Important Meal & Rest Break Penalty Calculation

08.12.21Baylee Davies

Important Meal & Rest Break Penalty Calculation

Change Is Here! What You Need to Know

California employers will be disappointed to hear that they will now be required to use an employee’s “regular rate of pay” versus an employee’s base hourly rate when calculating meal/rest period premiums. The difference is significant as the first calculation can be higher than the latter. As a result, employers will be further burdened with ensuring that the calculation of the regular rate of pay is accurate.

Meal and rest period premiums only come about if a non-exempt employee does not receive a meal or rest break during their workday. When due to an employer’s failure to provide such a break, an employee misses a meal or rest period, that employee is then entitled to “premium pay” in the form of an additional hour of pay, at the employee’s “regular rate of compensation” for each workday that such a meal period or rest period is not provided. 

How that one-hour premium pay is calculated has changed with the California Supreme Court rule of July 15th. Until this ruling, it was common practice for employers to pay the one-hour penalty at the employee’s base hourly rate. However, the recent California Supreme Court decision determined this practice to be unlawful, holding instead that the calculation of the required one-hour premium/penalty payment must be paid at the “regular rate of pay”. This calculation takes into account both the employee’s base hourly rate as well as all non-discretionary payments, such as certain types of bonuses and shift premiums which means the rate can be higher. This results in an added burden on employers to ensure that this calculation takes into account these various elements when determining an employee’s regular rate of pay.

The same “regular rate of pay” calculation required to be used by employers to compute overtime pay for non-exempt employees must now be used to determine an employee’s premium/penalty pay for all missed meals and rest breaks. 

Employers are on the hook for past payments, too.  This change affects future and past payments.  Yes, this change is retroactive, meaning employers will be held responsible for any meal/rest period premiums incorrectly calculated over the last 3 or potentially 4 years.

Your next steps require action, preparation and evaluation:

  • Update Payroll Processes and Practices. Ensure that your payroll processes and practices are updated to reflect the California Supreme Court ruling. Apply the “regular rate of pay” calculation used for paying overtime to all meal and rest break premiums/penalties. 
  • Audit Policies and Practices. It is more important than ever to maintain compliant break policies, practices, and waivers as well as making sure that employees (including managers) are following proper procedures to ensure compliance. 
  • Evaluate past practices and risks to determine if re-calculations of past payments and voluntary true-ups are in order.

If you have any questions please reach out to our team. 

For detailed information on calculating “regular rate of pay” see the California Labor Commissioner’s Office website

About the Author

Cherie Beck, Director Human Resources, Strategy and Rewards

Director of Human Resources, Strategy and Rewards, Cherie has over 25 years of HR experience, specifically in compensation, mergers and acquisitions and start-up operations, acting as an employee champion as well as a change agent. Cherie holds a Bachelor’s in Business Administration from Cal State San Marcos and she is a member of SHRM and WorldatWork.