California Supreme Court Surprises Employers on Penalty Rate Used for Meal and Rest Break Violations

California Supreme Court Surprises Employers on Penalty Rate Used for Meal and Rest Break Violations

In mid-July, the California Supreme Court issued a long-awaited decision concerning the correct payrate for California Labor Code meal and rest break violation penalties. Hourly non-exempt employees are entitled to meal and rest breaks under California law, the penalty for violating such law being one hour’s pay. The issue decided in Ferra v. Loews Hollywood Hotel, LLC was whether the penalty rate would be calculated as the base hourly rate or the regular hourly rate used for overtime with the latter factoring in other wages that must be added into the employee’s pay rate to calculate overtime, such as night premiums. Not only did the California Supreme Court surprise employers through its holding that meal and rest break violation penalties shall be paid at the regular hourly rate and not the base hourly rate, but it also made this decision retroactive citing that the text it had relied upon for its holding had long existed in the Labor Code. The Labor Code exempts production workers in the entertainment industry covered by a collective bargaining agreement containing its own meal penalty provisions from the above California meal penalty, but production employers with a California workforce will need to follow the decision for their non-union populations.