court agreed ‘regular rate of compensation’ has the same meaning as the ‘regular rate of pay’ used in the California code addressing overtime. This is different than an employee’s base hourly rate.
The Court used this example to demonstrate why it made this decision. An hourly employee ($25 per hour), a piece-rate employee ($50 per piece), and an hourly plus piece-rate employee ($20 per hour plus $10 per piece) all earned $1,000 a week. In this instance, the hourly and piece-rate only employees would receive $25 for a break premium whereas the hourly plus piece-rate employee would only receive $20. The Court did not believe there should be a disparity between workers receiving purely hourly rates and workers receiving a combination of hourly rates and incentives.
The biggest part of this ruling is this decision applies retroactively. This means the decision applies to past practices which have already take place barring any statutes of limitations.
This ruling highlights the importance of having a proper time and attendance system in place to comply with all meal and break rules. In addition, if there is a violation of the rule, having a system to track and credit the one-hour premium at the regular rate of pay is critical.
To learn ways we can help your company properly track meal and break rules including the calculation at the regular rate of pay (compensation), contact Time Equipment Company at firstname.lastname@example.org or 800-997-8463.
*This information simplifies complex Acts as it is understood by Time Equipment Company. It is not to be taken as legal advice. The regulations for this program are changing. For further information contact the California Department of Industrial Relations.