It’s Time to Update Your Premium Payment System
As a result of the Ferra v Loews Hollywood Hotel, LLC, decision held by the California Supreme Court on July 15,2021, all California employers must pay premium payments to employees for rest periods, recovery breaks and missed meals at the employee’s “regular rate of pay” instead of their base hourly rate. It is critical for employers to calculate the regular rate of pay accurately in order to determine the appropriate compensation rate. The regular rate of pay is often higher than the base hourly rate, as it includes all non discretionary incentive payments such as bonuses and commissions.
The court’s decision applies retroactively, which means that California employers may be exposed to class action claims.
Employers need to take action to ensure they are compliant with the law and should consider the following steps:
1) Update of Premium Payment Systems
Every noncompliant meal, rest and recovery period should be paid at the regular rate of pay.
2) Retroactive Payments
In order to avoid costly litigation and penalties, employers should make restitution payments to employees who previously received premium payments at their base hourly rate instead of their regular rate of pay.
3) Update or Eliminate Incentive Programs
Consider making changes to your incentive compensation programs in order to lighten the administrative workload.