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California Supreme Court Decides Non-Discretionary Payments Are To Be Included When Calculating Overtime Pay

In a published opinion, Ferra v. Loews Hollywood Hotel LLC, 11 Cal. 5th (2021), the California Supreme Court examined the issue of whether the state legislature intended the term "regular rate of compensation" as it is used under California Labor Code Section 226.7(c) has the same meaning as the term "regular rate of pay" pursuant to California Labor Code Section 510(a), so that an employer's calculation of overtime or premium pay owed to an employee must account for the employee's hourly wages and non-discretionary payments for work performed by the employee during missed meal or break and recovery periods. The Court determined that it does!

What are non-discretionary payments?

Non-discretionary payments are payments for an employee's work that are owed under a prior contract, agreement or promise between the employer and the employee. Non-discretionary payments are not determined at the sole discretion of the employer, meaning that an employee will have meaningful input when arriving at the agreement to receive non-discretionary payments from an employer. Examples of non-discretionary payments or wages include hiring bonuses, attendance bonuses, individual or group production bonuses, and incentive bonuses.

California Supreme Court rules Non-Discretionary Payments must be accounted for when calculating Overtime or Premium Pay for work performed by employee during missed meals, breaks, and recovery time. 

What happened in Ferra?

Non-discretionary payments were at the heart of the issue underlying the Ferra lawsuit filed before the California Supreme Court. Jessica Ferra, a bartender employed by Lowes Hollywood Hotel LLC, filed a lawsuit against Loews alleging that the company failed to include her non-discretionary payments - specifically quarterly incentive payments - when calculating her regular rate of pay for overtime or premium payments owed to her for work performed during missed meals, and rest break periods as required by the California Labor Code Section 510(a). Loews argued that under its interpretation of the law, Jessica was only to be compensated her hourly wage - or regular rate of compensation - under California Labor Code Section 226.7(c), meaning that the company should not have to include quarterly incentive payments in calculating overtime or premium payments that Jessica accrued while working through her meal and rest break time.

At trial and on appeal, Jessica Ferra lost both times, meaning the trial court and appeals court agreed with Loews that "regular rate of compensation" and "regular rate of pay" had two different definitions, despite being used interchangeably throughout the California Labor Code and by the Industrial Welfare Commission (IWC). However, the California Supreme Court granted review of Ferra's lawsuit and reversed the lower court decisions. Essentially, the California Supreme Court found Loews' interpretation of the law to be incorrect, and that "regular rate of compensation" and "regular rate of pay" have the same meaning under California wage and labor laws.

To arrive at the conclusion that "regular rate of compensation" under Labor Code Section 226.7(c) and "regular rate of pay" under Labor Code Section 510(a) are synonymous, the California Supreme Court unpacked in detail the lengthy legislative history behind the creation of the Industrial Welfare Commission (IWC); the Court reviewed the state legislature's adoption of California Labor Code Sections 226.7(c) and 510(a); and, it discussed how California's wage and labor policies are intended to mirror federal law where consistent, mainly, the Fair Labor and Standards Act (FLSA). The underlying goal of California and Federal wage and labor laws are meant to protect employees from meal and rest break violations by penalizing employers for non-compliance with meal and rest break laws.

Key Takeaways

One key takeaway from the Ferra lawsuit for employees is that regular rate of compensation and regular rate of pay are synonymous or have the same meaning. The California Supreme Court noted during its discussion of the legislative history that the Industrial Welfare Commission adopted an overtime or premium pay requirement for meal or rest break period violations using the term "regular rate of compensation", while at the same time the IWC issued an adopted wage order revising overtime policies that included use of the term "regular rate of pay". In short, Loews' interpretation was wrong as the Court outlined several instances in California's legislative history where "compensation" and "pay" along with "regular rate" were used interchangeably to describe how employees wages are to be calculated. Ultimately, Ferra determined that employees are entitled to receive non-discretionary wages or payments as part of the calculation for the employee's pay - or compensation - for overtime work performed during missed meal and rest break time.

The second key takeaway from the Ferra lawsuit for employees is that the California Supreme Court ruled that its decision would have retroactive application in workplaces throughout California. What this means is that employees in California may be owed additional overtime or premium pay for non-discretionary wages or payments accrued for work performed by the employee during missed meal and rest break periods that were not calculated in the employee's regular rate of compensation or regular rate of pay. Each case will depend on the specific facts, so it is important to consult with an experienced labor law attorney to assess the specifics of your case to determine if you are owed additional compensation and unpaid wages from your employer.

Free Consultation

Srourian Law Firm, with locations in Los Angeles, Westwood, Woodland Hills, and Orange County is experienced in all aspects of employment law including wage, labor, meal and rest break violations in the workplace, and have aggressively represented employees in Los Angeles, Hollywood, Santa Monica, Orange, Irvine, Anaheim, Santa Ana, Newport Beach, Costa Mesa, Fullerton, Tustin, Mission Viejo, San Clemente, Garden Grove, Laguna Niguel, Brea, Fountain Valley, Aliso Viejo, Yorba Linda, Westminster, Laguna Hills, Cypress, and La Habra.

If you or someone you know suffered employment violations, you may have certain employee rights under state and federal law, and may be entitled to compensation as a part of a class action lawsuit. Please contact us to speak with one of our lawyers for a free consultation.


Know The Law

Know the Law. Know your Rights.

Most people eagerly await payday in order to pay rent and bills on time, or maybe to splurge a little. Getting a late paycheck, regardless of the reason, is not only frustrating, but it could be against the law. Under California labor laws, employers must pay you on time, or they are violating your rights and breaking the law.

In general, employees must be paid by a certain date depending on whether paychecks are issued every two weeks (bi-weekly) or twice a month (bi-monthly). There are some narrow exceptions that apply to certain types of employees, such as salaried monthly executives, but the vast majority of employees are protected under California Labor Code section 204(a).

California Labor Code § 204(a) (in relevant part)

Labor performed between the 1st and 15th days, inclusive, of any calendar month shall be paid for between the 16th and the 26th day of the month during which the labor was performed, and labor performed between the 16th and the last day, inclusive, of any calendar month, shall be paid for between the 1st and 10th day of the following month.

For example, if an employee is paid twice a month, the pay period is often divided into the 1st through 15 days of the month; and the 16th through the last day of the month. Under California law, employers must issue paychecks no later than the 26th of the month for the first pay period, and the 10th of the following month for the second pay period.

For employees that are paid every two weeks, or weekly, the law requires employers issue checks within seven calendar days after each pay period. Failure to issue timely paychecks could subject employers to significant penalties.  

Also, according to California Labor Code section 204(b)(1), Employees have a right to be paid for overtime by the next regular paycheck. That means if you accrue overtime during a particular pay period, those extra wages must be included in the next paycheck. Again, if your employer fails to pay you overtime wage on time, your rights have been violated and you should seek legal advice.

FREE CONSULTATION

Srourian Law Firm, with locations in Los Angeles, Westwood, Woodland Hills, and Orange County is experienced in all aspects of employment law including failure to receive paychecks on time and have aggressively represented employees in Los Angeles, Hollywood, Santa Monica, Orange, Irvine, Anaheim, Santa Ana, Newport Beach, Costa Mesa, Fullerton, Tustin, Mission Viejo, San Clemente, Garden Grove, Laguna Niguel, Brea, Fountain Valley, Aliso Viejo, Yorba Linda, Westminster, Laguna Hills, Cypress, and La Habra.

If you or someone you know suffered employment violations as an employee such as not receiving paychecks on times in California, you may have certain employee rights under state and federal law and may be entitled to unpaid wages, interest, attorneys’ fees and costs, and/or be entitled to compensation as a part of the class action lawsuit. Please contact us to speak with one of our experienced lawyers for a free consultation.


Know The Law

Know the Law. Know your Rights.

California labor laws provide many protections to employees that often exceed federal labor laws. Therefore, it is important to know the various state laws designed to ensure your rights as an employee are not violated by employers. Fundamentally, labor laws and regulations are highly specific and often difficult to understand since laws are amended, enacted or repealed regularly, so it is important to consult with an experienced labor law attorney to ensure your rights are protected.

Often, employees do not realize that they have the right to timely, accurate wage statements each pay period with nine categories of information included in each wage statement. A wage statement, or pay stub, is the document an employer must provide employees every pay period that explains how the paycheck was calculated.

According to California Labor Code section 226, there are nine categories of information that must be included in every wage statement:

• gross wages

• total hours worked

• piece-rate units earned and any rate if employee is paid on a piece-rate basis

• all deductions from wages

• net wages

• dates of pay period

• employee’s name and the last four digits of social security number

• full name and address of the employer

• applicable hourly rates.

Some requirements are not required for exempt employees such as salaried employees. Additionally, section 246(h) of the California Labor Code requires employers advise employees each pay period of any paid sick leave they have accrued. While this is not specifically required on each wage statement, many employers include this information on wage statements as a matter of convenience. This information is particularly vital to any employee who seeks paid sick leave, which is guaranteed by the California Sick Paid Leave Law.

ACCURATE WAGE STATEMENTS ARE REQUIRED BY LAW

California law is clear that employers have a legal obligation to provide accurate wage statements to employees each pay period even if a third-party payroll company used. An employer who fails to comply with the law and violates an employee’s rights may face large fines and penalties, even for minor mistakes. The requirements are strict, and must be followed exactly. For example, the mandatory wage information must be on the face of the wage statement. In other words, the law is not being followed if the employee must find the required wage information on another document besides the wage statement.

In addition to possible fines and penalties, an employee has the right to file a lawsuit against the employer for “knowing and intentional” failure to comply with the law. If successful, an employee who has suffered an injury due to inaccurate or missing wage statements may be entitled to monetary damages.

FREE CONSULTATION

Srourian Law Firm, with locations in Los Angeles, Westwood, Woodland Hills, and Orange County is experienced in all aspects of employment law including failure to provide accurate wage statements and have aggressively represented employees in Los Angeles, Hollywood, Santa Monica, Orange, Irvine, Anaheim, Santa Ana, Newport Beach, Costa Mesa, Fullerton, Tustin, Mission Viejo, San Clemente, Garden Grove, Laguna Niguel, Brea, Fountain Valley, Aliso Viejo, Yorba Linda, Westminster, Laguna Hills, Cypress, and La Habra.

If you or someone you know suffered employment violations as an employee such as not receiving accurate wage statements in California, you may have certain employee rights under state and federal law and may be entitled to unpaid wages, interest, attorneys’ fees and costs, and/or be entitled to compensation as a part of the class action lawsuit. Please contact us to speak with one of our experienced lawyers for a free consultation.


Know The Law

Know the Law. Know your Rights.

Are you Earning at Least the Minimum Wage Required by California Law?

Employees in California must be paid the minimum wage and are protected by law. While there are some exceptions, it is illegal for employers to pay employees less than the required minimum wage. The California state minimum wage is higher than the federal minimum wage, so workers should be paid the higher required pay under state law. Moreover, some cities and counties have even higher minimum wages, so you should always be aware of the applicable minimum wage, as well as any increases to the minimum wage that typically occur every January 1.

California Labor Code §512(1)(a)

The minimum wage for employees fixed by the commission or by any applicable state or local law, is the minimum wage to be paid to employees, and the payment of a lower wage than the minimum so fixed is unlawful. This section does not change the applicability of local minimum wage laws to any entity.

If your employer is not paying you the minimum wage required by law, you can file a lawsuit to recover unpaid wages, interest on the wages, as well as attorneys’ fees and court costs. Also, if there are many employees that are not being paid the required wage, you could be part of a class action claim against the employer.

California Labor Code § 1194

Any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to such employee is entitled to recover in a civil action the unpaid balance of the full amount of such minimum wage or overtime compensation, together with costs of suit, notwithstanding any agreement to work for a lesser wage.

Also, be aware that in addition to the hours you are actually performing your job, your employer must also pay you for any additional time that your employer has control over you. For example, you are entitled to minimum wage for the time needed to change into a uniform; time on-call waiting to be called in to work; as well as time needed to pass through security between shifts. This time is covered by California labor laws, and your employer must pay you at least the minimum wage or they are breaking the law, and you may be entitled to compensation.

FREE CONSULTATION

Srourian Law Firm, with locations in Los Angeles, Westwood, Woodland Hills, and Orange County is experienced in all aspects of employment law including minimum and unpaid wages and have aggressively represented employees in Los Angeles, Hollywood, Santa Monica, Orange, Irvine, Anaheim, Santa Ana, Newport Beach, Costa Mesa, Fullerton, Tustin, Mission Viejo, San Clemente, Garden Grove, Laguna Niguel, Brea, Fountain Valley, Aliso Viejo, Yorba Linda, Westminster, Laguna Hills, Cypress, and La Habra.

If you or someone you know suffered employment violations as an employee such as being paid less than minimum wage in California, you may have certain employee rights under state and federal law and may be entitled to unpaid wages, interest, attorneys’ fees and costs, and/or be entitled to compensation as a part of the class action lawsuit. Please contact us to speak with one of our experienced lawyers for a free consultation.


Srourian Law Firm Files Class Action Lawsuit Against Ruth's Chris Restaurant

Srourian Law Firm has filed a class action lawsuit on behalf of former and current workers of Ruth's Chris Steak House workers. The lawsuit includes both front of house and back of house workers, including waiters, hosts, barbacks, runners, and kitchen staff for all restaurant locations in the State of California. The lawsuit alleges that Ruth's Chris violated various provisions of the California Labor Code, including failure to pay minimum wage, failure to pay overtime, failure to authorize meal breaks, failure to authorize rest breaks, failure to timely pay final paychecks, failure to provide proper paystubs, and violation of California Private Attorney General Act, among several other violations.

The lawsuit further alleges unlawful restaurant policies of denying and discouraging breaks based on providing team meals to be eaten quickly, lack of adequate resting facilities, and a requirement to keep inaccurate records of meals breaks. The lawsuit further alleges the requirement for workers to take on-duty meal breaks in violation of California leave.

SROURIAN LAW FIRM’S CLASS ACTION LAWSUIT

The class action lawsuit, titled Adrian Quiroz v. Ruth's Chris Hospitality Group, Inc., is currently pending in Riverside Superior Court Case No. RIC1804127. If you worked for any Ruth's Chris location in California at any time from February 26, 2014, until the present and would like more information about this case, please call us at (310) 601-3131 or send an email to contact@slfla.com. Be sure to give your name, telephone number, and the best time to reach you, and an attorney will get back to you soon.

FREE CONSULTATION

Srourian Law Firm, with locations in Los Angeles, Westwood, Woodland Hills, and Orange County is aggressively pursuing claims against MedMen, and other California cannabis dispensaries in Los Angeles, Hollywood, Santa Monica, Orange, Irvine, Anaheim, Santa Ana, Newport Beach, Costa Mesa, Fullerton, Tustin, Mission Viejo, San Clemente, Garden Grove, Laguna Niguel, Brea, Fountain Valley, Aliso Viejo, Yorba Linda, Westminster, Laguna Hills, Cypress, and La Habra. If you or someone you know suffered violations of the California Labor Code in relation to their employment with a cannabis dispensary, you may be entitled to compensation as a part of the class action lawsuit. Please contact us to speak with one of our lawyers for a free consultation.