The filing of class actions against California employers for meal and rest break violations remain as prevalent as ever, but the California Courts of Appeal have recently issued two rulings that may help employer-defendants.
Under California law, employers are required, under most circumstances, to provide employees duty-free meal periods of at least 30 minutes and rest breaks of at least 10 minutes at prescribed intervals. If they fail to do so, they must pay employees for one additional hour at their “regular rate of compensation.” See Cal. Labor Code section 226.7.
But in two recent separate decisions, the Courts of Appeal narrowed the scope of damages available against employers for these types of claims.
In Ferra v. Loews Hollywood Hotel, LLC (App. Case No. B283218), the Court addressed the definition of “regular rate of compensation.” The definition matters because prior holdings by California courts defining “regular rate of pay” in the overtime context held that employers must include nondiscretionary payments (e.g., shift differentials and nondiscretionary bonuses) in addition to the regular hourly wages in calculating overtime.
The plaintiffs in Ferra argued that the “regular rate of compensation” owed for missed meal breaks was the same as the “regular rate of pay,” and as a result, the company’s payment of one hour of regular hourly wages (which did not include nondiscretionary quarterly bonuses) was insufficient. The Court of Appeal disagreed, holding that meal premiums need only consist of an hour of regular pay. The employer was not required to include the nondiscretionary bonus amount in the premium.
Moreover, in a separate opinion, Naranjo v. Spectrum Security Services, Inc. (App. Case No. B256232), the Court of Appeal found that failure to pay break premiums cannot be used to trigger waiting time penalties under Labor Code section 203 or wage statement penalties under Labor Code section 226. The Naranjo plaintiffs contended that the owed meal premiums were “wages” and should entitle them to collect on derivative claims. The Court disagreed, holding that break premiums are not “wages” and accordingly, plaintiffs could not collect derivative wage statement or waiting time penalties.
The finding is significant because potential exposure for derivative penalties under sections 203 and 226 often dwarf those owed for the missed breaks themselves. Section 203 imposes penalties of up to 30 days’ wages for failure to pay “any wage” upon separation of employment. Similarly, Section 226 imposes a penalty of up to $4,000 per employee for wage statements that omit gross and net “wages earned.”
Both the Ferra and Naranjo rulings provide some much welcomed respite to employers facing meal and rest break violation claims in a jurisdiction often known for its derivative and stacking penalties.